Earnings call transcript: Vestas Q2 2025 sees strong revenue growth, challenges in order intake

Vestas Wind Systems reported strong Q2 2025 revenue growth of 14% to €3.7 billion, yet experienced a significant 44% year-over-year decline in order intake, largely attributed to customers awaiting policy clarity in the U.S. Profitability remained challenged with a 1.5% EBIT margin, primarily due to high offshore manufacturing ramp-up costs in Poland, expected to peak in Q4 2025. Despite this, management noted a strong start to Q3 with U.S. orders and maintained its full-year 2025 guidance, anticipating a stronger second half driven by a clearer U.S. policy outlook and robust onshore performance, while InvestingPro indicates the stock is currently undervalued.

Analysis

Vestas Wind Systems A/S presented a mixed operational picture in its Q2 2025 results, characterized by strong top-line growth set against concerning order and profitability metrics. Revenue increased a robust 14% year-over-year to €3.7 billion, but this was overshadowed by a 44% decline in order intake to 2 gigawatts, a drop management attributed to customers awaiting policy clarity, particularly in the United States. Profitability remains under significant pressure, with the EBIT margin standing at a thin 1.5%, primarily due to substantial ramp-up costs for offshore manufacturing in Poland. Management has indicated these costs are expected to peak in Q4 2025. Despite the weak Q2 orders, the company maintained its full-year 2025 guidance for revenue between €18-€20 billion and an EBIT margin of 4-7%, signaling strong confidence in a back-end loaded year. This optimism is supported by a strong start to Q3, with order intake already surpassing the entire Q2 volume, including approximately 1.5 gigawatts from the U.S. following improved policy direction. The company's financial health appears stable, evidenced by a strong Altman Z-Score of 4.26, and its long-term service recovery plan continues, aiming to improve profitability through 2026.

Key Decisions for Investors

• Investors should weigh the sharp 44% decline in Q2 order intake against management's maintained full-year guidance, as hitting the 4-7% EBIT margin target now hinges critically on a significant order and execution ramp-up in the second half of the year.
• Monitor the trajectory of offshore ramp-up costs, which compressed the Q2 EBIT margin to 1.5%, and watch for confirmation that these expenses peak in Q4 2025 as guided, as this is a key catalyst for future margin expansion.
• Consider the positive outlook for the U.S. market, where clearer policy is already driving a Q3 order recovery, as a potential leading indicator for sustained demand into the end of the decade.
• Assess potential supply chain risks related to the Chapter 11 filing of key blade supplier TPI Composites, even as Vestas management expressed confidence in operational continuity.