GE Vernova Q4'25 vs Q1'26 — Delta analysis
Purpose: find what weakened, went silent, or decelerated between Q4 2025 (released 2026.01.28) and Q1 2026 (released 2026.04.22). GEV's Q1 headline looks enormous (reported net income $4.75B, FCF $4.79B, guidance raised). The job of this note is to separate operational acceleration from accounting gains and from seasonal timing.
1. Headline comparison
| Metric | Q4'25 | Q1'26 | QoQ | Direction |
|---|---|---|---|---|
| Revenue | $11.0B | $9.3B | −15% | Seasonal (Q1 always lowest) |
| Revenue YoY org | +2% | +7% | Accelerating | |
| Orders YoY org | +65% | +71% | Accelerating | |
| Backlog Q-end | $150B | $163B | +$13B | Accelerating |
| Adj EBITDA | $1.16B | $0.90B | −22% | Seasonal |
| Adj EBITDA margin | 10.6% | 9.6% | −100bp | Seasonal |
| Reported net income | $3.67B | $4.75B | +29% | Both have one-time items |
| FCF | $1.81B | $4.79B | +165% | Huge working-capital swing |
| Cash balance | $8.8B | $10.2B | +$1.4B | Despite $5.3B Prolec cash outflow |
The revenue/margin sequential decline is seasonal — Q4 is always GEV's biggest quarter (FY'25 revenue: Q1 $8.0B + Q2 $8.8B + Q3 $10.2B + Q4 $11.0B). Margins compress in Q1 because of equipment delivery mix. This is normal.
The leading indicators (orders, backlog, gas slot-reservations) continue to accelerate. So the operational story is real and intact.
2. The two one-time items that dominate reported net income
Both Q4 2025 and Q1 2026 reported GAAP net income figures are inflated by different, unrelated non-cash items. Readers should not compare them on GAAP-basis directly.
Q4 2025: $3.67B GAAP net income includes $2.9B one-time tax benefit from a U.S. Deferred Tax Asset (DTA) valuation allowance release. The reversal reflects management's judgment that future taxable income is sufficient to realize accumulated DTAs. Accounting gain, no cash impact. GAAP diluted EPS $13.39.
Q1 2026: $4.75B GAAP net income includes $4.5B pre-tax M&A gain — principally $3.99B from remeasuring the previously-held 50% equity interest in Prolec GE to fair value when the other 50% was acquired Feb 2, 2026 (ASC 805 step-acquisition treatment). Also $330M pre-tax gain from Proficy software sale to TPG. Both non-cash accounting gains. GAAP diluted EPS $17.44 would be roughly $3-4 after stripping out these items.
The more comparable underlying measure is Adjusted EBITDA, which adjusts for these items. Q4'25 $1.16B vs Q1'26 $0.90B — the seasonal decline.
This is why GEV explicitly discusses Adjusted EBITDA as the headline metric. The GAAP EPS comparison is nearly meaningless.
3. Segment-level: what accelerated, what's holding, what's worsening
Power — accelerating on gas turbine orders, margin stable
Q4'25 orders +77% organic vs Q1'26 +59% organic — appears to decelerate, but this is a comparison vs base effects. Absolute order dollars: Q4 $11.7B vs Q1 $10.0B. Gas Power equipment backlog + slot reservations:
- 2025 Q1-end: 33 GW / 29 GW slot
- 2025 Q3-end: ~55 GW total
- 2025 Q4-end: 83 GW total (40 GW backlog + 43 GW slot)
- 2026 Q1-end: 100 GW total (44 GW backlog + 56 GW slot)
- 2026 YE target (raised): "at least 110 GW"
17 GW sequential increase in one quarter. Target was implicitly ~105 GW entering Q1; raising to 110 GW signals confidence. Note: "slot reservation" is softer than firm orders (customer commitments that convert over 2-4 years), but backlog conversion ratios have been consistent.
Margin: Q4'25 16.9% → Q1'26 16.3%. Small QoQ decline, +470bp YoY. The FY'26 segment guide was raised from 16-18% to 17-19%.
Electrification — the big inflection, $2.4B data center orders alone
This is the most dramatic accelerating segment:
- Q4'25 orders $7.4B (+50% org) → Q1'26 $7.1B (+86% org)
- Book-to-bill Q1'26 ≈ 2.5x
- Margin Q4'25 17.1% → Q1'26 17.8%
- Q1 alone booked $2.4B in data center equipment orders — "more than all of 2025"
The $2.4B single-quarter data center order figure is the most structural signal in today's release. If 2025 full-year data center equipment orders were ~$2.4B, Q1'26 matched that in 90 days. The annualized run rate is roughly 4x 2025.
Prolec GE contribution: acquisition closed Feb 2, 2026, so Q1 has ~2 months of consolidated revenue ($486M of acquisition revenue; $5B of Prolec backlog added to the $163B total). FY'26 Electrification guidance raised:
- Revenue: $13.5-14.0B → $14.0-14.5B (+$500M midpoint)
- EBITDA margin: 17-19% → 18-20% (+100bp)
Wind — losses deepened, not stabilizing
| Metric | Q4'24 | Q4'25 | Q1'25 | Q1'26 |
|---|---|---|---|---|
| Revenue | $3.1B | $2.4B | $1.85B | $1.43B |
| EBITDA | +$19M | −$225M | −$146M | −$382M |
| Margin | +0.6% | −9.5% | −7.9% | −26.7% |
Q1'26 losses are 2.6x larger YoY and the margin is the worst in recent memory. Orders +85% organic sounds good but off an extremely low Q1'25 base ($640M → $1.2B). Management's own FY'26 Wind guidance: organic revenue down low-double-digits, ~$400M of segment EBITDA losses. Q1 already posted $382M of that.
Two concurrent causes:
- Onshore Wind: low equipment deliveries (consequence of soft orders in H1'25); margins compress on volume deleverage.
- Offshore Wind: contract losses — specifically on Dogger Bank A (UK) and Vineyard Wind (US) installations. Fixed-price contracts signed before tariff/supply-chain inflation now realizing losses.
- Tariffs: Section 232 steel / turbine component impact.
The "$400M full-year losses" guide implicitly means Q2-Q4 combined should be $0-$20M of losses — i.e., Wind losses stop within Q1. Possible if Q1 front-loaded contract loss provisions, but the trend line is worrying.
4. Capital deployment — execution is real and expensive
Capital actions in Q1'26:
- $5.3B cash paid for remaining Prolec 50% stake (Feb 2)
- $2.6B senior notes issued (IG rating BBB/BBB+)
- $1.3B share buybacks at avg $720/share — vs 2025 avg buyback price $406
- $0.50 dividend paid, another $0.50 declared
- $0.6B Proficy software sale to TPG (cash inflow)
- $0.2B China XD Electric 2% stake sale
- $0.4B capex (annualized $1.6B; on $6B 2025-28 commitment)
- $0.3B R&D
Despite the $5.3B Prolec outflow, cash balance went UP from $8.8B to $10.2B because:
- $4.8B FCF generation (largest single-quarter ever)
- $2.6B notes issuance
- $0.8B in asset sales (Proficy + China XD)
- Offset by $5.3B Prolec + $1.3B buybacks + $0.3B dividends ≈ $6.9B outflows
Note on buyback price: Repurchasing at $720 avg in Q1'26 vs $406 avg in 2025 reflects stock doubling. The buyback authorization was increased to $10B in December 2025. Capital allocation discipline at elevated prices is a live question — company is buying at prices 5x IPO (April 2024).
5. Guidance raise — genuine, with composition nuance
| Metric | Q4'25 initial 2026 guide | Q1'26 updated 2026 guide | Δ |
|---|---|---|---|
| Revenue | $44-45B | $44.5-45.5B | +$500M midpoint |
| Adj EBITDA margin | 11-13% | 12-14% | +100bp |
| FCF | $5.0-5.5B | $6.5-7.5B | +$1.5B midpoint (huge) |
| Power org rev | +16-18% | +16-18% | unchanged |
| Power EBITDA margin | 16-18% | 17-19% | +100bp |
| Elec revenue | $13.5-14.0B | $14.0-14.5B | +$500M midpoint |
| Elec EBITDA margin | 17-19% | 18-20% | +100bp |
| Wind rev | −LDD org | −LDD org | unchanged |
| Wind EBITDA loss | ~$400M | ~$400M | unchanged |
The FCF raise (+$1.5B) is the biggest surprise. Power/Elec margin raises and Electrification revenue raise are substantive. Wind is unchanged on both axes — meaning the $400M loss expectation wasn't revised up despite Q1 already hitting $382M.
Interpretation: either (a) Q1 front-loaded Wind contract losses and Q2-Q4 settle at near-breakeven, or (b) the full-year loss estimate is at risk. Management's guidance affirmation suggests (a), but the Q1 pattern is close to the full-year budget in one quarter.
6. Disclosure changes vs Q4 2025
Unlike Vertiv (which removed orders disclosure this quarter), GEV retained full orders disclosure. Backlog continues to be disclosed in detail (segment-by-segment, equipment vs services). Slot reservation agreements — a unique GEV disclosure for gas turbines — continue to be separated from firm backlog. This is transparent.
One subtle change: GEV realigned business unit reporting effective Jan 1, 2026. 2025 segment financials were re-stated to the new structure (linked in the press release). This is disclosed but complicates multi-year trending for readers doing their own analysis.
7. The two findings that most matter
-
GAAP earnings are optically inflated by non-cash accounting gains both quarters — $2.9B DTA release in Q4'25, $4.5B Prolec remeasurement in Q1'26. The more honest headline is Adjusted EBITDA (Q1'26 $896M, +96% YoY), not GAAP net income $4.75B. Press coverage that leads with "$17.44 EPS" misleads.
-
Wind losses accelerating into full-year budget in Q1 alone — $382M loss in Q1 against a $400M full-year guidance. Either Q1 front-loaded the worst or the guidance is fragile. Q2 commentary on this one segment matters more than anything else for full-year credibility.
8. What's genuinely strong
- Gas turbine backlog + slot reservations 83 → 100 GW single quarter; target 110 GW YE26 raised. Hard to fake physical equipment commitment at this scale.
- Electrification $2.4B single-quarter data center equipment orders exceeding full-year 2025.
- FCF $4.8B exceeding full-year 2025 FCF of $3.7B (even if partly working-capital timing).
- Orders +71% organic accelerating from Q4's +65%.
- Backlog +$13B sequential to $163B.
- 2026 guidance raised across revenue, margin, and FCF.
- Prolec acquisition closed on schedule with cash + debt financing at IG rating.