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Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.31pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.08pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.70pp
Lean +
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
fail+2
adversely+1
claims+1
failure+1
decline+1
Positive rising
success+2
opportunities+1
adequately+1
satisfy+1
Risk Factors (Item 1A)
12,946 words
Item 1A. Risk Factors
An investment in our securities involves risks and uncertainties. You should carefully consider the following risks as well as the other information included in this Annual Report, including “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factor Summary,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report, before investing in our securities. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our operations. Any of the following risks could materially and adversely affect our business, financial condition, results of operations or prospects. However, the selected risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results of operations or prospects. In such a case, the trading price of our securities could decline and you may lose all or part of your investment in us. Unless the context otherwise requires, all references in this subsection to the “Company,” “Vertiv,” “we,” “us” or “our” refer to Vertiv Holdings Co and its consolidated subsidiaries following the Business Combination, other than certain historical information which refers to the business of Vertiv prior to the consummation of the Business Combination.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
critical+7
restructuring+1
retaliatory+1
recessionary+1
losses+1
Positive rising
enhance+4
greater+3
positive+3
enabling+3
great+3
MD&A (Item 7)
5,634 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Unless the context otherwise indicates or requires, references to “the Company,” “Vertiv,” “we,” “us” and “our” refer to Vertiv Holdings Co, a Delaware corporation, and its consolidated subsidiaries; and “GSAH” refers to GS Acquisition Holdings Corp prior to the Business Combination. In addition, dollar amounts are stated in millions, except for per share amounts. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the Consolidated Financial Statements and the notes thereto included elsewhere in this Annual Report.
We have omitted the discussion on our results of operations for the year ended December 31, 2023, which discussion was previously included in Item 7 of our 2024 Annual Report on Form 10-K, filed with the SEC on February 18, 2025.
Overview
We are a global leader in the design, manufacturing and servicing of critical digital infrastructure technology that powers, cools, deploys, secures and maintains electronics that process, store and transmit data. We primarily provide this technology to data centers, communication networks and commercial and industrial environments worldwide. We aim to help create a world where critical technologies always work, and where we empower the vital applications of the digital world.
We rely on the continued growth of our customers’ critical infrastructure systems, in particular data center and communication infrastructure, to grow our business, operations and revenue, and any decreases in demand in these infrastructures could lead to a decrease in demand for our product offerings.
A substantial portion of our business depends on the continued growth of our current and potential customers’ data centers and communication infrastructure demand. If these data centers and communication infrastructures do not continue to grow, whether as a result of changes in the economy, shifts in the level or focus of spending on artificial intelligence, capital spending, building capacity in excess of demand, delays in receiving required permits and approvals, or for any other reason, overall customer demand for our product offerings could decrease, which would have an adverse effect on our business, results of operations and financial condition.
The length of the sales cycle for certain Vertiv products and solutions offerings, as well as unpredictable placing or canceling of customer orders, particularly large orders, may cause our revenues and operating results to vary significantly from period-to-period, which could make our future operational results less predictable.
A customer’s decision to purchase certain of our products or solutions, particularly products new to the market or long-term end-to-end solutions, may involve a lengthy contracting, design and qualification process. In particular, customers deciding on the design and implementation of large deployments may have lengthy and unpredictable procurement processes that may delay or impact expected future orders, including customers canceling orders based on unforeseen changes to their businesses. As a result, the order booking and sales recognition process is often uncertain and unpredictable, with some customers placing large orders with short lead times on little advance notice and others requiring lengthy, open-ended processes that may change depending on global or regional economic conditions. This unpredictability may cause our revenues and operating results to vary unexpectedly from quarter-to-quarter and year-to-year, making our future operational results less predictable.
We may not realize all of the sales expected from our backlog of orders and contracts.
Our backlog consists of the value of product and service orders for which a customer purchase order or purchase commitment is received, but has not yet been delivered. As of December 31, 2025 and 2024, Vertiv’s estimated combined order backlog was approximately $15.0 billion and $7.2 billion, respectively. The majority of our combined backlog is considered firm and expected to be delivered within 12 to 18 months. Our customers have the right in some circumstances, usually with penalties or other termination consequences, to reduce or defer firm orders in backlog. If customers terminate, reduce or defer firm orders, the revenue we expect to generate from our backlog may not be fully realized. Also, due to our large backlog, pricing changes may take longer to be reflected in our financial results.
Our recent acquisitions have added to our sales pipeline and backlog. The contracts associated with our acquisitions may have differing terms, allowing customers to reduce firm orders or terminate contracts, with varying costs.
Any disruption or consolidation of our customers’ markets or reduction in customer spending on technology could result in declines in the sales volume and prices of our products.
Our customers’ markets could sufferdisruption due to a number of factors, including government policy changes, local zoning decisions, community opposition or temporary or permanent local moratoria that limit or restrict the siting,
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construction or expansion of data centers and other critical digital infrastructure, industry consolidations or the shifting of market size and purchasing power among customers. Such consolidations or other disruptions may result in certain parties gaining additional purchasing leverage and, consequently, increasing the product pricing pressures facing our business. Evolving customer strategy resulting from consolidation or reduction in technology spend could lead to a significant decline in business with, or pricing pressure from, one or more of our key customers, which could adversely affect our business, results of operations and financial condition.
For example, if industry consolidation results in fewer, larger customers, the loss of any one customer or a significant reduction in their spending could have an outsized impact on results not anticipated in a customer marketplace composed of more numerous participants. In addition, changes in our customers’ investment priorities, for example, shifts in the level or focus of spending on artificial intelligence, cloud or other technology projects or in the types of facilities they deploy, may result in reduced demand or increased pricing pressure for certain of our offerings, even if overall technology spending remains robust. Any reduction in customer spending on technological development as a result of these and other factors could have an adverse effect on our business, results of operations and financial condition.
Larger customers often require terms and conditions that are more favorable to the customer, which could result in downward pricing pressures on our business.
Large customers, such as larger communication network, cloud/hyperscale, neocloud, and colocation data center providers, comprise a material portion of our customer base and generally have greater purchasing power than smaller customers. Accordingly, these customers often have enhanced leverage that allow them to require more favorable terms and conditions in their contracts with us, including in connection with large, multi-year projects to support artificial intelligence and other high-density compute workloads. In addition, these customers may impose substantial penalties for any product or service failures caused by us or the failure by us to timely deliver products ordered by those customers and may seek more stringent performance, service-level and delivery commitments as the scale and urgency of their projects increase. As we seek to sell more products to such customers, we may be required to agree to such terms and conditions more frequently, which could affect the timing of our cash flows and ability to recognize revenue or that allocate a greater share of project and schedule risk to us, and could have an adverse effect on our business, results of operations and financial condition.
We have long-term, fixed-price contracts (including long-term, turnkey projects). Our failure to mitigate certain risks or accurately estimate our costs associated with fulfillment of such contracts may result in excess costs and penalties.
Long-term, fixed-price contracts (including but not limited to turnkey projects) may have a duration greater than twelve months that involve substantial risks, which may result in excess costs and penalties. These fulfillment risks include but are not limited to:
• unanticipated technical problems with equipment, requiring us to incur added expenses to remedy such problems;
• changes in costs or shortages of components, materials, labor or construction equipment;
• recognition of revenues over the term of the contract;
• project modifications and changes to the scope of work resulting in unanticipated costs;
• delays caused by local weather or other conditions beyond our control;
• changes in regulations, permits or government policy;
• the failure of suppliers, subcontractors or consortium partners to perform; and
• penalties, if we cannot complete all or portions of the project within contracted time limits and performance levels.
Our failure to mitigate these risks may result in excess costs and penalties and may have an adverse effect on our results of operations and financial condition.
The industries and markets in which we operate are highly competitive, and we experience competitive pressures from numerous and varied competitors.
We encounter competition from numerous and varied competitors targeting all areas of our business on a global and regional basis. We compete primarily on the basis of our technology, reliability, quality, price, service and customer relationships. A significant element of our competitive strategy is focused on delivering reliable, high-quality products and solutions at the best relative global cost. If our products, services, and cost structure do not enable us to compete successfully, we may experience a decline in product sales and a corresponding loss of customers.
Our competitors, any of which could introduce new technologies or business models that disrupt significant portions of our markets and cause our customers to move a material portion of their business away from us, primarily include:
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• Large-scale, global competitors with broad product portfolios and service offerings. These competitors may have comparatively greater financial, technical and marketing resources available to them and would include Schneider Electric, S.E., Eaton Corporation Plc, Legrand SA, and Huawei Investment & Holding Co., Ltd, each of which has a large, global presence and compete directly in the markets in which we operate. If we do not successfully anticipate technological shifts, market needs and opportunities, we may not be able to compete effectively and our ability to generate revenues will suffer. Industry consolidation may also impact the competitive landscape by creating larger, more homogeneous and potentially stronger competitors in the markets in which we operate.
• Offering-specific competitors with products and services that compete globally but with a limited set of product offerings, which would include Delta Electronics, Inc., Stulz GmbH, Johnson Controls International PLC, and Socomec Holding SA. These competitors may be able to focus more closely on a particular product or service segment of the market and apply targeted financial, technical and marketing resources in ways that we do not, potentially leading to stronger brand recognition, technological advancement and more competitive pricing within that targeted segment.
• Regional or country-level competitors. These are competitors that compete with us in a limited geographic area.
Failure to obtain performance and other guarantees from financial institutions, may prevent us from bidding on or obtaining certain contracts, or increase our costs with respect to such contracts.
In accordance with industry practice, for certain project opportunities, including large data center, artificial intelligence and other complex infrastructure projects, we are required to provide guarantees, including bid-bonds, advance payment and performance guarantees. Some customers require these guarantees to be issued by a financial institution, and historic global financial conditions have in the past, and may in the future, make it more difficult and expensive to obtain these guarantees or may limit the capacity of financial institutions to issue them at the levels or on the terms we require. If we cannot obtain such guarantees on commercially reasonable terms or at all, we could be prevented from bidding on or obtaining such large project contracts, or our costs for such contracts could be higher and, in either case, could have an adverse effect on our business, results of operations and financial condition.
Our contracts with governmental customers are subject to increased pressures to reduce expenses, may contain additional or more onerous terms and conditions, and may subject us to increased risk of audits, investigations, sanctions and penalties by such governmental parties, which could result in various civil and criminalpenalties, administrative sanctions, and fines and suspensions.
We derive a portion of our revenue from contracts with governmental customers, including but not limited to the U.S. federal government, and various state and local governments. There is pressure on such governmental customers and their respective agencies to reduce spending and some of our contracts at the federal, state and local levels are subject to government funding authorizations. These factors combine to potentially limit the revenue we derive from such contracts.
Additionally, government contracts are generally subject to audits and investigations that could result in various civil and criminalpenalties and administrative sanctions, including contract termination, refunds, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business. Such contracts are also subject to various laws and regulations that apply to doing business with governmental entities, such as country-specific sourcing requirements and evolving cybersecurity, data protection and supply-chain regulations and standards.
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Risks Related to Our Business Operations
We are subject to various changes in costs of production, including some that are beyond our control, the impacts of which may be exacerbated if we fail to properly manage our supply chain and inventory.
Our operations, particularly our manufacturing and service operations, depend on raw materials, components, products and services from third-party suppliers, and such suppliers’ ability to timely deliver the quantities and quality required at acceptable prices. Successful operations depend on our ability to accurately anticipate these needs and prices. We have a large number of providers to support our global operations and breadth of offerings, some of whom are also competitors of ours in one or more parts of our business and those suppliers may decide to discontinue business with us. As described in our prior filings, at times in the past we did not accurately anticipate the magnitude of inflationary cost increases and customs duties and tariffs for our materials, freight and labor, which resulted in such cost increases not being immediately reflected in the prices for our offerings. Other supply chain issues that we have faced, and may face in the future include, but are not limited to, the following:
• Volatility in the supply or price of raw materials, freight and labor - Our products rely on a variety of raw materials and components, including steel, copper, aluminum and various electronic components. We may experience a shortage of, or a delay in receiving, such materials or components because of strong demand, supplier constraints or other operational disruptions. Moreover, prices and custom duties and tariffs for some of these materials and components have historically been volatile and unpredictable. We also rely upon labor and third-party freight services to produce and deliver our offerings to our customers. In the past few years, we experienced significant increases in material, freight and labor costs and custom duties and tariffs. If we are unable to secure necessary supplies at reasonable prices or acceptable quality, we may be unable to manufacture products, fulfill service orders or otherwise operate our business. We may also be unable to offset unexpected increases in material and component costs with our own price increases without suffering reduced volumes, revenues or operating income.
• Contractual terms - As a result of long-term price or purchase commitments in contracts with our suppliers, we may be obligated to purchase materials, components or services at prices higher than those available in the current market, which may put us at a competitive disadvantage, and, if these issues impact demand, may result in additional charges for inventory obsolescence. In addition, to secure the supply of certain materials and components on favorable terms, we may make strategic purchases of materials and components in advance or enter into non-cancelable commitments. If we fail to properly anticipate demand, we may have an oversupply which could result in excess or obsolete materials or components.
• Contingent workers - In some locations, we rely on third-party suppliers for the provision of contingent workers, and our failure to manage such workers effectively could adversely impact our results of operations. We may also be subject to labor shortages, oversupply, or fixed contractual terms relating to the contingent workforce, and our ability to manage the size of, and costs for, such contingent workforce may be further constrained by local laws or future changes to such laws.
• Single-source suppliers - We obtain certain materials or components from single-source suppliers due to technology, availability, price, quality or other considerations. Replacing a single-source supplier could delay production of some products because replacement suppliers, if available, may be subject to capacity constraints or other output limitations.
• Increasing Demand - As the demand for our products increases, or if we experience unexpected large orders, we will need to increase production and obtain sufficient supply of materials. If we fail to meet this increased customer demand in a timely manner, or at all, of if we fail to obtain the necessary raw materials or otherwise satisfy the performance obligations in our contracts related to these orders, we could be subject to penalty provisions, liquidateddamages or other claims. Additionally, our reputation and customer relationships could be damaged and we could lose revenue and market share.
Any of these risks could have an adverse effect on our results of operations and financial condition.
In addition, our operations depend upon disciplined inventory management, as we balance the need to maintain strategic inventory levels to ensure competitive lead times against the risk of inventory obsolescence because of rapidly changing technology and customer requirements. Excess or obsolete inventory, whether procured pursuant to an inaccurate customer forecast or otherwise, would result in a write-off of such inventory, causing an increase in costs of goods sold and a decline in our gross margins.
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If we fail to anticipate technology shifts, market needs and opportunities, and fail to develop appropriate products, product enhancements and services in a timely manner, we may not be able to compete effectively and, as a result, our ability to generate revenues will suffer.
We believe that our future success will depend in part upon our ability to anticipate technology shifts, such as the growth in artificial intelligence, and to enhance and develop new products and services that meet or anticipate such technology changes. Any such developments will require continued investment in engineering, capital equipment, marketing, customer service and technical support. For example, we will need to anticipate potential market shifts to more efficient products, alternative power architectures, cooling technologies, and energy storage that could diminish the demand for our existing offerings or affect our margins.
Also, our primary global competitors are sophisticated companies with significant resources that may develop superior products and services or may adapt more quickly to new technologies and technology shifts, industry changes or evolving customer requirements, including through strategic partnerships with other participants in the digital infrastructure value chain. If we fail to anticipate technology changes, shifting market needs or keep pace with our competitors’ products, or if we fail to develop and introduce new products, services or enhancements in a timely manner, we may lose customers and experience decreased or delayed market acceptance and sales of present and future products and services and our ability to generate revenues will suffer.
Disruptions to the various information technology and information security systems upon which our operations and our products and our services rely, especially cyber-security incidents, including data security breaches, ransomware or computer viruses, could harm our business, reduce our revenue, increase our expenses, damage our reputation and adversely impact our performance.
We rely on our IT and information security systems, including AI technology and those of third parties for processing customer orders, shipping products, billing our customers, tracking inventory, supporting finance and accounting functions, financial statement preparation, payroll services, benefit administration, engineering, manufacturing and operations functions, and other general aspects of our business. These information systems, including sensitive data stored or maintained by third parties, may be vulnerable to disruption, downtime, attack or breach that could compromise such information systems, resulting in disruptions or interruptions in our business operations or fraud, ransom attack or theft of our, or our customers' and suppliers', proprietary or sensitive information which could be accessed, publicly disclosed, misused, stolen or lost. This could impede our sales, disrupt or prevent manufacturing, distribution or other critical functions or harm our customers and our suppliers, and the financial costs we could incur to eliminate or alleviate these security risks could be significant and may be difficult to anticipate or measure. Moreover, such a breach could cause reputational and financial harm and subject us to liability to our customers, suppliers, business partners or any affected individual.
As our business increasingly interfaces with employees, customers, vendors and suppliers using IT systems and networks, including AI applications, we are subject to an increased risk to the secure operation of these systems and networks. Our evolution into smart products, Internet of Things, the use of AI, business-to-consumer, and e-commerce subjects us to increased cyber and technology risks. The secure operation of our IT systems and networks and ensuring that we have skilled personnel to assist in ensuring continued security, is critical to our business operations and strategy. IT security threats from user error to attacks designed to gainunauthorized access to our systems, networks and data are increasing in frequency and sophistication.
In addition, the products we produce or elements of such products that we procure from third parties and services we provide may contain defects, vulnerabilities, or weaknesses in design, architecture or manufacture, which could lead to system security vulnerabilities in our products, services and compromise the network security of our customers. If an actual or perceived breach of network security occurs, regardless of whether the breach is attributable to our products or services, the market perception of the effectiveness of our products or services could be harmed .
The manner in which a customer implements or operates the products and services they purchase from us may be contrary to information security or cybersecurity industry best practices or manuals regarding use. Such implementation or improper use may lead to a cybersecurity breach and, regardless of whether the breach is attributable to our products or services, the market perception of the effectiveness of our products or services could be harmed.
Implementations of new IT, information security systems, and enhancements to our current systems may be costly and disruptive to our operations.
Our implementation of new IT, information security systems, and enhancements, including AI, to current systems, including those relating to our enterprise resource plan, human capital management and product lifecycle systems, are costly and have in the past and may in the future be disruptive to our operations, problems, disruptions, delays or other
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issues in the design and implementation of such systems or enhancementsadversely impacting our forecasting and planning abilities, and our ability to process customer orders, ship products, provide service and support to our customers, bill and collect in a timely manner from our customers, fulfill contractual obligations, accurately record and transfer information, recognize revenue, file securities, governance and compliance reports in a timely manner or otherwise run our business. If we are unable to successfully design and implement these new systems, enhancements, and processes as planned, if the length of time or costs are greater than anticipated, if they result in further disruptions, or if they do not operate as anticipated, our business, results of operations and financial condition could be negatively impacted. Additionally, the benefits of these new systems may not be realized until they are fully implemented and testing has been completed.
We may not realize the expected benefits from any rationalization, restructuring, and improvement efforts that we have taken or may take in the future.
We have and continue to undertake rationalization, restructuring, and realignment initiatives to reduce our overall cost base and improveefficiency. There can be no assurance that we will fully realize the benefits of such efforts as anticipated, and we may incur additional and/or unexpected costs to realize them. These actions could yield other unintended consequences, such as distraction of management and employees, business disruption, reduced employee morale and productivity, and unexpected employee attrition, including the inability to attract or retain key personnel. If we fail to achieve the expected benefits of such initiatives and improvement efforts, or if other unforeseen events occur in connection with such efforts, our business, results of operations and financial condition could be negatively impacted.
Disruption of, or consolidation or changes in, the markets or operating models of our independent sales representatives, distributors and original equipment manufacturers could have a material adverse effect on our results of operations.
We rely, in part, on independent sales representatives, distributors, resellers, and original equipment manufacturers for the distribution of our products and services, some of whom operate on an exclusive basis. If the financial condition or operations of these third parties weaken, including as a result of a shift away from the go-to-market operating model they currently follow, and they are unable to successfully market and sell our products, our revenue and gross margins could be adversely affected. In addition, if there are disruptions or consolidation in their markets, such parties may be able to improve their negotiating position and renegotiate historical terms and agreements for the distribution of our products or terminate relationships with us in favor of our competitors. Changes in the negotiating position of such third parties in future periods could have an adverse effect on our results of operations.
Unanticipated changes in domestic or global tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could cause increased variability in our effective tax rate and negatively impact our financial performance.
Variability in the mix and profitability of domestic and international activities, identification and resolution of various tax uncertainties, changes in tax laws and rates or other regulatory actions regarding taxes, including the implementation of any global minimum tax for corporations, and our ability to realize net operating loss and other carryforwards included in deferred tax assets and avoid potential adverse outcomes included in deferred tax liabilities, among other matters, may significantly impact our effective income tax rate in the future. Further, our effective tax rate in any given financial reporting period may be materially impacted by the mix and level of earnings or losses by jurisdiction as well as the discrete recognition of taxable events and exposures. Changes in tax laws and rates or other regulatory actions may significantly impact the positions taken with regard to tax contingencies and we may be subject to audit and review by tax authorities, which may result in future taxes, interest and penalties.
Additionally, final laws enacting the Organization for Economic Co-operation and Development's global minimum tax framework ("Pillar Two Laws") became effective beginning in 2024 resulting in uncertainty related to its potential implementation in certain countries where we operate, which we continue to monitor. We are regularly subject to audits by tax authorities, and although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. Economic and political pressures to increase tax revenue in various jurisdictions may make resolving tax disputes more difficult and may lead to unpredictability in our tax estimates. The results of an audit or litigation could adversely affect our financial statements in the period or periods for which that determination is made and may have negative impacts on future periods as well. Additionally, actions brought by such foreign taxing authorities could impact our licenses, permits, or certifications in that jurisdiction, which could affect our ability to operate in that jurisdiction. If we lost our ability to operate in jurisdictions, especially those where we have manufacturing facilities, our results of operations and financial performance could be materially impacted.
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Any failure of our product offerings could subject us to substantial liability, including product liability claims, which could damage our reputation or the reputation of one or more of our brands.
Our product offerings are complex, and our regular testing and quality control efforts may not be effective in controlling or detecting all quality issues or errors, particularly with respect to faulty components manufactured by third parties. Additionally, customer application requirements changing, or using products outside of the originally intended performance envelope, could lead to inadequate testing and/or application failure mode analysis. Defects could expose us to product warranty claims, including substantial expense for the recall and repair or replacement of a product or component, and product liability claims, including liability for personal injury or property damage. We are not generally able to limit or exclude liability for personal injury or property damage to third parties under the laws of most jurisdictions in which we do business, and in the event of such an incident, we could spend significant time, resources and money to resolve. We may be required to pay for losses or injuriespurportedly caused by the design, manufacture, installation or operation of our products or by solutions performed by us or third parties.
An inability to cure a product defect could result in the failure of a product line, temporary or permanent withdrawal from a product or market, delays in customer payments or refusals by our customers to make such payments, increased inventory costs, product reengineering expenses, field service work for quality remediation, and our customers’ inability to operate their enterprises. Such defects could also negatively impact customer satisfaction and sentiment, generate adverse publicity, reduce future sales opportunities and damage our reputation or the reputation of one or more of our brands. Any of these outcomes could have an adverse effect on our results of operations and financial condition.
The global scope of our business poses specific operational risks and challenges, including those relating to disruptive global events and forces, compliance with laws, and enforcement of consistent company-wide standards and procedures; additional or exacerbated risks may exist in emerging markets.
As of December 31, 2025, we employed approximately 34,000 people globally and had manufacturing facilities and service centers in the Americas, Asia Pacific and Europe, Middle East & Africa. We expect that foreign revenue will continue to represent a significant portion of our total revenues. Managing daily global operations requires overcoming cultural and language barriers, assimilating different business practices, creating compensation, employment administrative programs and practices that comply across a spectrum of countries. We also must communicate and monitor company-wide standards and directives across our global network. Our failure to successfully manage our geographically diverse operations and our contractual and regulatory obligations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with company-wide standards and procedures.
War and conflict, such as the conflict in the Middle East, the ongoing Russian-Ukraine war, and any associated diplomatic measures or resulting sanctions by the U.S., European Union, and other countries may have a broad range of adverse impacts on global business and financial markets, some of which may have adverse impacts on our business. These include increased inflation, significant market disruptions, increased volatility in commodity prices, the imposition of additional tariffs by the U.S. on certain of its trading partners, which could trigger retaliatory tariffs by those trading partners, and the possibility of additional potential tariffs or other trade restrictions by the U.S. on other jurisdictions. The U.S. government and other governments in jurisdictions in which we operate may impose severe sanctions and export controls. Any sanctions imposed or actions taken by the U.S. or other countries, and any retaliatory measures could increase our costs, reduce our sales and earnings or otherwise have an adverse effect on our operations.
These risks may be enhanced in emerging markets, and additional risks not encountered in established countries may also occur, including more frequent foreign currency exchange rate fluctuations, foreign state takeovers of our facilities, trade protectionism, state-initiated industry consolidation or other similar government actions or control; difficulty enforcing agreements and collecting receivables through certain foreign legal systems; longer collection cycles and financial instability among customers; political or social instability that may hinder our ability to send personnel abroad or cause us to move our operations to facilities in countries with higher costs and less efficiencies; difficulties associated with repatriating earnings generated or held abroad in a tax-efficient manner, changes in tax laws, or tax inefficiencies; and exposure to wage, price and capital controls, local labor conditions and regulations, including local labor disruptions and rising labor costs which we may be unable to recover in our pricing to customers. Consequently, our exposure to these conditions which may exist in or otherwise impact the emerging markets that we enter may have an adverse effect on our business, results of operations and financial condition.
Serving a global customer base requires that we place more materials, production and service assets in emerging markets to capitalize on market opportunities and maintain our cost position. Emerging geographic markets may be relatively less profitable due to the investments needed to enter such markets and local pricing pressures, and we may have difficulty establishing and maintaining the operating infrastructure necessary to support the high growth rates associated with some of those markets. Manufacturers in countries that have lower production costs, such as China and
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India, may become competitors in key emerging markets and could offer their products in established markets. These actions may have a negative effect on our pricing, market share and operating results in these markets. In addition, foreign governments may decide to implement tax and other policies that favor their domestic manufacturers at the expense of international manufacturers. Similarly, the potential imposition of retaliatory tariffs or additional tariffs or modifications of free-trade agreements by the U.S. on other countries or regions, could increase our cost of doing business internationally, perhaps significantly, and may lead to further challenges for us in the various foreign markets in which we operate.
Any failure by us to identify, manage, integrate and complete acquisitions, divestitures, investments and other significant transactions successfully could harm our financial results, business and prospects.
As part of our business strategy, we have in the past and may in the future acquire businesses, interests in businesses, including non-controlling interests, or form joint ventures, create strategic alliances, or choose to invest in early-stage companies. Whether we realize the anticipated benefits from such activities depends, in part, upon the successful integration between the businesses involved, the performance and development of the underlying products, capabilities or technologies, our correct assessment of the success and growth of emerging companies, including their underlying products, capabilities or technologies, or assumed liabilities and the management of the operations. Accordingly, our financial results could be adversely affected by unanticipated performance and liability issues, our failure to achieve synergies and other benefits we expected to obtain, transaction-related charges, amortization related to intangibles, and charges for impairment of long-term assets.
Our ability to realize the expected synergies and benefits of an acquisition or investment includes, among other things, our ability to complete the timely integration of operations and systems, organizations, standards, controls, technologies, policies, and procedures, adequately protecting against downside risk of an investment or inability to realize on upside success, difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the combination or investment; and difficulties in managing the expanded operations of a significantly larger and more complex combined business.
With any acquisition or divestiture, we may encounter unexpected integration or divestiture-related costs, fail to realize all the benefits anticipated or be subject to other factors that adversely affect preliminary estimates. In addition, even if the operations of the two businesses are integrated or divestedsuccessfully, the full benefits of the acquisition or divestiture may not be realized, including the synergies, cost savings or sales or growth opportunities that we expect. The occurrence of any of these events, individually or in combination, could have a material adverse effect on the combined or remaining business’s financial condition and operating results.
Additionally, achieving benefits of any acquisition or divestiture may require certain related one-time costs, charges and expenses, which may be material and have not yet been quantified. We expect to incur significant, non-recurring costs in connection with consummating acquisitions or divestitures, combining the operations of target companies or separating the operations of divested businesses, and achievingdesired synergies and cost savings. These fees and costs may be substantial. No assurances can be made that the costs of achieving the anticipated cost synergies will not rise materially, or that synergies will be realized in the amounts expected, in the timeframes we currently anticipate, or at all. We can provide no assurance that we will be successful in generating growth, maintaining or increasing our cash flows or profitability or achieving cost savings and revenue enhancements in connection with the items reflected by these adjustments, and our inability to do so could have a material adverse effect on our business, cash flows, results of operations and financial position.
Our operations depend on production facilities, including the expansion of existing facilities and opening of new facilities, throughout the world, which subjects us to varying degrees of risk of disrupted production.
We operate manufacturing facilities worldwide and continue to expand and open new facilities in different locales. Our manufacturing facilities and operations could be disrupted by natural disasters, labor strikes, shortages in suppliers, components and parts, war, political unrest, terrorist activity, economic upheaval, changes in governmental regulations, including but not limited to regulations regarding taxes, tariffs, custom duties, restricted and/or sanctioned parties, government mandated shutdowns or shelter in place orders, or public health concerns. Some of these conditions are more likely in certain geographic regions in which we operate. Any such disruption could cause delays in the manufacture and/or shipments of products, performance of services, and the loss of sales and customers, and insurance proceeds may not adequately compensate for losses.
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Legal and Regulatory Risks
Future legislation and regulation could disrupt our customers’ markets resulting in declines in sales volume and prices of our products and otherwise having an adverse effect on our business operations and performance.
Various laws and governmental regulations, both in the U.S. and abroad, governing Internet-related services, related communications services, information technologies, artificial intelligence, and the construction and location of data centers and other critical infrastructure remain largely unsettled, even in areas where there has been some legislative action. There are anticipated regulations forthcoming in the U.S. and other countries where our customers operate in the areas of cybersecurity, data privacy and data security, artificial intelligence, and critical infrastructure construction, permitting and energy consumption, any of which could impact us and our customers. Future legislation and regulation could impose additional costs on our business, disrupt our customers’ markets or require us to make changes in our operations which could adversely affect our operations and performance.
Any failure to comply with evolving data privacy and data protection laws and regulations or to otherwise protect personal data, may adversely impact our business and financial results.
We regularly move data across borders to operate, and consequently are subject to a number of continuously evolving and developing privacy and data protection laws and regulations both domestically and around the world, including, the General Data Protection Regulation ("GDPR") in Europe, the California Privacy Rights and Enforcement Act of 2020 ("CPRA") in the U.S., and the Personal Information Protection Law ("PIPL") in China. These laws impose numerous, and oftentimes differing, obligations on data controllers and processors. Breaches could result in substantial fines, regulatory investigations, reputational damage, orders to cease/change our use of data, enforcement notices, and potential civil claims including class action type litigation. We seek to comply with and abide by all laws and regulations to which we are subject and devote significant time and resources to our compliance efforts. Despite such efforts, there is a risk that we may be subject to fines and penalties, litigation and reputational harm if we fail to properly process or protect the data or privacy of third parties or comply with data privacy and data protection regimes.
Our international operations expose us to specific legal compliance issues relating to anti-corruption laws and regulations of the U.S. government and various other international jurisdictions, and our failure to comply with those regulations could adversely impact our business.
We are subject to various anti-corruption laws, including the U.S. Foreign Corrupt Practices Act ("FCPA"), which prohibit payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. We operate in several less-developed regions that are recognized as having a greater risk of potentially corrupt business environments and, in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices. Our legal compliance and ethics programs and policies, including our code of business conduct, existing policies on anti-bribery, export controls, environmental and other legal compliance, and periodic training on these matters, mandate compliance with anti-corruption laws and are designed to reduce the likelihood of a compliance violation. In the event that we have reason to believe that our employees or business partners have or may have violated applicable laws, regulations or policies, including anti-corruption laws, we are required to investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. Nevertheless, such a violation could still occur, disrupting our business through fines, penalties, diversion of internal resources, negative publicity and possibly severecriminal or civil sanctions.
We are subject to governmental export and import controls and sanction programs that could subject us to liability or impair our ability to compete in international markets.
We, and certain of our products (including components of such products), are subject to applicable import laws, export controls and economic sanctions laws and regulations, including rule changes, evolving enforcement practices, and other government actions. Changes in import and export control or trade sanctions laws, the imposition of tariffs on certain U.S. trading partners, the potential for or imposition of retaliatory tariffs, or the potential for or imposition of additional tariffs or other trade restrictions, including potential control from China on rare earth elements, may increase our costs, and may restrict our business practices, including cessation of business activities in sanctioned countries or with sanctioned entities, and may result in claims for breach of existing contracts and modifications to existing compliance programs and training schedules. While we train our employees to comply with these regulations and have systems in place designed to prevent failure of compliance, we cannot provide assurance that a violation will not occur, whether knowingly or inadvertently. Violations may result in penalties, including fines, debarments from export and import privileges, and loss of authorizations or certifications needed to conduct aspects of our international business, and may harm our ability to enter into contracts with our customers and suppliers who have contracts with the U.S. government. A violation of the laws and regulations enumerated above could have an adverse effect on our business, results of operations and financial condition.
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Changes in U.S. or foreign trade policies, including additional tariffs or global trade conflicts, could increase the cost of our products, which could adversely impact the competitiveness of our products.
There is currently significant uncertainty about the future relationship between the U.S. and various other countries with respect to trade policies and tariffs. For example, the current U.S. administration has instituted substantial changes to U.S. foreign trade policy with respect to China and other countries, including a significant increase in tariffs on goods imported into the U.S. and the possibility of imposing further restrictions on international trade. The current administration has taken a different approach to U.S. foreign trade policy than their predecessors, so there remains uncertainty as to whether, and to what degree, trade between the U.S and other countries, including countries in which we operate, will be impacted by these policy shifts on an ongoing and/or long-term basis. Additional policy changes or continued uncertainty could depress economic activity and restrict our access to suppliers or customers. Furthermore, counter- or retaliatory tariffs imposed against the U.S. could impact our sales internationally. Tariffs implemented on our products (or on materials, parts or components we use to manufacture our products or to provide service for our products) have in the past increased the cost of our products manufactured in the U.S. and imported into the U.S. The imposition of additional tariffs on our products (or on materials, parts or components we use to manufacture our products or to provide service for our products) by the U.S. or other countries, the cost of our products manufactured in other countries subject to additional tariffs and imported into the U.S. or other countries in which we operate would increase as a result of new tariffs that are implemented, and could increase further to the extent that retaliatory tariffs or similar additional trade restrictions are implemented. In the event we are unable to pass along the increased costs resulting from any tariffs to our customers, it could have a material adverse effect on our business, profitability, and our earnings.
We are subject to risks related to legal claims and proceedings filed by or against us, and adverse outcomes in these matters may materially harm our business.
We are subject to various claims, disputes, investigations, demands, arbitration, litigation, or other legal proceedings. Legal claims and proceedings may relate to labor and employment matters, commercial contracts, intellectual property, disputes with customers and suppliers, product liability or defects, environmental, health and safety matters, property damage, theft, personal injury, fiduciary duties of our directors and officers, securities matters, and various other matters. Legal matters are inherently uncertain, and often we cannot at the outset predict the duration, scope, outcome or consequences relating to such matters. In addition, legal matters are generally expensive and time-consuming to defend, settle, and/or resolve, and may require us to implement certain remedial measures that could prove costly or disruptive to our business and operations. The unfavorable resolution of one or more of these matters could have an adverse effect on our business, results of operations and financial condition.
Our financial performance may suffer if we cannot continue to develop, commercialize or enforce the intellectual property rights on which our businesses depend, or if we are unable to gain and maintain access to relevant intellectual property rights of third parties through license and other agreements, or are subjected to third-party claims of infringement.
Our business relies on a substantial portfolio of global intellectual property rights. Intellectual property laws vary by jurisdiction and we may be unable to protect or enforce our proprietary rights adequately in all cases, or do so without undue cost. In addition, our intellectual property rights could be challenged, invalidated, infringed or circumvented. The existence of many patents in our fields, the secrecy of some pending patent applications, and the rapid rate of issuance of new patents makes it economically impractical to make conclusive advance determinations of whether a product or any of its components infringes the patent rights of others. We also rely on maintenance of proprietary information (such as trade secrets, know-how and other confidential information) to protect certain intellectual property, which can be difficult to maintain as confidential. Confidentiality agreements may not provide an adequate remedy in the event of an unauthorized disclosure, and the enforceability of such confidentiality agreements may vary from jurisdiction to jurisdiction. Failure to obtain or maintain trade secrets, protection of know-how and other confidential information could adversely impact our business.
We also rely on licensing certain intellectual property rights from third parties, which requires that we monitor and manage our use of third-party and open-source software components to comply with applicable license terms. Our ability to comply with such license terms may be affected by factors that we can only partially influence or control. The continuation of good licensing relationships with our third-party licensors is important to our business. If any of our third-party licensors are acquired by our competitors, the applicable licensed intellectual property may no longer be available to us or available only on less favorable terms, which could adversely impact our business, results of operations and financial condition.
In addition, third party claims of infringement by us or customers using our products, regardless of the merit of these claims, can be time-consuming, costly to defend, and could ultimately require that we develop or substitute non-infringing technologies, redesign affected products, divert management’s attention and resources away from our business, require
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us to enter into settlement or license agreements that may not be commercially reasonable, pay significant damage awards, including treble damages if we were found to be willfullyinfringing, or temporarily or permanently cease engaging in certain activities or offering certain products or services in some or all jurisdictions, and any of the foregoing could adversely impact our business.
Our customer contracts and certain of our intellectual property license agreements often include obligations to indemnify our customers and licensees against certain claims of intellectual property infringement, and these obligations may be uncapped. If claims of intellectual property infringement are brought against such customers or licensees in respect of the intellectual property rights, products or services that we provide to them, we may be required to defend such customers or licensees and/or pay some or all of the costs these parties may incur related to such litigation or claims.
We are subject to various environmental, health and safety laws, regulations, and other requirements, including regulations related to the composition and take back of our products and our ownership, lease or operation of our facilities, each of which could subject us to significant costs or liabilities.
We are subject to a broad range of foreign and domestic environmental, health and safety laws, regulations and other requirements, including those relating to the discharge of regulated materials into the environment, the generation and handling of hazardous substances and wastes, human health and safety, and the content, composition and take back of our products. For example, the European Union Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive and similar laws and regulations of China and other jurisdictions limit the content of certain hazardous materials such as lead, mercury, and cadmium in the manufacture of electrical equipment, including our products. Additionally, the EU, China and other jurisdictions have adopted or proposed versions of the Waste Electrical and Electronic Equipment Directive, which requires producers of electrical and electronic equipment to assume responsibility for collecting, treating, recycling and disposing of products when they have reached the end of their useful life, as well as Registration, Evaluation, Authorization and Restriction of Chemical Substances regulations, which regulate the handling and use of certain chemical substances that may be used in our products.
If we fail to comply with applicable environmental, health and safety laws and regulations, we may face administrative, civil or criminalfines or penalties, the suspension or revocation of necessary permits, and requirements to install additional pollution controls. Furthermore, current and future environmental, health and safety laws, regulations and permit requirements could require us to make changes to our operations or incur significant costs relating to compliance. For example, as climate change issues become more prevalent, foreign, federal, state and local governments and our customers have been responding to these issues. The increased global focus on environmental matters may result in new regulations or changes to current regulations, as well as changes in customer requirements, which could materially adversely impact our business, results of operations and financial condition.
In addition, we handle hazardous materials in the ordinary course of operations which increases the risk that there may be spills or releases of hazardous materials into the environment. We have significant global manufacturing facilities that we own, lease or operate, or have previously owned, leased or operated, or where we have disposed or arranged for the disposal of hazardous materials, and for which we could have current liability exposure for contamination, and could in the future be liable for additional contamination. We have been, and may in the future be, required to participate in the remediation or investigation of, or otherwise bear liability for, such contamination and be subject to claims from third parties who were damaged or injured by such contamination.
We are subject to risks related to various environmental and sustainability-related matters, metrics, and goals, which may impact our business and reputation.
Businesses are facing increasing scrutiny in environmental and sustainability-related areas, which may include the use of renewable resources, environmental stewardship, supply chain management, climate change, safety, inclusion, workplace conduct, human rights, philanthropy and support for local communities. If we fail to meet applicable standards or expectations with respect to these matters across our operations and activities, including any metrics and goals that we set for ourselves, and disclose publicly or we fail to disclose publicly, our reputation and brand image could be damaged, and our business, financial condition and results of operations could be adversely impacted. Our reputation also may be harmed by the perceptions that our customers, employees, and other stakeholders have about our action or inaction on these matters.
Certain organizations that provide corporate governance and other corporate risk information to our stakeholders have developed, and others may in the future develop, scores and ratings to evaluate companies based in whole or part on various metrics related to these matters. We do not control these organizations nor the content and opinions included in their reports, and cannot know whether their analysis about the company would be positive or accurate. Some investment funds focus on business practices and sustainability scores related to these matters when making investment decisions and may consider a company’s score related to such matters as a factor in making an investment decision.
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If we communicate to the market certain initiatives and goals regarding these matters, we could fail, or be perceived to fail, in our achievement of such initiatives and goals, or we could be criticized for the scope of such initiatives or goals. The expectations and assumptions underlying any such initiatives and goals would be necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and measuring and reporting on these matters.
In addition, in recent years “anti-ESG” sentiment has gained momentum across the U.S., including in the form of proposed and adopted governmental rules, orders, and regulations opposing ESG-related initiatives in the private sector. Such anti-ESG related policies, legislation, initiatives, orders, and related potential scrutiny of company business practices could result in us becoming the subject of government investigations and enforcement actions, and sustaining reputational harm for the same.
Risks Related to Our Financial Position, Investments and Indebtedness
Our results of operations may be adversely affected if we fail to realize the full value of our goodwill and intangible assets.
As of December 31, 2025, we had total goodwill and net intangible assets of $3,928.5 which constituted approximately 32% of our total assets in the aggregate. We assess goodwill and indefinite lived assets for impairment annually, and we conduct an interim evaluation of definite lived and indefinite lived assets whenever events or changes in circumstances, such as operating losses or a significant decline in earnings associated with the acquired business or asset, indicate that these assets may be impaired. Our ability to realize the value of goodwill and net intangible assets will depend on the future cash flows of the businesses to which they relate. If we are not able to realize the value of the goodwill and net intangible assets, this could adversely affect our results of operations and financial condition, and also result in an impairment of those assets.
We are exposed to fluctuations in foreign currency exchange rates, and our hedging activities may not protect us against the consequences of such fluctuations on our earnings and cash flows.
As a result of our global operations, our business, results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates, most notably if the U.S. dollar strengthensagainst the primary foreign currencies, which could adversely impact our revenue growth in future periods. For example, if the U.S. dollar strengthensagainst other currencies such as the euro, our revenues reported in U.S. dollars would decline. In addition, for U.S. dollar-denominated sales, an increase in the value of the U.S. dollar would increase the real cost to customers of our products in markets outside the U.S., which could result in price concessions in certain markets, impact our competitive position or have an adverse effect on demand for our products and consequently on our business, results of operations and financial condition.
The presence of a material weakness in internal control over financial reporting could result in material misstatements in our financial statements.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual consolidated financial statements will not be prevented or detected on a timely basis. As of December 31, 2025 management has concluded that the Company’s internal control over financial reporting was effective. Notwithstanding this conclusion, we have had material weaknesses in the past, and we cannot provide assurance that we will not have additional material weaknesses in our internal control over financial reporting in the future.
If we are unable to remediate any future material weaknesses identified, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the Securities and Exchange Commission, could be adversely affected. This failure could negatively affect the market price and trading liquidity of our Class A common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminalinvestigations and penalties and generally materially and adversely impact our business and financial condition.
Our current or future levels of indebtedness could adversely affect our financial condition and prevent us from making payments on our debt obligations.
We have debt, including existing outstanding indebtedness as of December 31, 2025, as detailed elsewhere in this Annual Report. Further, we may be able to incur additional debt in the future and the terms of the credit agreements governing the Senior Secured Credit Facilities and the indenture governing the Notes will not prohibit us from doing so subject to certain limitations.
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Our level of indebtedness could have important consequences, including making it more difficult for us to satisfy our obligations; increasing our vulnerability to adverse economic and industry conditions; limiting our ability to obtain additional financing for future working capital, capital expenditures, raw materials, strategic acquisitions and other general corporate requirements; exposing us to interest rate fluctuations because the interest on the debt under the Senior Secured Credit Facilities is imposed, and debt under any future debt agreements may be imposed, at variable rates, which may affect the yield requirements of investors who invest in our shares, adversely impacting the price of our shares and our ability to issue equity or incur additional debt; requiring us to dedicate a portion of our cash flow from operations to payments on our debt (including interest and scheduled repayments on the outstanding term loan borrowings under the Term Loan Facility, interest payments on the Notes or any future debt agreements with similar requirements), thereby reducing the availability of our cash flow for operations and other purposes; making it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; limiting our ability to refinance indebtedness or increasing the associated costs; requiring us to sell assets to reduce debt or influencing our decision about whether to do so; limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate or preventing us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins of our business; and placing us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable terms and that, as a result, may be better positioned to withstand economic downturns. In addition, if we add new debt to our current debt levels, the related risks that we now face could intensify and we may not be able to meet all our respective debt obligations.
Restrictive covenants in the credit agreements governing our Senior Secured Credit Facilities, the indenture governing the Notes, and any future debt agreements, could restrict our operating flexibility. Our ability to comply with these covenants and other restrictions contained in such documents is not fully within our control, and breaches could trigger adverse consequences.
The credit agreements governing the Senior Secured Credit Facilities and the indenture governing the Notes contain covenants and other restrictions that limit certain of our subsidiaries’ ability to take certain actions. These restrictions, though subject to exceptions, may limit our ability to operate our businesses, and may prohibit or limit our ability to enhance our operations or take advantage of potential business opportunities as they arise. Such restrictions include, among other things, our ability to incur additional indebtedness; pay dividends or other payments on capital stock; guarantee other obligations; grant liens on assets; make loans, acquisitions or other investments; transfer or dispose of assets; make optional payments of, or otherwise modify, certain debt instruments; engage in transactions with affiliates; amend organizational documents; engage in mergers or consolidations; enter into arrangements that restrict certain of our subsidiaries’ ability to pay dividends; change the nature of the business conducted by Vertiv Group and its restricted subsidiaries; and designate our subsidiaries as unrestricted subsidiaries. Further, the activities which may be carried out by Holdings (as defined herein) are subject to limitations.
In addition, under the ABL Revolving Credit Facility, if availability goes below a certain threshold, Vertiv Group and its restricted subsidiaries are required to comply with a minimum “Consolidated Fixed Charge Coverage Ratio” (as defined in the ABL Revolving Credit Facility) of 1.00 to 1.00.
Our ability to comply with these covenants and restrictions may be affected by economic conditions and by financial, market and competitive factors, many of which are beyond our control and future periods will also depend substantially on the pricing and sales volume of our products, our success at implementing cost reduction initiatives and our ability to successfully implement our overall business strategy, among other factors. The breach of any of these covenants or restrictions could result in a default under the credit agreements governing the Senior Secured Credit Facilities, the indenture governing the Notes or any future debt, including as a result of a cross-default, that would permit the applicable note holders or lenders to terminate any outstanding commitments and declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. In that case, the applicable borrowers may be unable to borrow under the Senior Secured Credit Facilities, the Notes, or any future debt, may not be able to repay the amounts due under the Senior Secured Credit Facilities, the Notes, or any future debt, may not be able to make interest payments on the Senior Secured Credit Facilities of the Notes and may not be able make cash available to us, by dividend, debt repayment or otherwise, to enable us to make payments on any future debt, meet other corporate needs or pay dividends. In addition, the lenders under the Senior Secured Credit Facilities, the noteholders of the Notes or any future secured debtholder, could proceed against the collateral securing that indebtedness. This could have serious consequences to our financial position, results of operations and/or cash flows and could cause us to become bankrupt or insolvent.
Our business plan may be dependent on access to funding through the capital markets.
Our ability to make strategic acquisitions and refinance maturing debt obligations may require access to the capital markets and sufficient bank credit lines to support short-term borrowings. Volatility in the capital markets may increase costs associated with issuing other debt instruments, or may affect our ability to access those markets. Any decline in the
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ratings of our corporate credit or any indications from the rating agencies that their ratings on our corporate credit are under surveillance or review with possible negative implications could adversely impact our ability to access capital. If we are unable to continue to access the capital markets, our ability to effectively execute strategic acquisitions or refinance maturing debt obligations could be adversely affected, which could have a material adverse effect on our business and financial results. Additionally, if our customers, suppliers or financial institutions are unable to access the capital markets to meet their commitments to us, our business and financial results could be adversely impacted.
Risks Related to our Securities
Resales of our securities may cause the market price of our securities to drop significantly, even if our business is doing well.
The sale or possibility of sale of shares under existing resale registration statements could have the effect of increasing the volatility in our share price or causing the market price of our securities to decline. We cannot predict the size of any such future sales of shares or the effect, if any, that future sales would have on the market price of our shares. Sales of our Class A common stock may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause our stock price to fall and make it more difficult for holders to sell shares of our Class A common stock.
Anti-takeover provisions contained in our Organizational Documents could impair a takeover attempt.
Our Organizational Documents contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. Certain of these provisions provide:
• no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
• the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;
• a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board or the Chief Executive Officer of the Company, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
• advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
Our Certificate of Incorporation includes a forum selection clause, which could discourageclaims or limit stockholders’ ability to make a claim against us, our directors, officers, other employees or stockholders.
Our Certificate of Incorporation includes a forum selection clause, providing that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring: (a) any derivative action or proceeding brought on behalf of the Company; (b) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees of the Company to the Company or our stockholders; (c) any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws; or (d) any action asserting a claims governed by the internal affairs doctrine, except for, as to each of (a) through (d) above, any claim (i) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (ii) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (iii) for which the Court of Chancery does not have subject matter jurisdiction or (iv) arising under the federal securities laws, including the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall concurrently be the sole and exclusive forums.
This forum selection clause may discourageclaims or limit stockholders’ ability to submit claims in a judicial forum that they find favorable and may result in additional costs for a stockholder seeking to bring a claim. While we believe the risk of a court declining to enforce this forum selection clause is low, if a court were to determine the forum selection clause to
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be inapplicable or unenforceable in an action, we may incur additional costs in conjunction with our efforts to resolve the dispute in an alternative jurisdiction, which could have a negative impact on our results of operations and financial condition. Notwithstanding the foregoing, the forum selection clause will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum.
We are a holding company and depend on the ability of our subsidiaries to pay dividends.
We are a holding company without any direct operations and have no significant assets other than our ownership interest in our subsidiaries. Accordingly, our ability to pay dividends depends upon the financial condition, liquidity and results of operations of, and our receipt of dividends, loans or other funds from, our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to make funds available to us. In addition, there are various statutory, regulatory and contractual limitations and business considerations on the extent, if any, to which our subsidiaries may pay dividends, make loans or otherwise provide funds to us. For example, the ability of our subsidiaries to make distributions, loans and other payments to us for the purposes described above and for any other purpose may be limited by the terms of the agreements governing the Senior Secured Credit Facilities, the Notes, and any of our other outstanding indebtedness.
General Risk Factors
Global macroeconomic conditions, including economic weakness and uncertainty in the areas in which we operate, could adversely impact our business, results of operations and financial condition.
Worldwide economic conditions generally impact demand for our product and service offerings. Macroeconomic weakness and uncertainty in global, regional or local areas may result in decreased orders, revenue, gross margin and earnings. Our business has been impacted from time to time in the past by macroeconomic weakness in the U.S. and various regions outside of the U.S. Continued pressures relating to global supply chain constraints, inflationary or tariff-related impacts on component parts and raw materials, higher overhead costs as a percentage of revenue, higher interest expense, and labor shortages have resulted, and could continue to result in, economic weakness and uncertainty, which could result in:
• capital spending constraints for customers and, as a result, reduced demand for our product and service offerings, including reduced or delayed investments in data center, cloud and artificial intelligence and other high-density compute infrastructure;
• increased price competition for our product and service offerings;
• excess and obsolete inventories;
• restricted access to capital markets and financing, resulting in delayed or missed payments to us and additional bad debt expense;
• excess facilities and manufacturing capacity;
• significant declines in the value of foreign currencies relative to the U.S. dollar, impacting our revenues and results of operations;
• financial difficulty for our customers and suppliers; and
• increased difficulty in forecasting business activity for us, customers, the sales channel and suppliers and vendors.
In order to successfully operate, we must identify, attract, develop, train, motivate and retain key employees, and failure to do so could seriouslyharm us.
In order to successfully operate as a public company and implement our business plans, we must identify, attract, develop, motivate, train and retain key employees, including qualified executives, management, engineering, sales, marketing, IT support and service personnel. The market for such individuals may be highly competitive. We may not be successful in attracting, integrating or retaining qualified personnel to meet our current growth plans or future needs. Our productivity may be adversely affected if we do not integrate and train our new employees quickly and effectively. Attracting and retaining key employees in a competitive marketplace requires us to provide a competitive compensation package, which often includes cash- and equity-based compensation. If our total compensation package is not viewed as competitive, our ability to attract, motivate and retain key employees could be weakened and failure to successfully hire or retain key employees and executives could adversely impact us.
Changes in our executive management team, including our executive chairman, may also cause disruptions in, and harm to, our business. Failure to have an effective succession plan in place for our key executive officers could significantly delay or prevent us from achieving our business and/or development objectives and could materially harm our business.
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We may elect not to purchase insurance for certain business risks and expenses and, for the insurance coverage we have in place, such coverage may not address all of our potential exposures or, in the case of substantial losses, may be inadequate.
We may elect not to purchase insurance for certain business risks and expenses, such as claimed intellectual property infringement, where we believe we can adequately address the anticipated exposure or where insurance coverage is either not available at all or not available on a cost-effective basis. In addition, product liability and product recall insurance coverage is expensive and may not be available on acceptable terms, in sufficient amounts, or at all. We may be named as a defendant in product liability or other lawsuits asserting potentially large claims if an accident occurs at a location where our products, solutions or services have been or are being used. For those policies that we do have, insurance coverage may be inadequate in the case of substantial losses, or our insurers may refuse to cover us on specific claims. Losses not covered by insurance could be substantial and unpredictable and could adversely impact our financial condition and results of operations. If we are unable to maintain our portfolio of insurance coverage, whether at an acceptable cost, acceptable levels of coverage, or at all, or if there is an increase in the frequency or damage amounts claimed against us, our business, results of operations and financial condition may be negatively impacted.
Fluctuations in interest rates could materially affect our financial results and may increase the risk our counterparties default on our interest rate hedges.
Borrowings under the Senior Secured Credit Facilities are subject to variable rates of interest and expose us to interest rate risk. Potential future increases in interest rates and credit spreads may increase our interest expense and therefore negatively affect our financial condition and results of operations, and reduce our access to capital markets. We have entered into interest rate swap agreements to hedge a portion of the floating rate exposure of the Term Loan Facility. Increased interest rates may increase the risk that the counterparties to our interest rate swap agreements will default on their obligations, which could further increase our exposure to interest rate fluctuations. Conversely, if interest rates are lower than our swapped fixed rates, we will be required to pay more for our debt than we would have had we not entered into the interest rate swap agreements.
We incur significant costs and devote substantial management time as a result of operating as a public company.
As a public company, we are subject to significant legal, accounting, and regulatory requirements, including the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, rules and regulations of the SEC, and the listing standards of the NYSE. Compliance with these requirements increases our legal and financial compliance costs and makes certain activities more time-consuming and costly.
We are required to implement and maintain effective disclosure controls and procedures and internal control over financial reporting, which requires significant investment in personnel, systems, and processes. Our management and other personnel must devote substantial time and attention to these compliance obligations, which may divert resources from operational and strategic initiatives. We expect to continue incurring significant expenses and dedicating substantial management effort to maintain compliance with SOX and other public company requirements.
Outlook and Trends
Below is a summary of trends and events that are currently affecting, or may in the future affect, our business, operations and short-term outlook:
• Trade and Economic Uncertainty: The global trade and economic environment continues to evolve rapidly with the imposition of new U.S. tariffs and retaliatory tariffs being imposed by foreign countries. In response to these escalating pressures and the geopolitical and macroeconomic uncertainties surrounding global supply chains and customer demand, we continue to pursue our supply chain strategy of supplier and geographic resilience. This includes, but is not limited to, continuing to add regional sourcing and manufacturing capabilities and capacity to complement our existing global supply chain. We’re strengthening our supply base and manufacturing footprint in the U.S. and other strategic jurisdictions around the world as part of our overall capacity strategy to grow with customer demand in the U.S. and other jurisdictions.
The imposition of U.S. tariffs and foreign country retaliatory tariffs, or the proposed imposition of additional or similar tariffs, in jurisdictions where we have manufacturing facilities or where our customers operate could increase our cost of doing business and could significantly impact our financial performance.
We are continually analyzing and implementing strategic measures in an effort to minimize the financial and operational impacts of the new and proposed tariffs on our business operations, including, but not limited to, continued expansion of domestic manufacturing, alternative sourcing of components and parts regionally, increased sourcing of components and parts that qualify under applicable trade agreements, and continued evaluation of our ability to incorporate tariff impacts into pricing decisions for our products and services.
We are also continually monitoring the evolving macroeconomic environment, including monitoring inflationary and recessionary pressures resulting from the ongoing tariffs and geopolitical climate. These additional pressures could significantly impact the labor markets, exchange rates, customer demand, supply chain, capital markets and other economic conditions in the jurisdictions we operate throughout 2026 and beyond. As we monitor this ever-changing situation, we have been adjusting, and will continue to adjust, our operational plans in an effort to mitigate the impact of these pressures on our business and financial performance.
• Capacity Expansion : We have strategically invested in expanding our global capacity to meet both current and anticipated customer demand across key infrastructure segments. Since late 2021, Vertiv has more than doubled its manufacturing capacity for switchgear, busbar and integrated power solutions through the opening of new facilities and capacity increases at existing operations worldwide. These expansions support our ability to deliver critical power infrastructure at scale for data centers and other mission-critical applications amid accelerating demand, particularly driven by AI and high-performance computing workloads.
To further support growth in thermal management solutions, we opened a new state-of-the-art manufacturing facility and test laboratory in Pune, India in 2024. This site significantly enhances our ability to produce a broad range of cooling products — from in-row and wall-mount units to large direct expansion and free-cooling systems — while serving both domestic and global customers.
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We expanded our domestic infrastructure solutions manufacturing footprint in 2024 with the addition of a 215,000-square-foot facility in Pelzer, South Carolina. This facility accelerates production of modular solutions, integrated power systems and other prefabricated infrastructure, enabling customers to reduce installation time and rapidly scale deployments.
Looking ahead, we anticipate continuing to invest in capacity globally to ensure that we provide the geographic presence and operational resiliency our customers require, with the ability to rapidly scale in response to evolving demand.
In addition to organic capacity growth, we expanded our solution capabilities through strategic acquisitions aligned with demand trends. In August 2025, we acquired the Great Lakes Data Racks & Cabinets family of companies ("Great Lakes") for approximately $200 million, which enhances our rack, cabinet and integrated white-space infrastructure offerings, strengthening our position in delivering comprehensive solutions for AI, high-density computing, edge and hyperscale environments. Great Lakes’ manufacturing operations in the U.S. and Europe broaden our execution capacity and accelerate the availability of pre-engineered rack and integrated infrastructure systems that address market needs for performance, scalability, and faster time to deployment.
• Artificial Intelligence: Increased maturity and adoption of AI and high-performance compute is currently impacting the data center industry and driving technology innovationleading to increased demand. We have invested in developing new product, services, and solutions to serve this growing industry. With this, we are increasing capacity to support additional demand for AI infrastructure as necessary, and we will continue to invest to support additional growth driven by AI.
• Thermal Management Portfolio Expansion : We continue to invest in expansion of our thermal management portfolio and product capabilities to meet customer demand. The complexity of hybrid air and liquid cooling created by AI workloads presents significant opportunities for innovation within, and expansion of, the entire thermal chain to better optimize performance, power utilization, control, and heat re-use. Our investment and expansion efforts are directed at capturing new technologies across the entire thermal chain from chip to heat rejection, re-use, and more to meet growing demands. Further, we are focused on the continued growth and expansion of our portfolio geographically, as we leverage our best-in-class regional products and expand such offerings into other regions and globally.
• Strengthened Services Capabilities : We continue to see attractiveopportunities in our services business as customers increasingly prioritize reliability, performance optimization, and lifecycle management across more complex and mission-critical digital infrastructure environments. The growth of AI and high-density computing is further increasing the importance of services that support uptime, efficiency, and long-term system performance.
Our services portfolio spans project-based and lifecycle offerings with an increasing emphasis on software-enabled and data-driven capabilities that allow us to engage earlier in the deployment cycle and remain embedded throughout the operational life of customer infrastructure.
We have continued to enhance these capabilities through targeted investments and acquisitions. These acquisitions strengthen our software and automation capabilities, enabling advanced analytics, orchestration, and AI-driven insights across complex infrastructure environments. For example, our acquisition of Purge Rite Intermediate, LLC ("PurgeRite") in December 2025 expands our thermal services capabilities, supporting system cleanliness, reliability, and performance, particularly in liquid-cooled and hybrid cooling applications. Refer to "Note 2 - Acquisitions" for additional information on this acquisition. Together, these investments support our integrated systems-level approach and strengthen the value proposition of our services offering.
• Strategic Partnerships: We continue to pursue strategic partnerships and investment opportunities that enhance our technology capabilities and support the delivery of scalable, resilient infrastructure solutions as customer requirements evolve. As data center and critical infrastructure environments become more power-dense and complex, collaboration across the ecosystem is increasingly important to meeting performance, efficiency, and reliability needs.
Our partnership with NVIDIA supports the development of advanced power and thermal infrastructure aligned with next-generation AI and high-performance computing architectures, while our collaboration with Oklo reflects exploration of alternative energy solutions that could support future data center power requirements. In addition, our partnership with Caterpillar strengthens our capabilities in distributed power generation and backup solutions for critical infrastructure applications.
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Collectively, these partnerships support Vertiv’s systems-level approach and enhance our ability to deliver integrated solutions across power, thermal, and digital infrastructure.
• Need for Speed and Scale: As digital infrastructure requirements continue to accelerate—particularly for AI and high-density computing—customers are increasingly prioritizing speed of deployment and the ability to scale reliably across geographies. Time-to-market, consistency, and execution certainty have become critical decision factors as customers seek to bring capacity online faster while managing growing system complexity.
We continue to invest in prefabricated, factory-integrated, and standardized infrastructure solutions designed to reduce on-site complexity and improve deployment efficiency. Our SmartRun overhead infrastructure portfolio accelerates data center build-outs through pre-engineered and modular power, busway, and integrated infrastructure solutions, enabling faster installation, improved quality, and greater scalability. In addition, Vertiv OneCore provides a standardized, repeatable architecture that integrates power, thermal, racks, software, and services into a unified systems framework, supporting consistent deployment and scalability across customer environments. These solutions shift a greater portion of engineering, assembly, and validation into the factory, reducing on-site installation complexity and reliance on scarce skilled labor, while improving deployment speed, consistency, and execution certainty.
Together, these capabilities support Vertiv’s systems-level approach and enhance our ability to help customers deploy critical infrastructure faster, at scale, and with greater predictability as demand continues to grow.
RESULTS OF OPERATIONS
Year ended December 31, 2025 compared to year ended December 31, 2024
(Dollars in millions)
$ Change
% Change
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Amortization of intangibles
Restructuring costs
Foreign currency (gain) loss, net
Other operating expense (income)
Operating profit (loss)
Interest expense, net
Loss on extinguishment of debt
Change in fair value of warrant liabilities
Income tax expense
Net income (loss)
Net Sales
Net sales were $10,229.9 in 2025, an increase of $2,218.1, or 27.7%, compared with $8,011.8 in 2024. The increase in sales was primarily driven by higher sales volumes and the positive impacts from foreign currency of $49.6. Product sales increased $1,961.8, which included positive impacts from foreign currency of $37.5. Services & spares sales increased $256.3, including the positive impacts from foreign currency of $12.1.
Excluding intercompany sales, net sales were $6,386.3 in the Americas, $2,019.2 in Asia Pacific and $1,824.4 in Europe, Middle East & Africa. Movements in net sales by segment and offering are each detailed in the Business Segments section below.
Cost of Sales
Cost of sales were $6,514.7 in 2025, an increase of $1,437.1, or 28.3% compared to 2024. The increase in cost of sales was primarily driven by the impact of higher volumes. Gross profit was $3,715.2 in 2025, or 36.3% of sales, compared to $2,934.2, or 36.6% of sales in 2024. Margin was relatively flat as benefits from higher sales volume and improved price realization were offset by cost inflation, particularly related to tariffs.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses (or “SG&A”) were $1,617.8 in 2025, an increase of $243.8, or 17.7% compared to 2024. The increase in SG&A was primarily driven by increased compensation costs. SG&A as a percentage of sales were 15.8% in 2025 compared with 17.1% in 2024.
Other Operating Expenses
The remaining other operating expenses include amortization of intangibles, restructuring costs, foreign currency (gain) loss, and other operating expense (income). These remaining operating expenses were $267.7 for 2025, which was a $74.9 increase from 2024. The increase was due to a $49.2 increase in restructuring costs, increased amortization of intangibles of $16.2, a $6.8 decrease in other operating expense (income) primarily due to mark-to-market losses associated with economic hedges, and a $2.7 increase in foreign currency loss.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities represents the mark-to-market fair value adjustments to the then outstanding private warrants. The change in fair value of the then outstanding private warrants during 2024 resulted in a loss of $449.2. Cote SPAC I LLC elected in December 2024 to exercise the remaining 5,266,667 outstanding private warrants on a cashless basis as permitted under the warrants, in exchange for which the Company issued 4,812,521 shares of Class A common stock. As of December 31, 2025 and 2024, there were no warrants outstanding.
Interest Expense
Interest expense, net, was $86.1 in 2025 compared to $150.4 in 2024. The $64.3 decrease is primarily driven by a $33.0 increase of interest income and a $26.1 reduction to interest expense as a result of our Term Loan amendments. To the extent interest rates continue to fluctuate our interest expense will change, although we expect these changes to be partially mitigated by our interest rate swaps and interest income.
Income Tax Expense
Income tax expense was $409.1 in 2025 compared to $269.6 in 2024. The effective rate in 2025 was primarily influenced by the mix of income between our U.S. and non-U.S. operations and net changes in valuation allowance offset by discrete benefits related to stock compensation. In 2024, income tax expense was primarily influenced by the mix of income between our U.S. and non-U.S. operations, net of changes in valuation allowances and uncertain tax positions, and reflects the impact of non-deductible changes in fair value of warrant liabilities, as well as discrete tax adjustments related to legislation changes enacted in the period.
Income tax expense in 2025 was $139.5 higher than 2024 primarily due to increased financial performance, changes in non-U.S tax holidays and incentives and the change in valuation allowance.
Business Segments
The following are business segment results for the years ended December 31, 2025 and 2024. Segment profitability is defined as operating profit (loss). Segment margin represents segment operating profit (loss) expressed as a percentage of segment net sales. For reconciliations of segment net sales and earnings to our consolidated results, see “Note 13 — Segment Information”, of our Consolidated Financial Statements. Segment net sales are presented excluding intercompany sales.
Americas
(Dollars in millions)
December 31, 2025
December 31, 2024
$ Change
% Change
Net sales
Operating profit (loss)
Margin
Americas net sales of $6,386.3 in 2025 increased $1,885.7, or 41.9%, from 2024. The increase in sales was primarily driven by higher sales volumes due to products increasing by $1,691.0 and sales of service & spares increasing by $194.7. The product growth was driven by broad-based strength across products and customer segments. Americas net sales were negatively impacted by foreign currency of approximately $6.3.
Operating profit (loss) in 2025 was $1,714.3, an increase of $616.5, or 56.2%, compared with 2024. Margin increased primarily due to the mix of product and service sales in addition to operational leverage.
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Asia Pacific
(Dollars in millions)
December 31, 2025
December 31, 2024
$ Change
% Change
Net sales
Operating profit (loss)
Margin
Asia Pacific net sales of $2,019.2 in 2025 increased $301.4, or 17.5%, from 2024. The increase in sales was primarily driven by growth throughout the region, partially offset by the negative impact of foreign currency of approximately $11.5. Net sales of products improved by $262.4, and service & spares improved by $39.0.
Operating profit (loss) in 2025 was $222.1, an increase of $46.9, or 26.8%, compared with 2024. Margin increased primarily driven by operational leverage, cost improvement actions, and geographical mix.
Europe, Middle East & Africa
(Dollars in millions)
December 31, 2025
December 31, 2024
$ Change
% Change
Net sales
Operating profit (loss)
Margin
Europe, Middle East & Africa net sales of $1,824.4 in 2025 increased $31.0, or 1.7%, from 2024. Sales increases were positively impacted by foreign currency of approximately $67.4, with products increasing by $8.4, and service & spares increasing by $22.6.
Operating profit (loss) in 2025 was $377.4, a decrease of $62.0, or 14.1%, compared with 2024. Margin erosion was primarily due to the mix of product and service sales, operational inefficiencies, and increased capacity to support future global demand.
Vertiv Corporate and Other
Corporate and other costs include costs associated with our headquarters located in Westerville, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, IT, Legal, and global product platform development and offering management. Corporate and other costs were $283.7 and $160.8 in 2025 and 2024, respectively. Corporate and other costs increased $122.9 compared to 2024 primarily due to an increase in restructuring costs and an increase in certain employee related costs.
Capital Resources and Liquidity
Our primary future cash needs relate to working capital, operating activities, capital spending, strategic investments and debt service.
Our capital expenditures are primarily related to the maintenance of our long-term assets, as well as the investment in projects, such as capacity and facility expansion, that support growth and innovation to further our enterprise strategy. Our capital expenditures (including capitalized software) were $226.4 in 2025. We expect to have capital expenditures (including capitalized software) of $425 to $525 in 2026 in order to support capacity expansion across the business.
We have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures, which consist of debt obligations, lease obligations, bank guarantees, bonds and other financial instruments. Refer to “Note 6 — Debt”, “Note 7 — Leases”, and “Note 16 — Commitments and Contingencies” of the accompanying consolidated financial statements for more information. In addition, we have uncertain tax positions that are further discussed in “Note 8 — Income Taxes” of the consolidated financial statements. We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which could materially impact our financial condition or liquidity.
We, through our subsidiaries, are party to certain indebtedness arrangements, including the Senior Secured Notes due 2028, with an outstanding principal amount of $850.0 as of December 31, 2025 (the “Notes”), the Term Loan due 2032, with an outstanding principal amount of $2,076.1 as of December 31, 2025 (the “Term Loan”), and the ABL Revolving Credit Facility due 2029, providing up to $800.0 of revolving borrowings, with separate sublimits for letters of credit and swingline borrowings and an uncommitted accordion of up to $200.0, for which none was outstanding as of December 31, 2025 (the “ABL Revolving Credit Facility” and collectively with the Term Loan, the “Senior Secured Credit Facilities”). Our Term Loan's maturity was extended from 2027 to 2032 through an amendment which was executed on August 12, 2025.
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See “Note 6 — Debt” of the consolidated financial statements for more detailed discussion of the material terms of the Notes and the Senior Secured Credit Facilities.
At December 31, 2025, we had $1,728.4 in cash and cash equivalents and $99.5 in short-term investments, which includes amounts held outside of the U.S., primarily in Europe and Asia. Non-U.S. cash is generally available for repatriation without legal restrictions, subject to certain taxes, mainly withholding taxes. We are not asserting indefinite reinvestment of cash or outside basis for our non-U.S. subsidiaries due to the outstanding debt obligations in instances where alternative repatriation options, other than dividends, are not available. At December 31, 2025, Vertiv had $784.0 of availability (subject to customary borrowing base and other conditions) under the ABL Revolving Credit Facility, net of letters of credit outstanding in the aggregate principal amount of $16.0, and taking into account the borrowing base limitations set forth in the ABL Revolving Credit Facility.
We believe our current cash and cash equivalent levels, augmented by availability under the ABL Revolving Credit Facility, will provide adequate near-term liquidity for the next 12 months of independent operations, as well as the resources necessary to invest for growth in existing businesses and manage our capital structure on a short- and long-term basis. We expect to continue to opportunistically access the capital and financing markets from time to time. Access to capital and the availability of financing on acceptable terms in the future will be affected by many factors, including our credit rating, economic conditions, and the overall liquidity of capital markets. There can be no assurance that we will continue to have access to the capital and financing markets on acceptable terms.
Summary Statement of Cash Flows
Year ended December 31, 2025 compared to year ended December 31, 2024
(Dollars in millions)
$ Change
% Change
Net cash provided by (used for) operating activities
Net cash provided by (used for) investing activities
Net cash provided by (used for) financing activities
Capital expenditures
Investments in capitalized software
Net Cash provided by (used for) Operating Activities
Net cash provided by operating activities was $2,113.8 in 2025, a $794.5 increase in cash generation compared to 2024. Net income from operations of $1,332.8 included $383.0 of net non-cash expense items, consisting of depreciation and amortization of $308.6, deferred taxes of $22.6, non-cash stock based compensation expense of $45.9, and amortization of debt discount and issuance costs of $5.9. Trade working capital provided $339.3 in 2025 compared to $114.1 in 2024.
Net Cash provided by (used for) Investing Activities
Net cash used for investing activities was $1,500.8 in 2025 compared to $201.7 in 2024. The increased use of cash in 2025 over the comparable period was primarily driven by the acquisition of businesses of $1,184.8 and net purchases of short-term investments of $89.6.
Net Cash provided by (used for) Financing Activities
Net cash used by financing activities was $72.3 in 2025 compared to $652.1 of net cash used by financing activities in 2024. The decrease in cash used in 2025 was primarily the result of a $599.9 decrease in repurchases of common shares and a $6.6 decrease in proceeds from the exercise of employee stock options, offset by a $24.4 increase in dividend payments, and a $10.7 decrease in employee taxes paid for shares withheld.
Critical Accounting Estimates
Our discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments related to these assets, liabilities, net sales and expenses. We believe these estimates to be reasonable under the circumstances. Management bases its estimates and judgments on historical experience, expected future outcomes, and on various other factors that are believed to be
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reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
We believe that the following accounting estimates are critical to our financial results:
Business Combinations
We allocate the purchase price of acquired companies to tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date. The amount of purchase price which is in excess of the fair values of assets acquired and liabilities assumed is recognized as goodwill. The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies, and are inherently uncertain.
The following are critical estimates in valuing intangible assets we have acquired or may acquire in the future and include but are not limited to:
• forecasted earnings before interest, taxes, depreciation, and amortization;
• forecasted net sales;
• customer attrition rates;
• royalty rates; and
• discount rates.
Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results. Different assumptions may result in materially different values for assets acquired and liabilities assumed, which may impact our financial position and future results of operations.
Goodwill
We account for goodwill acquired in a business combination in conformity with current accounting guidance, which does not allow for goodwill to be amortized. We review goodwill for impairment annually in the fourth quarter or when events and circumstances indicate an impairment may have occurred. The impairment assessment for goodwill is performed at the reporting unit level. The Company’s five reporting units are comprised of the Americas; Greater China; India; Asia; and Europe, Middle East & Africa. For segment reporting Greater China, India and Asia are aggregated into one reportable business segment, refer to “Note 13 — Segment Information” of the accompanying consolidated financial statements for more information.
We may assess our goodwill for impairment initially using a qualitative approach to determine whether it is more likely than not that the fair value of the reporting unit is greater than it’s carrying value. When performing a qualitative test, we assess various factors including industry and market conditions, macroeconomic conditions and performance of our businesses. If the results of the qualitative assessment indicate that it is not more likely than not that the fair value of the reporting unit is greater than it’s carrying value, a quantitative impairment analysis would be performed to determine if impairment is required. We may also elect to perform a quantitative analysis initially rather than using a qualitative approach.
If a quantitative approach is required or elected, we test goodwill for impairment by comparing the estimated fair value of the reporting units to the related carrying value. The valuation methods used by us to estimate the fair value of each reporting unit include the discounted cash flow approach, the comparable public company approach and the comparable acquisition approach using a weighted approach of 40%, 40% and 20%, respectively. The discounted cash flow model requires several estimates and assumptions including future sales growth, earnings before interest, taxes, depreciation, and amortization (or “EBITDA”) margins, capital expenditures, a discount rate and a terminal net sales growth rate (the net sales growth rate for the period beyond the years forecasted by the reporting units) for each reporting unit. The comparable public company and comparable acquisition approaches require several assumptions, including EBITDA multiples for comparable companies and transactions that operate in the same markets as our reporting units.
We performed our annual goodwill impairment using the qualitative approach in the fourth quarter for each reporting unit. Based on the results of our qualitative impairment assessment, we concluded that it is more likely than not that the fair value of each reporting unit exceeded their carrying value and, therefore, our goodwill was not impaired, and no impairment charges were reported for the year ended December 31, 2025.
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Revenue Recognition
We recognize revenue from the sale of manufactured products and services when control of the promised goods or services are transferred to customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. The majority of our sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer. Sales for service contracts, including installation, inventory with no alternative use and an enforceable right of payment upon customer termination and other discrete services, generally are recognized over time as the services are provided. Payments received in advance for service arrangements or product delivery are recorded as deferred revenue and recognized in net sales when the revenue recognition criteria are met. Unbilled revenue is recorded when performance obligations have been satisfied, but we do not have present right to payment.
For agreements with multiple performance obligations, the Company is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of agreements we allocate sales price to each distinct obligation on a relative stand-alone selling price basis. The majority of revenue from arrangements with multiple performance obligations is recognized when tangible products are delivered, with smaller portions for associated installation and commissioning recognized shortly thereafter. Generally, contract duration is short term, and cancellation, termination or refund provisions apply only in the event of contract breach. These provisions have historically not been invoked.
Payment terms vary by the type and location of the customer and the products or services offered. Revenue from our sales have not been adjusted for the effects of a financing component as we expect that the period between when we transfer control of the product and when we receive payment to be one year or less. Sales, value add, and other taxes collected concurrent with revenue are excluded from sales. We record amounts billed to customers for shipping and handling in a sales transaction as revenue. Shipping and handling costs are treated as fulfillment costs and are included in costs of sales.
We record reductions to sales for prompt payment discounts, customer and distributor incentives including rebates, and returns at the time of the initial sale. Rebates are estimated based on sales terms, historical experience, trend analysis, and projected market conditions in the various markets served. Returns are estimated at the time of the sale primarily based on historical experience and recorded gross on the consolidated balance sheet.
Sales commissions are expensed when the amortization period is less than a year and are generally not capitalized as they are typically earned at the completion of the contract when the customer is invoiced or when the customer pays Vertiv. We typically offer warranties that are consistent with standard warranties in the jurisdictions where we sell our goods and services. Our warranties are generally assurance type warranties for which we promise that our goods and services meet contract specifications. In limited circumstances, we sell warranties that extend the warranty coverage beyond the standard coverage offered on specific products. Sales for these separately-priced warranties are recorded based on their stand-alone selling price and are recognized as revenue over the length of the warranty period.
Income Taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Judgment in the forecasting of taxable income using historical and projected future operating results is required in determining our provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable, and deferred taxes. Under U.S. GAAP, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss and credit carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the enactment date occurs. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized. Deferred taxes are not provided on the unremitted earnings of subsidiaries outside of the U.S. when it is expected that these earnings are indefinitely reinvested. In the event that the actual outcome of future tax consequences differs from our estimates and assumptions due to changes or future events such as tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans, the resulting change to the provision for income taxes could have a material effect on the Consolidated Statements of Earnings (Loss) and Consolidated Balance Sheets.
The recoverability of deferred tax assets and the recognition and measurement of uncertain tax positions are subject to our various assumptions and judgment. If actual results differ from our estimates made in establishing or maintaining valuation allowances against deferred tax assets, the resulting change in the valuation allowance would generally impact
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earnings. Additionally, the positions taken with regard to tax contingencies may be subject to audit and review by tax authorities, which may result in future taxes, interest and penalties.
In determining the recoverability of deferred tax assets, we give consideration to all available positive and negative evidence including reversals of deferred tax liabilities, projected future income, tax planning strategies and recent trends in financial results. We attach the most weight to historical earnings as they are more objectively verifiable compared to forecasts. In evaluating the objective evidence that historical results provide, we generally consider three years of cumulative income or loss at the jurisdictional taxpayer level as an important factor.
