Can GE Vernova's Gas Turbines Make Up for a Collapsing Wind Business?
It's a red flag investors would rather not see waving, but most of them may not have put this shift in its proper perspective.
GE Vernova, a subsidiary of the former General Electric, is experiencing contrasting trends in its wind and gas turbine businesses. While demand for natural gas power turbines is surging, the wind turbine segment is experiencing a significant decline. GE Vernova, spun off from General Electric in 2024, is involved in power production, including wind, gas, hydropower, grid solutions, and nuclear power equipment.
GE Vernova's wind power equipment revenue decreased by 11% year-over-year to $2 billion in Q2, accompanied by a 40% drop in orders for wind turbines. This decline started in 2024 and isn't necessarily a reflection of renewable energy's viability but rather a changing preference for more reliable clean energy sources. However, the natural gas power turbines segment is thriving, with year-over-year revenue growth of 14% to $5.5 billion in Q2 and a 135% increase in orders to $16.7 billion.
The company's biggest challenge currently is a lack of production capacity, which it is working to address. Despite this, GE Vernova's future appears promising, primarily due to its gas turbine business. This growth engine is not only offsetting the decline in wind turbines but also seeing strong demand from artificial intelligence data centers.
These data centers use GE Vernova's natural gas turbines for secondary or primary power, and while AI capital spending might fluctuate, it's unlikely to significantly impact the company's core business. CEO Scott Strazik noted that only 20% of GE Vernova's current power division backlog is from data center customers, with the rest being traditional utility companies that require the equipment regardless of economic conditions.
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