Wärtsilä rides the AI power wave with record orders and margin clarity

Wärtsilä delivered a record quarter on the back of surging demand for power generation, largely from data centers and grid balancing. Total order intake jumped 33% to EUR 2.8 billion, an all-time high, with both Energy (+82%) and Marine (+12%) hitting records. Crucially, the company finally provided the margin visibility investors have long sought: since the start of 2025, the gross margin on its energy equipment order book has improved by plus 500 basis points. This is a major inflection point for a company that has been criticized for opaque pricing.

“We know there has been a lot of focus on euro per kilowatt, but we have also been very clear that that is not the right KPI to try to assess the margin content of the backlog. So we thought let's now give out this piece of information.” “Håkan Agnevall, CEO” — Håkan Agnevall, Chief Executive Officer (CEO) · 2026-07-21 The disclosure directly addresses the market's skepticism about whether the company is converting its strong order flow into profitability. As CFO Arjen Berends noted, the AI pipeline is “very strong, though volatile” “(Arjen Berends)” — Arjen Berends, Chief Financial Officer (CFO) · 2026-07-21, but the margin improvement is not just about pricing power—it also reflects operational efficiency and a shift away from EPC.

A capacity race to meet insatiable demand

The company is not waiting for demand to cool. It announced another EUR 90 million investment to expand its Vaasa facility, bringing total capacity expansion to 2.2x by 2029. “2028 we are sold out... The orders that we are negotiating now is for 2029. And we have started to sell out... I mean we have already sold some of it.” “Håkan Agnevall, CEO” — Håkan Agnevall, Chief Executive Officer (CEO) · 2026-07-21 This ties directly to the global theme of data centers straining the grid. The company's 790MW Texas order and 412MW Ohio/Texas order are testaments to its growing role in off-grid power for hyperscale customers.

The company's technology leadership is also evolving. It recently tested the world's first large-scale 100% hydrogen engine and secured commercial orders for ammonia-capable engines.

We have now successfully operated a new 100% hydrogen engine supplying power to Spain's national electricity grid... the world's first demonstration of a large-scale hydrogen engine running on 100% pure hydrogen.

Portfolio simplification and a storage pivot

Wärtsilä completed its six-year portfolio divestment program, exiting 11 business units, which will now allow it to focus solely on its high-margin core. Simultaneously, it set up a 50-50 joint venture with RCT Solutions for energy storage, expected to deliver a negative EUR 40-50 million impact to 2026 operating results. This is a strategic move to strengthen its competitiveness in the storage segment, even as it reclassifies storage as discontinued operations. The market has long debated the company's exposure to the volatile battery market, and this JV provides a cleaner path forward.

Prior quarters laid the groundwork for today's clarity. In February 2026, the CEO hinted at the backlog improvement: “We are starting to open up our backlog. I'm referring to the slide that we presented here. So it's a new standard slide going forward.” “Håkan Agnevall, CEO (Feb 2026)” — Håkan Agnevall, Chief Executive Officer (CEO) · 2026-02-04 And in July 2025, he described the data center pipeline as “more than a handful... there is a lot more, but they come and go.” “Håkan Agnevall, CEO (Jul 2025)” — Hakan Agnevall, CEO · 2025-07-18

With the alternative fuel engine portfolio expanding, a record service order book (EUR 2.6 billion, book-to-bill 1.07), and deep capacity investments, Wärtsilä has transformed from a cyclical engine maker into a critical enabler of the AI power buildout. The stock has yet to fully reflect this margin inflection, making this a name to watch.