Generac (NYSE:GNRC) executives highlighted accelerating momentum in the data center market alongside a weak late-2025 outage environment that pressured residential generator demand, as the company reported fourth-quarter and full-year 2025 results and issued a mid-teens growth outlook for 2026.
Fourth-quarter sales fell as outage activity softened
President and CEO Aaron Jagdfeld said fourth-quarter performance was led by a 10% year-over-year increase in global commercial and industrial (C&I) product sales, driven by higher revenue from products sold to data center customers. That growth was more than offset by lower residential generator shipments amid what he described as a continued soft power outage environment.
Fourth-quarter gross margin was 36.3%, down from 40.6% a year earlier. Ragen attributed the decline mainly to unfavorable sales mix and a $15.6 million net inventory provision related to the settlement of a supplier contract dispute for a discontinued product, along with higher input costs and lower manufacturing absorption that were mostly offset by price realization.
Operating expenses rose to $405 million, up 34% year over year, primarily due to a $104.5 million provision recorded for the settlement of a portable generator product liability matter. Adjusted EBITDA was $185 million, or 17% of sales, versus $265 million, or 21.5%, in the prior-year quarter. On a GAAP basis, Generac reported a $24 million net loss versus net income of $117 million in the fourth quarter of 2024; management tied the loss to the settlement-related charges.
Data center push and capacity investments
Jagdfeld said Generac made “significant progress” in the data center market, including developing partnerships with multiple hyperscalers and advancing to pilot phases with two specific customers. During Q&A, he said the company’s approximately $400 million data center-related backlog includes only a small amount associated with pilot programs and was built “without any material hyperscale business at this point.” He added that, assuming successful pilot completions, Generac expects to move toward longer-term master supply agreements that could drive future purchase orders and backlog additions.
Jagdfeld also said Generac’s current backlog has increased to about $400 million due to additional orders from data center colocators and developers, and he expects order intake to accelerate over the next several quarters as the company progresses through qualification and contracting stages. He characterized 2026 as an expected “inflection point” for the end market.
To support demand, Generac has been investing to expand its manufacturing footprint, including the purchase of an additional manufacturing facility in Wisconsin in December. Jagdfeld said domestic manufacturing capacity for large megawatt generators is expected to surpass $1 billion by the fourth quarter of 2026, and the company continues evaluating additional capacity across its global C&I production footprint. He told analysts the company took “a bit of a risk” expanding capacity ahead of signed hyperscaler contracts, but believes the move will position Generac to respond faster than competitors whose lead times are “out kind of two years on deliveries.”
Residential generators pressured; ecobee and storage helped
On the residential side, Jagdfeld said fourth-quarter home standby shipments declined 25% year over year, with home consultations and installations also down due to the lowest total outage hours in a decade during the second half of 2025. He said the transition to Generac’s next-generation home standby platform contributed to lower-than-expected shipments, though he described key indicators such as home consultations, activations, and close rates as “resilient” despite the weak outage environment.
Generac’s residential dealer network grew modestly to over 9,400 dealers, up nearly 300 from the prior year, according to Jagdfeld. He also discussed early results from a new lead distribution system that was tested during Winter Storm Fern in January, which drove increased demand for portable generators and improved year-over-year home consultation trends across every region excluding the West.
Management also highlighted continued strength in ecobee and energy storage. Jagdfeld said ecobee net sales grew at a “mid-teens” rate and reached a new full-year record, with gross margin expansion supporting positive EBITDA contribution in 2025. He said ecobee’s connected home count grew to about five million residences, and increased energy services and subscription sales supported a growing, high-margin recurring revenue stream.
Energy storage shipments benefited in 2025 from a Department of Energy program in Puerto Rico, which management said is winding down in early 2026 and is expected to reduce storage shipments this year. During Q&A, Jagdfeld said the DOE program represented about $100 million of energy storage revenue that will create a headwind in 2026. He also said the company remains focused on improving profitability for its residential energy technology products amid expected near-term challenges related to reduced federal incentives for residential solar and storage.
Full-year 2025 results and cash flow
For the full year 2025, Ragen reported adjusted EBITDA of $716 million, or 17% of net sales, compared with $789 million, or 18.4%, in the prior year. Operating cash flow was $438 million, down from $741 million in 2024, and free cash flow was $268 million versus $605 million a year earlier.
Capital expenditures totaled $170 million in 2025, or 4% of net sales, as the company invested in additional production capacity and capabilities to support future C&I growth. Generac repurchased about 1.11 million shares in 2025 for $148 million at an average price of $133 per share. Ragen also said the board approved a new share repurchase authorization on Feb. 9 allowing repurchases of up to $500 million over the next 24 months, replacing the remaining balance of the prior program.
2026 guidance: mid-teens sales growth, higher margins expected
Ragen said Generac is initiating 2026 net sales guidance calling for consolidated net sales to increase at a mid-teens rate year over year, including an approximate 1% favorable impact from foreign currency and completed acquisitions/divestitures. The guidance assumes power outage activity in line with a longer-term baseline average and does not assume a major outage event.
- Residential: Overall residential net sales expected to increase around 10%, driven by higher home standby and portable generator shipments and higher price realization, plus contributions from PWRmicro and continued ecobee growth; partially offset by lower energy storage sales due to the end of the Puerto Rico DOE program.
- C&I: C&I product sales expected to grow about 30% in 2026, primarily from products sold to data center customers. Ragen said the Allmand acquisition is expected to contribute about one quarter of the C&I growth, with the remainder from modest organic growth in traditional C&I channels.
- Other products/services: Expected to decline about 10% year over year due to a January divestiture of non-core assets.
Gross margin is expected to be roughly flat year over year in the 38%-39% range, with first-quarter gross margin expected around 36% as the low point for the year. Adjusted EBITDA margin is expected to rise to 18%-19% in 2026, compared to 17% in 2025, with first-quarter margins expected around 15% and improving through the year.
Ragen guided to 2026 free cash flow of approximately $350 million and projected capital expenditures at about 3.5% of forecast net sales. Management said it will provide a longer-term strategic update at an investor day scheduled for March 25.
About Generac (NYSE:GNRC)
Generac Holdings Inc (NYSE: GNRC) is a leading manufacturer of backup power generation products for residential, commercial and industrial applications. The company offers a comprehensive portfolio of standby and portable generators, transfer switches and power management systems designed to provide reliable electricity during power outages and other critical situations. With an emphasis on innovation, Generac has expanded its offerings to include clean energy technologies such as battery storage and integrated solar-plus-storage systems.
Generac’s product lineup addresses a broad range of customer needs.
