Turbine buyers' down payments lift GE Vernova's cash guidance to $16-17 billion

GE Vernova, which builds gas turbines, grid equipment and wind turbines, produced $15.3 billion of free cash flow in the first nine months of the year, the cash left from operations after capital spending. Over the same months its adjusted EBITDA, the company's measure of operating earnings before interest, tax, depreciation and amortisation, was $4.1 billion. For all of last year, free cash flow was $3.7 billion.

The company's explanation is that customers are paying before they receive their equipment. In its results it attributed the rise in last quarter's free cash flow mainly to working capital, the cash tied up in or released by day-to-day operations. Kenneth Parks, the chief financial officer, said working capital added $5.3 billion in the September 2026 quarter, driven primarily by down payments on gas-turbine orders and slot reservations in the Power segment, and by down payments in Electrification. A slot reservation lets a customer hold a place in the factory queue before placing a firm order. Last quarter firm gas equipment backlog grew while reservations shrank, as more customers turned reservations into firm orders. Asked whether customers' financing problems were slowing anything down, Scott Strazik, the chief executive, said "there's no change in our cash terms required to secure the equipment".

This is why the cash forecast has moved much further this year than the earnings forecast. In January the company guided to free cash flow of $5 billion to $5.5 billion for the year. It raised that range in April and in July, and in its latest results it moved it to $16 billion to $17 billion.

Earnings are following more slowly: down payments arrive when customers reserve slots and place orders, while the better-priced equipment is only now starting to ship. Power, which holds the gas-turbine business and its services, earned a segment EBITDA margin of 21.4% last quarter, against the company's July guidance of approximately 17% to 18%. Orders signed this year carry higher prices still: Strazik said gas order pricing per kilowatt for the full year would be about 50% above last year's. He described the second half of this year as a reasonable base for next year: "there's no reason to think that the second half of this year isn't the right way to start to think about our projection into '27".

The guidance also says the cash will not keep arriving at this rate. Subtracting the nine-month figure from the full-year range leaves $0.7 billion to $1.7 billion for the fourth quarter, a fraction of the third quarter's inflow. Parks said he expects fourth-quarter free cash flow to be positive, the same word the company used in July about the third quarter, a quarter that turned out far stronger. The range may therefore be cautious. Deposits depend on new signings, and Strazik said gas contracts in the fourth quarter would probably come in modestly above the third quarter's.

The company is now committing the money. It ended the quarter with $16.8 billion of cash. It agreed to buy Trench Group, a maker of high-voltage grid equipment, for $9.0 billion in a deal expected to close in late 2027. Parks said the price would be paid with an equal mix of new debt and cash on hand. The board also doubled the share repurchase authorization to $20 billion, after the company had nearly used up the previous authorization.