Breaking Down Generac Holdings Inc. (GNRC) Financial Health: Key Insights for Investors

You're watching Generac Holdings Inc. (GNRC) stock trade around $140.51 in mid-November 2025, a tough pill to swallow for many, especially with the stock down year-to-date. That share price action has a lot of investors defintely nervous, but honestly, the headline numbers from the third quarter 2025 earnings call tell a more nuanced story than just a stock slide. Yes, the Residential side is a drag-Q3 net sales were $1.11 billion, down 5% year-over-year, driven by a nearly 13% decline in residential product sales due to a quiet outage season. But here's the quick math on the opportunity: the Commercial & Industrial (C&I) segment is booming, posting approximately 9% growth and building a data center product backlog that has doubled to over $300 million. The company is guiding for full-year sales to be roughly flat, which means the C&I strength is compensating for the residential weakness, and that's the pivot point you need to understand to decide if the consensus analyst price target of $191.06 is achievable.

Revenue Analysis

You need to know where Generac Holdings Inc. (GNRC) is actually making its money, especially since the market is reacting strongly to recent guidance changes. The direct takeaway for 2025 is a sharp deceleration: the company now expects full-year net sales growth to be approximately flat compared to the prior year, a significant drop from earlier projections. This pivot is all about the Residential segment cooling off, but the Commercial & Industrial (C&I) side is showing real, strategic strength.

Generac Holdings Inc.'s business is split primarily into two segments: Residential Products and Commercial & Industrial (C&I) Products, plus a smaller contribution from services and other items. For the full fiscal year 2025, the analyst consensus pegs total revenue at roughly $4.35 billion. This anticipated flat growth-a 0% year-over-year change-is a direct result of a weaker-than-expected power outage environment, which is the key driver for home standby generator sales.

The story of 2025 is really a tale of two segments. The Residential side, which includes home standby and portable generators, started strong with a 15% year-over-year increase in Q1 2025 sales, hitting $494 million. But that momentum stalled. The C&I segment, which covers industrial generators and energy storage for businesses, is the clear opportunity, with Q3 2025 seeing a solid 9% growth, driven by a surge in data center product sales.

Here's a quick look at how the segments performed in the first half of 2025, before the full impact of the residential slowdown hit in Q3:

The significant change in revenue streams is the shift in growth reliance. Residential sales were the engine, but now C&I is stepping up. In Q3 2025, the C&I segment contributed approximately 32.2% of the total revenue. This is defintely a segment to watch, especially with the C&I backlog doubling to over $300 million, mostly from data center demand. You need to focus your investment thesis less on weather-driven residential sales and more on the structural demand from industrial and commercial power resilience.

• Residential demand is sensitive to power outage frequency.
• C&I growth is accelerating due to data center expansion.
• Full-year revenue growth is now guided to be flat.

This strategic shift highlights the company's long-term vision, which you can read more about in their Mission Statement, Vision, & Core Values of Generac Holdings Inc. (GNRC).

Profitability Metrics

You need to know Generac Holdings Inc.'s (GNRC) profitability is currently under pressure, but the underlying business structure remains healthy. The company's full-year 2025 guidance, updated after the third quarter, points to a net income margin of approximately 6.0%, a significant step down from earlier expectations, driven by a slowdown in the core residential market. This is a classic case of a cyclical business hitting a soft patch.

The good news is that Generac is still outperforming its industry peers on a gross profit basis, meaning its core manufacturing and pricing power is defintely intact. But, the operating leverage (how effectively revenue growth translates to profit) has been a challenge this year, especially as residential sales softened due to historically low power outage activity. You have to look beyond the net profit number to see the whole picture.

Margin Breakdown and Industry Comparison

When we look at the core margins for the trailing twelve months (TTM) leading into late 2025, Generac's gross margin is a clear strength, while its operating and net margins lag the industry average. This tells you the company makes its products efficiently, but selling, general, and administrative expenses (SG&A) and other operating costs are relatively high, squeezing the final profit.

Here is the quick math on where Generac stands against its industry peers, based on TTM data:

The key takeaway is Generac's TTM Gross Profit Margin of 39.45% is substantially higher than the 36.6% industry average, showing a superior cost of goods sold structure. But, the full-year 2025 Net Income Margin guidance of 6.0% is a stark reminder of the operational headwinds that hit the bottom line this year.

Operational Efficiency and Margin Trends

Generac's operational story in 2025 is a tale of two segments. The residential segment, which is highly dependent on power outages, saw a steep volume drop, which hurt manufacturing absorption (spreading fixed costs over fewer units). This is why the gross margin, which was 39.5% in Q1 2025 and 39.3% in Q2 2025, compressed to 38.3% in Q3 2025.

The company is fighting back with a mix shift and cost management. They are seeing strong growth in the Commercial & Industrial (C&I) segment, where sales grew 9% year-over-year in Q3 2025. This includes a massive surge in demand from the data center market, where the large-megawatt generator backlog has doubled to over $300 million.

• Pricing Power: Increased price realization helped offset some cost pressures.
• Tariff Headwinds: Higher tariffs and unfavorable sales mix are still a drag on margins.
• Strategic Growth: The C&I segment's margin expansion is driven by a favorable sales mix, especially in international markets.

This pivot toward C&I and energy technology, including the profitable Ecobee segment, is a deliberate strategy to stabilize margins and reduce reliance on unpredictable weather patterns. You can see their long-term focus here: Mission Statement, Vision, & Core Values of Generac Holdings Inc. (GNRC). This strategic shift is what analysts are banking on for the projected margin expansion over the next few years, where profit margins are forecast to rise from 8.2% to 10.8%.

Debt vs. Equity Structure

You're looking at Generac Holdings Inc. (GNRC)'s balance sheet to figure out how they fund their growth-debt or equity-and that's defintely the right place to start. A company's capital structure tells you a lot about its risk tolerance and financial flexibility. The quick takeaway here is that Generac is managing a moderate and healthy debt load, sitting right in line with industry peers.

As of the third quarter ending September 30, 2025, Generac Holdings Inc. carries a total debt burden of approximately $1.594 billion. This is split between short-term obligations of around $63 million and a much larger long-term debt component of about $1.531 billion. Here's the quick math: the vast majority of their debt is long-term, which is typical for a capital-intensive manufacturing and energy technology business.

The key metric to watch is the Debt-to-Equity (D/E) ratio, which measures financial leverage-how much debt a company uses to finance its assets relative to the value of shareholders' equity. For Generac Holdings Inc., the D/E ratio for the quarter ending September 30, 2025, stood at about 0.54.

This is a strong number. To be fair, the industry average for Electrical Components & Equipment is around 0.5541. Generac is slightly below that benchmark, indicating a conservative approach to leverage compared to its peers. A D/E ratio below 1.0 means the company is primarily funded by equity, not debt, which gives them a cushion if the market turns south.

Generac Holdings Inc. has been active in the debt markets in 2025, which shows a commitment to using debt strategically to fund operations and growth initiatives.

• February 2025 Activity: Moody's Ratings assigned a Ba1 rating to a new $1.0 billion senior secured first lien revolving credit facility and a $700 million senior secured first lien term loan A.
• Credit Rating: S&P Global Ratings maintains an issuer credit rating of 'BB+', which reflects their expectation that leverage will remain in the mid-2x area through 2025.

This balance of debt financing and equity funding is a deliberate strategy. Debt is cheaper than equity right now, especially with a solid credit rating, so using it for growth makes sense. But, they aren't overleveraging. They are using debt to fund things like R&D and expansion into new energy solutions, but they are balancing it with retained earnings and shareholder equity to maintain a low D/E ratio. It's a smart, measured approach to capital allocation.

For a deeper dive into the company's long-term strategic vision that drives this capital allocation, you should check out the Mission Statement, Vision, & Core Values of Generac Holdings Inc. (GNRC).

Liquidity and Solvency

You're looking at Generac Holdings Inc. (GNRC) and wondering if they can cover their near-term bills, which is the core of liquidity. The direct takeaway is that Generac's liquidity position is adequate, but it relies heavily on its inventory, so you need to watch working capital closely. Their cash flow from operations is down, but full-year free cash flow guidance still looks solid.

Let's start with the ratios, the quickest check on short-term financial health. As of mid-November 2025, Generac Holdings Inc.'s Current Ratio sits at about 1.97. That means the company has $1.97 in current assets for every dollar of current liabilities. That's defintely healthy, generally indicating a strong ability to meet obligations due within a year.

However, the Quick Ratio-which strips out inventory, a less liquid asset-is much tighter at 1.02. Here's the quick math: a ratio this close to 1.0 means Generac Holdings Inc. is relying on selling its inventory to cover its short-term debt. This isn't a red flag yet, but it's a yellow one, especially given the inventory build-up we've seen in the cash flow statement.

The trend in working capital confirms this inventory focus. For the trailing twelve months (TTM) ended September 2025, the change in working capital was a negative $-9 million. This small negative change, which was a larger $-69 million for the third quarter of 2025 alone, reflects an increase in inventory levels that is tying up cash. You want to see cash freed up from working capital, not consumed by it. What this estimate hides is the strategic nature of the inventory build-is it in-demand products or slow-moving stock? That matters.

Looking at the Cash Flow Statement for the nine months ended September 30, 2025 (9M 2025) gives us the full picture. Cash flow from operations (CFO) is the engine, and it has slowed down, coming in at $248.7 million for 9M 2025, a decrease of 38.1% from the prior year.

• Operating Cash Flow (9M 2025): $248.7 million.
• Investing Cash Flow (9M 2025): $(115.5) million used, mainly for property and equipment.
• Financing Cash Flow (9M 2025): $(121.3) million used.

The drop in CFO is the primary liquidity concern, driven by that increase in inventory and lower operating income. Still, the company is guiding for approximately $300 million in free cash flow for the full year 2025, which provides a cushion and near-term optionality for investment. The total debt outstanding is manageable at $1.4 billion as of the end of Q3 2025. Overall, the company is liquid, but the quick ratio and inventory levels are where the risk lies. For a deeper dive into the company's strategic direction, check out Breaking Down Generac Holdings Inc. (GNRC) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking at Generac Holdings Inc. (GNRC) and asking the core question: Is this stock a buy, a hold, or a sell right now? Based on the latest 2025 fiscal year data and market trends, the consensus suggests a 'Buy,' but the stock's valuation metrics are defintely not cheap, especially when stacked against its peers.

The market is pricing in significant future growth, which is why the stock trades at a premium. For instance, the trailing Price-to-Earnings (P/E) ratio is around 26.68, but the forward P/E, which uses 2025 earnings estimates, drops to a more palatable 18.68. This forward-looking metric is what analysts are focused on, but it still requires Generac to hit its growth targets.

Here's the quick math on key valuation multiples as of late 2025, which helps map out the risk of a potential overvaluation:

• Price-to-Book (P/B) Ratio: The P/B ratio is approximately 3.69 (as of Q3 2025). The industry median is closer to 2.39, meaning you are paying a premium for Generac's net assets, which is typical for a high-growth technology-driven industrial company.
• Enterprise Value-to-EBITDA (EV/EBITDA): The forward EV/EBITDA is around 11.7x. This is a cleaner metric because it strips out capital structure differences, and it suggests a more reasonable valuation compared to its historical highs, but still requires strong earnings before interest, taxes, depreciation, and amortization (EBITDA) execution to justify.
• Price-to-Earnings (P/E) Ratio: The 2025 estimated forward P/E sits at 18.68.

The stock price trend over the last 12 months tells a story of volatility and a necessary correction. Generac Holdings Inc. has seen its share price fall by approximately 20% to 25% over the past year, trading between a 52-week low of $99.50 and a high of $203.25. This decline reflects the slowdown in the residential generator market, which was a huge tailwind during the pandemic and early 2020s, plus the impact of a Q3 2025 earnings and revenue miss. The stock is currently trading near the $140-$147 range.

A note on shareholder return: Generac Holdings Inc. is a growth stock, not an income stock. The company does not pay a regular dividend, so the dividend yield and payout ratio are both 0.00%. All capital is reinvested back into the business, primarily to expand the Commercial & Industrial (C&I) segment and energy storage solutions, which is where the future growth lies.

Wall Street's outlook remains cautiously optimistic. The analyst consensus is a clear Buy rating, based on the input of 27 analysts. The average consensus price target is set at approximately $177.84, which implies a significant upside from the current price. What this estimate hides, however, is the risk of continued residential market softness and the execution risk in scaling the newer energy technology segments.

If you want a deeper dive into the operational risks and opportunities that underpin this valuation, you should review our full report at Breaking Down Generac Holdings Inc. (GNRC) Financial Health: Key Insights for Investors.

Risk Factors

You're looking at Generac Holdings Inc. (GNRC) and seeing a company at a critical inflection point. While the long-term story around grid fragility and data center demand is compelling, the near-term risks, especially those tied to the 2025 fiscal year performance, are real and demand a clear-eyed view. We've seen the company miss its third-quarter expectations and cut its full-year outlook, so let's break down where the pressure points are.

The biggest immediate concern is the softness in the Residential segment, which is Generac's core. In the third quarter of 2025, residential product sales decreased approximately 13% compared to the prior year, a direct result of below-average power outages. Simply put, fewer storms mean less panic-buying of home standby generators. This operational headwind directly impacted their bottom line, with Q3 2025 non-GAAP earnings per share coming in at $1.83, missing the analyst consensus of $2.25. That's a significant miss.

This residential slump forced a strategic revision to the company's 2025 outlook. They now expect full-year net sales to be approximately flat compared to the prior year, a noticeable step down from their earlier guidance that anticipated growth. Here's the quick math on the financial squeeze:

• Q3 2025 Revenue: $1.11 billion (missed the $1.20 billion forecast).
• Q3 2025 Adjusted EBITDA: $193 million (down from $232 million a year prior).
• Full-Year 2025 Adjusted EBITDA Margin Guidance: Revised down to approximately 17.0% (from the prior 18-19% range).

The company's stock volatility, indicated by a beta of 1.61, also means any bad news hits harder than the general market. Plus, the contracting residential solar market (part of their clean energy push) remains a relevant longer-term risk for their diversification efforts.

External and Operational Risks

Beyond the weather-driven residential cycle, Generac Holdings Inc. faces significant external risks, primarily from trade policy. The ongoing impact of tariffs, including continued 30% tariffs on China and 10% on other countries, creates a persistent margin headwind. This tariff uncertainty, especially with incremental tariffs on steel and copper factored into the second half of 2025, adds complexity to their global supply chain (the logistics of getting parts where they need to go).

To be fair, the company is fighting back. Their mitigation strategy is clear and multi-pronged:

• Tariff Offset: Implementing higher pricing and executing various supply chain initiatives and cost reduction efforts to fully offset the estimated impact of these tariffs.
• Strategic Diversification: Aggressively targeting the high-growth Commercial & Industrial (C&I) data center market. They're seeing early success here, with a growing backlog for large megawatt generators, which was above $150 million in Q2 2025. This is a crucial counterweight to the residential weakness.
• Product Innovation: Launching the next-generation home standby lineup, including a new 28kW model, to stimulate demand even in a low-outage environment.

The C&I segment is a mixed bag, still showing softness in shipments to rental equipment customers, but the data center opportunity is defintely a bright spot. They are also focused on financial stability, having repurchased 716,685 shares for approximately $97 million in Q1 2025, showing a commitment to shareholder value even amid operational challenges. You can read more about their core strategy here: Mission Statement, Vision, & Core Values of Generac Holdings Inc. (GNRC).

Here is a summary of the core near-term risks and their financial impact:

The key action for you is to watch the conversion of that data center backlog into revenue over the next few quarters. That will tell us if the strategic pivot is strong enough to overcome the residential headwind.

Growth Opportunities

You're looking at Generac Holdings Inc. (GNRC) and wondering where the real money will be made next year. The short answer: it's a pivot from the residential generator boom to the massive, mission-critical power needs of the data center market. That's the defintely the biggest opportunity.

While the residential segment, the company's historical backbone, is still important, the growth engine has shifted. The company's final guidance for the 2025 fiscal year, updated in October, projects net sales to be essentially flat, a significant drop from the initial expectation of a 3-7% increase. This is due to softer-than-expected residential demand, largely from a weak power outage environment. But that flat revenue hides a huge strategic shift.

• Data Centers: This is the new frontier, a potential $5 billion market opportunity by 2026.
• Clean Energy: Expanding the PWRcell and PWRview ecosystems to capture the decentralized grid trend.
• Product Innovation: Launching new, high-efficiency models like the 28kW air-cooled home standby generator.

The Data Center Pivot: A Multi-Billion-Dollar Backlog

The most compelling near-term opportunity is Generac's aggressive push into the Commercial & Industrial (C&I) data center market. The demand for reliable backup power for hyperscale and colocation data centers is unprecedented. Generac is leveraging its decades of industrial expertise to secure large contracts, with a global backlog for large-megawatt generators reaching over $150 million by the second quarter of 2025. Here's the quick math: securing even a fraction of the estimated $5 billion market opportunity by 2026 would fundamentally change the revenue mix.

The company's competitive advantage in this sector is speed. Generac has demonstrated the ability to offer lead times of approximately 42-45 weeks for fully packaged data center generators, which is a massive advantage over competitors whose lead times can stretch to 75-80 weeks. In a market where time-to-deployment is everything, that shorter lead time is a powerful sales tool.

2025 Financial Outlook: A Realistic View

The full-year 2025 financials reflect the residential headwind but also the margin discipline. The latest guidance, following the Q3 2025 results, shows a realistic, but constrained, near-term picture. What this estimate hides is the future revenue from the data center backlog, which will mostly be realized in 2026 and beyond.

The revised Adjusted EBITDA margin of 17% is still healthy, showing the company's success in offsetting tariff headwinds and managing supply chain costs. They are using pricing strategies to fully offset the cost of tariffs, which is crucial for margin resilience.

Strategic Initiatives and Competitive Edge

Generac is not just about generators anymore; it's an energy technology solutions provider. The strategic pivot to clean energy, including the PWRcell and the new PWRmicro microinverter, positions them to capitalize on the shift to a more resilient and decentralized grid. This is a long-term play, but it's already showing traction, driving growth in residential energy technology sales that partially offset the softness in traditional home standby units.

Also, the company is securing key partnerships, like the one with Highland Homes to integrate generators into new Texas homes, and a $50 million award from the U.S. Department of Energy to support grid resilience. These moves strengthen their distribution and validate their role in the evolving energy landscape. Generac's strong brand recognition and expansive dealer network remain its core competitive moat, especially in the residential market. You can read a more detailed breakdown of the company's financial health here: Breaking Down Generac Holdings Inc. (GNRC) Financial Health: Key Insights for Investors.