Legrand lifts 2025 margin outlook as data centres fuel growth

Legrand (LEGD.PA) has raised its 2025 operating margin outlook to between 20.5% and 21% after reporting first-half core earnings and sales that significantly exceeded market expectations. This strong performance was entirely driven by its data centre business, which saw 9% organic sales growth in the first half and now accounts for nearly a quarter of total sales, with revenue surging nearly sevenfold since 2018 due to robust AI-driven infrastructure demand. The company projects data centre revenue to surpass 2 billion euros by 2025 and reaffirmed its 2030 targets, anticipating reaching the upper end of its approximately 15 billion euro revenue range.

Analysis

Legrand (LEGD.PA) has demonstrated strong operational performance and strategic positioning, driven by the secular growth in data centre infrastructure. The company's first-half results surpassed analyst expectations, with adjusted EBIT reaching 1 billion euros against a 964 million euro consensus and sales of 4.77 billion euros exceeding the 4.66 billion euro forecast. Critically, the entire 9% organic sales growth was attributed to its data centre business, which now constitutes nearly a quarter of total sales and has seen its revenue surge almost sevenfold since 2018. This momentum, fueled by AI-related investments, underpins the decision to raise the 2025 adjusted operating margin guidance to a range of 20.5% to 21%. Further strength is evidenced by a 21.6% sales increase in the U.S., its largest market. While the company maintains a positive long-term outlook, aiming for the upper end of its 15 billion euro revenue target for 2030, a note of caution exists in its core residential business, where a significant recovery is not anticipated before 2026.

Key Decisions for Investors

• Investors should recognize Legrand's successful pivot to becoming a key supplier for the AI infrastructure build-out, as its data centre division is now the primary growth engine, justifying a positive re-evaluation of the company's earnings potential.
• It is prudent to monitor the performance of the core residential segment, as management's cautious outlook for a recovery before 2026 presents a potential drag on overall growth that could offset some of the data centre momentum.
• Given the strong H1 results and ambitious 2030 revenue targets, investors should assess the company's execution risk and whether the current stock valuation fully prices in the high expectations for continued, multi-year growth.