Vertiv's Strong Q4 2025 Results Bolster AI Growth Narrative but Valuation Risks Loom Large

What happened

Vertiv reported fourth quarter 2025 net sales of $2,880 million, a 23% year-over-year increase, with adjusted operating margin expanding 170 basis points to 23.2% and adjusted free cash flow surging 151% to $910 million. The DeepValue master report highlights that Vertiv's current share price of around $182 trades at 67x trailing EPS and 60x EV/EBITDA, embedding aggressive expectations for sustained mid-20s growth and structurally higher margins. This performance, including 252% organic orders growth and 200% diluted EPS growth, demonstrates robust execution amid AI-driven data-center demand, aligning with the report's acknowledgment of strong backlog conversion. However, the report warns that the stock's premium valuation leaves no margin of safety, with downside risks tied to potential hyperscaler capex digestion and delays in monetizing new AI platforms like 800V DC. Blending both, Vertiv's fundamentals remain solid in the near term, but the investment case is clouded by cyclical exposure and stretched multiples that demand flawless execution.

Implication

The impressive Q4 metrics, such as margin expansion and cash flow generation, validate Vertiv's operational leverage and AI-driven order growth, supporting its role as a key infrastructure play. However, with the stock already pricing in perfection via multiples like 60x EV/EBITDA, even minor setbacks in hyperscaler spending or 800V DC adoption could trigger significant multiple compression. Investors should note that the DeepValue report's base case implied value of $180 offers minimal upside from current levels, underscoring the asymmetric risk/reward skewed negatively. For existing holders, this news might serve as a cue to trim positions or await the 2026 guidance for clearer sustainability signals, while new buyers should prioritize entry points closer to the report's attractive level of $135. Ultimately, while the results are strong, they do not alleviate the core concern that Vertiv's valuation lacks a safety net against cyclical or execution risks.

Thesis delta

The Q4 2025 results align with the DeepValue report's recognition of Vertiv's strong execution and AI-driven growth, but they do not shift the cautious thesis. The report's potential sell rating remains intact, as the stock's elevated valuation still relies on sustained high growth and margin expansion that are vulnerable to hyperscaler capex cycles. Any delta is incremental, reinforcing rather than altering the need for a valuation reset or more durable proof before turning bullish.