Generac Is Becoming an AI Power Play. Amazon Just Made That Case Bigger.
Generac (GNRC), best-known for supplying backup generators for homes, has been building a bigger presence in the artificial intelligence (AI) infrastructure market for years — and Amazon (AMZN) just gave the company a major opportunity. Under the deal, Generac is set to provide roughly $2.4 billion in generators to Amazon over 2027 and 2028, while the partnership has room to expand to as much as $8 billion. Amazon also received a warrant to acquire up to 1.69 million Generac shares with a potential exercise value of about $340 million.
GNRC stock has climbed 50% so far this year, while Amazon stock is up 8% year-to-date (YTD). The deal sounds like a win-win for both companies. But does that make Generac stock a buy now?
Amazon Is Turning Generac Into an AI Infrastructure Story
Generac was already moving toward data centers before Amazon entered the picture. In the second quarter, sales for its Commercial & Industrial business rose 29% to $556 million. This growth was driven by increasing shipments of “products sold to the data center market.” AI data centers need enormous amounts of electricity, backup generators, and other power infrastructure to keep critical computing equipment operating when grid power is interrupted or unavailable. Generac’s large megawatt generators are specifically designed to meet that need.
Furthermore, on the Q2 earnings call, management also stated that the company has a path to triple large MW production capacity over the following 12 months. The company is also accelerating work at its Sussex, Wisconsin, facility and expanding packaging capacity, including through its facility in Belvidere, Illinois.
Generac already had $1.6 billion of data-center orders waiting to be delivered at the end of Q2. Amazon’s deal adds another major customer to that growing business, giving Generac another potential source of future growth as Amazon expands its AI data centers.
The $340 Million Warrant Explains How
Amazon also got a piece of the upside with the Generac deal.
The upside comes from the $340 million warrant that gives Amazon the right to potentially acquire up to 1.69 million shares of Generac common stock at an exercise price of $200.93 per share. If Amazon ultimately exercises the entire warrant for cash, Generac could receive roughly $340 million in proceeds, with Amazon receiving an equity stake in a rising AI infrastructure company. However, while Generac will receive additional cash when the warrants are exercised, it will also dilute existing shareholders.
Amazon’s benefit goes beyond the potential equity upside. From this deal, Amazon gains a long-term relationship with Generac for backup power rather than relying solely on spot orders or sourcing generators project by project. This is particularly important for Amazon, whose data-center footprint is rapidly expanding to support AI and cloud workloads.
Is Generac Stock a Buy Now?
Generac’s earnings growth estimates over the next two years make its valuation look reasonable. Analysts estimate that EPS will rise to $9.74 in fiscal 2026, a 54% increase, while revenue is expected to climb 17% to $4.9 billion. Furthermore, revenue is expected to increase 27% to about $6.2 billion in fiscal 2027, while EPS is expected to rise 22% to $11.92. Trading at 17.4 times forward 2027 earnings, investors are paying a relatively moderate price for the projected growth.
Furthermore, the Amazon agreement adds another potential growth catalyst, with $2.4 billion of initial generator deliveries expected in 2027 and 2028. Amazon’s new equity link with Generac could further strengthen the company’s emerging AI infrastructure story.
On Wall Street, GNRC stock holds a consensus “Moderate Buy” rating. Of the 20 analysts that cover the stock, 13 have a “Strong Buy,” one analyst has a “Moderate Buy,” and six have a “Hold" rating. The average target price of $295.69 implies that GNRC stock could climb 42% from current levels. Meanwhile, the high price estimate of $375 suggests potential upside of around 80% over the next 12 months.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.