Based on GE Vernova (GEV +5.34%) management’s commentary at recent investor conferences, the company will likely report strong growth in orders and backlog when it releases its third-quarter results on Oct. 28. Those are important numbers to keep an eye on, but there’s another underlying metric that is almost as important, and investors should keep an eye out for it because it’s been very bullish for the company in recent quarters.
GE Vernova’s backlog and growth prospects
GE Vernova’s backlog stood at $176 billion at the end of the second quarter, but CEO Scott Strazik said he thinks it will hit $200 billion “very early” in 2027, based on strong third-quarter orders. That’s an impressive number, but it only tells part of the story.
GEV – GE Vernova
$858.49+$43.49 (+5.34%)
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GE Vernova operates in three segments. The loss-making wind segment is working through unprofitable offshore wind contracts and focusing on margin improvement as it returns to profitability. The electrification segment continues to grow strongly, driven by the need to build and maintain the grid and support growth from AI data centers and the electrification-of-everything megatrend.
However, its long-term growth depends on its power segment, specifically gas power turbines. They are typically sold with long-term service agreements (LTSAs) that generate highly lucrative service revenue over many years. As such, investors should view every gas turbine installed as a driver of long-term earnings and cash flow rather than a near-term profit generator.
Gigawatts matter, so do heavy-duty gas turbines
While the dollar amount in the backlog grabs the headlines, investors should also think in terms of the gigawatts (GW) of power in the gas power backlog, and the type of gas turbine orders it’s winning — its heavy-duty gas turbines, notably its H-class turbines (HA) generate significantly more long-term services revenue than its smaller turbines, such as aeroderivatives do.
Image source: Getty Images.
Strazik outlined these dynamics at a recent Morgan Stanley conference, noting that HA services revenue is currently $1 billion of the power segment’s $24 billion in revenue. However, that’s only from “130 machines running today,” and the company has another 195 on contract. “… by the end of next year, we’ll cumulatively have at least 400 machines either running or on contract,” he said, representing an incremental 200 GW of power. Given that every GW of HA power generates $500 million in services revenue over the first 20 years of its lifetime, this increase adds $100 billion in future high-margin services revenue.
What might GE Vernova report this week?
The company reported 21 GW of new gas equipment contracts in the first quarter and 20 GW in the second quarter. In addition, HA gas turbine orders increased from 15 units in the first half of 2025 to 27 in the first half of 2026. However, the July guidance called for just 20 GW in the second half. That said, Strazik told investors in September that guidance now looks conservative.
As such, investors should look for guidance indicating a run rate of 20-40 GW for the second half. Anything closer to the higher end of the range, driven by HA gas turbine orders, could send the stock sharply higher.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
