We raise the price of GE Vernova as AI heats up a big quarter
GE Vernova is soaring after a monster quarter, thanks to the insatiable demand for energy driving the AI boom. Revenue for the three months ended March 31 rose nearly 16% year over year to $9.34 billion, topping expectations of $9.22 billion, according to LSEG. Orders increased 71% organically to $18.3 billion, driven by growth in all segments. As a reminder, analysts focus on orders to gauge demand rather than sales, which may reflect previous order fulfillment. Earnings per share (EPS) of $17.44; however, this is not the same as the $1.86 estimate, given that it includes $4.5 billion in pre-tax M & A gains, primarily from Prolec GE. Accounting for this, LSEG pegs the adjusted EPS result at around $2.08, still better than expected. GEV 1Y mountain GEV 1 year return Shares of GE Vernova rose more than 12% on the publication, hitting an intraday high of $1,142 shortly after the opening bell. In light of Wednesday’s rally, we are raising our target price to $1,300 from $1,000. As Jim Cramer put it during the Morning Club Meeting, “This could be one of the years.” We maintain our buy rating of 1 on the stock. The bottom line The word “discontent” may not be enough to describe the kind of demand GE Vernova is seeing for its natural gas engines and other products used to power data centers. While the company’s wind power business remains under pressure, sales of gas and electrification solutions have been flat, leading management to raise its outlook year-over-year and beyond. This isn’t surprising, considering Nvidia’s Jensen Huang’s five-layer AI cake starts with power as a foundation and builds from there to chips, infrastructure, models, and applications. Therefore, all AI roads lead back to the need for energy, and that puts GE Vernova on the ground floor of the Fourth Industrial Revolution. Put another way, whenever you hear about a new energy commitment or data center project, understand that the gigawatts needed will likely come from GE Vernova. Across the board, GE Vernova’s adjusted EBITDA margin also came in more than a full percentage point ahead of expectations. EBITDA represents earnings before interest, taxes, depreciation, and amortization. GE Vernova Why we own it : The company has several powerful global headwinds behind it, including the need for more reliable energy and electrical installations, especially as AI increases demand for power-hungry data centers. GE Vernova could also benefit from deals as the countries work with the Trump administration to reduce the trade deficit between the two countries. Competitors : Siemens Energy , MHI Most recent purchase : Oct. 7, 2025 Intiated : May 13, 2025 In addition to strong margins, sales, and earnings, GE Vernova brought in $13 billion to grow, increasing its deficit to $163 billion. Management now expects to achieve a backlog of $200 billion by 2027, a year ahead of schedule. In gas power, the backlog stands at 100 gigawatts, up from 83 gigawatts in the previous quarter. “Approximately 80% of all the gigawatts we have under contract are traditional customers, with the remaining 20% clearly supporting data centers,” CEO Scott Strazik said on a conference call with investors. Even better, and no doubt supporting the dramatic move in stocks on Wednesday, Strazik said the current second quarter is off to a good start: “The quarter so far, we’ve booked more electrical equipment orders by value than we did in Q1 2026,” he said. That’s surprising, considering the second quarter isn’t even halfway through the books. With incredible demand comes pricing power, and GE Vernova is ready to cash in. Strazik noted that on a kilowatt basis, orders for the first quarter of 2026 are tracking to be approximately 10 to 20 points higher than the fourth quarter of 2025. To give you an idea of how much power these data centers consume, a gigawatt is 1 million KW. A gigawatt of energy can power more than 750,000 homes a year. In addition, the more turbines GE Vernova can use, the larger the installed base can be later. So, with every delivery, the capacity of the GEV service book also increases. While investors are focused on demand for gas turbines, there is also a long path to growth in electrification, especially following the acquisition of Prolec, which closed in early February. As a result, expect this category to receive more attention going forward. Strazik said the segment is expected to generate about $14.5 billion this year, and that the annual adjusted market will grow to nearly $300 billion by the end of the decade. Prolec will be a major factor in GEV capturing as much of that TAM as possible. “Demand for power supply solutions is driven not only by traditional customers, but also by data centers, which accounted for nearly $2.4 billion in orders in Q1, over the full year of 2025,” Strazik said. Wind continues to struggle, as the US offshore wind market remains weak. However, Strazik said the strategic review found “an opportunity of more than $100 million in EBITDA growth in the coming years, driven by lower costs and better quality operations.” Finally, capital expenditures came in higher than expected, but a strong operating cash flow performance set the stage for free cash flow to exceed expectations. In fact, the company generated more free cash flow in the first quarter of 2026 than in all of 2025. Segment results In Energy, revenue increased 10% organically to $4.97 billion, beating the average of $4.95 billion. The segment delivered an EBITDA margin of 16.3%, representing an expansion of 470 points year-on-year. In electricity, revenue increased 29% to $2.96 billion, beating the estimate of $2.87 billion. The segment delivered an EBITDA margin of 17.8%, representing a base expansion of 670 points year-on-year. On Air, organic revenue fell 25% to $1.43 billion, missing the estimate of $1.52 billion. The segment delivered an EBITDA margin of -26.7%, down from -7.9% from last year. Updated guidance for the full year 2026: GE Vernova now expects 2026 revenue of $44.5 billion to $45.5 billion, an increase of $0.5 billion at the upper and lower ends of the forecast range, and ahead of the estimate of $44.43 billion, according to LSEG. Management’s adjusted EBITDA forecast is now in the 12% to 14% range, a 1 percent increase on both the low and high ends, making guidance in line with expectations. Driving the upward revision, management now expects an EBITDA margin of 17% to 19%, up from the previous forecast range of 16% to 18%. In electrification, the group expects sales of $14 billion and $14.5 billion, from the previous range of $13.5 billion to $14 billion, with an EBITDA margin of between 18% and 20%, from the previous 17% to 19%. Second quarter: Energy business revenue growth of 15% to 17% due to strong demand for both equipment and services. The segment’s EBITDA margin is expected to be 17% to 18% on electric revenue ranging from $3.3 billion to $3.5 billion, “with sequential EBITDA expansion.” Wind revenue fell in the mid-teens, with an EBITDA loss of about $200-to-$300 million due to reduced offshore wind turbine volume. (Jim Cramer’s Charitable Trust is long GEV. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling stock in his charity portfolio. When Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade warning before making a trade. THE PRIVATE INFORMATION OF THE BURNING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AND OUR PRIVACY POLICY. 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