20 February 2025
If you are covering Schneider Electric's latest results, please see the following comment from Jarek Pominkiewicz, industrials analyst at Quilter Cheviot:
"Schneider Electric delivered strong organic sales growth in Q4 2024, driven by the continued strength in data centre and infrastructure demand, and solid margin progression helped by good energy management.
"However, Schneider generates approximately 20% of group revenues from supplying data centres, and the recent sell-off in AI-exposed stocks following the emergence of the Chinese DeepSeek algorithm as a potential competition to US AI players impacted Schneider. Its share price has underperformed the broader European capital goods segment by 9% year to date.
"The sell-off implies broadly halving of growth forecasts for data centre demand and for utilities - no step-up in growth vs history, thus ignoring AI-related investments altogether. This feels overly cautious, particularly in light of Schneider's U.S. peer Eaton highlighting that its data centre-related backlog is equivalent to seven years of production at 2024 rates. With this in mind, Schneider’s management sees the data centre and networks market growing in excess of 10% per annum during 2023-27.
"Furthermore, tailwinds driving utility investment higher remain intact, such as aging grids and their increasing complexity, combined with the growing share of renewables and ongoing EV infrastructure development. This is particularly so in Europe, where utility capital expenditure is less dependent on data centre expansion.
"While it has challenges ahead, Schneider remains competitively priced for a clean way to play the key themes of electrification, automation and digitalisation."
