Eaton raises outlook as data center demand drives record Q2
Eaton’s better-than-expected second-quarter results and raised guidance show that the AI data center buildout is sustaining robust demand despite recent market volatility in the hardware sector.
Eaton posted record second-quarter revenue of $8.53 billion, surpassing analyst estimates of $8.13 billion, while adjusted earnings per share hit $3.15 against a $3.07 forecast. The power management firm immediately raised its full-year outlook, projecting organic growth of 11% to 13% and adjusted EPS between $13.40 and $13.60. Full-year margins are now expected to range from 24.1% to 24.5%.
The results provided a clear counterpoint to recent jitters in the AI hardware sector, which were partly triggered by a disappointing quarter from rival Vertiv. Eaton's electrical equipment segment, which supplies data centers, delivered an 18% organic growth rate and a book-to-bill ratio of 1.2x. Total U.S. data center backlog has expanded to 307 gigawatts, representing 15 years of demand at 2025 build rates.
Crucially for investors seeking predictable returns, roughly 80% of that data center backlog will not convert to revenue until 2028 or later. That long tail provides significant visibility into future earnings. Ruiz noted that this extended revenue timeline is a major positive for the business.
A key growth driver is the March acquisition of Boyd Thermal, which adds liquid cooling capabilities to Eaton's portfolio. Management raised Boyd's annual sales estimate to $1.8 billion from $1.7 billion, with CEO Paulo Ruiz stating he would be "shocked" if the company fails to beat that guidance. Boyd "cut their teeth; they developed their pedigree in aerospace," Ruiz said. "So it is very, very stringent conditions technically, where failure is not an option. So they bring that DNA to the data center environment."
To optimize its portfolio, Eaton is shedding its lowest-performing unit. The company agreed to combine its mobility division with auto parts manufacturer Dana in a $5.1 billion deal set to close in the first quarter of 2027. Structured as a Reverse Morris Trust transaction, the move avoids a large corporate tax bill while immediately lifting Eaton's overall organic sales and profit margins.
For the current third quarter, Eaton expects organic growth of 13.5% to 15.5%, beating the 11.7% consensus estimate. Segment margins are forecast to expand to between 24.6% and 25%, with adjusted EPS expected between $3.46 and $3.56.
