Generac Holdings reported a robust second quarter on Wednesday, with adjusted earnings of $2.91 per share, as the company continues to benefit from a surge in data center construction driven by artificial intelligence workloads. The maker of backup generators and power equipment said it added roughly $1 billion in new orders since its last update, lifting its backlog across both large hyperscale builders and smaller operators.
Data centers can't afford downtime
Data centers require uninterrupted power to keep servers running, and the rise of AI has dramatically increased the energy demands of these facilities. Operators are investing heavily in backup power systems, including large generators, switchgear, and related electrical gear, to ensure reliability. Generac's Commercial & Industrial segment, which serves this market, saw revenue climb 29% to $556.5 million in the quarter.
The company noted that demand is coming from both ends of the market: the biggest cloud players building massive hyperscale data centers, as well as smaller operators expanding their facilities. This broad-based demand is a key driver of the $1 billion in new backlog, which represents orders that have been placed but not yet fulfilled.
This trend is not unique to Generac. Other companies in the power infrastructure space are also seeing a boost from data center expansion. For instance, FirstEnergy reported a 30% surge in data center demand since the first quarter, while Nexans raised its 2026 profit target on the back of North American electrification demand.
What it means for investors
Generac's results highlight a growing theme in the markets: the infrastructure buildout required to support AI is creating opportunities beyond just chipmakers and cloud providers. Companies that supply the physical backbone of data centers—power equipment, cooling systems, and electrical components—are seeing sustained demand.
The company maintained its full-year 2026 sales outlook, suggesting management sees the current momentum as durable rather than a one-time spike. For everyday investors, this signals that the AI boom is translating into real, measurable revenue for industrial companies, not just tech giants.
However, investors should be aware that this sector is not immune to broader economic risks. Rising interest rates can increase borrowing costs for data center operators, potentially slowing expansion plans. Additionally, copper prices have slipped recently as concerns about AI demand and Federal Reserve rate bets weigh on sentiment, which could affect the cost of electrical components.
Broader context: AI infrastructure spending
The surge in data center construction is part of a larger wave of capital expenditure by tech companies. Major cloud providers like Amazon, Microsoft, and Google have announced billions of dollars in spending on new data centers to handle AI workloads. This has created a ripple effect across the supply chain, benefiting companies like Generac that provide the equipment needed to power and protect these facilities.
Generac's results also come amid a mixed earnings season for industrial companies. Some have reported headwinds from tariffs and rising costs, but those tied to data center demand have generally fared better. For example, Ford raised its profit forecast as truck demand offset tariff and EV costs, while Veralto raised its 2026 profit outlook on steady water utility demand.
Looking ahead
Generac's $1 billion in new backlog provides good visibility into future revenue, as these orders will be fulfilled over the coming quarters. The company's ability to maintain its 2026 sales outlook suggests confidence in the sustainability of data center demand, even as some investors worry about a potential slowdown in AI spending.
For investors, the key takeaway is that the AI revolution is not just about software and chips—it's also about the physical infrastructure that makes it all possible. Companies like Generac are well-positioned to benefit from this trend, but as with any investment, it's important to consider the broader economic environment and potential risks.
