The "Boiling Point" Moment of the Liquid Cooling Era: A Look at the New Liquid Cooling Revolution Through Vertiv's Financial Report
Order volume surged year-on-year, with $15 billion in orders on hand (six times last year's total revenue), and 2026 revenue guidance of $13.5 billion (well above analyst expectations)—Vertiv's data clearly shows: liquid cooling has shifted from an "optional solution" to a "mandatory standard," moving from "technology validation" to the "order explosion period." 2026 marks the industry's turning point from "pilot stage" to "mass production," with a market space in the hundreds of billions quickly opening up, requiring a systematic elevation of strategic understanding of this sector.
I. What happened? Vertiv's results far exceeded expectations
Vertiv Technologies (Vertiv) released its Q4 2025 financial report, with outperforming results and guidance driving the stock up 24%, marking a definitive industry signal that global computing power infrastructure is moving from the "air cooling era" fully into the "liquid cooling era." Orders grew 252% year-on-year, with $15 billion in backlog (six times last year's total revenue), and 2026 revenue guidance at $13.5 billion (well above Wall Street's expected $11.7 billion), confirming that 2026 will be the watershed for the liquid cooling industry from "pilot" to "mass production," with a rapidly expanding market in the hundreds of billions.
Source: WIND
① Core Financial Data: Not just a "beat," but a "structural re-rate"
All Vertiv key financial indicators showed nonlinear growth:
(1) Profit and Revenue: Outperformed across the board
Q4 adjusted EPS was $1.36, up 37% YoY, significantly higher than the Wall Street estimate of $1.29;
Q4 revenue was $2.9 billion, up 23% YoY, with organic growth of 19%, and the Americas recording a staggering 46% growth;
(2) Orders and Backlog: The real "explosive moment" signal
Q4 orders grew 252% YoY, up 117% quarter-on-quarter;
Book-to-bill ratio reached 2.9 times, meaning for every $1 sales realized, nearly $3 in new orders were received;
End-of-period backlog reached $15 billion, doubling from the same period last year, equivalent to 1.5 times 2025 projected revenue and 1.1 times 2026 guidance.
(3) Profitability and Cash Flow: Quality of growth is solid
Q4 adjusted operating margin was 23.2%, up 170 basis points YoY;
Full-year adjusted free cash flow was about $1.9 billion;
Net leverage only 0.5x, with an extremely healthy balance sheet.
(4) 2026 Guidance: Well above market consensus
Full-year revenue guidance $13.5 billion (range $13.25–$13.75 billion), representing 28% organic growth, far exceeding Wall Street’s expectation of $11.7 billion;
Full-year adjusted EPS guidance at $6.02 (range $5.97–$6.07), up 43% YoY, far above expected $4.85;
② Three "Beyond Expectation" Signals Within The Financial Report
Signal One: Nonlinear order growth reflects customer purchasing behavior shifting from "pilots" to "grabbing supply".
The 252% order growth cannot be explained by "linear extrapolation". This means a group of large internet customers have completed technical validation for liquid cooling and entered the phase of large-scale collective purchasing. CEO Giordano Albertazzi explicitly stated during the call, "We see project pipelines growing strongly across all regions and all tech product lines, and order sizes are getting larger." This is not cyclical restocking, but a structural capex surge driven by generational tech replacement.
Signal Two: $15 billion orders on hand locks in growth visibility for the next 18–24 months
Vertiv's order delivery cycle has extended from 6–9 months to 12–18 months; not because of declining supply chain efficiency, but because demand far exceeds short-term supply capacity—raising performance certainty to top levels in the AI hardware value chain.
Signal Three: 46% organic growth in the Americas, EMEA "coiled spring is uncoiling"
The rapid growth in the Americas is the most direct proof of AI compute investment translating to infrastructure. More critically, EMEA orders are sharply rebounding; management described the European market launch as "coiled spring is uncoiling." This signals liquid cooling demand spreading from North America to worldwide, with sector prosperity potentially surpassing expectations in breadth and duration.
After the earnings release, Vertiv stock hit all-time highs. Note this is not a simple response to a single quarter but a systematic market reassessment of growth for the entire liquid cooling industry. The strategic significance is comparable to the December VIP article "Micron Financial Results Interpretation." Worth attention.
II. Why is it important? Liquid cooling becomes the new core variable
Why is liquid cooling the trend? Underlying logic: chip power consumption has broken the physical limits of air cooling, making liquid cooling the "only solution".
Current AI accelerator chips have TDP (thermal design power) typically reaching 700–1000W; Nvidia B200 platform exceeds 1000W and next-generation Rubin architecture is expected to go even higher. The upper limit for air cooling heat dissipation is around 800W per chip; once above this, traditional cooling faces:
- Excessive fan speeds causing noise and reliability issues;
- Dramatic drop in airflow organization efficiency;
- Deteriorating data center PUE (electric efficiency), unable to meet regulatory requirements.
Thus, liquid cooling is not a "better choice", but "the only feasible path". Leading global cloud providers have made liquid cooling the default for next-gen architectures. This is a very important qualitative inflection:
- 2024: Liquid cooling still a "technical option", some customers piloting;
- 2025–2026: Liquid cooling written into RFPs and becomes "admittance threshold";
- After 2027: Air cooling is basically eliminated in new high-end compute clusters.
TrendForce predicts global AI data center liquid cooling penetration will jump from 14% in 2024 to 47% in 2026. Tripling penetration in three years is an extremely steep S-curve in hardware replacement history. By estimates, global AI server liquid cooling market size will reach $21.8 billion by 2027. Of this, Nvidia GPU-related cold plate liquid cooling demand alone will be $6.9 billion and $17.3 billion in 2025 and 2026 respectively; adding AMD, Amazon and other ASICs, total increases by $500 million and $1.2 billion more.
What is $21.8 billion?
- About 15%–20% of the global server market;
- 8–10x the global liquid cooling market in 2023;
- CAGR (2024–2027) exceeds 80%.
The state of the liquid cooling industry in 2026—in three dimensions:
(1) Supply side: Capacity bottlenecks emerging, capex on the rise
Vertiv has raised 2026 capex/revenue ratio from 2–3% to 3–4%, mainly for new plants and capacity expansion. Domestic vendors Invt, E-Meicon etc. are also scaling up. Equipment investment leading the way signifies lasting prosperity for the value chain.
(2) Demand side: Nvidia Rubin platform as the "strongest catalyst"
Rubin's compute tray and network switch chassis both use fanless designs, relying entirely on liquid cooling. Rubin will be a milestone product achieving over 90% liquid cooling penetration, with small-batch shipment expected to start in 2026 and scale-up in 2027—timing that coincides with the $21.8 billion market opportunity for liquid cooling.
(3) Price side: Profitability continues to improve
Vertiv's Q4 operating margin was 23.2%, up +170bp YoY, showing high technology barriers bring pricing power. As scale kicks in, leading players have room for further margin improvement.
III. What next? Tech routes and industry value allocation
Liquid cooling technology routes are clearly tiered:
(1) Cold plate (DTC, Direct-to-Chip)—currently the absolute mainstream (90%+ share)
- Advantages: Minimal changes to server components, smooth transition from air cooling, mature value chain, cost controllable;
- Status: Vertiv and Taiwanese vendors (Auras, Chaun-Choung) dominate; domestic Invt, Sugon etc. have full-chain solutions;
- Outlook: Will remain the shipment leader for the next three years.
(2) Immersion liquid cooling—for ultra-high heat density, the ultimate solution
- Advantages: Highest cooling efficiency, PUE can drop below 1.1, eliminates all fan power;
- Bottleneck: High coolant cost, equipment retrofitting difficulty, maintenance ecosystem immature;
- Assessment: 2026–2027 will be the "eve of a boom", and after 2028 may grab 10–20% share in top supercomputing clusters and new mega data centers.
(3) Microchannel/two-phase liquid cooling—frontier supplementary technology
- Still in the lab-to-industry transition phase, with TSMC, Nvidia, Microsoft involved;
- Mainly for chip-internal/in-package cooling, performance enhancer for cold plates, not a replacement.
Globally, the liquid cooling market is dominated by Taiwanese vendors, with high trust barriers. As liquid systems directly contact chips worth tens of thousands of dollars, chip-level reliability certification (RVL) is key. Nvidia controls entry via its official RVL supplier list, and Taiwanese giants (Auras, Chaun-Choung, Delta) with decades of history with Nvidia and AMD have formed a solid ecosystem closed loop.
Domestic market is breaking through with two tracks:
- Track one: OEM for Taiwanese leaders, indirect international participation. E.g. some cold plate, pipe and quick connector makers leverage manufacturing and cost advantage to enter the global supply chain.
- Track two: Directly co-develop R&D with chip giants, obtain RVL code. A few tech-leading companies are upgrading from "hardware OEM" to "standard formulation participant" via next-gen cooling reference design with Nvidia etc.
China's liquid cooling firms now face a dual window of "global supply chain entry" + "domestic substitution acceleration".
We boil the value distribution of the liquid cooling chain down to a "three-tiered pyramid":
Key segment focus—
① System integration & thermal solution providers—industry anchor, priority allocation
Key logic: manage customer interface, offer total solutions, and can upgrade to RVL-certified supplier. Companies with full-chain liquid cooling reserves are rare, deserving valuation premium.
② Core component makers (cooling source, casting, quick connectors)—spillover certainty of demand
Key logic: during global liquid cooling capacity bottleneck, leading foreign firms will outsource parts manufacturing, so domestic firms with precision manufacturing directly benefit.
③ Coolants (fluorinated/silicone liquids)—long-cycle, high elasticity, main battlefield for domestic substitution
Key logic: The biggest bottleneck for immersion cooling scale-up is coolant cost and supply security. China has a complete fluoro-silicone chain, and after 3M's exit, a huge supply gap opened, with self-sufficiency urgently needed. Current penetration is very low; once tech matures, the market expands exponentially.
Upcoming catalysts—
① Q2–Q3 2026: Rubin platform tech details announced
Nvidia GTC conference will be a key catalyst, with the final Rubin cooling architecture determining the liquid cooling tech path weights for the next two years.
② H2 2026: Domestic CSPs (cloud service providers) liquid cooling bidding season
AliCloud, Tencent Cloud, ByteDance etc. 2027 intelligent data center plans will roll out, and whether domestic suppliers can gain major bids is the core competitiveness test.
In summary, Vertiv's Q4 earnings marks an official confirmation of liquid cooling switching from "theme investment" to "prosperity investment." 252% order surge, $15 billion backlog, 43% EPS growth guidance together sketch a sharply inclined, highly visible growth curve. Worth attention.
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