nVent Electric's Q3 2025: Contradictions Emerge on Data Center Growth, Organic vs. Acquisition-Driven Expansion, and Operating Margin Forecasts

Date of Call: October 31, 2025

Financials Results

• Revenue: $1,054M, up 35% YOY
• EPS: $0.91 adjusted EPS, up 44% YOY
• Operating Margin: 20.2% return on sales; adjusted operating income up 27% YOY

Guidance:

• Raised full-year reported sales growth to 27%–28%; organic growth now 10%–11%.
• Raised full-year adjusted EPS to $3.31–$3.33 (up ~33%–34% YOY); tariff impact assumed ~$90M.
• Q4 reported sales growth expected 31%–33%; Q4 organic growth 15%–17%; acquisitions ~15 pts; FX ~1 pt tailwind.
• Q4 adjusted EPS expected $0.87–$0.89 (midpoint ~+50% YOY).
• Expect price + productivity to offset inflation/tariffs; FCF conversion 90%–95%.
• Corporate costs now modeled at ~$120M (vs $110M prior).

Business Commentary:

* Record Sales and Profit Growth: - nVent Electric plc reported record sales of $1,054 million for Q3, up 35% year-over-year. - Growth was driven by strong demand in the infrastructure vertical, particularly in data centers and power utilities, as well as contributions from acquisitions.

• Data Center and AI Demand:
• Organic orders in data centers increased by approximately 65%, driven by large orders for AI data center buildout.

• The strong growth in data center orders is attributed to the increasing demand for electrical connection and protection solutions in AI infrastructure.

• Increased Backlog and Acquisitions:

• The company's backlog grew strong double digits sequentially, with acquisitions contributing $139 million to Q3 sales.

• Acquisitions have performed ahead of expectations, driving significant organic sales growth and supporting the expansion into new markets and product offerings.

• Operational Efficiency and Margin Pressure:

• Segment income increased 27%, with a return on sales of 20.2%. However, margins were impacted by inflation and acquisition costs.
• Despite margin pressures, the company offset inflation through price increases and supply chain productivity improvements.

Sentiment Analysis:

Overall Tone: Positive

• Management cited "record sales and adjusted EPS," first-quarter sales > $1 billion, "record orders and backlog," very strong free cash flow ($253M, up 77% YOY), and raised full-year sales and EPS guidance reflecting stronger data‑center and utility demand.

Q&A:

• Question from Joseph Ritchie (Goldman Sachs): Can you parse the data-center acceleration — are you seeing farther visibility in the pipeline/lead times (backlog typically 9–12 months)? Is the type of data-center order changing (more modular)?
  Response: Data-center orders are accelerating with visibility into 2026 and some into 2027; orders are large and lumpy, driven by liquid cooling plus cable management and PDUs, and modular offerings are expanding the customer base and support the planned capacity expansion.

• Question from Deane Dray (RBC Capital Markets): On the new modular liquid-cooling launch, does it move the industry toward standardization and less customization; what does that do to mix? And can you unpack margin impact and whether capacity expansion is included there?
  Response: The modular platform increases interoperability and scalability, enabling expansion beyond hyperscalers; near-term margin headwinds reflect M&A and growth investments, and capacity expansion will be funded via both CapEx and OpEx (including engineering investments).

• Question from Jeffrey Sprague (Vertical Research): Are Avail EPG orders included in your organic orders? Can you give perspective on the base versus the 65% order growth headline and what percent of revenues/orders data centers represent?
  Response: The 65% order growth cited is all organic (excludes acquisitions); core business ex-Avail EPG is up high-single-digits on orders, and data solutions represent roughly ~20% of revenue with data-related orders driving outsized growth this quarter.

• Question from Julian Mitchell (Barclays): Is the Q4 operating-margin placeholder roughly 20%–21% and when should we expect margin expansion next year? Also, can you comment on RPO/backlog movement through September?
  Response: Q4 margins are expected to be up sequentially (improving vs Q3) and will be up excluding EPG; near-term dilution from acquisitions, investments and higher incentive comp, but margins should improve next year; backlog was up double-digits sequentially.

• Question from Nigel Coe (Wolfe Research): Is a ~1.3x book-to-bill in the right ballpark? How do gross margins for liquid cooling compare to fleet average? And why does Q4 revenue step down vs Q3?
  Response: While book-to-bill isn't disclosed, bookings were healthy; liquid-cooling gross margins are healthy and in line with Systems Protection averages (acquired businesses had lower margins but plans are in place); Q4 seasonal patterns and lower inorganic contribution explain the sequential revenue step-down.

• Question from Brian Drab (William Blair): How will the modular standardized solutions impact margins and timing for seeing that benefit? And what do you see across different cooling technologies over the next 2–3 years?
  Response: Modular products should scale through distribution and improve margins over time but it will take time to reach scale; liquid-cooling adoption is early (<10% of data centers today) and nVent's broad portfolio and CDU capability position it to integrate across immersion, cold-plate and 2‑phase architectures.

• Question from Nicole DeBlase (Deutsche Bank): EPG Avail performance — any apples‑to‑apples growth or margin stats? Also, parse the high-single-digit non-data-center order growth between Comm/Resi and Industrial.
  Response: EPG Avail is performing ahead of expectations with double‑digit apples‑to‑apples growth, will contribute ~15 points to Q4 and is ~+$0.10 to EPS YTD (vs prior ~$0.05); non‑data‑center orders grew across Industrial, Commercial/Residential and Electrical Connections (breadth of order growth).

• Question from Jeffrey Hammond (KeyBanc): With rapid demand and capacity additions, what are the biggest execution risks/ramp challenges; are you seeing optimization opportunities at Avail similar to Trachte and any capacity expansions planned?
  Response: Key challenges are supply‑chain scaling and workforce ramp; nVent's decade of liquid‑cooling experience, supplier partnerships and integration playbook (lean/flow) mitigate risks, and the company is executing plant optimizations and targeted capacity expansions.

• Question from Vladimir Bystricky (Citi): Is the stronger M&A contribution and raised outlook driven by better demand patterns or by productivity/shipment improvements? And do you see repeatable large data‑center orders in the pipeline?
  Response: It's both — Avail EPG is delivering stronger top‑line and better‑than‑expected margins via plant productivity; large hyperscaler orders are lumpy but the pipeline supports additional large awards and justified the 2026 capacity build.

• Question from Scott Graham (Seaport Research Partners): If new-products contributed ~5%, how much is infrastructure-specific? Will Q4 tariff impacts be similar to Q3 after price/productivity and what does net productivity look like? Also, what is pro‑forma net leverage?
  Response: A significant portion of the new‑product contribution is infrastructure but not exclusively; tariffs continue to build but stronger Q4 pricing and productivity are expected to offset them and drive sequential margin improvement (ex‑EPG); net leverage is roughly in the mid‑to‑high 1.x range (about ~1.8x).

Contradiction Point 1

Data Center Order Growth and Visibility

It reflects differing perspectives on the growth and visibility of data center orders, which are crucial for understanding the company's short-term and long-term financial outlook.

What drove the Q1 acceleration? Do you see long-term growth in data centers? Has the lead time remained 9-12 months? Are you expanding modular data center usage? - Joseph Ritchie(Goldman Sachs)

2025Q3: Our data center orders are accelerating. We have some view into 2026, and visibility into 2027 with key customers. - Beth Wozniak(CEO)

Can you clarify the timeline for converting the current backlog and its expected duration, and explain the implications of a major hyperscaler launching a custom liquid cooling platform? - Deane Michael Dray(RBC Capital Markets)

2025Q2: Our backlog has grown due to increasing demand in data centers, particularly with liquid cooling solutions. The backlog extends into 2026, driven by strong orders and our partnership strategy. - Beth A. Wozniak(CEO)

Contradiction Point 2

Organic Growth and Acquisitions

It highlights differing views on the contributions and integration of acquisitions, which are important for assessing the company's growth strategy and financial performance.

Are EPG Avail orders included in organic growth? How do you view the base business and acquisition strategy? - Jeffrey Sprague(Vertical Research Partners)

2025Q3: The 65% order growth is all organic and does not include Avail EPG acquisition. - Beth Wozniak(CEO)

Can you update us on the backlog size and whether Systems Protection will grow organically above Electrical Connections in the second half? - Julian C.H. Mitchell(Barclays Bank PLC)

2025Q2: Our backlog has increased with new acquisitions, particularly in Systems Protection. - Beth A. Wozniak(CEO)

Contradiction Point 3

Operating Margin Expansion

It involves differing statements on the expected timing and trajectory of operating margin expansion, which is critical for investors assessing the company's profitability and financial health.

What are expectations for Q4 operating margin? When will margin expansion resume? Do you have insights on RPO? - Julian Mitchell(Barclays Bank)

2025Q3: We expect margins to improve next year. - Gary Corona(CFO)

How are you passing through tariff costs via price hikes, and can you fully offset these costs with productivity gains? - Jeffrey Todd Sprague(Vertical Research Partners)

2025Q2: We expect to resume accelerating EPS growth in the second half, reflecting healthy pricing, expanding gross margins and operating leverage. - Gary Corona(CFO)

Contradiction Point 4

Operating Margin Expectations

It involves changes in financial forecasts, specifically regarding operating margin expectations, which are critical indicators for investors.

What are expectations for Q4 operating margin? When will margin expansion resume? What insights can you share on RPO? - Julian Mitchell(Barclays)

2025Q3: Q4 margins should be up sequentially and above Q3, excluding EPG. - Gary Corona(CFO)

Will operating margins be down in Q1 and are there differences between the two segments? - Julian Mitchell(Barclays)

2024Q4: Overall, Q1 return on sales will be down slightly due to corporate costs and investments in infrastructure. However, we expect margin expansion overall. - Sara Zawoyski(CFO)

Contradiction Point 5

M&A Strategy and Impact

It involves differing perspectives on the company's M&A strategy and the impact of acquisitions on financial performance, which are crucial for understanding the company's growth strategy and financial outlook.

Is the improved M&A contribution due to demand patterns or productivity? - Vladimir Bystricky(Citigroup)

2025Q3: Avail EPG is performing well. We're seeing more top-line growth and better margins than expected. It's driven by both demand and productivity improvements. - Gary Corona(CFO)

What is the Q1 EPS impact from Trachte and your 2025 guidance? - Scott Graham(Seaport Research Partners)

2024Q4: In addition to the strong contribution from Trachte, we also have an acquisition, Avail from earlier in the year, the benefits of which were fully realized in the quarter. - Sara Zawoyski(CFO)