GE Vernova beats revenue estimates, raises 2026 outlook: why is the stock falling?

GE Vernova GEV shares fell about 4% in premarket trading on Wednesday after the energy equipment maker narrowly missed Wall Street's profit expectations.

The company also warned that global tariffs could increase its costs by as much as $200 million (approx. Rs 55.9 billion) next year, overshadowing stronger revenue growth and another increase in its full-year outlook.

The company said tariffs are expected to raise costs by between $100 million (approx. Rs 28 billion) and $200 million (approx. Rs 55.9 billion) in 2026, even after accounting for contractual protections and cost recovery measures.

The warning came despite another quarter of robust order growth fueled by surging electricity demand linked to data center expansion and broader electrification trends.

The Cambridge, Massachusetts-based company reported adjusted core earnings of $1.3 billion (approx. Rs 349.5 billion) for the second quarter, slightly below analysts' expectations of $1.3 billion (approx. Rs 357.9 billion), according to LSEG data.

Adjusted earnings per share came in at $2.47, missing the analyst consensus estimate of $3.04.

Revenue rose 22% year over year to $11.1 billion (approx. Rs 3.1 trillion), surpassing FactSet estimates of $10.8 billion (approx. Rs 3 trillion).

Net profit increased to $649 million (approx. Rs 181.5 billion), or $2.47 per share, from $492 million (approx. Rs 137.6 billion), or $1.86 per share, in the same quarter last year.

Chief Executive Scott Strazik said GE Vernova continues to benefit from strong global demand, supported by a record backlog worth $176 billion (approx. Rs 49.2 trillion).

In the second quarter, total orders climbed to $24.2 billion (approx. Rs 6.8 trillion), nearly doubling from $12.4 billion (approx. Rs 3.5 trillion) a year earlier, with organic orders rising 88%, driven primarily by the Power and Electrification businesses.

Wind remains the weakest business

While demand for electricity infrastructure continued to strengthen, GE Vernova's wind division remained a drag on overall performance.

Revenue from the Wind segment declined about 10% to $2 billion (approx. Rs 567.6 billion) as lower onshore turbine deliveries and higher offshore project costs weighed on results.

The business reported a core operating loss of about $275 million (approx. Rs 76.9 billion), extending losses from the previous year.

By contrast, the Electrification segment generated core profit of $671 million (approx. Rs 187.6 billion), more than doubling from $314 million (approx. Rs 87.8 billion) a year ago.

The Power business also posted strong performance, with core profit rising about 31% to $1 billion (approx. Rs 288 billion).

The contrasting results underscore the company's increasing reliance on conventional power generation and grid infrastructure, areas benefiting from growing investment as utilities prepare for rising electricity demand.

Company raises outlook despite tariff warning

GE Vernova increased its financial guidance for the second consecutive quarter, citing accelerating investment in electricity generation and transmission.

The company now expects 2026 revenue of between $45.5 billion (approx. Rs 12.7 trillion) and $46.5 billion (approx. Rs 13 trillion), approximately $1 billion (approx. Rs 279.6 billion) higher than its previous forecast.

It also sharply raised its free cash flow outlook to between $11.5 billion (approx. Rs 3.2 trillion) and $12.5 billion (approx. Rs 3.5 trillion), compared with its earlier projection of $6.5 billion (approx. Rs 1.8 trillion) to $7.5 billion (approx. Rs 2.1 trillion).

The improved outlook reflects expectations that electricity consumption in the United States will continue rising as artificial intelligence infrastructure, data centers and broader electrification projects boost demand.

Commercial electricity demand is expected to outpace residential consumption over the coming year, creating additional opportunities for equipment suppliers.

Valuation debate continues

GE Vernova shares have climbed roughly 60% this year and have nearly doubled over the past 12 months, making the stock one of the strongest performers in the industrial sector.

Last month, Jefferies raised its price target on the company to $1,210 while maintaining a Buy rating. The shares currently trade around $1,079.

However, not all analysts believe the valuation is justified.

According to Simply Wall St, a discounted cash flow analysis values GE Vernova at around $874 per share, implying the stock trades at roughly a 23.5% premium to its estimated intrinsic value.

At the same time, valuation based on earnings multiples suggests the shares remain attractive relative to peers.

Analysts say the key question for investors will be whether GE Vernova can continue converting the global wave of investment in power generation and grid infrastructure into sustained earnings growth and stronger cash flows while managing rising costs and execution risks.