Vestas' Q2 Performance: A Crucial Crossroads for Renewable Energy Investors

Vestas, the Danish wind turbine giant, has navigated a turbulent Q2 2025 with a fragile return to profitability, yet its path to sustained growth remains fraught with supply chain bottlenecks and pricing pressures. For investors, the company's performance underscores a critical juncture: Can Vestas balance its aggressive expansion in offshore wind with the operational and financial discipline needed to deliver on its long-term margin targets?

Q2 2025: A Modest Recovery, But Gaps Remain

Vestas reported Q2 revenue of €3.745 billion, a 13.6% year-over-year increase, yet this fell short of the Bloomberg consensus of €4 billion. Adjusted EBITDA of €315 million (8.4% margin) also lagged expectations, reflecting ongoing cost overruns in its offshore wind ramp-up. However, the return to positive operating profit (€57 million) and net profit (€34 million) after a €185 million loss in Q2 2024 signals progress.

The company's order backlog of €67.3 billion—€31.4 billion in turbines and €35.9 billion in service agreements—provides a strong tailwind for 2025. Yet, the Q2 order intake of €2.2 billion (2.0 GW) marked a 44% decline from Q2 2024, driven by U.S. policy uncertainty and permitting delays. This highlights a key risk: Vestas' ability to convert backlog into cash flow hinges on resolving geopolitical and regulatory headwinds.

Historically, Vestas has shown a 57.14% win rate over three days and an 85.71% win rate over 30 days following earnings releases, with an average 30-day return of 4.30%. These results suggest that a simple buy-and-hold strategy post-earnings has historically outperformed in the medium term, despite short-term volatility.

Supply Chain Challenges: A Double-Edged Sword

Over 98% of Vestas' carbon footprint originates from suppliers, making supply chain sustainability both a strategic imperative and a financial liability. The company's 2024 Supplier Forum and human rights risk heatmap initiative demonstrate a commitment to ESG alignment, but these efforts come at a cost. For instance, the ramp-up of the V236-15.0 MW offshore platform—critical for capturing the U.S. and European offshore markets—has strained margins. Q2 EBITDA was dragged down by €100 million in offshore ramp-up costs, a trend expected to persist through 2025.

Investors must weigh Vestas' ESG leadership against its operational execution. While the company's collaboration with EcoVadis and participation in the Wind Energy Initiative signal proactive risk management, its reliance on global suppliers exposes it to geopolitical tensions (e.g., U.S. tariffs) and raw material price swings. The recent U.S. import tariffs, for example, threaten to erode margins unless Vestas can pass costs to customers—a challenge in a price-sensitive market.

Pricing Power: A “Value Over Volume” Strategy

Vestas' pricing strategy in 2025 has pivoted toward high-margin service agreements and localized manufacturing. The 950 MW U.S. order, including a 10-year service contract, exemplifies this approach. By locking in long-term service revenue, Vestas insulates itself from short-term hardware price wars. Its Service segment, already generating an 18% EBIT margin in Q1 2025, is a cash flow engine with a €35.9 billion backlog.

However, pricing power in the onshore segment remains constrained. European turbine prices have stagnated in 2024 compared to 2023, and U.S. tariffs could force Vestas to raise prices, risking competitiveness against rivals like Siemens Gamesa and GE Vernova. The company's $1.7 billion U.S. manufacturing investment aims to mitigate this by reducing logistics costs, but execution risks—such as delays in scaling the V236 platform—could undermine returns.

Investment Implications: Navigating the Crossroads

Vestas' Q2 results affirm its resilience but expose vulnerabilities. For investors, the key question is whether the company can achieve its 10% EBIT margin target by 2027. Three factors will determine this:
1. Offshore Margin Recovery: The V236-15.0 MW platform's scalability and cost efficiency will be critical. If Vestas can reduce offshore EBITDA drag from 10% to 5% of total costs by 2026, its full-year guidance of 4–7% margins becomes achievable.
2. U.S. Policy Clarity: The resolution of permitting delays and tariff disputes will dictate the pace of U.S. project execution. A favorable outcome could unlock $5 billion in annual revenue from the U.S. market alone.
3. Service Segment Expansion: With service margins targeting 25% long-term, Vestas' ability to leverage its 10-year service contracts and predictive maintenance tools will drive margin stability.

Risks to Consider:
- Supply Chain Volatility: Geopolitical tensions and raw material shortages could disrupt turbine production.
- Tariff Impact: U.S. tariffs may force Vestas to raise prices, potentially losing market share to local competitors.
- Execution Risks: Delays in offshore project delivery could strain cash flow and credibility.

Conclusion: A Buy for the Long-Term, With Caution

Vestas remains a cornerstone of the global energy transition, with a robust order backlog and leadership in both onshore and offshore wind. Its ESG initiatives and service-focused strategy position it to outperform peers in a maturing market. However, near-term margin pressures and geopolitical risks warrant a cautious approach. Investors with a 3–5 year horizon should consider a buy, but with a stop-loss at €120/share (based on current valuation metrics) to mitigate downside from supply chain shocks or U.S. policy setbacks.

For those seeking immediate exposure, the Service segment offers a safer bet, with its high-margin, recurring revenue model. Yet, Vestas' long-term success hinges on its ability to transform its offshore operations into a profit center—a challenge that will define its trajectory in the coming years.