GE Vernova Q4 Preview: Margin Gains Mask Revenue Weakness as Valuation Risk Persists

What happened

GE Vernova is set to report Q4 2025 earnings, with Zacks Investment Research anticipating strong EBITDA, margin expansion, and cash flow, driven by operational improvements in Power and Electrification. However, revenues are expected to dip due to timing issues in gas turbine deliveries and continued weakness in the onshore wind segment, which remains loss-making and a drag on consolidated profitability. This aligns with the DeepValue report's warning that Wind's turnaround is critical for achieving aggressive 2028 targets, yet progress has been slow amid policy and competitive headwinds. Despite these near-term operational gains, the stock trades at extreme multiples—around 99x P/E and 98x EV/EBITDA—implying flawless execution of multi-year growth plans and leaving no margin for error. Investors should scrutinize the earnings for any signs of margin stalling or free cash flow shortfalls, as the valuation embeds perfection and any disappointment could trigger sharp downside.

Implication

The Q4 results, if strong on margins and cash flow, may provide temporary support but are unlikely to justify the current premium, given the embedded assumptions of 20% EBITDA margins by 2028 and $22B+ cumulative free cash flow. Persistent wind losses and revenue volatility underscore structural challenges that could derail the path to these targets, increasing the risk of multiple compression if 2026 guidance of 11-13% EBITDA margins or $4.5-5.0B FCF is missed. With the stock trading at nearly 100x earnings and facing a crowded, valuation-sensitive market, any deviation from expectations could lead to significant price declines, as highlighted by recent downgrades. The DeepValue report recommends trimming or avoiding positions until the price resets to $450 or operational evidence clearly outperforms, emphasizing patience over chasing the rally. Long-term investors must monitor key catalysts like Wind's margin improvement and Prolec acquisition integration, as failures here would validate bearish scenarios and undermine the investment thesis.

Thesis delta

The new article does not alter the core thesis; it reinforces existing concerns by highlighting margin gains alongside revenue weaknesses, consistent with the DeepValue report's view that the stock is overvalued with execution risks. No shift is warranted, as the valuation still discounts perfection, and investors should maintain a cautious stance, prioritizing risk management over incremental optimism until more definitive data on 2026 targets emerges.