This home-generator maker is shifting focus to AI data centers, and the stock is soaring

By Tomi Kilgore

Fewer power outages led to disappointing residential sales for Generac, but investors cheered the jump in sales to data centers

Generac shares soared as an upbeat outlook on sales to data centers offset a weak quarter, as sales of home generators declined.

Shares of Generac Holdings shot up toward a multiyear high on Wednesday, after the maker of home generators provided an upbeat sales-growth outlook as the company's push into the data-center market accelerates.

The apparent shift in focus toward the company's (GNRC) commercial and industrial business, which builds large backup generators used by data centers that power artificial-intelligence applications, comes as its residential business is hurting due to "continued weakness" in power-outage activity.

Basically, there was a big drop in power outages during the latest quarter compared with the previous year, which has reduced demand among homeowners for generators. But investors don't seem too worried about the weakness in what is still the company's largest business given its opportunity to be an AI player.

The stock soared 17.9% to $214.99 on Wednesday, and was the S&P 500 index's SPX top gainer on the day. It closed at the highest price since Sept. 12, 2022.

Overall results for the fourth quarter weren't good. Adjusted earnings per share, which excludes nonrecurring items, fell to $1.61 from $2.80 a year ago, to miss the average analyst EPS estimate compiled by FactSet of $1.77. And total sales dropped 11.6% to $1.09 billion, below expectations of $1.16 billion.

Residential product sales sank 23.1% to $571.9 million, well below expectations of $644 million.

There was a bright spot, however, as sales of commercial and industrial products increased 10% to a record $399.5 million, to beat the FactSet consensus of $387.2 million.

The growth in C&I sales was "primarily due to revenue from products sold to data-center customers, both domestically and internationally," Chief Financial Officer York Ragen said, according to a FactSet transcript of the post-earnings call with analysts.

For 2026, the company said it expects year-over-year net sales growth in the "mid-teens percent range," which is better than the growth of 12% implied by the current FactSet sales consensus of $4.72 billion.

For the C&I business, Generac expects 2026 sales to increase 30%, while the FactSet consensus for sales of $1.77 billion implies an increase of 21.7%.

The company said residential product sales are expected to increase 10%, citing an "assumed recovery in the power outage environment."

Based on the company's growth projections, C&I sales as a percentage of total sales would increase to 43% in 2026 from 39% in 2025.

Generac shares have run up 51.7% over the past 12 months, while the S&P 500 has advanced 14.4%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

02-11-26 1615ET