Vestas Annual Report 2025 – Generating value amidst growing uncertainty

Vestas reported record 2025 revenue of EUR 18.8bn with an EBIT margin before special items of 5.7% and total investments of EUR 1,251m, while Service EBIT was EUR 626m and order intake reached 16.3 GW lifting combined order backlog to EUR 71.9bn. Management proposed a DKK 0.74 per-share dividend and a EUR 150m buyback and issued 2026 guidance of EUR 20–22bn revenue and a 6–8% EBIT margin b.s.i.; the company flagged manufacturing ramp-up extra costs and that Service performance fell short of targets despite meeting revised guidance.

Analysis

Market structure: Vestas (VWS.CO) reporting EUR 18.8bn revenue, 5.7% EBIT and a EUR 71.9bn backlog reinforces suppliers and service providers as near-term winners—Onshore OEMs and service-heavy names capture steadier cashflows while pure developers face margin compression from higher financing costs. Offshore installers and vessel owners see mixed signals: lower Offshore orders in 2025 reduce near-term pull-through for marine services, while a healthy backlog supports stable equipment demand into 2027. Cross-asset: stronger cash flow and buyback/dividend reduce credit risk for Vestas bonds (tighten spreads), limit downside volatility in equity, and modestly lift demand for industrial commodities (steel, copper) over the next 12–24 months.

Risk assessment: Tail risks include large project cancellations (policy reversals or defaulted PPAs), warranty/quality liabilities from offshore ramp-up, or a 100–200 bps jump in European yields that re-prices project economics. Immediate (days) risk is sentiment around the audiocast/Q&A; short-term (weeks–months) risks are order conversion and supply-chain costs; long-term (quarters) hinge on successful Offshore scale-up and Service margin expansion to 15.5–17.5% in 2026. Hidden dependencies: installation vessel availability, magnet/semiconductor supply, and customer financing windows; catalysts are EU policy changes, commodity shocks, or a surprise order cancellation >1 GW.

Trade implications: Favor selective long in VWS.CO sized 2–3% of portfolio given 2026 guide (EUR 20–22bn, 6–8% EBIT) and strong backlog; hedge execution risk with cheap puts or call spreads. Consider pair-trade long VWS.CO / short Siemens Gamesa (SGRE.MC) to play relative execution and service margin differences over 6–12 months. Use options: buy 6–9 month call spreads (caps losses) and sell near-term OTM covered calls to harvest IV when warranted. Rotate 2–4% from pure developers (Ørsted, large IPPs) into equipment & services and short-duration credit to lower duration exposure.

Contrarian angles: Consensus may underweight conversion risk—EUR 71.9bn backlog is not immediate revenue; assume 25–40% conversion annually vs. headline number. If Vestas proves Offshore ramp-up and Service margin targets by Q2–Q3 2026, upside re-rate of 20–35% is plausible; conversely, a single large project failure could erase similar equity value. Historical parallel: past OEM cycles (2016–2018) show rapid margin recovery post-execution fixes, implying concentrated asymmetric upside if management demonstrates operational discipline.

Key Decisions for Investors

• Establish a 2–3% long position in Vestas (VWS.CO) within the next 10 trading days; simultaneously buy 3–6 month puts ~12% OTM sized to cover 50% of the position to limit execution/cancellation risk and reassess after Q1 audiocast (by end-April 2026).
• Implement a relative-value pair trade: long VWS.CO vs short Siemens Gamesa (SGRE.MC) in equal euro notional (target spread capture 15–25% over 6–12 months); cut the trade if the spread tightens >8% or if both report matching positive surprises in margins/orders.
• Buy a 6–9 month VWS.CO call spread (e.g., buy Jul 2026 ~15% OTM call, sell Jul 2026 ~30% OTM call) sized to 1–2% of portfolio to express upside to 2026 guidance with capped downside; alternatively sell 30–45 DTE 8–12% OTM covered calls to collect premium during IV spikes.
• Reduce 2–4% exposure to developer/IPPs sensitive to financing costs (examples: ORSTED.CO, selected RWE.DE holdings) and redeploy into equipment & services suppliers (VWS.CO, NDX1.DE) and short-duration corporate green bonds if spreads exceed sovereign +250bp, rebalancing after Q2 2026 results.