赫貝爾 (HUBB) 2026 年第三季法說會：資料中心成長推升財測指引

重點總覽

• 第三季淨銷售額年增 25% 至 18.73 億美元，包括 11% 的有機成長，以及併購帶來的 13% 貢獻。
• 調整後營業利益成長 33% 至 4.77 億美元。在高毛利業務銷量成長與增益併購的支撐下，調整後營業利益率擴增 160 個基點至 25.5%。
• 電氣解決方案部門（Electrical Solutions）實現 22% 的有機成長，主要由資料中心銷售額超過 80% 的有機成長帶動。該部門調整後營業利益率達 24.8%，上升 400 個基點。
• 調整後稀釋每股盈餘（EPS）成長 14% 至 5.91 美元，而自由現金流成長 10% 至 2.80 億美元。
• Hubbell 上調 2026 全年展望，銷售額成長預計為 18%-19%，調整後 EPS 預計為 20.40-20.60 美元。目前預期有機成長為 10%-11%。
• 在強於往常的在手訂單能見度與新增產能支撐下，管理層預期 2027 年有機成長將至少符合其中個位數的長期框架。

核心財務業績

業務與營運表現

電氣解決方案

電氣解決方案為主要的成長驅動力。有機營收成長 22%，其中在單機價值提升、新產品及產能擴充對需求的支撐下，資料中心銷售額的有機成長超過 80%。

管理層預計，截至 2026 年底，資料中心將占電氣解決方案部門營收的 15% 左右。輕工業市場保持強勁，而輸配電與再生能源市場亦有所成長。非住宅需求穩健，但重工業市場相對疲軟。

NSI 為該部門的營收成長貢獻了 29 個百分點，且營運調整後利潤率具有增益效果。管理層表示，整合進度與營運表現均優於最初預期。

公用事業解決方案

公用事業解決方案錄得 5% 的有機成長。在配電與輸電業務帶動下，電網基礎設施有機成長 8%，同時變電所銷售額亦有所成長。

公用事業部門的在手訂單今年迄今擴增超過 5 億美元，比 2026 年初的水準高出約 30%。管理層將此成長歸因於輸電與變電所專案、負載成長、電網強化及韌性投資。

電網自動化有機下降 4%，原因是電表零件短缺導致約 1,500 萬美元的營收從第三季遞延至第四季。管理層表示已全面恢復生產，並預期隨著遞延營收的認列，電網自動化將在第四季實現雙位數成長。

保護與控制業務（Protection & Controls）實現了雙位數成長，主要得益於變電所開關產品及負載聯網專案的支撐。

產能投資

Hubbell 正在跨資料中心、輸電及變電所產品類別增加機器、組裝線與廠房空間。管理層將這些專案描述為旨在滿足可見需求的高報酬投資。

該公司表示，2026 年每季將有約 2,500 萬美元的新增產能上線，並預計該數字在 2027 年將增加至每季約 5,000 萬美元。產能擴充將保持漸進式，預計將進行進一步投資以滿足 2027 年之後的需求。

管理層財務指導

Hubbell 上調其 2026 全年展望：

展望 2027 年，管理層預期有機成長至少達到公司中個位數的長期框架目標。公司還預期價格-成本-生產力以金額計將呈中性至正面，邊際增量利潤率為 25%-30%。

公司正將電氣解決方案的價格調整提前至 2026 年 11 月，並計劃在年底或 2027 年初提高公用事業解決方案的價格，以應對通貨膨脹及正常的年度定價週期。

管理層預計 2027 年資料中心需求將保持強勁。公司亦認為公用事業輸電、配電及變電所，以及電力輸配電和再生能源市場將持續保持強勁。對瓦斯、電信、電表與 AMI（智慧電表系統）、非住宅建築及重工業市場的預期則相對平淡。

風險與關注焦點

• 2026 年期間廣泛的通膨與較高的原料成本持續存在。Hubbell 預計定價與生產力措施將抵銷這些壓力，但執行力仍然至關重要。
• 電表零件短缺暫時減少了電網自動化的銷售額，但管理層預計該問題將在第四季末得到解決。
• 變電所控制室產能提升慢於預期，導致公用事業解決方案全年有機成長展望下調。
• 第四季公用事業解決方案的利潤率面臨來自通膨、產能與產品開發投資的壓力，以及與 IEEPA 關稅退款相關約 500 萬美元的客戶對價從第三季遞延至第四季。
• 與併購 NSI 及 DMC Power 相關的較高利息費用以及較高的稅率，在 EPS 層面部分抵銷了第三季的營業利益成長。
• 新增產能仍屬於漸進式，這意味著需要持續投資以滿足多年的輸電、變電所與資料中心需求。

分析師問答亮點

• 2027 年框架：管理層提及高於常態的在手訂單能見度，並預期實現至少中個位數的有機成長、中性至正向的價格-成本-生產力效益，以及 25%-30% 的邊際增量利潤率。
• 公用事業展望下調：此變化反映了暫時性的電表零件短缺，以及模組化變電所控制室產能擴充慢於預期。管理層預期這兩個領域將在進入 2027 年後獲得改善。
• 電氣部門利潤率：第三季 24.8% 的利潤率得益於季節性強勁的銷量、高毛利的資料中心產品以及 NSI。管理層未將該季形容為常態水準，但預期長期利潤率擴增趨勢仍將持續。
• 高壓輸電：Hubbell 贏得了一項 765-kV 專案，預計將在年底至 2027 年期間開始出貨。管理層表示專案儲備庫持續成長，不過產品測試與認證仍需投資。
• 電網自動化：在針對 1,500 萬美元營收轉移進行正常化調整後，管理層表示表現符合先前對下半年的預期。與 Aclara 相關的業務正聚焦於電表、地方合作社、AMI 及已安裝基礎，重點放在適度成長與更佳的利潤率。

完整法說會逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

Thank you for standing by, and welcome to Hubbell's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Dan Innamorato, Investor Relations. Please go ahead.

Daniel Innamorato

Thanks, operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the third quarter of 2026. The press release and slides are posted to the Investors section of our website at Hubbell.com. Joined today by our Chairman, President and CEO, Gerben Bakker; and our CFO, Joe Capozzoli.

Please note our comments this morning they include statements related to the expected future results of our company. The forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.

Please note the discussion of forward-looking statements in our press release and considered incorporated by reference in this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures, which are included in the press release and slides. SP999 Now let me turn the call over to Gerben.

Gerben Bakker

Good morning, and thank you for joining us to discuss Hubbell's Third Quarter 2026 results. I will start my comments by summarizing 3 main themes we are seeing across the business in 2026. The first is that demand for Hubbell's critical infrastructure solutions remains strong. We see this clearly in our order book, year-to-date backlog build and in long-term planning discussions with our utility and electrical end customers. Second, we are proactively investing to serve this strong demand. These investments have varying profiles across businesses, product lines and factory footprint. Some areas such as data center balance of system, electrical components and certain transmission and substation product categories are coming online quickly and are driving outperformance in 2026, while some investment in the same high-growth markets will enable us to serve longer-term visible project demand in 2027 and beyond.

What is consistent across the capital investment program as a whole, is a highly attractive return profile accretive to our overall ROIC, which will enable us to grow our leading position in our core end markets over the next several years.

And finally, we are managing effectively through a dynamic supply chain and inflationary environment. While broad-based inflation persists, we continue to aggressively drive price and productivity actions across our portfolio. Our recent track record, our unique positions in our end markets and our visibility on actions taken and in progress give us confidence in our ability to continue to manage the price cost productivity equation to neutral or better through the cycle.

Looking more specifically at the third quarter, Hubbell delivered strong financial performance with double-digit growth in sales, adjusted operating profit, adjusted earnings per share and free cash flow in the quarter as well as on a year-to-date basis.

Third quarter performance was highlighted by 22% organic growth in Electrical Solutions, driven by data center sales increasing more than 80% in the quarter on an organic basis as well as continued progress on our segment unification efforts and vertical market strategy. The NSI acquisition is off to a strong start, with performance and integration efforts trending ahead of our initial expectations.

Utility Solutions results were solid in the quarter with strong core T&D performance offsetting a temporary component availability headwind in our meters business.

We are raising our full year 2026 outlook this morning, primarily driven by stronger growth outlook in the Electrical Solutions. As we look ahead to 2027, we see an attractive growth outlook across our largest, highest margin end markets, and I'll talk further about the preliminary views on next year at the end of this call. But now let me turn the call over to Joe to provide some details on the third quarter.

Joseph Capozzoli

Thank you, German, and good morning, everyone. I am going to start my comments on Slide 4. Hubbell's overall financial performance was strong with double-digit growth across sales, adjusted operating profit, adjusted earnings per share and free cash flow, both in the quarter and on a year-to-date basis.

Net sales of $1.873 billion in the quarter increased by 25% as compared to the prior year. Organic growth of 11% was driven by robust 22% organic growth in Electrical Solutions and solid 5% organic growth in Utility Solutions.

Acquisitions contributed 13% to growth in the quarter, with NSI off to a strong start in the Electrical segment, as Gerben indicated, and DMC Power contributing nicely to our utility segment.

From an operational standpoint, Hubbell generated $477 million of adjusted operating profit in the third quarter, representing 33% growth versus the prior year, and delivered adjusted operating margins of 25.5%, representing 160 basis points of year-over-year expansion. Growth in adjusted operating profit was primarily driven by strong volume and high-margin businesses as well as the impact of acquisitions, which were accretive to adjusted operating margins.

Price cost productivity was approximately neutral on a dollar basis in the third quarter, including the net impact of IEEPA tariff refunds. While broad-based cost inflation has persisted as 2026 has progressed, we have driven strong price and productivity realization over the last several quarters, and we are executing additional actions as we exit the year, which we are confident will position us well for 2027.

Adjusted earnings per diluted share were $5.91 in the third quarter. This represented a 14% increase versus the prior year, driven by adjusted operating profit growth and a modestly lower share count as a result of prior share repurchase activity, partially offset by higher interest expense associated with the NSI and DMC Power acquisitions and a higher year-over-year tax rate.

Free cash flow of $280 million was up 10% relative to the prior year. We continue to anticipate approximately 90% conversion of free cash flow to adjusted net income on a full year basis, which absorbs the impact from increased capital expenditures, acquisition costs and working capital investments to serve strong current and future sales growth.

Our balance sheet remains healthy, and we remain committed to deleveraging over the next 2 years, which will drive incremental adjusted EPS accretion in 2027 and position our strong balance sheet for further accretive M&A investments over the next few years.

Turning to Page 5 to review our performance by segment. Utility Solutions delivered 10% adjusted operating profit growth in the quarter and 9% sales growth, which was comprised of 5% organic growth and 4 points of contribution from the DMC Power acquisition. DMC Power's performance will be reflected in organic growth starting in the fourth quarter of 2026, which we anticipate will be accretive to the segment's organic growth rate.

Grid Infrastructure grew 8% organically in the third quarter, led by strong growth in distribution and transmission markets. Substation sales also grew strongly in the quarter, but modestly below our prior expectation, driven by timing of capacity expansion in our substation control house business.

From a demand perspective, we continue to see broad-based order strength across substation, transmission and distribution markets, leading to further backlog build in the quarter as utility customers plan new projects supporting load growth and continue to invest in hardening and resiliency initiatives.

Grid Automation declined 4% organically in the third quarter, driven by a temporary component availability headwind in our meters business, which we anticipate will be resolved by the end of the fourth quarter and results in a shift of approximately $15 million in revenue from the third quarter into the fourth quarter.

Protection & Controls delivered strong double-digit growth in the quarter, led by continued strength in substation switching products where project interconnecting load growth and recent capacity expansion investments are bolstering our performance.

Operationally, Utility Solutions delivered $267 million of adjusted operating profit in the third quarter, representing 10% growth versus the prior year, with adjusted operating margins up 30 basis points year-over-year.

Adjusted operating profit growth was primarily driven by strong volume growth in high-margin businesses and acquisitions while higher cost inflation and raw material costs were largely offset by price realization, productivity and a net tariff benefit in the quarter.

We also remain focused on executing and investing in capacity expansion initiatives to serve customer demand in high-growth areas, our utility business, which we are confident will drive strong organic growth and deliver attractive returns on shareholder capital, both in the near term and over the next several years.

Moving to Page 6. Electrical Solutions results were very strong in the quarter. On the top line, Electrical Solutions generated net sales of $845 million, which represented growth of 51% versus the prior year and ahead of our prior expectations, driven by outperformance in both our organic business and in NSI.

Starting with NSI, as we highlighted at the time of the acquisition, this business is a strong strategic fit with our portfolio and enables us to double down on our attractive core of critical infrastructure components with complementary products and brands, similar channels to market and clear opportunities for revenue and cost synergies. We are encouraged by the early integration efforts and strong performance with NSI contributing 29 points to the Electrical Solutions segment revenue growth in the third quarter at accretive adjusted operating margins.

From an organic revenue standpoint, 22% organic revenue growth was again highlighted by strength in data center and light industrial markets. Data center sales increased over 80% on an organic basis in the third quarter as content gains, new product introductions and capacity additions drove out growth in a strong underlying market. Most notably, our wiring device and [indiscernible] leave product lines have driven accelerated data center penetration through our vertical market strategy, and recent product innovations and recent capacity investments in these areas are enabling us to capitalize on strong customer demand.

Outside of data center, light industrial markets remain strong, bolstered by U.S. manufacturing activity and electric T&D and renewables markets also grew strongly in the quarter.

Nonresidential markets were solid in the quarter, while heavy industrial markets remained relatively soft.

Across our HES portfolio, our initiatives around cross-selling and channel conversions have driven broad-based commercial success, and we see further opportunities to accelerate this strategy through the integration of NSI.

Operationally, Electrical Solutions delivered $210 million of adjusted operating profit in the third quarter, representing 80% growth versus the prior year, and adjusted operating margins of 24.8% expanded 400 basis points year-over-year. Adjusted operating profit growth was driven by strong volume growth and the NSI acquisition. The higher cost inflation and raw material costs were largely offset by price realization, productivity and a net tariff benefit in the quarter.

Turning to Page 7 to discuss our full year outlook. We are raising our 2026 outlook this morning, driven by stronger sales growth and adjusted operating profit growth. On sales, we are raising our growth outlook to plus 18% to 19%, reflecting an increase in organic growth expectations to 10% to 11%, and stronger NSI contribution now expected to contribute approximately 7.5% to full year sales growth.

Our increased organic growth expectations are driven by a stronger outlook in Electrical Solutions, which we now expect to grow 17% to 18% organically in 2026, while we have slightly lowered our outlook in Utility Solutions to plus 6% to 7% on a full year basis.

Broadly, orders and end market demands have exceeded our expectations across our largest end markets in both segments as 2026 has progressed. The timing of project deployments and internal capacity expansions is driving stronger relative growth within Electrical Solutions segment near term.

Operationally, we anticipate over 20% year-over-year growth in adjusted operating profit on a full year basis at the midpoint of our outlook range, an increase versus our prior expectation, driven largely by stronger volume growth, while the impact of incremental cost inflation, price and productivity actions results in an anticipated adjusted operating margin range of 23.0% to 23.2% for the full year.

Our expectations for below-the-line items remain unchanged, and and we continue to anticipate approximately 90% free cash flow conversion on adjusted net income on a full year basis, which includes the impact of elevated levels of inflation, increased year-over-year capital investment and NSI acquisition costs.

We are raising our full year outlook for adjusted earnings per share to a range of $20.40 to $20.60. We are confident in our ability to deliver on this increased outlook in 2026, which represents year-over-year earnings growth of 12% to 13%.

Now let me turn the call back over to Gerben to give some preliminary views on our attractive 2027 outlook.

Gerben Bakker

Thanks, Joe. We see an attractive end market setup for Hubbell in 2027. Our standing long-term outlook targets mid-single-digit organic growth through the cycle. And as we have indicated throughout this year, everything we see in our end markets, order trends and conversations with customers has given us incremental confidence in the strength and duration of the long-term investment cycle ahead of us.

Given the shorter cycle nature of many of our products, we intend to remain conservative as we update both our annual and long-term growth targets next year, but we will be exiting 2026 with stronger than typical backlog visibility and we are confident in our ability to deliver an attractive year of organic growth in 2027.

In Utility Solutions, we continue to see broad-based strength across distribution, substation and transmission markets. Orders throughout 2026 have continued to exceed our initial expectations, with particular strength in transmission and substation project activity driving backlog build in excess of $500 million year-to-date.

We continue to believe utility T&D markets are in the early stages of an attractive multiyear investment cycle driven by aging infrastructure and bolstered by load growth and data center interconnections.

We have strong specified positions with our end customers, along with leading brands and installed base. And our primary focus as a management team is on executing the capacity expansion required to serve this broad-based demand for our utility customers.

In our smaller end markets, we anticipate more modest growth in the approximately 20% of our portfolio exposed to gas, telecoms and meters and AMI.

In Electrical Solutions, we expect data center markets to remain strong in 2027, and we are confident in our ability to continue to drive outperformance through content gains, capacity initiatives and a vertical market strategy to capture more of our available balance of systems component opportunity.

More broadly, conversations with distributor partners on large project activities have been constructive as electrification, U.S. reshoring and data center build-outs drive tailwinds across the broader industrial economy.

We also anticipate continued strength in electric T&D and renewable markets in 2027, while our expectations for nonresidential and heavy industrial remain more modest.

Finally, I'll highlight that we expect the addition of NSI to further accelerate our strategy to compete collectively in HES with a broad portfolio of leading brands and critical infrastructure solutions driving continued commercial success across our portfolio.

With that, we will turn the call over to Q&A.

Operator

[Operator Instructions] Our first question comes from the line of Steve Tusa of Wells Fargo.

分析師問答

Charles Stephen Tusa

Can you just provide a little bit of color, I guess, on just the '27 bridge dynamics? I know you guys gave the usual slide talking about the year forward, which looks like it implies something above your long-term algo, first of all, but then anything that you'd want to highlight moving forward on the bridge outside of obviously the tariff stuff?

Joseph Capozzoli

Sure. Steve. So just a little more color on '27 Bridge. So certainly, we'll provide a little more color as we get out into January on 27. But at this point, we've got a little more visibility than we typically would heading into '27 just given the incoming order rate, the backlog build. So we like the visibility into '27 at this point. And we're confident that '27 sees organic of at least our mid-single-digit standing long-term framework. So we feel really good about that.

We're anticipating PCP to be in the neutral to dollar positive next year with incrementals in line with our long-term algo at 25% to 30%. So I'd say that's probably the anchor of the construct, Steve, for '27.

Charles Stephen Tusa

And do you have to go get more price between now and then to make that happen? Or are you pretty comfortable with the way things stand today?

Joseph Capozzoli

So we are pricing -- accelerating price for '27 on the electrical side, pulling that forward into the fourth quarter here in November, and we'll be out at the end of the year, the beginning of the year with utility price. And that's generally for 2 key purposes. One is to address the cost inflation, the higher levels of inflation we've been seeing come through the last couple of months, and also in line with our normal annual price increase cycle.

Operator

Our next question comes from the line of Chad Dillard of Bernstein.

Charles Albert Dillard

I was hoping you could dig more into the guidance cut on utility. Can you talk through like what some of the sub segments drove the more conservative outlook?

Gerben Bakker

Yes. I think 2 main things that are driving slightly below what we're expecting here in the third quarter. And as we look for the balance of this year. The first one is, as we highlighted, a component shortage that we had in our meters business. And this is a very discrete and unforeseen situation, and it has to do with our contract manufacturer of meters who was unable to source a component from a supplier that led to a production slowdown. And this took several weeks to resolve.

The good news is we're back in full production right now and looking to start that recovery -- have that recovery here in the first -- in the fourth quarter. So that was one.

The second one has to do with our substation and particularly the control houses in our substation market. This is our systems controls businesses. And if you look at this market in total, it represents about 20% of the HUS segment with about half being the components and half be in this modular control house. And as a whole, this portfolio grew very attractively, I would say, in line with what transmission and distribution in the high single, low double digits. And if you break that down, the components actually grew even better. This is stuff like connectors and bushings and arresters and switches, and that was in excess of 20% growth. And it's also areas where we've been successfully adding capacity here this year.

We were expecting stronger growth in those control houses going from the first half to the second half. And this is a business that's grown very attractively over the last couple of years. We've been adding capacity and continue to add capacity and that just proved a little harder here in the third quarter to continue to ramp that up. So as a result of continued growth, we're actually flat sequentially from the second quarter to the third quarter.

There's actions in place to continue to grow that, but it's just taken us a little bit longer. So I would expect this part to ramp up as we go into next year, but just at a little bit slow pace. So if you look at those 2 events, it's really what caused us to pull back a little bit on the organic growth this year. But I would say it's a really, really solid setup for next year as we continue to add capacity to our portfolio.

Charles Albert Dillard

Got you. That's super helpful. And maybe just on that capacity ramp point, can you give more detail in terms of just broadly across the whole business, the product lines? Any way to frame just like revenue unlock as you go into '27? And then just timing and talk about where you're investing to unlock that revenue?

Gerben Bakker

Yes. Yes. And if you look at capacity broadly, I would put it in a few bucks, the primary buckets and where we're most adding capacity is what we've been talking about. It's adding the next machine, adding the next assembly line. We're a very skewbroad company and portfolio, so generally, our capacity as take that form. And if you think about [indiscernible] connectors, if you think about the [indiscernible] where we've been able to grow 80%, it's adding more machines under existing roof life, similar to those components in the substation that I talked about. And that's the primary way that we add capacity still today.

The next level of capacity add is extending rooflines. And you can only keep adding so many machines before you run out of roofline. And so adding more roofline adding more square footage around those existing factories is the next level, and we're seeing areas where we're doing that right now.

Our systems control business is one of those that we're doing that as well. So those are primarily the areas how we're adding capacity into our business. What we talked about this year is about $25 million a quarter of that additional capacity coming online, and that's to serve the growth that we're seeing in these markets. And as we look into next year, we anticipate that to about double to about $50 million per quarter as we go into next year.

So I would say our capacity adds have been very successful. The return on these projects, it's the highest returns we get of our investment. So we feel generally really, really good. It's an area where we're focused as a management team to execute, to serve this visible demand that we're seeing in the markets.

Daniel Innamorato

And Chad, I might just add a lot of that capacity going into key markets where we see durable, high growth, high margin and that continues to be in transmission, substation and data center market. So certain areas we've been adding as we go along, we were doing it last year, we're doing it this year, and you see that coming through in the data center growth rate in particular, but also happening in transmission substation as well. So long term, a lot going on there, but really excited about the opportunities.

Operator

Next question comes from the line of Julian Mitchell of JPMorgan.

Julian Mitchell

This is [indiscernible] on for Julian. My first question is on Q4 operating margins. I think they're implied down year-over-year in the guide. So is this both segments? And can you just provide some color to what's the big headwind here?

Joseph Capozzoli

Sure. So the margin impact is primarily you're seeing in utility. And that is a couple of things, and we'll touch on each of these. First, we're seeing and anticipating price cost productivity neutral in the fourth quarter in utility. We are seeing higher levels of inflation come through in the back half here. We are seeing higher levels of price realization, the utility business implemented price in July. And as they work their way through the backlog, that price realization is ramping up as the back half is progressing and that is serving to offset that cost inflation that we're seeing. But it does have price -- an impact on the margin, just trade and price cost dollars there.

Number 2 is we've got some investments as Gerben was just talking about capacity expansion in key areas. Some of that is CapEx dollars, some of it shows up in OpEx dollars, but really important that we're investing for our future in these growth initiatives. Some of that is also beyond CapEx and capacity is also targeted at new product introductions and those new products are serving things like 765 and data center products and things of that nature.

So investments are also included in there. And then we also have some spillover. We talked about our expectations of IEEPA refunds coming through in the third quarter of about $30 million of refunds with about $10 million of partial offsets of customer considerations. And this kind of straddles 3Q.

We did receive the $30 million of IEEPA refunds in the quarter as anticipated. And while we were expecting about $10 million of customer considerations and other, we realized about $5 million of that in 3Q and about $5 million of that is going to spill over into 4Q. So that's also part and parcel to that margin dynamic that you're seeing in Utility in the fourth quarter.

Julian Mitchell

Okay. Just to be clear, Electrical is, you're expecting it to be up year-over-year or it's off and down?

Daniel Innamorato

Yes. So we haven't given by segment margin, but I think Electrical's got tailwinds from obviously, the NSI acquisition and then a lot of the same dynamics that Joe just outlined.

Operator

Our next question comes from the line of Chris Glynn of Oppenheimer.

Christopher Glynn

A little bit on HUS. Curious on the $500 million or more year-to-date backlog build, if that's pretty much all grid infrastructure. Curious if there's any kind of advance or green shoots at the grid automation besides the P&C? And also, if there's any update on the high-voltage transmission sort of next-gen architecture?

Gerben Bakker

Yes, Chris, it's in both areas of about grid infrastructure and grid automation that we're seeing that. And to give maybe some context to that, it's about up 30% from where we were at the beginning of the year, and this is what gives us more confidence as we go into 2027 with just higher visibility to some of that demand.

As far as the 765 , it's an area that, so far, we've been successful. It's actually what we do for a living. It is the products that go into the transmission and substation for 765. We've been continuing to build that up to higher voltages over the years. So 765 is just a natural progression for us. We talked about in the past having won a project that we'll start shipping here as we go to the end of the year and into next year. I'd say the pipeline for that is growing. And we have products that we're working with our customers with specified. These are all specified products.

So we feel really good. It does require investment, and Joe talked a little bit here in the fourth quarter. So before you can get these products up on the line, you're doing a lot of design testing on it. We have some of those capabilities in-house, but some also go to third parties. So there's an investment that's required to get these products specified and ready to go on the line. But I would say that's progressing very well. And we believe over the next years, we'll benefit from those voltages coming online.

Christopher Glynn

Is that something that pulls your share even higher at least nominally directionally?

Gerben Bakker

Yes. I mean I don't know that it would be materially higher. I mean, we're clearly very well positioned for. I think if we look generally in these kind of materials, we're a leading supplier to the market. And I would expect that to be similar here.

Christopher Glynn

Yes, makes sense. And then last one, just comments, latest thoughts on DM fit for the Aclara portion of grid automation?

Gerben Bakker

Yes, I would say, as we've talked in the past, this is a business that we've change the direction and a little bit focused on electric meters, Munich co-ops on the AMI side and the installed base of [indiscernible]. We've taken structural cost out of this business. And from here, our expectations of it is to have more modest growth and improve the margins. And just as a reminder, this is less than 10% of HUS revenue exiting this year and well below that on an OP basis. So we would expect it to stabilize and drive less volatility going forward.

Operator

Our next question comes from the line of Tommy Moll of Stephens.

Thomas Moll

Gergen, I wanted to start with a question on your Electrical Solutions margin approaching 25% for the quarter. You did call out NSI integration is ahead of plan. So that's got to be part of it. But if you pull that away, what other factors were favorable this quarter and as we think towards next year, before we all put '25 in our model for 2027, is there any temporary benefit you had this quarter that we should be mindful may fall away going forward?

Joseph Capozzoli

Good morning, Tommy. So I would say the anchor of that margin performance in the quarter was strong organic volume contribution. And that strong volume has come in, in key product lines, high-margin product lines that are serving data center in addition to the contribution, nice contribution we were anticipating from NSI. So certainly, third quarter is seasonally the strongest revenue and margin performance quarter of the year for us. We're very pleased with the margin performance of Electrical in the quarter. But certainly, this is the going run rate performance. It certainly is the seasonal performance.

But we do continue to see strong margin in Electrical. And Tommy, we've talked about this long-term margin expansion program that Mark Mikes and the Electrical segment team have been driving which is really multifaceted and includes the segment unification strategy, our go-to-market strategy with our with our broad electrical solutions-focused commercial team. We've talked about portfolio management. We've talked about business simplification and management delayering and consolidation, new product intros in key areas. So a lot of variables driving this long-term margin expansion program through electrical, and we really see us in the middle innings and continuing that margin expansion program.

So while you are seeing a real strong third quarter margin, we think about it more broadly that the Electrical Solutions segment will continue to drive margin expansion in 2027 and beyond for all those reasons.

Thomas Moll

And as a follow-up, I wanted to ask about the capacity adds, particularly in your transmission and substation businesses. noted that it should unlock some revenue for you into next year. But assuming that occurs, are you in that case fully meeting the demand? Or should we still think of this as a capacity constrained market?

Gerben Bakker

Yes. I would say this -- I mean, this is not in the form of you add a huge plan, you have an incremental step and then you're done or you're planning for multiyears out. I mean some areas of this market, if you think about some of the other equipment, that's exactly how you have to plan capacity add. For us, still the capacity adds are incremental even when we do roofline extensions. So it's a question of staying ahead of it. So certainly, the capacity that we're adding next year isn't to solve for multiyear. We're going to have to continue to add capacity in '27 for '28 and '28 for '29. And we view that actually as a good thing because it limits you a little bit from getting too far ahead of yourself, but I would see it in that kind of construct of how are we thinking about capacity add multiyear.

Operator

[Operator Instructions] Our next question comes from the line of Alexander Virgo of Evercore ISI.

Alexander Virgo

Great. I wondered if you could just talk a little bit about 2 things for me. The first one, the $15 million in Grid Automation. If I adjust that back, it looks like automation was kind of flat year-on-year instead of building on something as the momentum that you saw in Q2 against an easier comp. So I'm just wondering why we should be feeling better about that as we go forward into next year?

And then secondly, the data center business, you're obviously very strong, and your comments on backlog are helpful and the '27 sort of initial view is helpful. But obviously, a dark green arrow masks a lot of potential growth next year. So I wonder if you could just give us a little bit of a hand on what that end up looking like in HES, again in the interest of putting a sensible sort of number into the model to start with.

Joseph Capozzoli

So yes, I'll start with your first question. That's a $15 million flip in grid automation and normalizing 3Q, 4Q, you're thinking about that the right way. And that $15 million flip would have been very consistent with our expectation for the back half 90 days ago. So just that movement from 3Q to 4Q, normalizes the expectation of grid auto that would have been positive in the third quarter. And we're anticipating now with that $15 million falling into the fourth quarter, that we see double-digit growth in grid auto in the fourth quarter because of it.

The second question on the data center business and the backlog. Certainly, data center has been really strong for our Electrical business. And we're anticipating that we exit the year with about 30% -- sorry, 15% of our Electrical segment revenues tied to data center. And we will provide more color and insight on our 2027 guidance on data center come January. But at this point, we're anticipating that data center continues to grow at very attractive levels in 2027 off of a higher base for us as we exit this year.

Operator

I would now like to turn the conference back to Dan Innamorato for closing remarks. Sir?

Daniel Innamorato

Great. Thanks, everybody, for joining us. I'll be around all day for follow-up calls.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.