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Generac Surges 58% Year to Date: Is There More Room to Run?
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Key Takeaways
GNRC's C&I revenues up 29% in the second quarter, driven by data centers, mobile products and global growth.
GNRC secured an Amazon deal with $2.4B of initial generator deliveries expected across 2027 and 2028.
Generac faces residential softness, capacity-expansion risks and margin pressure from a higher C&I mix.
Generac Holdings (GNRC - Free Report) has been one of the stronger industrial performers in 2026, with shares surging about 57.8% year to date. The rally reflects growing investor enthusiasm around the company’s growing exposure to the data center vertical.
Image Source: Zacks Investment Research
The company’s Commercial & Industrial (C&I) business is accelerating rapidly. It now has a sizeable data center backlog and is investing in large-megawatt generator capacity.
More importantly, the investment story got a boost when Generac disclosed a long-term supply agreement with Amazon (AMZN - Free Report) for backup generators supporting its data centers last month.
Generac Holdings Inc. Price, Consensus and EPS Surprise
This tie-up can be considered a validation of Generac’s emerging position in the data center power infrastructure space. However, following the stock’s substantial year-to-date gain, investors need to weigh execution risks, residential-market softness and the potential margin implications of Generac’s rapidly changing business mix.
Let’s discuss the company’s growth factors that contributed to the share price gain and the risks it faces to assess investment prospects and make an informed decision.
Data Center Emerges as a Major Tailwind for GNRC
C&I revenues totaled $556 million in the second quarter of 2026, up 29% year over year, driven by data center demand, mobile product strength and international growth.
Management expects data centers to remain a significant long-term growth opportunity amid accelerating infrastructure investments and AI adoption. Generac generated more than $100 million of data center revenues in the second quarter and secured two multi-year hyperscale supply agreements.
On the last earnings call, Generac noted that the data center backlog reached $1.6 billion as of July 2026, including roughly $1 billion of new orders received in the prior 90 days, but excluding any committed volumes from the second hyperscale customer. Management also raised its 2026 data center revenue expectation to roughly $450 million, underscoring the rapid scaling of this business.
Since then, Generac finalized a long-term supply agreement with Amazon. It will supply backup power generators for Amazon data centers, with initial deliveries expected to total $2.4 billion across 2027 and 2028. Generac also issued Amazon.com NV Investment Holdings LLC a warrant to acquire up to 1,693,745 shares of its common stock at an exercise price of $200.9266 per share. Amazon.com NV Investment Holdings LLC is a wholly owned subsidiary of Amazon.
Of the total warrant shares, 307,954 vested immediately. Generac added that the remaining warrant shares will vest in tranches contingent upon aggregate gross payments, net of certain offsets, received by Generac and its affiliates from or on behalf of Amazon and the affiliates for backup power generators, extending up to a total of $8 billion of qualifying payments.
The Amazon agreement adds considerable scale and visibility to a data center business that is fast emerging as Generac’s key growth engine.
Management expects (as announced on the last earnings call) C&I segment net sales to increase in the low 30% range in 2026, up from the prior mid-to-high 20% outlook. Continued demand from data centers, mobile equipment and C&I energy storage systems supports a broader growth profile beyond a single end market.
Generac’s opportunity appears large, but successfully converting demand into revenues depend heavily on production capacity. The company is ramping production at existing domestic and international facilities and accelerating the outfitting of its Sussex, WI, facility. On the second-quarter earnings call, management said production at Sussex was expected to begin by the end of the third quarter, roughly a quarter ahead of its prior schedule. Management also acquired the Belvidere, IL, packaging facility. The Enercon buyout (completed earlier this year) is expected to boost Generac’s vertical integration and support margin expansion for megawatt backup power offerings.
However, data center market expansion brings its own set of concerns. With increasing reliance on this end market, Generac is exposed to cyclical capital spending cycles in AI and data centers. Any delays in manufacturing capacity expansion can also weigh on growth targets. Generac also needs to watch out for increasing competition in the data center space.
Cummins (CMI - Free Report) is also rapidly expanding its data center footprint and is developing a 130-liter natural gas genset for prime power and supplying Circe Energy with QSK60 and HSK78 generators with microgrid technology for a prime power solution supporting a high-performance computing data center in Texas. In August, Cummins secured its largest battery energy-storage deployment to date for a major U.S. data-center project.
Meanwhile, Caterpillar’s (CAT - Free Report) second quarter 2026 Power & Energy sales reached $8.2 billion, up 17% year over year. Sales to users grew 33% in the Power & Energy segment. Within Power generation, sales to users grew 72%, supported by strong demand for large gensets and turbines used in data center applications.
Residential Business Remains an Important Counterbalance
While the data center opportunity is driving investor excitement, Generac’s residential business still represents a major part of it.
In the second quarter, revenues from Residential were down 2% year over year to $621.3 million. Lower energy storage system and portable generator shipments drove the decline, largely offset by higher home standby generator sales. Portable generator sales declined due to low outage activity.
Residential energy-storage sales in 2025 was largely driven by Puerto Rico’s energy grant-related program. However, with the completion of the program, energy storage systems remain pressured. The residential solar and storage market also remains challenging due to policy and macro headwinds. Management reduced its 2026 Residential growth outlook to high single-digit growth from roughly 10%, citing the low outage environment, affordability concerns and a small divestiture.
While residential growth remains uneven, the segment has durable long-term drivers. Strength in residential energy technology products is a key catalyst. Connected home count surpassed 5.25 million residences in the second quarter, with increased energy services and subscription sales. With the integration of PWRcell 2, PWR microinverter and next-gen standby generators with ecobee, Generac aims to create a differentiated residential energy ecosystem.
Margins Require Some Perspective
Gross margins improved sharply in the second quarter, but the underlying margin profile remains sensitive to mix and tariffs. Consolidated gross margin reached 44.5% from 39.3%. Tariff refunds added roughly 6% to gross margin. Favorable pricing partly offset unfavorable sales mix and higher input costs. Excluding tariff refunds, management expects 2026 gross margin near the low end of the prior 38.5% to 39.5% range due to higher C&I mix. C&I products generally carry lower margins than residential offerings.
GNRC’s Valuation
GNRC’s shares are trading at a forward price/earnings multiple of 18.82X, marginally lower than the Manufacturing-General Industrial industry’s ratio of 20.39X.
Image Source: Zacks Investment Research
The modest discount offers some valuation support, but execution risks and margin headwinds temper the case for fresh buying following the stock’s sharp rally.
In comparison, Cummins and Caterpillar trade at a forward PE multiple of 15.48X and 26.78X, respectively.
GNRC: What Should Investors Do?
At present, GNRC carries a Zacks Rank #3 (Hold).
Expanding data center backlog and the Amazon agreement strengthen its long-term growth prospects and provide greater revenue visibility. However, residential softness, capacity-expansion risks and mix-related margin pressure warrant a measured approach after the stock’s sharp year-to-date surge.
Existing investors may remain invested, while new buyers could wait for a more favorable entry point.
View the Zacks #1 Rank List
Image: Bigstock
Generac Surges 58% Year to Date: Is There More Room to Run?
Key Takeaways
Generac Holdings (GNRC - Free Report) has been one of the stronger industrial performers in 2026, with shares surging about 57.8% year to date. The rally reflects growing investor enthusiasm around the company’s growing exposure to the data center vertical.
Image Source: Zacks Investment Research
The company’s Commercial & Industrial (C&I) business is accelerating rapidly. It now has a sizeable data center backlog and is investing in large-megawatt generator capacity.
More importantly, the investment story got a boost when Generac disclosed a long-term supply agreement with Amazon (AMZN - Free Report) for backup generators supporting its data centers last month.
Generac Holdings Inc. Price, Consensus and EPS Surprise
Generac Holdings Inc. price-consensus-eps-surprise-chart | Generac Holdings Inc. Quote
This tie-up can be considered a validation of Generac’s emerging position in the data center power infrastructure space. However, following the stock’s substantial year-to-date gain, investors need to weigh execution risks, residential-market softness and the potential margin implications of Generac’s rapidly changing business mix.
Let’s discuss the company’s growth factors that contributed to the share price gain and the risks it faces to assess investment prospects and make an informed decision.
Data Center Emerges as a Major Tailwind for GNRC
C&I revenues totaled $556 million in the second quarter of 2026, up 29% year over year, driven by data center demand, mobile product strength and international growth.
Management expects data centers to remain a significant long-term growth opportunity amid accelerating infrastructure investments and AI adoption. Generac generated more than $100 million of data center revenues in the second quarter and secured two multi-year hyperscale supply agreements.
On the last earnings call, Generac noted that the data center backlog reached $1.6 billion as of July 2026, including roughly $1 billion of new orders received in the prior 90 days, but excluding any committed volumes from the second hyperscale customer. Management also raised its 2026 data center revenue expectation to roughly $450 million, underscoring the rapid scaling of this business.
Since then, Generac finalized a long-term supply agreement with Amazon. It will supply backup power generators for Amazon data centers, with initial deliveries expected to total $2.4 billion across 2027 and 2028. Generac also issued Amazon.com NV Investment Holdings LLC a warrant to acquire up to 1,693,745 shares of its common stock at an exercise price of $200.9266 per share. Amazon.com NV Investment Holdings LLC is a wholly owned subsidiary of Amazon.
Of the total warrant shares, 307,954 vested immediately. Generac added that the remaining warrant shares will vest in tranches contingent upon aggregate gross payments, net of certain offsets, received by Generac and its affiliates from or on behalf of Amazon and the affiliates for backup power generators, extending up to a total of $8 billion of qualifying payments.
The Amazon agreement adds considerable scale and visibility to a data center business that is fast emerging as Generac’s key growth engine.
Generac Holdings Inc. Revenue (Quarterly)
Generac Holdings Inc. revenue-quarterly | Generac Holdings Inc. Quote
Management expects (as announced on the last earnings call) C&I segment net sales to increase in the low 30% range in 2026, up from the prior mid-to-high 20% outlook. Continued demand from data centers, mobile equipment and C&I energy storage systems supports a broader growth profile beyond a single end market.
Generac’s opportunity appears large, but successfully converting demand into revenues depend heavily on production capacity. The company is ramping production at existing domestic and international facilities and accelerating the outfitting of its Sussex, WI, facility. On the second-quarter earnings call, management said production at Sussex was expected to begin by the end of the third quarter, roughly a quarter ahead of its prior schedule. Management also acquired the Belvidere, IL, packaging facility. The Enercon buyout (completed earlier this year) is expected to boost Generac’s vertical integration and support margin expansion for megawatt backup power offerings.
However, data center market expansion brings its own set of concerns. With increasing reliance on this end market, Generac is exposed to cyclical capital spending cycles in AI and data centers. Any delays in manufacturing capacity expansion can also weigh on growth targets. Generac also needs to watch out for increasing competition in the data center space.
Cummins (CMI - Free Report) is also rapidly expanding its data center footprint and is developing a 130-liter natural gas genset for prime power and supplying Circe Energy with QSK60 and HSK78 generators with microgrid technology for a prime power solution supporting a high-performance computing data center in Texas. In August, Cummins secured its largest battery energy-storage deployment to date for a major U.S. data-center project.
Meanwhile, Caterpillar’s (CAT - Free Report) second quarter 2026 Power & Energy sales reached $8.2 billion, up 17% year over year. Sales to users grew 33% in the Power & Energy segment. Within Power generation, sales to users grew 72%, supported by strong demand for large gensets and turbines used in data center applications.
Residential Business Remains an Important Counterbalance
While the data center opportunity is driving investor excitement, Generac’s residential business still represents a major part of it.
In the second quarter, revenues from Residential were down 2% year over year to $621.3 million. Lower energy storage system and portable generator shipments drove the decline, largely offset by higher home standby generator sales. Portable generator sales declined due to low outage activity.
Residential energy-storage sales in 2025 was largely driven by Puerto Rico’s energy grant-related program. However, with the completion of the program, energy storage systems remain pressured. The residential solar and storage market also remains challenging due to policy and macro headwinds. Management reduced its 2026 Residential growth outlook to high single-digit growth from roughly 10%, citing the low outage environment, affordability concerns and a small divestiture.
While residential growth remains uneven, the segment has durable long-term drivers. Strength in residential energy technology products is a key catalyst. Connected home count surpassed 5.25 million residences in the second quarter, with increased energy services and subscription sales. With the integration of PWRcell 2, PWR microinverter and next-gen standby generators with ecobee, Generac aims to create a differentiated residential energy ecosystem.
Margins Require Some Perspective
Gross margins improved sharply in the second quarter, but the underlying margin profile remains sensitive to mix and tariffs. Consolidated gross margin reached 44.5% from 39.3%. Tariff refunds added roughly 6% to gross margin. Favorable pricing partly offset unfavorable sales mix and higher input costs. Excluding tariff refunds, management expects 2026 gross margin near the low end of the prior 38.5% to 39.5% range due to higher C&I mix. C&I products generally carry lower margins than residential offerings.
GNRC’s Valuation
GNRC’s shares are trading at a forward price/earnings multiple of 18.82X, marginally lower than the Manufacturing-General Industrial industry’s ratio of 20.39X.
Image Source: Zacks Investment Research
The modest discount offers some valuation support, but execution risks and margin headwinds temper the case for fresh buying following the stock’s sharp rally.
In comparison, Cummins and Caterpillar trade at a forward PE multiple of 15.48X and 26.78X, respectively.
GNRC: What Should Investors Do?
At present, GNRC carries a Zacks Rank #3 (Hold).
Expanding data center backlog and the Amazon agreement strengthen its long-term growth prospects and provide greater revenue visibility.
However, residential softness, capacity-expansion risks and mix-related margin pressure warrant a measured approach after the stock’s sharp year-to-date surge.
Existing investors may remain invested, while new buyers could wait for a more favorable entry point.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.