Generac Surges Most On Record As Amazon’s Generator Deal Electrifies Data Centers

Generac shares surged the most on record in premarket trading in New York after disclosing a long-term deal with Amazon that could generate up to $8 billion in power-generation spending. 

Wells Fargo analyst Praneeth Satish, who covers Generac, shared his initial thoughts on the massive Amazon-Generac power deal in a note:

GNRC Announces Multibillion Dollar Contract With AMZN. GNRC announced a multi year agreement to supply backup generators for Amazon’s data centers and issued warrants to AMZN, allowing for the purchase of up to 1.69M GNRC shares at $200.93/ share. The warrants vest as Amazon’s cumulative generator purchases increase, up to $8B of spend, with ~18% vesting at signing. Initial deliveries are expected to total $2.4B in 2027-28, or an average of $1.2B/yr (vs our prior estimate of >$1.0B).

Warrants Imply A Long-Term Relationship. The warrant agreement suggests Amazon’s relationship with GNRC is intended to extend well beyond the initial $2.4B delivery schedule for 2027-28, with Amazon able to earn the full warrant only if cumulative diesel generator purchases ultimately reach $8B, reinforcing our view that the strategic significance o

Stock Was Not Reflecting Much Data Center Upside, Making This Deal More Impactful. GNRC stock has underperformed recently given investor concerns around Trump’s EO on foreign-sourced grid equipment and GNRC’s use of Baudouin engines. We estimate GNRC is worth ~$185/sh assuming only a sustained ~$1B annual revenue run rate from its first hyperscaler and colo deals. With GNRC trading at $175/sh pre AMZN deal, the stock appeared to be discounting little to no value for any new data center deals.

William Blair industrials analyst Brian Drab told clients that Generac’s seven-year deal with Amazon is a “massive win” : 

Our Take. This is a massive win for Generac and provides clarity regarding the demand underpinning management’s recently announced plan to triple manufacturing capacity for large-format generators by August 2027. We estimate the agreement will add more than 20% to total company EBITDA in 2028. In addition, the agreement provides strong visibility, with an indication of $8 billion in spend over seven years, for Generac at a time when many investors are questioning the durability of capital spending trends in the data center industry. The agreement also reduces the perceived risk associated with the extraordinary capacity expansion management has in motion. Prior to today’s announcement, shares were trading at only 10 times 2027 EBITDA, despite our forecast for greater than 20% EBITDA growth over the next several years. We believe that the signing of this agreement will not only drive material upward estimate revisions but also lower the discount rate applied to the future earnings given increased visibility, driving valuation expansion.

Generac shares surged 34% in premarket trading. If sustained through the cash close, the massive gain would mark the stock’s largest one-day gain in Bloomberg data going back to 2010.

Analyst coverage includes 16 “Buy” ratings, six “Holds,” and no “Sells,” with an average 12-month price target of about $293.

We recently cited Apollo’s head of thematic investing, Rob Bittencourt, who said the US reindustrialization is already “underway” and will require trillions of dollars in investment. Bittencourt noted that much of the investing activity has centered on compute-related spending (read the report). Generac’s Amazon deal shows how the spending is extending beyond computing hardware into the power infrastructure supporting the data center buildout and powering up America trends.