Generac Q2 2026: sales +10.6% to $1.17B as data-center generators drove C&I up 29%; EPS nearly doubled to $2.40, but ~$71M came from a one-off tariff refund.
Revenue
$1.2B
+10.6% YoY
Net income
$143M
+93.5% YoY
Diluted EPS
$2.40
+92.0% YoY
Operating margin
17.9%
Overview
Generac, best known for home standby generators, grew second-quarter 2026 net sales 10.6% to $1.17 billion, and earnings per share nearly doubled to $2.40 from $1.25. Two things are behind those numbers.
Data-center generators are now carrying growth. Sales in the Commercial & Industrial (C&I) segment rose 29.2% to $556.5 million. The 10-Q says the growth was "primarily driven by ramping revenue from products sold into the global data center market." Residential sales slipped 2.2%.
A one-time tariff refund lifted profit. On February 20, 2026, the U.S. Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA) and allowed importers to recover what they had paid. Generac booked about $71.1 million of that recovery as lower cost of goods sold this quarter. The company says the refund added about 6 percentage points to gross margin. Take it out and the underlying margin went down, not up (see below).
The quarter ended June 30, 2026. The 10-Q was filed August 4, 2026, after the July 29 earnings release.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$1,173.5M
$1,061.2M
+10.6%
— Residential segment (external)
$617.0M
$630.6M
-2.2%
— Commercial & Industrial segment (external)
$556.5M
$430.6M
+29.2%
Read 0 community reports on Generac, or write your own.Write a report
Gross margin is the share of sales left after the direct cost of making the products. Operating margin is the share left after running the business as well, before interest and tax. Adjusted EBITDA is the company's own measure of earnings before interest, tax, depreciation and amortization, with some one-off items also removed. Free cash flow is operating cash flow minus spending on property and equipment. GAAP and adjusted figures both include the roughly $71 million tariff refund.
For the first half of 2026, net sales rose 11.5% to $2,232.9 million, and diluted EPS rose to $3.64 from $1.98.
The tariff refund, and what the quarter looks like without it
Generac treats the refund as a "loss recovery," which means it can be booked only once receipt is probable. In the first half it received about $61.4 million in cash and recorded a further $27.7 million receivable (money it expects to collect). Of the total recovery, $71.1 million went through second-quarter cost of goods sold. The rest reduced the value of inventory on the balance sheet, so it will reach profit as those goods are sold.
Our rough view of the quarter without the $71.1 million (our arithmetic on the filing's figures, not a company number):
Gross margin would have been about 38.4%, below last year's 39.3%. The 10-Q says the same thing in words: apart from the refund, "unfavorable sales mix and higher input costs were partially offset by favorable price realization." Sales mix means the blend of products sold. Here, more of the sales came from lower-margin C&I equipment and less from high-margin home generators.
Operating margin would have been about 11.9%, up from 10.5%. Operating expenses rose only 2% ($6.4 million) while sales rose 10.6%, and legal costs were lower.
EPS would have been roughly $1.50 rather than $2.40. That assumes the refund is taxed at the quarter's 24.6% effective rate. It is still about 20% above last year's $1.25.
The refund also distorts the segment numbers. Residential adjusted EBITDA margin jumped to 34.7% from 23.1%, and the company attributes about 9 points of that to tariff refunds. The remaining gain came from "favorable sales mix and operational efficiencies." In C&I, the margin rose to 14.6% from 12.4%, of which about 2 points was the refund.
Items below operating income worked in both directions:
Generac's stake in EV-charger maker Wallbox produced a $5.9 million fair-value gain, compared with a $1.5 million loss a year earlier.
The company booked a $13.5 million loss on business dispositions, mostly from two small businesses sold on June 1 for a combined $13.4 million loss.
The effective tax rate rose to 24.6% from 17.2%, because the prior-year quarter had a one-off tax benefit linked to a business disposition.
Segments
Commercial & Industrial (+29.2%, to $556.5M).
About 6 points of the growth came from acquisitions, divestitures and currency, so core growth (excluding those) was in the low-20s percent.
Data centers drove it. Higher shipments to rental and telecom customers were more than offset by weaker sales to domestic industrial distributors.
Generac is buying capacity to build large generators:
It bought Enercon (East Peoria, Illinois) in April. Enercon designs and builds custom power equipment and industrial enclosures.
It bought Wolter Power Systems (Brookfield, Wisconsin) in May.
It bought an additional facility in Belvidere, Illinois.
The combined preliminary price of closed acquisitions, including Allmand, was $348.5 million. Of that, $44.8 million was paid in Generac shares.
A deal for South Africa's New Way Power is expected to close in Q4 2026.
Segment adjusted EBITDA rose 52.8% to $81.5 million. Mix worked against the margin, and so did "strategic operating expense investments to support future growth."
Residential (-2.2%, to $617.0M external).
Home standby generator sales grew. That growth was "mostly offset" by lower shipments of energy storage systems (home batteries) and portable generators.
The 10-Q notes two headwinds: a "very low level of baseline power outage activity" in the second half of 2025, and the July 2025 tax law (OBBBA) that sped up the phase-out of solar and storage tax credits, which hurt that market.
First-half Residential sales were down about 1%, to $1,173 million.
Data-center backlog and the Amazon deal
A backlog is orders received but not yet delivered. A hyperscale customer is one of the very large cloud companies building data centers. In the July 29 earnings release, Generac said:
Its data-center product backlog had reached about $1.6 billion. That figure excludes volumes from a second hyperscale customer signed on June 24, whose 2027–2028 terms were still being negotiated.
The first hyperscale customer had committed nearly $700 million of volume for 2027.
Backlog is a management figure. The 10-Q's formal accounting measure, "remaining performance obligations," was only about $143 million at June 30, but it leaves out contracts with an original term of one year or less. The two numbers are not directly comparable.
After the quarter, an 8-K filed September 16, 2026 disclosed a long-term supply agreement with Amazon for backup generators for its data centers:
Initial deliveries are expected to total $2.4 billion in 2027 and 2028.
Amazon received a warrant (a right to buy shares at a set price) for up to 1,693,745 Generac shares at $200.9266 each.
307,954 of those shares vested immediately. The rest vest in tranches as Amazon's payments for generators build toward a total of $8 billion.
The full warrant is equivalent to about 2.9% of the 58.8 million weighted-average basic shares in Q2 (our calculation). If exercised, it would dilute existing holders somewhat in exchange for a very large customer commitment.
The 8-K does not say whether Amazon is one of the two hyperscale customers mentioned in July.
Balance sheet and cash
Operating cash flow was $121.2 million in Q2, compared with $72.2 million a year earlier. Free cash flow rose to $62.9 million, helped by tariff refund receipts.
In the first half, Generac spent $211.8 million in cash on acquisitions and $87.7 million on property and equipment.
It bought back no shares in the first half of 2026, compared with $147.9 million in the first half of 2025. The full $500 million buyback authorization approved in February 2026 remains unused.
At June 30, debt was $491.3 million on Term Loan B and $700 million on Term Loan A, with nothing drawn on the $1 billion revolving credit line.
Cash was $264.9 million, and total liquidity was $1.26 billion.
Total leverage (debt relative to earnings under the credit agreement's definition) was 1.20x, well inside the 3.75x covenant limit.
Takeaway: Q2 profits look much stronger than the business underneath them. The $71 million tariff refund accounts for about 6 of the 7.4-point jump in operating margin, and without it gross margin fell. The real change is in what Generac sells. C&I, driven by data-center generators, is growing close to 30% while Residential shrinks, and with a $1.6 billion data-center backlog plus the Amazon deal, that shift is now locked in through 2027–2028.
Outlook
Management's full-year 2026 guidance, updated July 29:
Net sales growth in the mid-to-high teens percent, unchanged. That includes about 2 points from currency and acquisitions net of divestitures.
C&I sales growth in the low-30% range.Residential growth in the high-single digits.
Net income margin of 9.0–10.0%, up from 8.0–9.0%.
Adjusted EBITDA margin of 20.0–21.0%, up from 18.5–19.5%. The company attributes the increase mainly to the tariff refund, worth about 1.5 points for the full year.
Our read:
The margin raise is mostly the refund. Nearly all of the 1.5-point increase in the adjusted EBITDA margin range comes from the one-time tariff recovery, not from better underlying profitability.
Residential needs a strong second half. The segment was down about 1% in the first half, so high-single-digit full-year growth implies a clear rebound in the second half. The comparison is easy, since the 10-Q describes very low outage activity in late 2025, but it still depends on storms and outages, which nobody can forecast.
C&I margins are the thing to watch. Data-center revenue is scaling quickly, but mix is already pulling margins down and Generac is spending heavily on capacity. That shows up in higher operating expenses, higher intangible amortization from acquisitions, and $211.8 million spent on acquisitions in the first half. The Amazon warrant adds some dilution. Whether large-generator margins improve as volumes reach the levels committed for 2027–2028 is the open question.