Earnings call transcript: Wärtsilä sees mixed Q3 2025 results, stock dips

In the third quarter of 2025, Wärtsilä reported mixed financial results, with a notable decline in net sales but improvements in operating results. The company’s stock price fell by 3.45% following the announcement, reflecting investor concerns over revenue declines and a negative net cash position. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.36, supported by strong revenue growth of 14.68% over the last twelve months.

Key Takeaways

• Wärtsilä’s Q3 2025 net sales dropped 5% year-over-year to €1.6 billion.
• Operating results improved by 20%, reaching €230 million.
• The company launched a new marine carbon capture solution.
• Stock price decreased by 3.45% after the earnings report.

Company Performance

Wärtsilä’s performance in Q3 2025 showed resilience in operating results despite a decline in net sales. The company achieved a 20% increase in operating results, totaling €230 million, and maintained a strong return on capital employed at 51.1%. The 5% year-over-year drop in net sales to €1.6 billion raised concerns among investors, though InvestingPro analysis shows impressive gross profit margins of 44.49% and a healthy current ratio of 1.22. The company’s strategic focus on innovation, including the launch of a marine carbon capture solution and expansion into data center power generation, underscores its commitment to sustainable growth.

Financial Highlights

• Order intake: €1.8 billion (stable year-over-year)
• Organic growth: 6%
• Net sales: €1.6 billion (-5% YoY)
• Comparable operating results: €195 million (+10%)
• Operating results: €230 million (+20%)
• Cash flow: €340 million (highest in 15 years)
• Net cash position: €1.4 billion negative

Market Reaction

Wärtsilä’s stock price fell by 3.45% following the earnings announcement, closing at €26.60. This decline reflects investor apprehension about the company’s revenue performance and negative net cash position. The stock has fluctuated within a 52-week range of €13.57 to €27.90, and the recent dip aligns with broader market uncertainties affecting the industrial sector. Despite recent volatility, InvestingPro data reveals the stock has delivered an impressive 62.27% return over the past six months, with analysts maintaining positive coverage. InvestingPro subscribers can access 10+ additional ProTips and comprehensive valuation metrics to make more informed investment decisions.

Outlook & Guidance

Looking ahead, Wärtsilä anticipates an improvement in marine demand over the next 12 months, driven by strong segments in cruise, container, and LNG. The company expects energy demand to remain stable compared to previous periods and foresees an improved energy storage order intake in Q4. With a PEG ratio of 0.6 and a 34-year track record of consistent dividend payments, the company demonstrates strong fundamentals for long-term investors. Wärtsilä continues to focus on geographical expansion and market development to drive future growth.

Executive Commentary

CEO Håkan Agnevall highlighted the company’s technological advancements, stating, "We are now at 11.9% of sales. Operating results increased by 20% to €230 million." CFO Arjen Berends emphasized the strong cash flow, noting, "Cash flow was at least the highest cash flow in the last 15 years."

Risks and Challenges

• Continued revenue decline could impact long-term growth.
• Negative net cash position poses financial risks.
• Regulatory challenges in the battery storage market, especially in the U.S.
• Moderating demand in the marine market could affect future orders.
• Competitive pressures in the energy storage sector.

Q&A

During the earnings call, analysts showed significant interest in Wärtsilä’s data center power generation capabilities, exploring opportunities in the 50-400 megawatt range. Questions also focused on the competitive landscape in energy storage and the company’s strategies to leverage its technological leadership in marine and energy solutions.

Full transcript - Wartsila Oyj Abp (WRT1V) Q3 2025:

Hanna-Maria Heikkinen, Investor Relations, Wärtsilä: Good morning and welcome to this news conference for Wärtsilä Q3 2025 results. My name is Hanna-Maria Heikkinen and I’m in charge of Investor Relations. Today, our CEO Håkan Agnevall will start with the group highlights, continue with the business performance, and after that, our CFO Arjen Berends will continue with financials. After the presentation, there is a possibility to ask questions. Håkan, time to start.

Håkan Agnevall, CEO, Wärtsilä: Thank you, Hanna-Maria. Thank you and welcome everybody. This quarter was a good quarter, actually, and we are moving in the right direction, but it’s also a quarter where you need to look a little bit under the hood. I mean, first of all, operating results and cash flow increased. Order intake was stable at around €1.8 billion, but if you look at the organic growth, it’s actually up 6%. Also, if you look at marine and energy specifically, you see that marine order intake was actually up 8% and energy order intake was up by 29%. The challenge, and I’ll come back to that, is on our battery business, our energy storage business, where the order intake in Q3 for new equipment was basically zero. Marine and energy are growing in a good way. This also leads to a strong order book of €8.6 billion.

Net sales decreased by 5% to €1.6 billion, but also there, this is driven primarily by timing of deliveries on energy. The deliveries in energy will be tilted to the fourth quarter. I’ll talk more about that later. Comparable operating results increased by 10%, so we continue our journey to reach our financial targets. We are now at 11.9% of sales. Operating results increased by 20% to €230 million, which corresponds to 14.1% of net sales. Items affecting comparability amounted to €35 million, mostly related to the divestment of ANCS. On services, our group service book-to-bill ratio continues to be well above one. Cash flow, I will come back to that, we have a strong cash flow from our operating activities of €340 million. Now, let’s look more into the details of the numbers. If we start with the quarterly, the Q3 results.

Order intake, as we talked about, is actually down a percent, but as I said, if you look on organic growth, up 6%, you’re also seeing the growth in marine 8%, energy 29%. If we look at the net sales, it goes from €1.7 billion to €1.6 billion, down 5%, but as I said, it’s majorly related to periodization of sales in energy, and I will come back to that. If we look at book-to-bill, we continue with a good book-to-bill, about one, at 1.1 this time, and I think this is the 18th consecutive quarter in a row where we have a book-to-bill about one. Comparable operating result, €195 million, up 10%, and we are now at 11.9% of net sales. The operating results, €230 million, up 20%, and now at 14.1% of net sales.

If we look at the year to date, I think there are two figures that I would like to highlight: our order book, which is up 14%, up to €8.6 billion, and also our continued improved comparable operating result, up 18%, or going from 10.5% to 11.7%. Solid path to reach our financial targets. Looking at our two industries, if we look on the marine market, we see moderating demand for new builds, but still in line with the 10-year average. If we look at Wärtsilä core segments, strong ordering across cruise, container, and LNG bunkering vessels. The number of vessels that were ordered in Q3 decreased to 1,200, down from 1,700 in the corresponding period last year. The regulatory uncertainty, high new build prices, and softer market conditions are affecting negatively the new build investment demand in some segments.

Ordering has though been uneven across vessel segments, with continued strong ordering appetite in Wärtsilä’s key segments: cruise, container ships, and LNG bunkering vessels. Contracting in our key segments is expected to remain clearly above the 10-year average level, with the latest forecast actually indicating a 30% increase in contracting volumes between 2025 and 2027. Shipbuilding continues to expand, primarily in China. In January to September, 259 orders for new alternative fuel-capable vessels were reported, which accounts for 48% of the capacity of contracted vessels. On the energy side, the increased demand drives investment in the energy transition, and the global energy transition continues to move forward. The International Energy Agency expects renewables, grids, and storage investments to post another record high in 2025, and investments in fossil fuels to decrease.

BNEF reported that both wind and solar investments grew in the first half of the year compared to H1 in 2024. Energy-related macroeconomic development in 2025 has been heavily impacted by elevated risks in the geopolitical environment. In our engine power plants, market demand for equipment and services has been strong. Demand for baseload engine power plants is expected to remain stable, with further growth opportunities in data centers. The drivers for engine balancing power plants continue also to develop favorably. In battery energy storage, though, the demand is closely linked to the increasing share of intermittent renewables, which on one side continues to progress slowly. However, the U.S. market is facing headwinds in the regulatory environment, though several drivers remain solid, and actually also on the storage side now, with data centers as a potential new opportunity.

Going through the numbers, organic order increase, as I said, organic order intake increased by 6%. Order intake overall remains stable. Marine order intake increased by 8%. Energy order intake increased by 29%. Energy storage order intake decreased by 79%. Equipment order intake remains stable, and service order intake remains stable. If we look at the order book, we have a strong order book. Rolling book-to-bill continues well above one. We see the trend. We also see that the order book is building up further and further into the future. That is something to recognize. Organic net sales remain stable. Net sales decreased by 5%. Marine net sales increased by 18%. Energy net sales decreased by 30%. This, once again, is driven by the periodization of deliveries between quarters. We do expect that deliveries during the second half year will clearly be tilted in energy to Q4.

Also, as you know, we have more and more equipment contracts moving from EPC to equipment, and equipment contracts, to make it simple, they are invoiced when the delivery. EPC is a little bit more smoothed out. You can also see this as one of the consequences of that. We are actually moving our gravity to the equipment business. Energy storage net sales decreased by 10%. Equipment net sales decreased by 11%. Service net sales remain stable. Profitability continues to improve. Net sales, given the context, decreased by 5%. Comparable operating result increased by 10%. Comparable operating margin 12-month rolling is now at 11.6% compared to 10.6%. On technology and partnerships, we continue to shape the decarbonization of marine and energy. The energy example, 217 megawatt dual fuel power plant to deliver reliable power for Kentucky residents.

We will supply the engineering and equipment for a 217 megawatt power plant in Kentucky in the U.S. The plant is needed to provide additional grid capacity, thereby helping East Kentucky Power Cooperative to meet increasing demand. This order was booked by us in Q3. On the marine side, we continue our close collaboration with Vasa Line. We will together deliver the world’s largest marine battery hybrid system project. We have been selected as the electrical integrator for a major battery extension project for the Wasaline RoPax ferry, the Aurora Botnia. When the project is finished, it will be the world’s largest marine battery hybrid system in operation, close to 13 megawatt hours. The Aurora Botnia operates with a range of Wärtsilä solutions, including four highly efficient Wärtsilä 31DF engines. This order was also booked in Q3. Marine, and here we have a fantastic picture of a fantastic Finnish icebreaker.

We are very much close to this segment. Half of the world’s icebreakers actually have engines from Wärtsilä. There are exciting opportunities also in the dialogue between the governments of Finland and the U.S. Marine, increased order intake, net sales, and comparable operating results. Continued growth in equipment order intake. Overall order intake is up 8%, net sales up 18%. We also see the continued improved profitability margin. The drivers in the bridge for the profitability are higher service and equipment volumes, better operating leverage, and on the headwind, it’s increased R&D costs. We keep on investing in our future and being a technology leader in our space. If we look at the service business, overall marine service book-to-bill is well above one. Strong growth in service agreements. However, in this quarter, we saw reduced order intake in retrofits and upgrades.

To the left, you can see 8% solid CAGR growth in the marine service business. On the right side, you see the different disciplines of our service business. You see the service agreement curve accelerating in a good way. We now have about 34% of our installed fleet under service agreement. The renewal rates continue to be above 90%. Good progress. You also see the retrofits and upgrades coming down. As we talked about before, retrofit and upgrade is a project business. It can be a bit bumpy, and it’s lumpy by nature. We have a good pipeline in front of us, that I can say. Energy, increased order intake, lower net sales due to the timing of the deliveries. Continued growth in equipment and service order intake. On the order intake side, up 29%. This quarter, we haven’t had a data center order.

You remember, we had our first U.S. data center order in Q2. There is an exciting pipeline of data center opportunities in front of us, various stages of maturity. There is a good pipeline coming. Net sales, down 30%, driven by the periodization. Comparable operating results, the percentage is moving in the right direction. If we look at the drivers, the higher service volumes clearly contribute to the profitability. Lower equipment sales in this quarter is, of course, a drag. Also here, we continue to increase our R&D investments to be a technology leader for the future. If we look at energy service business, the book-to-bill also continues to be well above one. Strong growth in service agreements also here. However, also in energy, reduced order intake in retrofits and upgrades. Here you can see also a solid service business CAGR, 7% over two years.

It looks a little bit similar as marine. There is no correlation why this coincides, marine and energy. It’s a coincidence. You can see agreement is continuing to go up. Also in energy, around 33%, 34% coverage. The renewal rate on agreement above 90% is very positive. We see the retrofit business clearly being down in Q3. We have a good pipeline in front of us. Energy storage, which of course on the order intake was challenging in Q3. Order intake low due to the U.S. tariffs, regulatory changes, and also increased competition. On the positive side, really strong profitability in Q3, 6.9% EBIT, real EBIT in Q3. I think that’s a strong delivery by the team. Order intake coming down 79%. I want to highlight the press release we made yesterday where we took our first order in Q4.

We are also very clear that we do expect order intake to pick up in Q4. Net sales down 10%. The operating margin continues to develop in a good way. If we look at the bridge, on the positive side, really solid project execution. We are delivering on our backlog in a very good way with a great risk reward and with happy customers. We also have higher service volumes. The service business is, of course, smaller than for the rest of our Wärtsilä business, but it’s growing. On the negative side, we are investing, you could say, in growing. That’s part of our strategy that we have communicated in the past, that we will expand our geographical coverage. We are increasing headcount, supporting the new markets, new customers, and the products. Here you have the bridge, Q3 2024 to Q3 2025.

I think really good development, marine going from 10.4% to 12.4% EBIT, energy from 13.6% to 15.9%, energy storage, as I talked about before, from 4% to 6.9%, and then portfolio business from 9% to 6.8%. That is primarily driven by ANCS, which has now been divested. We have taken that out, and that business contributed in a profitable way to portfolio. Comparable operating results increased by 10%. Other key financials, Arjen, over to you.

Arjen Berends, CFO, Wärtsilä: Thank you, Håkan. If we look at the other key financials, also very positive numbers in general. First of all, cash flow, clearly a very strong cash flow in Q3. It was at least the highest cash flow in the last 15 years. We did not go further back, but €340 million, clearly a good number, taking us close to €1 billion year to date. Good support in the cash flow from profitability, but also clearly from working capital. Working capital at the moment approaching, let’s say, €1.1 billion negative, which is also an all-time low. Net interest-bearing debt, clearly moving also in the right direction, €1.4 billion at the moment negative. Return on capital employed, ROCE, clearly improving from 44.6% at the end of Q2, now to 51.1%. Over the 50%, which is really remarkable for us as a company. Gearing clearly going also in the right direction.

We have been running this at a negative number already for a long time, well below, let’s say, our financial targets. Solvency also clearly improving now with improved profitability. Earnings per share, both on the quarter as well as on the year to date, clearly ahead of last year at the same time and the same quarter. If we look at the trends, cash flow as well as working capital to net sales ratio, both are moving in the right direction. If we look at the dotted line on the right side graph, working capital, or let’s say five-year average working capital to net sales ratio, every quarter we are, let’s say, lowering the line, basically. At the end of Q1, it was 2.4%. At the end of Q2, it was 1.3%. Now 0.1%. We are very close to a negative line here as well going forward.

Actually here, I also want to comment that we anticipate that, let’s say, this negative working capital will sustain the next years. Looking at our financial targets and the progress there, if I start at the left side top graph, marine and energy combined, organic growth plus 13%, well above, let’s say, our targets of, let’s say, 5%. Really going in the right direction here. Same for profitability. Percentage at the end of Q2 was 13.1%, now 13.2%. It’s again a step up. Small step this time, but a step up. If we look at energy storage, of course, growth is not there as we want it to be, given all the, let’s say, challenges that we had in the past quarters on that one with respect to order intake. Clearly, let’s say, the delivery is going very well.

As Håkan also explained, generating good profitability from executing projects from the order book. Currently, we are at 4.2% of sales here and really within the frame of the financial targets. Group targets, I don’t want to comment too much. I think gearing is very obvious. We are well below 0.5% positive. We are actually 0.5% more than negative. Dividend, we have always met our financial targets of paying at least 50% of EPS out as dividend. With these words, back to you, Håkan.

Håkan Agnevall, CEO, Wärtsilä: ROCE at 50%. This is interesting.

Arjen Berends, CFO, Wärtsilä: Yes, yes, fully agree.

Håkan Agnevall, CEO, Wärtsilä: Now, we continue our journey to become a more focused, stable, and profitable company. We are making progress in our portfolio business divestments. As we announced in Q2, the divestment of ANCS to Solix was completed on July 1. In Q3, this divestment had a positive impact of €34 million on the result, and it’s reported in the items affecting comparability in Q3. Annual revenue of the business was close to €230 million in 2024. That’s also a data point. ANCS did not anymore contribute to the figures in Q3 2025, and the group order book has been adjusted accordingly, so impact about €260 million. On MES, as we announced in July 2025, Wärtsilä will divest MES, Marine Electrical System, to Vinci Energies. Subject to approvals, we expect the transaction to be completed in Q4 2025. Let’s look at our outlook then.

For marine, we expect the demand environment for the coming 12 months to be better than in the comparison period. In energy, we expect the demand environment for the next 12 months to be similar to that of the comparison period. Here we also note that Q2 was an all-time high in order intake, so we are coming from a very strong order intake in energy overall. On storage, we expect the demand environment for the next 12 months to be better than in the comparison period. However, here we really highlight the geopolitical uncertainty that particularly impacts this business. We also make a general comment that we underline that the current high external uncertainties make forward-looking statements challenging.

Due to high geopolitical uncertainty, the changing landscape of global trade, and the lack of clarity related to tariff, there are risks for postponement in investments, decisions, and also of the global economic activity slowing down. All right, that was our summary of Q3. Now we open up for Q&A, Hanna-Maria.

Hanna-Maria Heikkinen, Investor Relations, Wärtsilä: Thank you, Håkan, and thank you, Arjen. Now we are ready for Q&A. I kindly ask all of the analysts to start with one question and leave the follow-up questions to the second round, please.

Operator/Moderator: If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Max R. Yates from Morgan Stanley. Please go ahead.

Thank you. Good morning. I guess my first question, just starting on the data center related business, the first thing to understand, you know, when you talk about anticipating better order intake in the fourth quarter, to what extent is the comment around data center and the energy thermal business, or are you really just relating to the energy storage business? More broadly, when we look at sort of quotations and conversations with your customers, maybe help us understand how those are evolving versus six months ago. I think there’s a lot of expectation in the market that there’s more emphasis on engine technology. There’s a greater acceptance of engine technology. Would you say you kind of see that reflected in your customer conversations and the number of these kind of hyperscalers and colocation companies that are kind of knocking on your door or flying into Vasa?

Any comment there would be appreciated. Thank you.

Håkan Agnevall, CEO, Wärtsilä: Absolutely. Quite a few questions, but I’ll try to answer them. If I forgot some of them, please remind me again. Just to clarify, this is about energy Q3, Q4. That is on the sales side. I mean, our deliveries, where we clearly say that deliveries and therefore sales recognition are clearly skewed to the fourth quarter. That is not related to the whole data center. I will get to that later, just so we are clear. We have been clear in our communication. It’s related to deliveries, and we are basically saying deliveries and therefore sales recognition is skewed to Q4. I mean, it was fairly low in Q3 for energy.

Sorry to interrupt, but you do say in the release, we anticipate ordering to pick up in the fourth quarter. I guess I was just trying to understand on that comment. Is that storage or is that the thermal business?

Okay, good. First, I talk about energy, and I made the comment on sales deliveries and energy. That is our power plant business. Coming to, if I talk about the energy storage business, yes, it’s clearly that we expect order intake to pick up in Q4. I mean, it was basically zero for new build for equipment in Q3. It will certainly pick up at a much higher level. A proof point is that, as I mentioned yesterday, we announced our first order for Q4, and there is more coming. Even though clearly the U.S. market is still slow, there are other markets like Australia. This order from yesterday was from Australia, and there are also other markets to support the energy storage order intake for Q4.

Moving to data center, I have to ask you, were you referring to data center and energy storage or data center in our thermal business?

Data center in your thermal business, and specifically, you know, the growing interest in engines, has that led to a rise in quotations on the number of projects you’re discussing versus, say, six months ago?

Yeah, we do see increasing interest in the engine technology. You might recall this, what we’ve been talking about, and this is a journey of, I would say, two years. It used to be data center sizes needing power, 5, 10, 20, 30, 50 megawatts. Now the data centers are growing in size, and the data center owners cannot get access to the utilities, so they need to build out their own power generation off-grid. Now we are talking about hundreds of megawatts, 102, 300, 400 megawatts. This is coming right in our sweet spot. This market is really heating up for us. To your question, yes, we see a lot of engagement from customers, a lot of interest.

I think many customers are more and more also recognizing the benefit of the engines compared to the competing technologies on the gas turbine side, but also on the high-speed engine side. Yes, there is more activity clearly. If I may just for clarification, also because we also mentioned data centers in relation to our battery business, the battery storage. You might think, what the hell is this? Now I think what operates, I mean, the data center operators are also finding out there are other big swings, and there are the big swings in the minutes region, but there are also the big swings in the millisecond regions. Here, it’s balancing power. It’s the good old balancing power. You have two tools in the toolbox for the balancing power. In this millisecond second region, we see an increased interest actually for battery storage to kind of balance the load.

Understood. Thank you.

Operator/Moderator: The next question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. I wanted to follow up on energy, but sort of thinking more about the margin and what you’ve said on sort of like less EPC now concentrates the deliveries into Q4, more skewed than in the past. Does that apply also to how we should think about margin seasonality? Should we think about sort of like a more intense concentration of margin also in Q4 than in the past? In general, how does that work? Thank you.

Håkan Agnevall, CEO, Wärtsilä: I am. You take it.

Arjen Berends, CFO, Wärtsilä: Yeah, I would say yes. Margin correlates with sales volume. Margin that you make on the project is recognized in the quarter that you recognize the sales. That depends on is it a percentage of completion, which is typically used in EPC contracts, or let’s say on time, or let’s say completed contract method, which is then basically based on deliveries. Yes, when sales shift, also margin shifts at the same time in the recognition. Correct.

Great. It was just for Marie. If it was just for energy, I would say that your comment was skewness on EPC.

Yes, yes. The EPC comment is related to energy. Marine is basically all is completed contract method.

All right. Thank you very much.

Operator/Moderator: The next question comes from Akash Gupta from JPMorgan Chase & Co. Please go ahead.

Yes, hi. Good morning. I have a follow-up on energy. I think you are kind of indicating that revenue in equipment side will be strong in Q4. This simply has to do with seasonality in delivery of equipment, which will be more in Q4 than Q3. I just want to understand what is causing this seasonality in delivery because I think I would have assumed that you would be producing these engines every quarter. Therefore, when it comes to delivery patterns, they would be more homogeneous. Maybe if you can help us explain what is causing this seasonality and is this something we should expect every year, that some periods may be more busy, some periods may be less busy on revenue, or there is something unusual in 2025 that may not be repeating next year. Thank you.

Arjen Berends, CFO, Wärtsilä: I can answer that. Let’s say that it’s really about the delivery schedules that you’ve agreed with customers. Some years you have it more evenly spread. Other years, it’s more in certain quarters. What you mentioned earlier, that production of engines does not relate to income recognition or sales recognition in a certain quarter. It’s the delivery to the customer that counts. Here we follow basically what we have agreed with customers. There are clearly in every project, there are delivery schedules. In this year, in the second half of the year, it’s mostly into Q4. I cannot comment whether this will happen every year because that depends on the orders that you have in that particular year.

If I try to put a little bit myself in the shoes of customers, that if you build a power plant or if you build a ship and you work with a percentage of completion, most likely, if you want to have an impact on your results, you want to have the delivery done before the year end if you close your financial year at a calendar year. That might be one driver, but we follow the schedules that we agreed with customers.

Maybe just to follow up to that question, does the size of the project change this seasonality? I assume that if you have a large 200, 300 megawatt order, then you may want to ship everything in one go, which could create a bit of this pattern. Any comment on size of orders may be impacting revenue recognition profile?

There are many delivery schedules in a certain project. It might be, let’s say, shipping, let’s say if you have a power plant with 10 engines, it might be one batch in this quarter and the next batch in the other quarter. It varies a lot by project. It depends also quite much, let’s say, where do you need to ship it to? There is no, let’s say, one pattern and one size fits all here.

Håkan Agnevall, CEO, Wärtsilä: I agree. It’s not a model where you bundle all the engines and you ship them at once. There are many different ways to deliver the engines. Normally you deliver them in stages. It’s easier to handle them at site. If we talk energy, then receiving everything at once, etc. I’m afraid it’s much more complicated than that. It’s really related to how the customers want us to deliver, so to say. That can vary quite a lot.

Arjen Berends, CFO, Wärtsilä: Yes.

Thank you.

Operator/Moderator: The next question comes from Sven Weier from UBS. Please go ahead.

Yes, good morning and thanks for taking my questions. Just wanted to follow up on what you said on data centers and battery storage. Obviously, we had the announcement from Nvidia mid-October around the next generation data centers, the 800 VDC ecosystem, which builds in battery storage as a standard. I was just curious if you were also referring to that announcement. What do you need to do to be able to do business there in terms of the battery sourcing? How much have you already changed the sourcing maybe to Korea, which I guess will be a much better starting point, and China probably continues to be penalized. That’s the first one. Thank you.

Håkan Agnevall, CEO, Wärtsilä: Two things. I think actually that, and this is my outside in observation, that I think there is a lot of learning going on on how the data centers are behaving as electric loads. You have certain data centers that are focusing on learning. You have other data centers that are focusing on interference. They have completely different load profiles in terms of what energy they need and how it swings back and forth. I cannot comment on the latest from Nvidia, but clearly there seems, and there is an evolving understanding that for certain types of data centers, the swings can be pretty big and pretty quick. That leads to an interest to the energy storage side, so to say. Coming to where we source our batteries, yes, we certainly source from China, but we also source from other countries in Southeast Asia.

We are also looking at possibilities for sourcing in the U.S. However, in our view, that is taking longer to evolve.

Would you say the largest share still clearly comes from China, or how should we think about that?

Yeah, the share of supply of battery cells for Wärtsilä, the biggest share is still from China, yes.

Okay, you started to already make the shift to other regions in the last couple of quarters.

Correct, correct.

Maybe one quick follow-up on the thermal side and the discussions you have with the U.S. customer base for data centers. What is the biggest pushback? Do you reckon there are still predefined views that kind of people think you don’t get fired for buying a turbine, but no experiments with new tech because engines have probably not been used so much for baseload in the U.S.? What’s the biggest hurdle you find in your discussions?

No, I think the technology acceptance is certainly evolving. I mean, we have one group of customers, they are fully into engines. They see the benefits, etc. There are other customer types, which is a little bit more what you’re alluding to. It’s a new technology. I think this is how we’ve been selling the Wärtsilä propositions for many, many years. We run our simulations, we show them the proof points, etc. Step by step, we convince customers because also in this application, there are some intrinsic benefits for the engine. Energy efficiency is higher than our competition. You know, no derating on high altitude, which is sometimes important. Very little water consumption, which is sometimes important. Really good, I mean, ramping, we all know that from the balancing compared to the CCGTs, etc.

For me, it’s very similar, you could say, the business development and sales process that we have with many of our, you could say, regular customers. I think the difference is that the speed of execution and the desire from the customer to deliver, that is clearly one or two notches higher than, so to say.

Understood. Thank you, Håkan.

Correct, correct. Thank you for clarifying. Sorry, Sven, you were saying something.

Thank you both.

Okay.

No, I was.

Operator/Moderator: The next question comes from Panu Laitinmäki from Danske Bank. Please go ahead.

Hi, I wanted to ask about cash flow and capital allocation. You had $1.4 billion of net cash, and maybe just to confirm that, did you change your comment on the working capital that you expected to remain negative for longer as you previously, in my view, indicated it to kind of reverse? If that’s so, does it kind of change your view on capital allocation if it’s like better for longer in terms of balance sheet? Are you more open to doing share buybacks, or what will you do with the cash?

Arjen Berends, CFO, Wärtsilä: Let’s say the allocation principles as such don’t change. I have been saying in many quarters that, okay, the negative working capital level is extraordinary. It’s not so long ago that we went through the negative line, basically from positive working capital to negative working capital. You could in a way say it felt in the beginning a little bit uncomfortable, but we now see that this is a sustainable, sorry, sustainable trend that we see. Will it be all the time that negative as we see it today? There are clearly factors in the market that are currently there, which in the future might not be there. I give one example. I think I gave it also last time. Yard order books are very long. Yards want to lock their costs.

If they want to lock the cost with Wärtsilä, they need to put the order at Wärtsilä with a down payment. You get cash earlier. The exit cash or the cost generation is later in the time. That’s a positive impact on what is happening today. Will yard order books in the future get shorter again? It might reverse that trend. Difficult to say if that will happen, when it will happen, but at least for the coming year’s horizon, we anticipate that working capital will stay negative. Another trend, which I also I think mentioned last time, is, for example, in energy, we have seen a few projects. I’m not wanting to call it a trend, but we have seen more projects than before, let’s put it that way, where customers don’t want to make payment security arrangements like LCs, bank guarantees, etc. That’s fine for me.

Cash up front. We have a lot more cash early on before we actually make the cost. Is this something that will stay there? Difficult to say. For now, I think it will not change rapidly, but yeah, this can change. That’s where we were in the beginning very careful with making bold statements about working capital staying negative. I think we feel much more comfortable about at least the coming few years to say, yes, it will stay negative. Sorry, I did not answer your capital allocation question. The capital allocation principles don’t change. Share buybacks, yeah, that’s for future consideration. Not at the table today.

Okay, thank you.

Operator/Moderator: The next question comes from Vivek Midha from Barclays. Please go ahead.

Good morning. It’s Vaspaanavari from Barclays. Two questions for me, if I may. Very strong margin in thermal energy this quarter. Congratulations on that. This lack of the equipment delivery in the quarter, did it have positive or negative impact on the margin? Because, of course, on one hand, mix is favorable, but on the other hand, cost absorption is less. That’s the first question. Second question, could you comment on the competitive environment in energy storage globally and maybe by key regions? Has there been any changes there recently? Thank you very much.

Håkan Agnevall, CEO, Wärtsilä: If you take the first.

Arjen Berends, CFO, Wärtsilä: I did not catch the first one, to be honest. The line was.

Håkan Agnevall, CEO, Wärtsilä: I think I get it, but it’s better to say.

Arjen Berends, CFO, Wärtsilä: The line was a bit buried, at least.

I can repeat the first question. The question is, the lower deliveries in the energy business in Q3, did it have positive or negative impact on profitability in Q3, given that on one hand, the mix is favorable, but on the other hand, cost absorption is less?

I got you. Shall I answer that now?

Yes.

The answer is fairly simple. Of course, in absolute terms, it’s negative because you have less sales that generate margin because we make positive margin on our new build business. Of course, from a percentage point of view in the mix, it’s a positive because service typically has higher margin %. In the percentage mix, it’s a positive. It’s both actually, but it depends if you look absolute or if you look percentage of sales.

Håkan Agnevall, CEO, Wärtsilä: If I continue, as I understood your question, Vlad, how has the competitive situation developed in energy storage more from a global perspective? I would say that the competition is increasing, and I think there are two major drivers for it. One driver is, of course, the slowdown of the U.S. market, you know, with the regulation and tariff regimes, which, of course, drives suppliers to focus on other markets. The other trend is also that we see more vertical integration where cell producers are also moving into the integrator space, so to say. The competition is increasing in general, I would say.

Super. Thank you very much.

Operator/Moderator: The next question comes from Michael from Nordea. Please go ahead.

Thank you. Good morning, everybody, and thanks for taking the question. One on data centers, if I may. In your view, I mean, how big part of the future data center market is relevant for the 50 to 400 megawatt sweet spot that you are referring to? I assume that you have done some research on the topics, just trying to understand the opportunity for Wärtsilä here. That would be my first question. We can come back to the second one then.

Håkan Agnevall, CEO, Wärtsilä: Yeah. Now, just to give you, I mean, the short answer, there is a significant opportunity. It’s very hard to quantify. Why is it so hard to quantify? I can give you some other public data that has been compiled by a number of reputable players like the McKinseys, the Goldmans, the JPs, the International Energy Agency. If you look at the forecasts of, if you just zoom in on the U.S., if we look at the forecast, how much growth there will be in data center power from now to 2030, there is a span from those reputable players in their forecast from 20 to 100 gigawatts. It’s very hard to, with that as a starting point, derive what is the concrete, addressable market. I would say the underlying, there is definitely a market for engines.

There is definitely a market for, I mean, if we start, there is definitely a market for off-grid. In the off-grid space, there is definitely a market for engines. If you talk engines, there is definitely a market for Wärtsilä. We do see growth opportunities, but it’s very hard to pin down what are the, even the spans of the additional capacity that would go trickle down when the spread in the starting estimate is as broad as it is. Now, we think that data center is a very interesting opportunity. We have a pipeline that is looking very interesting. No orders in Q2, but we have an interesting pipeline. We are also looking on how to further develop our delivery capabilities.

Okay, thank you very much. The second question would be on the carbon capture solution. I think we haven’t talked about that topic for a while. I wanted to revisit that. Maybe you could get a bit of an update, you know, where are we now in terms of the infrastructure developments there? What is the customer interest right now given the regulatory environment? Do you have anything in the pipeline and so on and so forth?

Basically, just to make a quick recap, we actually did the commercial launch of a carbon capture solution for marine. It is an extension of our scrubber business. We can now deliver 70% capture rate, so 7.0, on a 10 to 15% energy penalty. It is really this relationship between how much you can capture and how much energy you put in. It needs to be a viable road user, to say. We have had our first pilots in full scale, and it is working very well. We had the commercial launch. We are engaged with customers. Clearly, this is a whole ecosystem that needs to evolve. I mean, we add our piece to the puzzle. We can capture the carbon. We can store it on the vessel. Then you need to take it ashore, and what do you do with it? We all know there are basically two routes.

You can use it for sequestration, pumping it back, or you can use it as a raw material for some kind of chemical process, including synthetic fuels. The customers that we are talking to now are more the early adopters. The regulatory framework already before IMO, the recent IMO postponement, I think in April in MEPC 83, it was already decided to come back and work further on the regulatory context and coming back later. For IMO, it will still take some time for the regulatory landscape to evolve. I think EU is further ahead in this area, so to say. This is a market that will evolve. It will take time. We have made it clear. I would say we are engaged with our customers that are the kind of early adopters or the pioneers.

Okay, thank you very much.

Operator/Moderator: The next question comes from Vivek Midha from Citigroup Inc. Please go ahead.

Thank you very much, everyone, and good morning. I had a couple of questions. The first is on energy power plants. I was interested in hearing your latest view on pricing trends. We’ve seen big price uplifts, for example, in the turbines. We, of course, can’t see the underlying pricing trends, stripping out mix and scope and so on. We can only see the crude average selling price, and that appears to actually be down around 25% on my calculations versus the second quarter. Could you give us any indication on underlying pricing trends and new order margins? Thank you.

Håkan Agnevall, CEO, Wärtsilä: In general, it is a hot market in the energy space, and it’s a hot market for all the technologies that I know of, so to say. Of course, in that type of market, it gives the suppliers opportunities for price realization. Of course, there is a customer where the offering needs to make sense for the customer to build a business case, etc. There is always a balancing. In general, I think the price realization is rather good.

Understood. Thank you. Just one follow-up as well, differently on the marine service growth. If I’m just looking at the spare parts development, it looks like there’s been a drop year on year and the book-to-bill is below one. How should we think about that developing? Would it be fair to assume that the spare parts are at the highest margin part of the service business? Thank you.

Overall, I wouldn’t be concerned. You clearly looked at what we call the four disciplines. It will vary a little bit. I think the big trend agreement is clearly growing. There’s a bit of spare parts in agreements as well. Then we have the retrofits. The retrofits look pretty dramatic, you know, as a downturn, but it’s the cyclicality of the retrofit business. As we have indicated, we see we have a good pipeline in front of us. Our message on service is both in energy and marine, with a book-to-bill about one. It’s a consistent continued message.

Thank you very much.

Operator/Moderator: The next question comes from Max R. Yates from Morgan Stanley. Please go ahead.

Thank you. Maybe just two quick follow-ups. The first one is around your energy storage business and obviously a softer quarter this quarter. It feels like some of the U.S. kind of competitors have talked about a much more positive market backdrop. I guess I was trying to understand, is this an active decision by you not to participate so much in the U.S. market because it’s viewed as more competitive and therefore focus outside? Is there any reason if sort of storage gets better in the U.S., your either setup of sales network, your procurement because of tariffs makes you less able to participate? Do you think it is fair that you’re kind of focusing on other markets just to really understand what looks like a bit of a kind of difference with your performance versus what some of the other peers in the U.S.

are kind of talking about for this market?

Håkan Agnevall, CEO, Wärtsilä: I would say the U.S. is an important market for us, but I would say in relative terms, Australia and the UK and a couple of other markets carry a lot of weight. There are other players where the U.S. is more important for them, relatively speaking. The U.S., we are in the U.S. We have continued our kind of selective strategy in the sense that we don’t try to be the solution for each customer type. We continue to focus on the customer types that value our delivery track record, which is really solid, our thermal track record, which is really solid, and also our capability to leverage our power system skills to integrate the equipment. You could see, looking at our profitability, it has, with the help of a good project execution, it’s translating to real bottom line.

I cannot comment on others, but we will continue this selective strategy. What we said when we came out of the strategic review is that we will try to add a couple of geographical markets. We will try to expand. We are definitely going to remain in the U.S. We will probably try to add, but we will have a selective approach overall. In this situation, we also talk about that we are certainly looking at how do we further continue to improve our competitiveness. This is, of course, continue to work on our costs and also exploring avenues for synergetic opportunities with the supply chain, so to say. These are the areas that we are working on.

Okay, maybe just a very quick follow-up on your energy deliveries, and this is your sort of thermal power plant business. Are you seeing any customers, particularly in the U.S., pushing back related to tariffs? Obviously, you’ve said tariffs are built into the contract structure. The customer pays them. Are any customers slowing deliveries, and is that having any impact on the rate of delivery, or is it purely just a timing issue?

No, this is clearly a pure timing issue. I mean, it’s not about, I think it’s fairly well, of course, customers are not happy about it, but I think customers understand the dynamic that we are adding the import tariffs to our prices. Nobody likes it. We don’t like it either, but that’s a clear principle. We haven’t had any cancellations or anything like that. This Q3, it’s purely, you know, we talked about the customer delivery schedules that happen to be in this way this year.

Understood. Very clear. Thank you very much.

Operator/Moderator: The next question comes from Antti Kansanen from SEB. Please go ahead.

Hi guys, it’s Antti from SEB. I have two questions regarding the trends in marine service, please. I fully understand the volatility related to the retrofits and upgrade business, so we can kind of exclude that from the discussion. Looking at the agreement book-to-bill growth, could you please remind what do you actually book in terms of agreement orders? If I understand correctly, the backlog is the 24 month expected value. Is that also kind of what do you include in the agreement orders there? The second question is maybe on the slowing trend on the book-to-bill on the parts and field services. Do you think you are cannibalizing that with the agreement business? Should we be a bit concerned that the sales growth in the marine services will start to approach zero as kind of the agreement is longer converting and maybe the more transactional is slowing down?

Arjen Berends, CFO, Wärtsilä: I think there is, let’s say, the first part of your question we can confirm that’s correctly assumed. It’s good to remember we take 24 months in and then on the moment that we take an order in on an agreement, we roll it every quarter, basically with one quarter forward until the whole agreement lifetime is consumed, you could say. When it comes to the spare parts, are agreements cannibalizing parts? No, I would not say so. Agreements are contributing to parts. Of course, it depends a little bit what kind of agreement you have. If you have an agreement where you get paid by running hours, a certain fixed fee, and within that fee, you need to do the maintenance, of course, your aim is to do as little as possible spare parts.

Spare parts typically, what we book as part of an agreement ends up in the graph basically as parts. That’s good to keep in mind.

Håkan Agnevall, CEO, Wärtsilä: I would say to that, what I assume is your more fundamental question, you know, how do we see book-to-bill and in services going forward? I would say the underlying, we have a very positive view on that.

Arjen Berends, CFO, Wärtsilä: Yes.

Håkan Agnevall, CEO, Wärtsilä: I would say both in marine and energy.

Arjen Berends, CFO, Wärtsilä: Mix between the lines can change, but in general, we look positive. Growth will continue.

If I think about earnings contribution within the aftermarket, I guess the parts business is very, very important in that regard. Do you have any kind of views on why the book-to-bill on a 12-month rolling basis has been slowing throughout 2025? Is there something in customer behavior that you can clearly kind of pick out what’s causing this, or is it just normal fluctuations?

I would say it’s normal fluctuations.

I agree on that. Okay, thank you.

Operator/Moderator: The next question comes from Akash Gupta from JPMorgan Chase & Co. Please go ahead.

Yes, hi. I have a follow-up on your capacity in energy and what sort of flexibility do you have given the demand that we see in the data center is more for gas engines, while I think in your business you have both gas, oil, and renewable fuel engines. A question like, is there any way to quantify how much theoretical megawatt or gigawatt you can produce, and then how much of that is gas versus non-gas, and do you have flexibility to retool capacity for oil engines to gas engines? Any color on that would be helpful. Thank you.

Håkan Agnevall, CEO, Wärtsilä: To clarify, our engines are fuel flexible, so it’s not about oil or gas. I think the more critical thing for us when it comes to our supply chain and our manufacturing is the size of the engines. You have the large bore engines and you have the medium bore engines. This is more where we need to be careful in our forecasting and how we manage our delivery capabilities. Just to clarify, it’s not fuel related, it’s size related. I understand you want to know the gigawatts, but so does competition, and I won’t tell them. Sorry about that. What we clearly said is that for certain engine types, and I will not go into the details for the same reason, but for certain engine types, we are now looking at delivery times in the second half of 2027.

We still have other engine types where we can deliver next year. It’s a mixed situation.

Operator/Moderator: Thank you, Håkan. Thank you, Arjen. Thank you for all of the good questions. I’m afraid that we have already run out of time for this call. As a reminder, we are hosting several events every quarter, which are equally open for everybody who is interested in Wärtsilä as an investment. The next event will be hosted by Håkan. It’s a CEO strategy call on November 27th. I hope to see you there. Thank you.

Thank you for today.

Håkan Agnevall, CEO, Wärtsilä: Thank you.

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