Vertiv Holdings: Powering and Cooling the AI Buildout

Vertiv reported organic orders up 60% year-over-year in Q3 2025, driving backlog to $9.5 billion, up from $8.5 billion the prior quarter. Book-to-bill hit 1.4x, meaning the company books $1.40 in new orders for every $1.00 shipped. This surge reflects hyperscalers locking in multi-year contracts for liquid cooling and power infrastructure before AI capacity bottlenecks worsen. The backlog is firm purchase orders, not forecasts, giving revenue visibility into 2026 and beyond.

The company is scaling liquid cooling production more than 40-fold in 2024 to meet demand from GPU-dense AI workloads that air cooling cannot handle. Vertiv holds 23.5% of the global data center thermal management market and co-develops cooling systems directly with Nvidia. Liquid cooling carries a 30% compound annual growth rate versus 10% for air cooling, and Vertiv's engineering partnerships with hyperscalers create switching costs that protect share as rack densities climb from 20 kilowatts to 100+ kilowatts.

Adjusted operating margin reached 22.3% in Q3 2025, up 220 basis points from Q3 2024, driven by factory efficiency gains, higher liquid cooling mix, and pricing discipline. Management targets 25% operating margin by 2029 as software-enabled services and vertical integration through acquisitions lift profitability. Free cash flow rose 38% to $462 million in Q3, and full-year 2025 guidance calls for $1.5 billion in free cash flow, supporting buybacks while debt shrinks. Margin expansion is structural, not cyclical, because recurring service contracts now represent 22% of revenue and liquid cooling commands premium pricing.

Liquid Cooling Capacity Expansion Across Europe and Asia: Vertiv is expanding coolant distribution unit production by 40x in 2024-2025 and launched three new CoolChip models, CDU 70, CDU 100, and CDU 600, across Europe, Middle East, and Africa to capture retrofit and greenfield data center demand. Asia-Pacific data center power capacity is projected to reach 94.4 gigawatts by 2028, and Vertiv's direct-to-chip liquid cooling solutions position the company to win share as hyperscalers build out regional AI infrastructure.

Nuclear Power Partnership with Oklo Commercializes by 2027: Vertiv signed a collaboration with nuclear energy firm Oklo to co-develop power and thermal management systems for hyperscale data centers powered by small modular reactors. The pilot deployment at Oklo's Aurora nuclear plant will demonstrate integrated cooling solutions that use waste heat from nuclear generation, cutting data center energy costs by up to 30% and creating a differentiated offering that competitors cannot replicate.

AI Rack Densities Triple to 300 Kilowatts, Mandating Liquid Cooling: Current AI workloads push rack power to 100-150 kilowatts, but next-generation GPU clusters from Nvidia and AMD are expected to reach 300 kilowatts per rack by 2028, making air cooling physically impossible. Vertiv's liquid cooling portfolio, already deployed at hyperscale facilities, will become the default standard, allowing the company to capture 25-30% of a thermal management market growing at 30% annually through 2030.

Vertiv derives roughly 80% of revenue from data centers, with heavy exposure to hyperscaler spending by Microsoft, Meta, Google, and Oracle. If AI model training hits diminishing returns or regulatory scrutiny slows deployment, hyperscalers could moderate capex growth, as they did briefly in mid-2024, causing Vertiv's backlog conversion to stall. The company's order visibility is strong today, but a shift in hyperscaler prioritization from infrastructure to software could compress multiples and delay margin targets.

Schneider Electric and Eaton are expanding liquid cooling capacity and acquiring thermal management specialists to challenge Vertiv's 23.5% cooling market share. Schneider bought 75% of liquid cooling firm Motivair in 2024, while Eaton partners with process chiller manufacturers to enter high-density segments. Both competitors have broader product portfolios and stronger balance sheets, allowing them to bundle power and cooling into single contracts that pressure Vertiv's pricing power and win rates. Market share erosion of even 2-3% would slow revenue growth and force margin investment to defend positioning.

Component shortages, particularly silicon chips, lithium-ion batteries, and industrial fans, can push lead times to 52 weeks, delaying backlog conversion and risking customer penalties. While Vertiv reports lead times are now customer-driven rather than supply-constrained, tariffs on imported components and geopolitical tensions could reverse progress. The company manufactures globally but lacks full vertical integration, making it vulnerable to supplier disruptions that competitors like Schneider, who control more of their supply chain, can better navigate. Missing delivery windows on large hyperscaler projects would damage relationships and defer revenue recognition into later quarters.