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Can Generac Turn C&I Business Momentum Into a Durable Revenue Engine?
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Key Takeaways
Generac's C&I sales surged 29%, prompting management to project low-30% growth for 2026.
GNRC won two multiyear hyperscale supply deals, including $700M in product commitments for 2027.
GNRC expects $450M in 2026 data center revenues, but tariff volatility and C&I mix could pressure margins.
Generac Holdings Inc. (GNRC - Free Report) is becoming a major supplier of power-generation equipment for Commercial and Industrial (C&I) customers, particularly the rapidly expanding data center market. In the second quarter, C&I sales jumped 29% year over year to $556.5 million, driven by ramping revenues from products sold into the global data center market. C&I adjusted EBITDA margin expanded to 14.6% from 12.4% in the prior-year quarter, led by tariff refunds and operating discipline, partly offset by unfavorable mix and growth investments. Following its second-quarter performance, management projected low-30% C&I sales growth for 2026 compared with its earlier mid-to-high-20% expectation.
The driving force behind Generac's C&I acceleration is the data center industry. AI infrastructure is driving extraordinary demand for electricity and backup power. Data centers cannot tolerate prolonged power interruptions, making large-scale standby generation an increasingly critical component of infrastructure planning. Generac is benefiting directly from this trend. During the quarter, it generated more than $100 million in data center revenues and secured two multiyear supply agreements with hyperscale customers. The first agreement includes nearly $700 million in product commitments for 2027, while the second is in the final stages of negotiations for 2027 and 2028 deliveries. These deals validate GNRC’s position as a top-tier C&I backup power supplier.
GNRC now expects nearly $450 million in 2026 data center revenues, up from its previous forecast, with the growing backlog providing greater visibility into accelerating C&I sales growth in 2027. However, C&I mix and tariff volatility could squeeze margins. Despite a sharp increase in gross margin to 44.5% from 39.3%, tariff refunds drove most of the improvement, adding roughly six percentage points. Excluding these benefits, 2026 gross margin is expected near the low end of the prior 38.5-39.5% range. A rising C&I mix could further weigh on profitability, as these products generally carry lower margins than residential offerings, while higher input costs and tariff volatility could add further pressure.
Intense Rivalry Poses a Risk to GNRC’s C&I Growth
Caterpillar Inc. (CAT - Free Report) outlook is supported by broad demand across construction, mining and power markets, with rising sales to users and a record backlog improving revenue visibility. It continues to invest in digital capabilities, connected assets, services and more productive equipment to deepen customer relationships beyond new-machine sales. CAT targets services revenues of $30 billion by 2030, up from $24 billion in 2025. Caterpillar is also extending its digital and AI capabilities through its Cat AI Assistant, its expanded collaboration with NVIDIA, RPMGlobal and Skycatch. These initiatives add software, spatial analytics and AI tools that can improve equipment interaction, mine planning and operating decisions.
Cummins Inc. (CMI - Free Report) is benefiting from sustained data center power demand, supported by multiyear backup power commitments and prime power expansion. Firmer North American truck demand and Engine and Components outlooks add support, while energy-transition investments and disciplined capital returns strengthen the long-term case. It is also widening its data center role through natural gas generation and microgrid solutions. Cummins is advancing its long-term growth and decarbonization strategy through targeted investment in lower-emission technologies. Its HELM approach now includes a phased launch of the model-year 2027 X15 and X10 engines, while legacy platforms remain available during the transition.
GNRC Price Performance, Valuation and Estimates
Shares of GNRC have surged 14.8% in the past month, while the sub-industry is up 0.4%.
Image Source: Zacks Investment Research
GNRC is trading at a forward 12-month price/earnings ratio of 18.82X, lower than the industry’s multiple of 20.51X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GNRC earnings for 2026 has been revised up marginally over the past 60 days.
View the Zacks #1 Rank List
Image: Shutterstock
Can Generac Turn C&I Business Momentum Into a Durable Revenue Engine?
Key Takeaways
Generac Holdings Inc. (GNRC - Free Report) is becoming a major supplier of power-generation equipment for Commercial and Industrial (C&I) customers, particularly the rapidly expanding data center market. In the second quarter, C&I sales jumped 29% year over year to $556.5 million, driven by ramping revenues from products sold into the global data center market. C&I adjusted EBITDA margin expanded to 14.6% from 12.4% in the prior-year quarter, led by tariff refunds and operating discipline, partly offset by unfavorable mix and growth investments. Following its second-quarter performance, management projected low-30% C&I sales growth for 2026 compared with its earlier mid-to-high-20% expectation.
The driving force behind Generac's C&I acceleration is the data center industry. AI infrastructure is driving extraordinary demand for electricity and backup power. Data centers cannot tolerate prolonged power interruptions, making large-scale standby generation an increasingly critical component of infrastructure planning. Generac is benefiting directly from this trend. During the quarter, it generated more than $100 million in data center revenues and secured two multiyear supply agreements with hyperscale customers. The first agreement includes nearly $700 million in product commitments for 2027, while the second is in the final stages of negotiations for 2027 and 2028 deliveries. These deals validate GNRC’s position as a top-tier C&I backup power supplier.
GNRC now expects nearly $450 million in 2026 data center revenues, up from its previous forecast, with the growing backlog providing greater visibility into accelerating C&I sales growth in 2027. However, C&I mix and tariff volatility could squeeze margins. Despite a sharp increase in gross margin to 44.5% from 39.3%, tariff refunds drove most of the improvement, adding roughly six percentage points. Excluding these benefits, 2026 gross margin is expected near the low end of the prior 38.5-39.5% range. A rising C&I mix could further weigh on profitability, as these products generally carry lower margins than residential offerings, while higher input costs and tariff volatility could add further pressure.
Intense Rivalry Poses a Risk to GNRC’s C&I Growth
Caterpillar Inc. (CAT - Free Report) outlook is supported by broad demand across construction, mining and power markets, with rising sales to users and a record backlog improving revenue visibility. It continues to invest in digital capabilities, connected assets, services and more productive equipment to deepen customer relationships beyond new-machine sales. CAT targets services revenues of $30 billion by 2030, up from $24 billion in 2025. Caterpillar is also extending its digital and AI capabilities through its Cat AI Assistant, its expanded collaboration with NVIDIA, RPMGlobal and Skycatch. These initiatives add software, spatial analytics and AI tools that can improve equipment interaction, mine planning and operating decisions.
Cummins Inc. (CMI - Free Report) is benefiting from sustained data center power demand, supported by multiyear backup power commitments and prime power expansion. Firmer North American truck demand and Engine and Components outlooks add support, while energy-transition investments and disciplined capital returns strengthen the long-term case. It is also widening its data center role through natural gas generation and microgrid solutions. Cummins is advancing its long-term growth and decarbonization strategy through targeted investment in lower-emission technologies. Its HELM approach now includes a phased launch of the model-year 2027 X15 and X10 engines, while legacy platforms remain available during the transition.
GNRC Price Performance, Valuation and Estimates
Shares of GNRC have surged 14.8% in the past month, while the sub-industry is up 0.4%.
Image Source: Zacks Investment Research
GNRC is trading at a forward 12-month price/earnings ratio of 18.82X, lower than the industry’s multiple of 20.51X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GNRC earnings for 2026 has been revised up marginally over the past 60 days.
Image Source: Zacks Investment Research
GNRC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.