Vestas Wind Systems: Navigating Policy Uncertainty and Offshore Ramp-Up to Deliver Steady Earnings and Long-Term Growth

The global wind energy sector is no stranger to volatility. Policy shifts, geopolitical tensions, and the inherent capital intensity of offshore projects create a landscape where only the most resilient players can thrive. Vestas Wind Systems A/S, the Danish turbine giant, has long been a bellwether for the industry's ability to adapt. In 2025, as the company navigates a perfect storm of U.S. trade policy uncertainty and the costly ramp-up of its next-generation offshore platform, its strategic resilience and margin normalization efforts are on full display.

A Mixed Q2: Growth Amid Headwinds

Vestas reported second-quarter revenue of €3.7 billion in 2025, a 14% year-over-year increase, driven by strong performance in its Service segment. However, the Power Solutions segment—responsible for turbine sales and installation—struggled, with an EBIT margin of -0.4% before special items. This underperformance was largely due to the costs of scaling up production of the V236-15.0 MW offshore turbine, a critical component of Vestas' long-term strategy. Despite these challenges, the company maintained its full-year guidance of €18–20 billion in revenue and a 4–7% EBIT margin, a testament to its confidence in its operational playbook.

The Service segment, meanwhile, remains a bright spot. With an EBIT margin of 17.2% in Q2 and a backlog of €36 billion, Vestas is leveraging its expertise in maintenance and optimization to generate steady cash flow. This segment's long-term goal of a 25% EBIT margin underscores Vestas' ability to monetize its installed base, even as it invests heavily in capital-intensive offshore projects.

Strategic Resilience: From CTOO to Commercial Discipline

Vestas' ability to balance short-term pain with long-term gain hinges on its strategic initiatives. The most transformative of these is the creation of the Technology and Operations Organisation (CTOO), which merges the roles of Chief Technology Officer and Chief Operating Officer. This restructuring, led by Anders Nielsen, aims to eliminate silos between innovation and execution, accelerating the deployment of technologies like machine learning-enhanced turbine controls and AI-driven predictive maintenance. By streamlining decision-making, Vestas hopes to reduce project timelines and mitigate the risks of costly delays—a critical advantage in offshore wind, where delays can erode margins by double digits.

Complementing this structural shift is a renewed focus on commercial discipline. Vestas has tightened customer negotiations and optimized supply chain coordination to reduce margin erosion. Warranty costs, for instance, have fallen from 5% of revenue in 2024 to 4.3% in Q2 2025, with a target of 3% by 2026. This progress is not accidental but the result of rigorous quality control and design improvements. Investors should note that such cost discipline is essential for Vestas to offset the drag from its offshore ramp-up, which currently costs €1.2 billion in 2025.

Policy Uncertainty: A Test of Adaptability

The U.S. market, once a growth engine for Vestas, has become a source of volatility. A 44% drop in wind turbine orders in Q2 2025 reflects the uncertainty caused by potential tariffs and shifting trade policies under the Trump administration. Yet Vestas is not retreating. Instead, it is absorbing these costs while advocating for policy clarity and collaborating with stakeholders to shape a sustainable energy transition. The company's assumption that higher electricity prices will ultimately drive demand for wind energy is a calculated bet on the sector's long-term fundamentals.

This adaptability is mirrored in Vestas' global strategy. While the U.S. remains a wildcard, the company is doubling down on Europe and Asia, where offshore wind is maturing. The V236-15.0 MW platform, now in serial production in Poland, is a cornerstone of this strategy. Though margins in offshore wind are expected to lag onshore projects for now, Vestas is betting that its early mover advantage will pay off as the segment grows at 20–25% annually through 2030.

Margin Normalization: A Path to 10% EBIT

Vestas' long-term ambition of a 10% EBIT margin is ambitious but achievable. The company's return on capital employed (ROCE) has already reached 11.5% in the last twelve months, the highest since 2020, and it aims to push this to 20% by 2027–2028. This will require continued investment in operational maturity—standardizing processes, reducing technology introductions, and leveraging digital tools like digital twins to improve equipment reliability.

The Service segment, with its high-margin potential, will be a key driver. Vestas' recovery plan for this segment includes optimizing service delivery models and extending maintenance intervals by 12% through AI-driven analytics. These measures are expected to generate €700 million in EBIT before special items in 2025, with further gains on the horizon.

Investment Implications

For investors, Vestas represents a compelling case study in strategic resilience. While its EBIT margin of 1.5% in Q2 2025 is far from its 4–7% target, the company's ability to maintain guidance amid headwinds speaks to its operational discipline. The key risks—U.S. policy shifts and offshore margin dilution—are well understood and actively managed.

The stock's recent volatility reflects these uncertainties, but its fundamentals remain robust. With a record-high order backlog of €67.3 billion and a clear roadmap for margin normalization, Vestas is positioned to deliver steady earnings growth. Investors should monitor key metrics such as warranty cost trends, Service segment EBIT expansion, and the pace of offshore project execution.

Conclusion

Vestas Wind Systems is a masterclass in navigating a volatile market. By integrating technology and operations, tightening commercial discipline, and adapting to policy shifts, the company is laying the groundwork for long-term profitability. While the path to a 10% EBIT margin is not without bumps, the rewards for patient investors are substantial. In a world where energy transitions are both inevitable and unpredictable, Vestas' strategic resilience is its greatest asset.