HUBB Q3 Deep Dive: Data Center and Grid Markets Offset Utility Segment Volatility

Electrical and electronic products company Hubbell (NYSE:HUBB) fell short of the markets revenue expectations in Q3 CY2025 as sales rose 4.1% year on year to $1.50 billion. Its non-GAAP profit of $5.17 per share was 3.9% above analysts’ consensus estimates.

Is now the time to buy HUBB? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Hubbell’s third quarter was met with a positive market reaction, driven by improved profitability and strong performance in key business segments, despite falling short of Wall Street’s revenue expectations. Management attributed the quarter’s results to robust organic growth in Electrical Solutions and Grid Infrastructure, while noting that Grid Automation sales faced a significant decline due to project roll-offs. CEO Gerben Bakker emphasized continued strength in utility transmission and distribution markets, and highlighted successful cost management and productivity initiatives that helped offset rising input costs.

Looking ahead, management raised its full-year adjusted earnings guidance and emphasized confidence in continued broad-based organic growth, especially as grid modernization and electrification trends accelerate. Bakker stated that Hubbell is positioned to benefit from “high visibility to robust project pipeline” in substation and transmission, as well as ongoing data center expansion. However, management also cautioned that macroeconomic uncertainty may temper growth in certain industrial markets. The company expects recent acquisitions and ongoing operational improvements to support sustained margin expansion into next year.

Key Insights from Management’s Remarks

Management cited strong execution in Electrical Solutions and Grid Infrastructure, while acknowledging delayed growth in some Utility markets and the impact of recent project roll-offs on Grid Automation.

• Electrical Solutions momentum: The Electrical Solutions segment delivered high single-digit organic growth, supported by successful new product introductions and capacity expansions, particularly for data center applications. Management highlighted that investments in automation and a unified sales strategy enabled margin expansion and operational efficiencies.

• Grid Infrastructure strength: Grid Infrastructure saw high single-digit organic growth, with solid demand across transmission, substation, and distribution. Management noted that order activity in September and October accelerated, signaling an expected step-up in growth for the fourth quarter.

• Grid Automation headwinds: Sales in Grid Automation declined by 18% due to large project roll-offs, which management described as temporary. The company anticipates these headwinds to subside in the next quarter as the business returns to more normalized comparisons.

• Segment unification and productivity: Initiatives to unify the Electrical Solutions segment and streamline operations continued to drive improved productivity and margin expansion. Management cited ongoing restructuring and cost management as instrumental in offsetting inflationary pressures.

• Strategic M&A and leadership transition: Hubbell closed the acquisition of DMC Power, aiming to strengthen its substation offerings and add high-margin products. The quarter also marked the announced retirement of CFO Bill Sperry, with Joe Capozzoli named as his successor, underscoring a focus on leadership continuity and strategic execution.

Drivers of Future Performance

Hubbell’s outlook is anchored by accelerating grid modernization demand, continued data center investment, and operational improvements to drive margin expansion.

• Grid modernization and electrification tailwinds: Management believes ongoing investments in grid hardening, transmission, and substation upgrades will support sustained organic growth, particularly as utilities respond to increasing energy demand and data center interconnection needs.

• Data center and industrial market trends: The company expects continued strength from data center-related electrical products, while cautioning that macroeconomic uncertainty could limit growth in nonresidential construction and heavy industry. Management’s strategy is to focus on high-growth verticals while adapting to slower segments.

• Integration of DMC Power and operational efficiency: The recent DMC Power acquisition is expected to enhance Hubbell’s substation product offerings and contribute to earnings accretion next year. Ongoing productivity initiatives and pricing actions are projected to support margin expansion, although management noted rising input costs and tariffs remain risks.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the pace of demand recovery in Grid Automation and meters, (2) order momentum in Grid Infrastructure and data center verticals, and (3) margin performance following the integration of DMC Power. We will also track any shifts in macroeconomic conditions that could affect industrial and construction markets, as well as the impact of ongoing operational productivity initiatives.

Hubbell currently trades at $468.05, up from $433.83 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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