ABB Tops Order Estimates on Data Center and Utility Demand
(Bloomberg) — ABB Ltd. reported third-quarter orders that surpassed expectations after demand for electric components used by data centers and utilities surged.
Comparable orders in the third quarter jumped 40% to $12.1 billion, the Swiss manufacturer said Tuesday. That beat an average analyst estimates of $11.4 billion.
Separately, the company is pushing on with acquisitions, setting up a joint venture with Mitsubishi Electric Corp for a low-voltage power distribution business in Japan. ABB will pay around $495 million for a 51% stake in the unit.
ABB fell 5% in early trading in Zurich, bringing the decline since the start of the month to over 10%. The drop comes after concerns over the trajectory of the boom in demand related to artificial intelligence rattled markets. The Swiss factory automation firm makes the transformers that enable power grids to supply the centers’ substantial energy needs.
Citigroup’s Martin Wilkie said that while the order beat points to further upside for 2027 and 2028, “we’d see an improvement in market sentiment on the broader AI theme as necessary to drive the shares higher.”
Orders for electrification components were the third quarter’s key growth engine, accounting for 70% of new business. The motion business grew by 14% while automation was stable.
ABB is part of a slew of companies making acquisitions that benefit from the build-out of data centers and demand for artificial intelligence software. French competitor Schneider Electric SE earlier this month agreed to buy PTC Inc. for $22.6 billion to add engineering software for automotive and other industries.
ABB also made a small upward tweak to its revenue forecast and now sees comparable revenue growth in the ”low teens” range. Previously it said revenue might rise in the low double-digit to low teens range.
It generated $1.6 billion in third-quarter free cash flow despite higher capital spending with the firm indicating it’d be disciplined on spending.
“In the current strong market environment it is essential to maintain focus and discipline,” the company said in a statement. ABB is seeking to keep a lid on spending through incremental capacity expansions, more productivity through automation and only using third-party assembly some of the time.
Capital expenditure is trending higher at around $1 billion, though the company doesn’t expect this to rise in the medium-term.
Earlier this year ABB bought British industrial components company Rotork Plc for an enterprise value of around $5.5 billion to expand its electrification and automation businesses, its biggest ever acquisition. Chief Executive Officer Morten Wierod has said ABB has a pot of $13 billion available for additional purchases.
Wierod has streamlined ABB’s portfolio since taking over nearly two years ago to tap into burgeoning investment in data centers and utilities underpinning the AI boom. The Zurich-based manufacturer last year sold its robotics division for more than $5 billion.
(Updates with share price, analyst comment from fourth paragraph.)
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