Vestas Wind Earnings Show Strength Amid Transition

Vestas Wind ((VWDRY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Vestas Wind’s latest earnings call struck an overall optimistic tone as management highlighted record revenue, rising margins and cash generation, while openly acknowledging pressure points in Service and Offshore. The mood was confident but measured, with leadership stressing that the balance sheet strength and backlog depth give them room to fix operational weak spots through 2026.

Record Revenue and Improved Profitability

Vestas reported 2025 revenue of EUR 18.8 billion, a 9% year-on-year increase supported by solid execution across Power Solutions. Gross profit reached an all-time high of EUR 2.5 billion, lifting the EBIT margin before special items to 5.7%, up 1.4 percentage points and signaling healthier underlying economics in the core business.

EPS Surge and Strong ROCE

Earnings per share climbed 60% to EUR 0.8, underscoring the earnings leverage that is now coming through the P&L. Return on capital employed improved to 11.8%, showing that the company is extracting more value from its asset base and disciplined capital deployment after years of margin rebuild.

Backlogs and Order Intake Hit New Highs

Full-year order intake reached 16.3 GW, feeding record order backlogs that underpin multi‑year visibility. Power Solutions backlog rose to EUR 33.2 billion and the Service backlog grew to EUR 38.7 billion despite a roughly EUR 1.9 billion foreign‑exchange headwind, giving investors comfort on future revenue streams.

Power Solutions Momentum and Stable Pricing

In the fourth quarter, Power Solutions orders totaled 6.5 GW, including a large 828 MW onshore deal in Brazil and a 390 MW offshore project in Korea that highlight geographic and segment diversification. Average selling price held steady at EUR 1.01 million per MW, suggesting that competitive pressures have not yet forced Vestas to discount to win volume.

Robust Cash Generation and Net Cash Fortress

Operating cash flow reached EUR 1.3 billion in the fourth quarter, with adjusted free cash flow of EUR 872 million even after significant ramp‑up and warranty activity. After funding dividends and buybacks, Vestas ended the year with a net cash position of EUR 1.2 billion, providing a sizeable buffer against market volatility and execution risk.

Capital Returns and Refined Capital Framework

Management doubled down on shareholder payouts with a proposed dividend and an immediate EUR 150 million share buyback. The updated capital policy targets net interest‑bearing debt to EBITDA between -1x and +1x while committing to return at least 40% of net profit over time via dividends and repurchases, tying distributions directly to earnings growth.

Warranty and Quality Metrics Improve

Warranty costs fell to 3.2% of revenue for the year, half the 2022 level and the lowest in five years, as large legacy issues rolled off and repairs were completed. The lost production factor also improved, signaling that turbines are operating more reliably in the field and reducing future drag on profitability.

Sustainability and Safety Progress

Vestas highlighted that turbines produced in 2025 are expected to avoid about 463 million tonnes of greenhouse gas emissions over their lifetime, reinforcing the firm’s role in the energy transition. It also supplied 22,000 tonnes of low‑emission steel and reported a TRIR of 2.7 with no fatalities, pointing to a more mature safety culture.

Service Revenue Decline and Underperformance

The main blemish was Service, where revenue declined 16% year-on-year and performance fell short of internal ambitions despite meeting revised EBIT guidance. Extra costs at specific sites hit fourth‑quarter Service margins, raising questions about execution and contract mix in what is supposed to be a stable, high‑margin line.

Offshore Ramp-Up Costs Weigh on Margins

Vestas is investing heavily to scale its Offshore business, and that ramp came with clear near‑term pain in the quarter. Manufacturing start‑up costs and higher depreciation helped push the Q4 EBIT margin before special items down to 9.3%, a 3.1‑point drop versus last year, amplifying the profitability drag from the weaker Service performance.

Restructuring and Special Items Hit Q4

The ongoing Operating Model Reset translated into EUR 56 million of negative special items in the quarter, including redundancy costs and non‑cash impairments tied to cutting about 900 positions. Management framed the restructuring as necessary to simplify the organization and align costs with demand, but investors should expect some continued disruption and charges.

Q4 Warranty Consumption Spike

Warranty consumption in Q4 reached EUR 251 million, with warranty cost in the quarter at EUR 207 million or 3.3% of revenue, largely due to closing out major repair campaigns. While this temporarily pressured cash and margins, the company argued that it clears a backlog of issues and supports the downward trajectory of warranty intensity going forward.

Service Turnaround Only Halfway

Management described the Service recovery plan as only halfway complete, with the program extending through 2026 and multiple headwinds still in play. Unit cost inflation, tariff and material indexation, plus operational inefficiencies are all weighing on margins, making Service a key execution swing factor for future profitability.

Cash Flow Variability Remains a Feature

Despite strong full‑year cash metrics, fourth‑quarter operating cash flow dipped versus the prior year as warranty consumption and working‑capital movements turned less favorable. The company highlighted that this volatility is inherent in project‑based businesses and cautioned investors to focus on full‑year cash trends rather than quarter‑to‑quarter noise.

Market and Execution Risks Persist

Management flagged several external risks, including geopolitical and trade tensions, permitting bottlenecks and auction design uncertainty in some markets, all of which can delay projects and disrupt pricing. Regional supply‑chain issues were also cited as potential sources of cost overruns and schedule slippage, underlining that the macro backdrop for wind remains challenging.

Painful but Ongoing Organizational Simplification

The workforce reductions and rightsizing tied to the Operating Model Reset illustrate that Vestas is still reshaping its organization for a tougher, more competitive market. Leadership signaled that further simplification and rightsizing are likely, implying additional restructuring costs and near‑term cultural strain even as the company seeks long‑term efficiency gains.

Forward-Looking Guidance and Outlook

For 2026, Vestas guided revenue of EUR 20–22 billion and an EBIT margin before special items of 6–8%, with Service margins seen between 15.5% and 17.5% and capex around EUR 1.2 billion. Management reiterated its balance‑sheet and payout framework, arguing that strong backlogs, healthy working capital and a net cash position of about EUR 1.2 billion provide the foundation to meet these targets while continuing substantial capital returns.

Vestas’ earnings call painted the picture of a company that has regained financial momentum but still faces execution tests in Service, Offshore and organizational restructuring. For investors, the core positives are rising margins, robust backlogs and disciplined capital returns, while the key watchpoints are Service margin recovery, offshore profitability and the management of cash flow volatility through the next investment cycle.