Title: Friday POW! — Generating Power... And Profits Show: Haymaker (Substack, paid post) Guest: David Hay / Haymaker — edition authored with frequent contributor Daniel Bustamante Date: 2026-08-28 URL: https://haymaker.substack.com/p/friday-pow-4da Length: written post — no timestamps Note: Written Substack post (no video). Body text captured verbatim from the paid post via logged-in session; chart images (Investor Day CapEx slide, NWS El Niño map, Bloomberg financials/valuation/technical charts) not reproduced. Standard Haymaker legal disclosures omitted.
Special thanks to frequent Haymaker contributor Daniel Bustamante for his work on this POW! edition.
Generac: The Market Is Finally Recognizing the C&I Transformation
Generac is no longer simply a residential generator company dependent on hurricanes and power outages.
The company is developing a second earnings engine in Commercial & Industrial (C&I) power equipment, with data-center demand accelerating faster than the market previously expected. At the same time, the legacy residential business is becoming more profitable, even without a major weather-driven demand cycle.
That combination changes the investment case:
- C&I and data centers provide structural growth. - Residential provides significant earnings leverage if outage activity normalizes. - Higher production volumes and operating efficiencies expand margins. - A rapidly growing backlog provides unusually strong visibility into 2027. - The company can produce meaningful earnings growth without requiring both businesses to peak simultaneously.
So, while others are worrying about CapEx spend on the hyperscalers Generac has been, and will continue to be, a net benefactor of said spend. Below is an image from the March 2026 Investor Day highlighting the CapEx spend and the demand-growth forecast which is significant and as we lay out our thesis you'll see that Generac has been capturing and executing on this cycle.
The Inflection
The most important development is the acceleration of Generac's C&I business.
The stock has already begun to reflect this transition as it was up nearly +90% earlier this year prior to a one-third correction of its previously overbought condition. However, the earnings cycle is not necessarily finished. The next phase depends on Generac converting its data-center backlog into revenue while demonstrating that the resulting growth is durable beyond the current order cycle.
Second-quarter C&I sales increased 29% to $556 million, driven primarily by products sold into the global data-center market. This followed 28% C&I growth in the first quarter, meaning the acceleration is no longer based on a single quarter or a hypothetical pipeline which was the market concern just over a year ago.
Generac now has an approximately $1.6 billion data-center backlog, an increase of roughly $1 billion since its previous update. That backlog does not include committed volume from the company's second hyperscale agreement, making the reported figure potentially conservative relative to the full opportunity.
The company has now:
- Finalized an agreement containing nearly $700 million of committed 2027 volume with one leading hyperscale customer. - Signed a global supply agreement with a second hyperscale customer. - Begun negotiating product-specific terms for that customer's 2027 and 2028 volume. - Acquired Enercon to expand its capabilities in generator controls and packaging. - Acquired an additional Illinois facility to increase large-megawatt packaging capacity.
These actions indicate Generac is investing against contracted demand, not merely building capacity in anticipation of demand that may never arrive.
[Chart: Generac Q2 2026 Results]
Why This Matters
Historically, investors valued Generac primarily as a weather-sensitive residential equipment company. Strong hurricane seasons created demand surges, while quiet outage periods produced inventory corrections and earnings volatility. Thus, it is worth touching on broader grid vulnerabilities which Generac's expansive solution suite is designed to address. The hurricane topic is front of mind for many, as a so-called "Super" El Niño this year and next seems probable.
[Image: Courtesy of NWS, via The Weather Channel]
Tying that back to the main point, every large-scale data center requires multi-megawatt backup generation capable of carrying the full facility load through grid outages. Well, Generac manufactures those very generators at a scale (and service network) that new entrants cannot replicate quickly.
Generac's CEO Aaron Jagdfeld describes the data center market as, "unlike anything we've seen before," the Q2 numbers appear to back it up. The company received approximately $1 billion in new data center orders in the 90 days ending June 30, or roughly $11 million per day. The $1.6 billion backlog with $1.35 billion scheduled for 2027 means a significant portion of next year's commercial and industrial revenue is already contracted. Management raised full-year data center revenue guidance to $450 million and secured two multi-year hyperscale agreements in a single quarter.
Data centers improve the quality of Generac's earnings in three ways:
- Visibility: Large customer orders and multi-year supply agreements provide a clearer and more reliable revenue pipeline. - Scale: Large-megawatt generators carry significantly larger project values than traditional residential products. - Diversification: Growth becomes less dependent on residential outage activity and consumer discretionary demand.
C&I represented approximately 47% of second-quarter external sales, compared with roughly 41% in the prior-year period. As data-center revenue grows, Generac increasingly resembles a diversified power-infrastructure company rather than a pure residential generator manufacturer.
That distinction is important because infrastructure businesses with visible backlogs and secular growth generally receive higher and more durable valuation multiples than highly cyclical consumer-equipment companies.
The Residential Optionality
The residential segment is no longer the primary reason to own the stock, but it retains valuable upside optionality, especially given retail investors who tend to trade it when there are major weather events - see the 2021 Texas freeze storm.
Second-quarter residential sales declined approximately 2%, yet home-standby generator sales increased enough to offset part of the weakness in portable generators and energy storage. Residential adjusted EBITDA margin reached 34.7%, although roughly nine percentage points came from tariff refunds.
The more important development was that favorable mix and operating efficiencies also supported profitability.
This creates an important change in "the old Generac": the current thesis does not require a major hurricane season, but elevated outage activity could still generate incremental demand, dealer installations, and portable-generator sales.
In other words, the C&I business is what the market cares about, at least in this cycle.
Generac by The Financials
[Chart: Bloomberg]
Generac's financial outlook shows a clear earnings acceleration beginning in 2026, driven by rapid C&I and data-center growth. After declining slightly in 2025, consensus expects revenue to reach approximately $4.94 billion in 2026 and nearly $6.0 billion in 2027. The more important development is the operating leverage: adjusted EBITDA is projected to increase from $690 million in 2025 to more than $1.0 billion in 2026 and nearly $1.2 billion in 2027, supporting a sharp recovery in earnings and cash generation.
- Revenue: Expected to grow 17.4% in 2026 and 21.3% in 2027. - Adjusted EBITDA: Projected to rise from $690 million in 2025 to $1.01 billion in 2026 and $1.19 billion in 2027. - EBITDA margin: Expected to recover from 16.4% in 2025 to 20.5% in 2026. - Adjusted EPS: Forecast to increase from $5.14 in 2025 to $9.75 in 2026 and $11.82 in 2027. - Free cash flow: Expected to reach approximately $353 million in 2026 and $478 million in 2027. - Balance sheet: Approximately $1.33 billion of debt against $265 million of cash, producing enterprise value of roughly $13.0 billion.
Main takeaway: GNRC is entering a new earnings-expansion cycle, with data-center demand producing both faster revenue growth and meaningful operating leverage.
Generac currently has a $500 million share-repurchase authorization, approved on February 9, 2026, for a 24-month period.
Remaining authorization: $500 million as of June 30, 2026
The Company trades at roughly 18.2x forward earnings and 2.7x trailing sales, well below its 2021 peak and near the middle of its post-2022 valuation range. Despite the data-center growth story, the stock's multiple has recently compressed, suggesting earnings expectations, not valuation expansion, are now doing most of the work.
Five-Year Price/Sales and P/E Ratios
[Chart: Bloomberg]
The Technicals
The stock is hovering right on the 200-day moving average and given the +90% run up to start the year this pullback provides a potential area for new longs. For the Fibonacci folks out there, we are also testing the 50% retracement (from the December lows to the June 2026 highs) which already found buyers back in July. This combined with the 200-day could see us begin to consolidate well and make our next leg higher into the back half of the year.
[Chart: Bloomberg]
Conclusion
Generac has moved beyond the early turnaround stage. The earnings inflection is visible, management has raised expectations, and the company has secured meaningful contracted demand.
The story, at this point, boils down to one question: "How big can the C&I business become?"
The $1.6 billion backlog, nearly $700 million of committed 2027 volume and a second hyperscale agreement materially improve the visibility of the next earnings cycle. Meanwhile, the residential business remains profitable optionality rather than the sole driver of the investment case.
Given the rapid rise earlier this year the stock was clearly pricing in the re-rating of this business but now that it's pulled back, it provides an intriguing play near the $200 area. Furthermore, their share buyback authorization remains an option which management can activate at any time.