Generac's Manufacturing Expansion: Capitalizing on C&I Boom and Data Center Growth

Generac Holdings Inc. (GNRC) is making a significant strategic play in the Commercial & Industrial (C&I) energy solutions market through a new manufacturing plant in Sussex, Wisconsin. This facility acquisition represents a pivotal expansion of the company’s production footprint, designed to meet surging demand for backup power systems and large-megawatt generators. The Sussex plant joins existing operations in Beaver Dam and Oshkosh, Wisconsin, positioning the company to capture substantial opportunities in one of the fastest-growing industrial sectors.

Strategic New Plant Footprint to Drive C&I Capacity

The new manufacturing site in Sussex will enhance Generac’s ability to scale output for its high-margin C&I business segment. Expected to commence operations in the fourth quarter of 2026, the facility is projected to create over 100 manufacturing jobs and will serve as a critical hub for meeting accelerating customer demand. This expansion underscores management’s confidence in the durability and long-term growth trajectory of the C&I segment, which has demonstrated consistent momentum throughout 2025.

Generac’s broader manufacturing footprint now spans multiple continents. The company operates nine production facilities across Mexico, Europe, Asia, and South America, supporting its comprehensive C&I energy solutions portfolio. This global distribution network enables the company to serve diverse customer bases while maintaining supply chain efficiency and reducing delivery times to key markets. The strategic placement of these facilities reflects Generac’s commitment to vertical integration and operational resilience.

Data Center Market as Growth Engine

The most compelling aspect of Generac’s expansion narrative centers on the explosive growth of the data center sector. As artificial intelligence and cloud computing infrastructure deployment accelerates globally, power requirements for data centers are reaching unprecedented levels. Industry projections indicate that global data center capacity is expected to more than triple by 2030, creating a generational commercial opportunity for companies positioned to supply reliable, large-scale power solutions.

Generac’s decision to develop large-megawatt generators has enabled entry into this lucrative market, where competitors are limited and barriers to entry remain high. During the company’s third-quarter earnings discussion, management disclosed that customer order backlogs for these systems have doubled—a remarkable expansion that signals robust market acceptance and future revenue visibility. Initial shipments have begun to international markets, with the first customer in Australia receiving deliveries, while domestic shipments commenced in October 2025.

The data center opportunity carries substantial margin potential. These projects typically command higher pricing than traditional backup power applications, and Generac’s first-mover advantage in developing manufacturing capacity specifically oriented toward mega-scale generators positions it favorably against competitors. Management has indicated that the majority of the current order backlog is scheduled for delivery throughout 2026, providing a clear near-term revenue catalyst.

Financial Performance and Revenue Trajectory

In the third quarter of 2025, Generac’s C&I division generated $358 million in revenue, reflecting a 9% year-over-year increase. This growth was driven by elevated shipment volumes to domestic industrial distributors and telecom customers, combined with developing momentum in European markets and expanding deliveries of large-megawatt systems to data center operators. International sales climbed 11% during the same period, outpacing domestic growth and signaling opportunity expansion beyond North American markets.

For the full year 2025, management projects C&I revenues to rise in the mid-single digit range. However, this conservative guidance may prove overly cautious given the acceleration in data center orders and upcoming facility capacity additions. With the Sussex plant contributing production capacity from late 2026 onward, the company’s revenue potential in subsequent years appears substantial. Management has articulated the possibility of doubling C&I sales over a three to five-year horizon—a compelling growth thesis if execution progresses as planned.

Diversified End-Market Applications

While data center applications capture headline attention, Generac’s C&I capacity expansion addresses well-established, stable customer segments as well. Healthcare facilities, hospitality properties, wastewater treatment plants, water utility systems, and large industrial operations all depend on reliable backup power infrastructure. These verticals have demonstrated persistent demand for generator systems, particularly as regulatory requirements and facility redundancy standards become more stringent. The Sussex facility enables Generac to serve all these segments concurrently while prioritizing high-growth data center opportunities.

Global Operations and International Expansion

Generac’s international C&I energy solutions platform has emerged as a meaningful growth driver. The company’s nine manufacturing locations across Mexico, Europe, Asia, and South America provide localized production capacity and customer support capabilities that multinational operators require. This geographic diversification reduces dependency on any single market while enabling the company to capture growth opportunities across diverse economic regions.

The international division’s 11% third-quarter revenue growth outpaced the domestic segment, suggesting that non-North American markets are experiencing robust demand expansion. As multinational technology and infrastructure companies expand data center footprints globally, Generac’s established international manufacturing presence positions the company to participate in these buildout cycles.

Investment Thesis and Stock Market Position

From a valuation and ranking perspective, Generac carries a Zacks Rank of #3 (Hold). The stock has declined 7.7% over the past year, underperforming the Zacks Manufacturing - General Industrial industry average return of 12.5%. This relative weakness may reflect market uncertainty regarding execution on the expanded data center opportunity or broader technology sector rotation concerns.

However, the fundamental investment case appears compelling. The manufacturing capacity investments, order backlog strength, and addressable market expansion—particularly in data center power supply—suggest meaningful upside potential over the next several years. Success in scaling production and capturing data center market share could drive multiyear revenue and earnings growth that the current valuation may not fully reflect.

For investors seeking broader exposure to industrial growth and manufacturing excellence, several peer companies merit consideration. Watts Water Technologies (WTS), Trimble Inc. (TRMB), and Nordson Corporation (NDSN) all carry Zacks Rank #2 (Buy) designations. These companies have demonstrated consistent earnings performance: Watts Water beat consensus estimates in four consecutive quarters with an average surprise of 10.9%, while Trimble achieved a 10% long-term earnings growth rate. Nordson similarly beat estimates in three of four trailing quarters. Over the past year, these stocks have generated returns of 41.8%, 10%, and 21.5% respectively, outpacing broader market benchmarks.

Generac’s strategic manufacturing expansion positions the company at an inflection point in the emerging data center infrastructure cycle. Success in this initiative could transform the C&I business from a steady-state operation into a significant growth engine, warranting closer monitoring by investors focused on industrial manufacturing and infrastructure opportunity themes.