Vestas Wind Systems A/S

Good morning and welcome to Vestas' Q3 reporting and also closing and looking forward to close a very solid year 2025. I'll also take here the opportunity to extend a big thank you to our customers, colleagues and not least our external stakeholders. Great support and commitment through the current environment and through the first current nine months of the year to the execution we are talking and going to talk much more about today. So with that, could I go here to the key highlight? So key highlights, revenue of 5.3 billion euros. That's an increase of 3% year on year, driven by higher deliveries despite negative foreign exchange development. When we look at the EBIT margin of 7.8%, earnings achieved through improved onshore project execution, lower warranty costs, partly offset by our manufacturing ramp-up, which is continuing but also progressing well. When we look at the order intake of 4.6 gigawatts, up 4% year-on-year, driven by US and Germany, and onshore is up more than 60% quarter-on-quarter comparison to last year. When we look at the manufacturing ramp up, the driver cost and also investments, the onshore and offshore ramp up is progressing as we focused on delivering a very busy fourth quarter, but also as importantly, getting a strong start of 2026. By this, we also decided to return value to our shareholders. I think most importantly, in line with our capital structure strategy and also solid liquidity position, a share buyback of 150 million will be initiated and will be starting as of tomorrow morning. And then on the outlook, we narrowed the outlook in terms of turnover EBIT, reflecting the lower service EBIT, but also the stronger offshore execution. With that, I will talk about the market environment we are in. And again here, wind energy is key to affordability, security, and sustainability. That is our narrative, and we can see it actually working across many of our markets, as you've also seen in our order intake and not least also in our delivery table. When we look at our global environment, no doubt inflation, raw materials, and transport costs are stable, but tariffs will increase cost over time for the end user. When we look at the ongoing geopolitical and trade volatility leading to a regularization, we have spoken about that in now many of the previous quarters, and I will almost say the previous years, and we are seeing it continuing, and we are dealing and planning and executing well in it. When we look at the market environment, there is a heightened focus on energy security and affordability across many of our main markets. The grid investment is prioritized in our key markets, and we can see it's progressing in a number of markets, but also probably have status quo in a number of others. On the permitting side, it is improving in some markets, but overall permitting, auctions and market design is still challenging. Maybe here is the perfect place also to just express a bit of a concern with Europe's continuing introduction of rules like CSRD, CBAM and others, while the rest of the world are after competitiveness. However, when we then look at the project level, I will say, Vestas, we see a strong project execution in the quarter and also year-to-date. We see some regional disruptions from time to time, but we are coping very well with it. And, of course, that's then leading to the result we're also seeing in power solution today, which I'm sure Jacob will talk much more in details about. When we look at the power solutions in Q3 2025, strong quarter across all key markets. So when we look at the Q3, order intake of 4.6 gigawatt, that's up 4% compared to the last year. The increase was mainly driven by strong order intake in the Americas, especially in the US, as well as continued positive momentum in EMEA, especially in Germany. There are no offshore orders in Q3, so it is a clean onshore order intake quarter. The ASP declined to 101 million per megawatt in Q3 compared to Euro 111 megawatt in the prior quarter. The decline was driven by a change in the order mix with higher share of supply-only orders in the U.S. Generally, we are very pleased with the positive continuing price and price discipline we are showing and our customers support and understand it. When we look at the order backlog and power solution, it increased to 31.6 billion. That's up 3.3 billion compared to one year ago as our energy solutions continue to have good traction with customers across our core markets. And you can see more of the details in the charts to the right. With that, on to service. So service outlook revised and also the recovery plan is progressing as we go through and we are now three quarters in. So the service order backlog increased to 36.6 billion from 35.1 billion a year ago, despite 1.5 billion headwind from foreign exchange rate movements year to date. When we see a service, it reads 159 gigawatt under service. It's flat compared to Q2 as additions were offset by a higher level of expiries and also deselecting in the quarter as the commercial reset continues. This is some of the consequences we have spoken about in the previous quarters as part of our service turnaround. And I think we can now start seeing that some of it also shows, at least in the gigawatt under service as such. When we look at the service recovery plan, which runs until the end of 2026, it's progressing, and we are seeing early signs of operational improvements and also a reduction, especially in our overdue work orders and the backlog of the same. That's very healthy and it's very positive to see, and of course we will continue working with that, and we look forward to talk more in details over the coming days. However, earnings in service are also affected by foreign exchange rate headwinds, as well as some costs related to some specific offshore sites, which has led to a revision of the 2025 outlook of service. You will see here to the right the breakdown of the service order backlog, 36.6 billion overall, of which 31 billion is onshore, 159 gigawatts under active service contracts, and then an average duration of 11 years. You will see the breakdown on the regions below, and as you will also not surprisingly see in Asia Pacific, if you don't have new order intake, it also is limited to how much you grow gigawatt under service. Will that take you through development? Development, not a lot. So I'll have that pretty quickly. Discipline, the same. We also focus very much about finding projects and advancing projects. But as you can also see, the environment right now is a lot of focus on in the key markets to progress projects. And we haven't really progressed anything in Q3. So I'm pretty sure from a performance point of view, they also feel that for Q4. In Q3 2025, we had a pipeline of development projects that was stable around 27 gigawatt with Australia, US, Spain, and Brazil holding the largest opportunities. Strategic focus is on maturing and growing a quality project pipeline as well as conversion of mature projects in project sales and related turbine order intake. You can see the regional breakdown below. And our go-to sustainability in Q3, Vestas is the most sustainable energy company in the world, and we keep having that focus also with our customers and stakeholders. When we look at the turbines produced and shipped in the last 12 months, they are expected to avoid 461 million tonnes of greenhouse gas emissions over the course of their lifetime. You will see that here to the right. And of course, as we are ramping up, we expect that to continue increasing. The carbon emission from our own operations over the last 12 months increased by less than 1%, which is actually a very positive achievement because our activities are increasing. So therefore, keeping scope one and two at the current level is a testament to the focus and execution of our operations across. It's also saying when we ramble offshore, it is a significant change in business mix, so there will be an upward pressure on the carbon emission because we are using and spending more time at sea, at vessels and other transport measures. When we look at the number of recordable injuries per million working hours, that was up from 2.8 to 3.3 year on year, Safety remains a top priority for us as we tirelessly work to improve our safety performance across our value chain. I think also here from a personal point of view, I'll say this is not good enough. When we see overall the year, we have less serious injuries and we have no fatalities, that's positive. But the higher frequencies in especially Northern Europe and North America with onboarding many of our new colleagues, that also means that when we ramp up offshore, we see some of those frequent injuries we shouldn't see. So therefore, we highlighted that, we talked directly to our colleagues. How do we see our colleagues and our family members remain safe on sites in this? So therefore, we are taking it extremely serious that it has not gone down, but actually gone up in the last 12 months after Q3. With that, I will hand over to the financials.

Jacob, take it away. Thank you, Henrik. And let me take us through details I'll just flip the slides. Let's take through the details of the income statement and the highest ever third quarter gross profit. Revenue increased 3% year-on-year, driven by growth in power solutions, offset by slightly lower revenue in service, primarily as a result of negative foreign exchange rate developments. Gross profit that I just spoke to increased to record-breaking $7.72 million in the quarter, the highest ever in the third quarter. The record was achieved by improved profitability in onshore, lower warranty cost, partly offset by manufacturing ramp-up costs. Earn EBIT margin before special item was 7.8% in the third quarter. As mentioned throughout the year, 25 is a back-end loaded year. The third quarter that we are just going out of was a strong start to a busy second half, and we expect a better balance between earnings in the third and fourth quarters compared to previous years. Diving into the segment, starting with the strong performance in power solutions, as Henrik also alluded to. Revenue increased by 4% year-on-year, driven by higher megawatt delivered at stable average selling prices. EBIT margin before special items improved to 3.9 percentage points, year-on-year to 8.1%. The improvement was driven by lower warranty provisions, continued strong onshore project profitability, and importantly, execution, partly offset by costs related to the manufacturing ramp-up in our offshore in Europe and onshore U.S. Moving into the service segment. Service revenue declined 3% year on year due to lower transactional sales compared to last year, while contract revenue was stable. Revenue growth in the quarter was affected by 3% currency headwind. Service generated EBIT of 153 million, corresponding to an EBIT margin of 17%. The profit levels is in line with recent quarters, but we expect additional cost in Q4 related to some specific offshore sites. The service recovery plan continues and it will take time before benefits are visible in the financials. Net working capital decreased in Q3, mainly due to a reduction in inventory as a result of high project deliveries in the quarter and continued focus on working capital management. Important to note is compared to Q3 last year, we have seen Euro 1.4 billion improvement in the net working capital. That leads us into the cash flow statement where importantly and what you have seen also where we say we initiate a share buyback on the back of strong cash flows and our net cash position. Our operating cash flow was 840 million in the quarter, a significant improvement compared to last year. The improvement was driven by better profitability and a favorable development in net working capital as you just saw. Adjusted free cash flow in the quarter amounted to 508 million, also a substantial improvement driven by the same reasons as mentioned in above. And then finally, we ended the quarter with a net cash position of Euro 0.5 billion 500 million. Total investments in the quarter amounted to $274 million in quarter three. The spending is primarily related to tangible investments such as transport equipment and tools, as well as property plans and equipment across our turbine portfolio, such as the offshore 15-megawatt inventors and our 4-megawatt platform in the U.S., Importantly, we are also very pleased to welcome more than 400 new Vestas colleagues at the onshore blade factory in Poland, which we took over in September from LM Wind Power. The factory will deliver blades for our inventors platform and expand our industrial competitiveness in Europe. Looking at provisions and our lost production factor, we see signs of stabilization. The repairs of the sites mentioned in previous quarters are now largely completed. Disregarding these sites, the underlying LPF has trended down during 2025. Warranty costs amounted to $160 million in the quarter, corresponding to 3% of the revenue, and that is a significant improvement from the 6% we saw in Q3 last year. Warranty consumption was 206 million for the quarter. The higher consumption level in the quarter is related to the above-mentioned repairs. And finally, ending on a high, we can report our best EPS and ROSI in five years. Net debt to EBITDA ended the quarter at minus 0.2 times compared to 0.9 a year ago. Investment grade rating for Moody's we still have with a stable outlook. Earnings per share measured on a 12-month rolling basis improved to €0.9, driven by the better profitability. Our return on capital employed, which broke the 10% barrier last quarter, improved again, and now to 13.6% as the earnings recovery continues. And finally, our strong financial position and improved key metrics allows us to return cash to shareholders. Thus, we are initiating a share buyback of 150 million starting tomorrow. And now back to Henrik to take us to the outlook.

Thank you so much. So thank you, Jacob, and thanks. Very nice slide to finish with, and if we were a bit out of sync, I have to catch up with that change of your slides in the future, but we will rehearse that. When we look at the outlook for the year, revenue narrowed 18.5%, 19.5%. billion from previous 18 to 20. Of course, there are some negative foreign exchanges you picked up. On the EBIT margin before special items, 5 to 6 percent narrowed from 4 to 7, and services expected to generate an EBIT before special items of around 625 million, and then total investments remain stable at 1.2 billion, as we also had in our previous outlook. With that, I will just say thank you for listening in. I will pass to the operator and we will go to the Q&A. And also in that slide, you will be able to see the financial calendar for 2026. Over to you, operator.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questionnaires on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Sean McLaughlin from HSBC. Please go ahead.

Thank you for taking my question. Let me just come to offshore. The ramp looks to be progressing as expected, but you've postponed the investment in the blade plant in Poland. I wanted to understand just what is your latest view here on the market and what is the risk that we might see an early peak of deliveries in 26 and 27 and potential underutilization there? thereafter and ultimately what would it take in your mind to kind of put that blade expansion back on track? Thank you.

Thank you, Sean. And with a little bit of risk of using an expression here and throwing a good colleague under the bus, I will sort of say here that blade factory that is so-called stopped in Poland was never built in Poland either. It's actually an old decision that was paused 18 months ago. it got interpreted a bit and probably got its own life. And that I will use a bit also to say to everyone here on the call and others listening in, it seems like offshore is getting an unreasonable bashing everywhere in the day-to-day press or among analysts. Yes, there have been headwinds and others, But from us, we don't see that it is a piece of land we have. So if we at some point in time wanted to do a further capacity expansion, then it's an opportunity, an option for us. And right now, we are working well. We are progressing well with our own capacity plant upgrade. And that we will just wait and see. This is a dependency on what happens in the backlog when we look four years plus ahead. That's where we will adjust the capacity currently. We don't see any reason for raising the question or question two if we need to adjust capacity downwards. That's for sure, Sean. So we are ramping up and therefore in a call like this start talking about capacity downwards. We have a backlog of more than 10 billion euros of projects and we will be throughout this year, next year and into 27 reach what we will call a more stable full capacity utilisation.

Thank you. And if I could just follow up on offshore as looking at the moving parts for you effectively not lifting the midpoint of the guidance after this strong Q3 surprise. I mean, is offshore a component of that or is that really driven by service? Thank you.

No, I don't. As I said here, if we look at a midpoint here, you can sort of see if you have three quarters now, you can see we struggle to absorb the offshore ramp and the ramp up cost in generally if we are laying around two and a half billion in turnover. Now we are above five. We have a very good quarter. But again, it's a lot easier to absorb it when we have a higher turnover. So We are pleased with where we are. Probably is around the maximum of the ramp we are seeing here in the second half of the year. So therefore, coming into 26, we should start seeing also it's reducing and disappearing over time. So that is sort of the, in our heads, the timing of it. And then, as I said, in the mid-range also here, Sean, of course, we still have also the business absorbing, for instance, tariff and other exchanges that happens in the world. So we're not We're actually very pleased with what is in here, and we're also very pleased with what onshore execution is supporting our continued investment into offshore.

Thank you. The next question comes from the line of John Kim from Deutsche Bank. Please go ahead.

Hi. Good morning, everybody. Thanks for the opportunity. Two questions, if I may. If we think about the updated guidance here and include the headwinds in service, I believe it still implies a weaker margin in Q4 for power solutions. I'm just wondering if you could give us a bit of color here, whether it's more about the cadence of the onshore deliveries or potentially a bigger drag in Q4 from offshore. How should we think about that?

I think here it's the busiest quarter again in Q4. We walk into a Q4, you will have seen it. We always said when we started the year, back end loaded, but it's second half of the year. I will sort of say here, when you look at that, John, I will much rather see it in A, that we have managed to equalize Q3 and Q4 much better. Last year we didn't. So therefore, compared to last year, we're looking into a Q4. that looks fairly much as execution of Q3. And then there can be a variation to the theme of what do we have in the backlog in there. You shouldn't read more into that. Then it is a busy quarter. We got 56 days to go and we will always be subject to the normal variables in Q4. So that's, yeah, we won't try to make it worse. That's for sure in the onshore execution, which we so far have had a really good run at this year.

Okay, helpful. Thank you. And on the service guidance 625 as the updated guide, I want to say there's a little bit under 20 million in FX headwind. Is the remainder of the difference from 700 to 625 due to the offshore that you had mentioned in the commentary?

I won't comment on your FX calculation. I think we probably will see it slightly a bit more than that. But as I said, let's not do that. What we are just saying here, if we have a couple of things where we put a lot of vessels and a lot of people at sea in a Q4, it will drag something. So when we see that in a Q4 of a service, which let's just say between us, we maybe end up around a billion in turnover, then... you can easily invest 20 million in some of these offshore sites in a quarter. And that's why we are guiding towards the 625. Okay, thank you.

The next question comes from a line of Christian Thorn from SCB. Please go ahead.

Yes, thank you. I have two questions. First one is about the production ramp-up in offshore and onshore as well. So you've been fairly clear stating that it has a material earnings dilution impact this year. Considering the progress you've done so far, how confident are you that this will have a materially lower dilution next year?

How material are we? At least we know that it's ordinary ramp. So that means the longer you get in, the better we get at it, Christian. But it's also here for both the onshore U.S. and offshore. We see a tendency, too, that we are further into the onshore U.S., so that should be definitely disappearing over the coming 2026. And then, as I said, in the offshore ramp, listen, we opened the teen nacelle factory less than six months ago. So, therefore, we are at a maximum of both onboarding and running the education and training systems. So, I can't give you a date where it maxed out and then it starts coming down, but we do everything we can to actually have it coming out gradually over 26. Will it be totally done in 26? I don't know, because there will always be things, so that we will talk more about when we get to... 2026 outlook in February. But we are comfortable with it. And that's probably the main reason here. We have more than half a gigawatt at sea now in the Baltic Sea and the North Sea. So we see that progressing. But of course, we are into the winter season where it's a slightly different environment to construct and install offshore.

Understood. Fair enough. Then my second question is on your order intake in the APEC region, which, again, this quarter was fairly low. So just any commentary on the outlook and your optimism for actually seeing APEC orders pick up?

I will just say nothing more than he should be doing better as a whole region out there in Asia-Pacific. So that we encourage them to do. I think it's lumpy when you are in markets of the nature of what they have in Asia-Pacific. They are a bit more depending on when does it come over the finish line. I'm pretty sure there sits a whole region and not wanting to show us and you that they are doing zero in fourth quarter because that's not the intention. So... We'll see where they end in 31st of December, but game on for the region to build a proper FOI in fourth quarter.

Understood. Thank you.

The next question comes from the line of Dan Togogensen from DNB Carniche. Please go ahead. Mr. Jensen, your line is open. You can go ahead.

Sorry, can you hear me now? Yes. Okay, good, thanks. A couple of questions from my side as well. On warranty provisions, low this quarter here, but how should we think of this level, both absolutely and also relative, of course, as you put on more on the offshore side? Can you maintain this level here, or is there a risk that we will start to see level... or an increase in net ratio. And then a question on the Shara Act, the 150 million. Can you elaborate a bit about the math behind reaching the 150 million? I mean, cash flow, free cash flow generation was more than half a billion and you have almost half a billion in cash by end Q3. And how should we think of it by end Q4? Will you again be, you know, possibly in a position where Shababax could roll into the current program and be released by a new program. Thanks.

Dan, this Jacob here let me take the first part, and then Henrik will comment on the latter. Warranty, what we should remember, and I'm sure those are also the numbers you're looking at, 23 we had more than 5%, 24 we were down to 4.3%, and then this year we are hovering around the 3%. So it's something we're really proud of, and it's an outcome of our focus on quality. We also see the underlying LPF reduction as we say, except for these couple of sites. And our ambition is to continue that journey down. And again, looking at next year, we'll talk about after Q4, but it's certainly our ambition. We are not satisfied with the current level of 3%. We see further potential and we have higher ambitions. Okay, sounds good. And we're going to share that back.

And it's hereby back. I think always when we do these things, we look at it in a bigger scheme of things. We have had a highest EPS, as Jacob mentioned, highest EPS and highest return on capital employed for five years. As you know, our chairman very well, it's probably also the highest EPS for most of the 10 years. So therefore, when we look into this, we think it's fairly reasonable that we also say to shareholders, you will get cash back. Could we have done more? Yes. Could we have done less? Yes. But we ended at 150 million because it's also the time of the year where we can get this done until the 17th of December. And then, of course, we get together again in beginning of February. And as you're rightly saying, we're not about piling up cash here in an environment where we feel very comfortable of the investments we have been doing and still are doing in offshore. But that is also to say if people have struggled to see the value in the Vestas shares, then share buyback is the best way. We can also say we at least we trust in the Vestas share.

Thank you.

The next question comes. from the line of Akash Gupta from JP Morgan. Please go ahead.

Yes, hi, good morning and thanks for your time. My first one is on surveys. So I think when we look at your Q4, implied Q4, it's slightly over 140 million adjusted EBIT, which is smallest since 2020. Can you tell us maybe how much of this is structural and how much of this is like temporary figures and Can you also talk about growth rates for service in Q4, given last year we had 30% year-on-year growth in service top line? So that's the first one.

Thanks, Akash. I will say sort of the top line first. When you see the service top line, there can be, and there was also last year, some repowerings. Therefore, if Q&Q, there are differences in the top line that can relate to special things like that. And you will also appreciate we do have transactional sales as part of it, which can vary it. We don't comment much about that and don't want to comment much about it. But as we also discussed over the last quarters when we embarked into this service reset, it is important for us that also we get better in saying in this quarter, we already know this is what we are going to do in the quarter in especially some of these offshore sites. So therefore, we have to give you a bit more guidance on some of these. That is not a recurring thing. So therefore, when you're into next year, You should see probably year to date and what we have done in the previous quarters is the underlying run rate of the business. So I'm not so nervous of that. But we got to pick it up with you when we have already now a month into Q4. So that's the reason why we are seeing it. And as I said, it relates to something specifically in offshore that is in the quarter dragging it down.

Are these offshore sites the same as where you were fixing some quality issues where you took provisions or they are different?

They are partly different. So therefore, it's not related to any of that and it's not related to the 236 either. So this is something where we just know that when you're in this season and you got to have it, then it's a focus from us and it's a focus from the customers and it is very few customers involved as well.

Thank you. And my second one is on produced and shipped turbine in the quarter. You had slightly over 3 gigawatts, which is down 17% year-on-year. And we had growth here in first half, and now we are flat on a year-to-date basis. Can you tell us what is driving it? Are there any supply chain issues, like probably sourcing of magnets or any retooling of facilities? So, yeah, can you elaborate what's driving this Q3 produced and shipped turbines and expectations for Q4? Thank you.

No, I will say here, and I think Jacob spoke to that, if I can point to a positive here, we get better and better together with our partners in having a straight through on the production and also the supply chain. So we've been better able to control inventory and therefore if we do that, then we also, to some extent in some quarters, you can't adjust it completely from what is going to be delivered and constructed next quarter. So we are being better at that. And we haven't yet seen any influence of any supply chain shortages. Then we wouldn't have used the expression of very good execution in onshore. So we actually, again, coming into Q4, we won't be many weeks away from when we have all what we need on site. So therefore, we see good traction on execution towards the end of 2025 as well.

Thank you, Hendrik.

The next question comes from the line of Colin Moody from RBC. Please go ahead.

Hi there. Thanks for taking my question. Just focusing on the very strong margin performance in Power Solutions this quarter, well understood on the drivers regarding warranties and volumes, but maybe just on that project execution point, am I right in thinking this is essentially a contingencies release? And could you help us understand how much of a contributor this was And generally, should there be some more in Q4 to come? And generally, on contingencies, do you recognize the benefits of that release every quarter as projects approach the end or more kind of towards the back end of the year? Thank you.

I don't know if I'm commenting on something in your special way of doing. We do exactly what we always done. If we have a project, we do a pre and post CalCAP. When we get the final payment from the customer, we put it into our P&L. So therefore, I can't comment on what others are doing in contingencies or whatever. We run whatever we do when we have a project. a project as you would expect us to do there is always something in a project where you have what if something goes wrong and of course that gets released when you also have the project completed so it's a quarter where onshore execution has been and delivered this and of course even in this quarter in power solutions we have also spent quite a lot of amounts in ramping still and investing in the offshore and onshore ramp. So for us, this is a normal quarter. But I think you should read back to what I started saying by it is difficult to absorb our investments in ramp when you have a much lower turnover and top line as you saw in Q1 and Q2. That's what you should read into it. There's nothing else. Then it's just a clean... execution and profitability, and that's also what we are looking in for the full year.

Well understood. And then maybe just a second question, if I could. On U.S. market trends, clearly very strong U.S. orders intake year-to-date. Just thinking about the July safe harbor coming up in 2026, how do you think about order developments going forward? And am I right in thinking that you shouldn't necessarily expect a big peak or ramp ahead of that deadline, but actually you could continue to see very strong order momentum even beyond 2026 into 2027 and beyond. Thank you.

Yeah, thank you. As I said, it's always difficult to predict in individual quarters. You know my statistics in that. That has been relatively poor, as Klaus Almer will remind me of. So I think here we are also saying we take the orders we can get to. I think it's also fair saying we are pleased with what we are seeing. We are having a well-covered order backlog in the U.S., and people are building out and planning for building out What is that based on? That's based on that the wind also in the U.S. has a very attractive levelized cost of energy. It goes well in combining up against gas and others. So, therefore, it's a build-out rush that we will continue to see in the U.S., also beyond whenever PTC is expiring or not. I think we will probably have had more orders if we haven't had some uncertainties around the tariff side. But outside that, no, we love getting close to our customers in the U.S. and keep developing that plan for the coming years. So we're in good state. I won't comment on when orders are coming because that's simply too difficult to predict. But don't forget, when we talk about tariff, we have a very, very large local supply chain that has been there for more than two decades. And, of course, that we are supported well for, and customers can come and see both the sourcing of the components and supply chain into the U.S. factories, which gives a very, very comfort situation, confident situation between us and customers in the U.S.

Well understood. Thank you.

The next question comes from the line of Klaus Halmer from Nordea. Please go ahead.

Thank you. First of all, congratulations with a solid Q3. I will not ask about the orders, but about the tariffs. So first of all, did tariffs in Q3 have an impact on the profitability in power? That would be the first one.

Yes, it will always have now because if you're paying and you're sourcing and you're constructing clouds, you can see the deliveries in the table we have in the interim report. So therefore, of course, part of that is already under influence of tariff and of those that will be fully booked under it and also split in the ratio between customer and us.

So it's been quoted that you're expecting to be able to mitigate some of these effects. So could you maybe quantify what was the headwind in Q3 that maybe will vanish over the coming quarters or years?

That goes a little tight in what we are sitting with. So we have a P&L to optimize in and for our customers and that we do very well. We can't mitigate 100% of tariffs because there is not an opportunity to be 100% local sourcing. in the US. So therefore, there will be tariff and they will come on either projects or components and therefore be booked up against the projects when we execute on them. We don't have an interest in sharing that. Why is that? It's not a market for many. So therefore, we keep that execution with us and our customers. They understand what we are doing and they support what we are doing. And I think we are in best possible way, trying to mitigate what we can mitigate, but mitigate all of it, not possible.

Fair enough. Then my second question, which is also tariffs. So there's been some quotes out today from you, Jacob, that U.S. customers are holding back due to the tariffs uncertainty, which also was mentioned on this call. I guess this is mainly the ongoing U.S.-China situation. which may last for quite a while. So is there any way that you can reduce this uncertainty and thereby unlocking some of these projects in the pipeline?

I would just say maybe Jacob better comment on his. And so we fully agree on that. Of course, as I also said to the previous one, we would probably have taken more if it wasn't for the tariff. And that's absolutely right. And there is also probably a continuing backlog sitting and waiting for clearance on a few of these things. So therefore, let's see what happens there. But as I said, I'm not trying to predict sort of... macroeconomics and geopolitics these days because it's simply not predictable. So therefore, we do what we do whenever there is clarity and whenever the offtake is there. There are also cases now where the offtake is so much in demand that you actually will execute on it whether there is small, low or even high tariffs on it because that's what you need to get to your electricity and your energy supply. So, year-to-date, we have more than 2 gigawatts of orders, and our U.S. team are doing a cracking job in doing that. So, we do what we can to support them, Klaus. So, I think here, really, really good progress.

There's no doubt 1.8 gigawatts from the U.S. was quite amazing in the quarter. That was all for me. Thanks so much.

Thanks, Klaus.

The next question comes from the line of AJ Patil from Goldman Sachs. Please go ahead.

Good morning and thank you for the presentation. A couple of questions, please. Firstly, on offshore, we're largely through this year. I'm just thinking about the offshore business where that has been hampered by a number of issues this year, fixed cost absorption, ramp-up costs, maybe lower margins on the contracts. And I'm thinking beyond because that's a sizable portion of the reflection on the profitability of SDAs. is there any sort of guide you can give on the ramp-up costs this year so that we can have better modeling of how that profitability may turn? And then the second question I had was, you know, you're performing really well on the onshore side. You can see the green shoots of offshore turning around sizably. You talk to service margins improving by the end of the service plan. It looks like there's significant... profit improvement to happen over the next two to three years. I'm just thinking today's buyback. Can we infer that that sizable amount of cash flow, that buybacks will be very much a part of that debate and that really we're really looking at a picture that's got returns of value as a sizable proportion of the investment case?

You're asking me quite a number of questions in the question. So I will try to sort of, we believe very much in our free business areas. Onshore, very mature, very well developed. And you can say the onshore has been, if I was an inside investors colleague, has been paying a lot for some of the investments we have continued doing in the offshore. We are absolutely convinced and we are adamant that offshore will be a really great business area, not only for visitors, but for a few around and also for our customers. So we are not being caught by the same, I call it a bit the frustration or depression over offshore. The great days of offshore in a P&L for Vestas will rightly so come when you look beyond the further ramp up in terms of projects in 26. So therefore, second half 26 into 27, you're right, offshore would start looking much more like what we're also seeing in the offshore profitability. That comes together with that we are doing the right things in service. So, yeah, you can definitely come to a higher EBIT margin when you do the future years. It's not why we are looking at a share buyback in an individual quarter. But I think it's a testament from the board and also from management here to see we feel confident of what we are doing and where we are and that confidence you need to see. Because if there's something we probably discussed in the last four quarters, which is when did the business turn around? When was it we were comfortable of the turnaround we had done? And is it working? And I think today we can definitely say to people, This is the first sign of it's working, and then, of course, everyone can do their predictions. The more cash we get available, the more we will probably redistribute back because the biggest part of the investment we needed to get done in offshore is actually behind us.

Thank you very much. Very kind.

The next question comes from the line of Alex Jones from Bank of America. Please go ahead.

Great, thank you. Two, if I can. First, just to follow up on tariff costs, to what extent were those already hitting the P&L this quarter, or are there still further sort of incremental increases in tariff costs ahead as you work through inventory imported before the various tariff measures were put in place? And then second question, if I can, on offshore, and sorry if I missed it, but could you explain exactly what is happening at the offshore sites, either because of technology or because of your customers' demands that is driving the additional costs in service in Q4. Thank you.

If I take the offshore first, then I can leave the tariff a bit more onto Jacob. I think we've spoken a lot about the tariff already. But on the offshore, it is specific sites. It is where we are manning up. It is not related to our 236 and it's not related to the sort of back in Q3 and Q4 last year, where we had a component failure in one of the platforms. So this is about that we have what I would probably more call a hypercare in a couple of offshore sites where we agreed that with the customer. And therefore, of course, we are also investing in that. So that is in a winter and a high season for offshore is a way of also us saying we are investing with in also prioritizing cost here. So that's what we have done and that's what we are sort of pre-guiding you on for Q4.

And on the question around tariffs, it is hitting our books right now, as Henrik also answered in the previous question, continue hitting in Q4. But what is important is, and that's what we're also saying with our narrowed guidance, we can keep that within the narrowed guidance. And you will see during the math that we have the same midpoint as we had basically since the beginning of the year. So in that sense, yes, it's in there and it will continue to be in there.

The next question comes from the line of Max Yates from Morgan Stanley. Please go ahead.

Thank you. Just one question from me. Just on the services business, could you give us an update on how the turnaround program is going? Are customers kind of accepting the renegotiated terms? And I guess maybe if you could just help us with the kind of how long we will actually – how long it will take to actually see this in numbers. I guess you're kind of operating in a 16% to 18% margin I appreciate you won't want to give guidance for 26, but do we still see sort of 26 as a year, you know, where the groundwork is being laid for future margin improvement? Or do you really see it as we'll start to see some of the, you know, the improvements actually coming through in kind of growth and margins in the service business as we go into 2026? Just trying to get a sense of, you know, so we don't anticipate it happening sooner than we actually see it in numbers. Thank you.

Max, I really, really appreciate your comment in that way because I couldn't agree with you more. This is a global business that has 159 gigawatt under service and we have more than 15,000 employees. So when you do a reset and a turnaround of the business, it will take longer time. So please don't start making things in 22 or 25% service margin in 26%. We've said it takes the two years. We are five quarters away from finishing this work because it does take some time. I'm really pleased with where we are in the service team and Christian Wennerby, who heads it, have done a really good job. We know the details of what we are going through. But I think also, as we are hinting here, When we looked and talked about this two or three quarters ago where we said we probably would foresee that we will have some flat gigawatt on the service, then surprisingly it didn't happen in the first one or two quarters. Now it does happen because we are getting to some of the gigawatts where, as I think we also spoke about, that for instance something like multibrand, It doesn't make an awful lot of value for shareholders and it doesn't make an awful lot of sense for us unless we have customers that ask us specifically to do it more on a cost plus basis. So therefore, you will see now that we're actually having a real firm grip of what is happening from quarter to quarter. So we're in good momentum. We're in good momentum of addressing where we wanted to have a better operational environment. And then we have a good momentum in also talking to customers straight. And that includes even escalations to me as well. So we are actually pretty pleased of where we are with the commercial reset. And we're not done with it. That will be wrong. But that's because you cannot fix that much in one or two quarters. But run rate up until third quarter is the run rate, I will say. And that's, for me, the middle of the road we are going with.

Understood. Thank you very much.

The next question comes from the line of Lucas Verani from Jefferies. Please go ahead.

Good morning. Just to follow up on offshore, when are you kind of booked out to? I know you said you have 10 billion euros of projects in the backlog that kind of last you until 2027, even into 2028. And then when you look at the kind of the recent failed auction in several countries in Europe, And maybe the AR7 in the UK, that was maybe slightly below expectations. It depends on who you ask to. How do you feel about the ability to get those redone and then rebid and then the orders coming through to the turbine suppliers roughly on time? Thank you.

Yeah, no, as I said, it's a good 10 gigawatt. We are sitting and muscling around. We have more PSAs, but there are also more PSAs in discussion. So I'm not so worried about that. And then when you look at the near term right now, we have a lot to do in the coming three to four years. So that is also the cycle of it. So where you come from, and I keep encouraging you, Don't compare, but don't compare between the backlog and the process we're running between offshore and onshore because offshore processes are longer and therefore not so nervous about that. If there's one thing that concerns me, and I hinted that a bit here, is that we... at least in Europe where offshore should be one of the biggest solutions to get our, I will call it less energy dependence on friends outside Europe. We are 50% dependent on energy import and offshore should be one of the things we scale faster. But it seems like every country in Europe choose to go through a failed auction before they get it right. And of course, that takes time. And we've seen a number of countries, including the Danish government, went through a thing last year. But that also means now you have a CFD backed. And even with the CFDs, that will significantly improve the Danish electricity price as well. So therefore, it works and it works across. So we are not so nervous about that. And when we look at an AR7 in the UK, I can only give praise Maybe I will also have one of the ones that would like to have a bit larger budget committed. But on the other hand, the government and the Secretary of State that knows a lot about it, Ed Miliband, he has conditioned himself that he can take individual projects out and also potentially progress that. So I think we got to work through this. And if somebody wants to characterize it as an offshore crisis, I'm not in that category. So I think it's a proven technology. It's a proven market access that works. And therefore now is the time to show leadership both from developers and OEMs to get it built out. So we are more positive on that. We see 25, 26, to some extent, I'm happy that we are doing what we are doing right now, because if we had more stress on the factories and the ramp up, that would actually only create more concerns at Vestas. So we don't have that. So we are comfortable executing on it. And what I am probably most encouraged by is also our customers like the discussions and the deep detailed discussions we are having leading up to 2030 and even beyond.

Perfect, thank you. And just a quick follow-up on tariff. I think most of what we're seeing and what has impacted you so far is more the Section 232 or maybe steel specific components. But there's also a probe that has been launched in the U.S. into wind specifically. Can you talk about, you know, how do you understand that? I obviously see that there's not much information out there, but how do you look at that risk of what could come out of this probe?

Thank you. I know, and there are sections and there are EU tariffs and there are other tariffs that seem to be changing every quarter. So we are basically taking the stand that we will deal with it as it's being thrown at us and therefore we are also dealing with this. Outcomes, I can't predict, but what we are both guiding for for the rest of the year is what we know and what we are dealing with and therefore it's priced in. And I think we are best doing and best served with doing that, because otherwise we have to start changing every time there is a change in legislation. It might be it goes up in tariff. It might be that it goes. I think the last week we've seen initiatives that seems to be. Maybe talking to tariffs returning towards the zero again in some areas, but let's see. I don't comment on that because it's way outside my area where I can affect it. What we can affect is how we execute and how we deal with them, and that's where we have a fantastic team in the U.S. and North America that are absolutely on the details for that.

Perfect. Okay, thanks.

The next question comes from the line of Harry Tarr from Berenberg. Please go ahead.

Thanks for taking my questions and congratulations again on a strong quarter. The first question is just around onshore and onshore margins into 2026. Clearly that business is running very well today. As I look into next year, What are the key drivers? Volumes look relatively stable. Pricing seems to level out. How are you seeing cost trends and mix? Do you think there's a little more juice left in that onshore margin as you look out? Or are we already performing as well as you can hope?

Thanks, Henry. I think, I don't know, juice left. Maybe I should comment differently. I think on 26, we'll comment on the 5th of February. I've learned that lesson over the years. We do nothing in the onshore business to try to make it run worse right now. And we're actually doing reasonably well. So what we have seen here, expect more of the same. If we can do more and we can get more, it's probably where we have more concurrent projects where we can avoid having change cost and other stuff in the onshore. But I'm really just pleased with seeing what is happening in the onshore. And of course, we don't do that. I think that's also only fair because there are limited players. So there's no need for them to sit and read the P&L of individual business segments between onshore and offshore. Onshore, really well, and we will see if we can do more of the same next year, and we will try very hard.

Fair enough, fair enough. And then just on staying on the onshore, from an orders outlook, you sort of covered the U.S. How about the rest of the world as you look to Europe and so on? I know you sort of reference in the materials that... You know, you see potential for high single digit growth in onshore wind sort of globally out to 2030. Are you still sort of happy with that view and you still see a lot of movement and activity in onshore wind in Europe as you look out over the next few years?

I think there are two reasons in Europe. I think some of the countries are leading the way. If you take Germany, if you take a couple of countries like Romania and others, I think they're leading the way and saying this is how we can get more done and built. And I think those countries are absolutely examples to follow. I think on top of that, I think it's getting more and more discussed in details how we can do a repowering in Europe, which again speaks back to wind was very much founded and invented out of Europe. And therefore, we also have an aging fleet. And that, of course, opens up a European repowering that could be a real business opportunity for people like us. It could also be a huge business opportunity for the owners and the developers involved. And secondly, it's a fantastic way of increasing the energy production in Europe. So there are two levers there. I will avoid commenting on countries where they potentially haven't got it right. But let us say we are very pleased with our Spanish colleagues and our factory in Spain. But I think on the permitting side and the flow of projects in Spain, there's probably still some outstanding to wish for. So therefore, in Europe, we see really positive underlying. And of course, Germany is one. If we spoke about it three years ago, Henry, we wouldn't have gotten to the number we see today. And that's thanks to both current and previous government in Germany. When it comes to Asia and Asia Pacific, a lot is being done. A lot of also is being considered. Some of the countries are a bit new on the block getting into that. But as I said, there's still some firm order intake to be shown from our colleagues in Asia Pacific. And then in Latin America, similar, we have had a Brazil that's probably gone very low in PPAs. and therefore we'll see when Brazil returns to that. But we do have some good feelings around that also Latin America will start showing some strength again because some of the data centers and others are moving into LATAM across. So I think a bit disappointed probably where we are year to date in Asia Pacific and LATAM, very encouraged by where we are in North America and in Europe. And that I think is a trend that we see continuing.

Okay. Thanks very much, Henry.

The next question comes from the line of Kasper Blum from Danske Bank. Please go ahead.

Thank you very much. A bit of another kind of question from my side. I think it's been close to seven years since you launched the Inventus turbine platform. And we now see that more and more of the orders you get in are for these larger six, seven megawatt onshore turbines. At the same time, we've also seen you talk about a stable pricing environment now for the last three years or so after there was this material price hike a few years ago. Is it fair to say that there is an opportunity from you guys sort of sticking to the current technology, keeping pricing flat, and then basically just having How could you say operational efficiency from the fact that you have now gained very, very material experience in developing this turbine? And as a supplement, do you have any kind of plans of adding new platforms in the foreseeable future?

Thank you. First of all, platform introductions never happened on an analyst call. So Casper, that's the first. The other thing is inventors, we are super pleased. And you can say that you're touching spot on. The more we ramp up and the more we get in the backlog, the better we become at it. And that also goes for our supply chain. So when I started extending a big thank you here, it also goes to our partners in the supply chain because they help us getting some of those costs out. And I think today, from when we have been in an environment where inflation was very close to zero or even at par and then interest rate, everyone have seen a cost inflationary, which, of course, also for some projects have either potentially danger the project for being built now it's also about getting and returning and getting it built and therefore cost out is absolutely name of the game for all of us so so that goes through the supply chain and it goes into our our factories and and the more volume you have the better you get at it so that's that's an over overarching one And I think you saw some of that. If you take the V163 4.5 megawatt that are now selling across most of the world, but particularly in North America and in the US, that was developed as probably an 80% component from a 4 megawatt platform. And that also means that we are running high cost out programs on. So, of course, that's a school and textbook example of how we want also to to build the inventors. So you're right, Kasper, and I think some of it we will be using to continue improve our profitability. Some of it we will definitely also let go back to the customers. So we make sure that the projects are being built and not being stopped for not having attractive enough investments case with local governments.

If I may supplement, I think if one goes back in time, there was sort of a general rule of thumb that pricing would come down by maybe 3 or 5% a year due to technological advantages and sharing this with customers. Isn't it then fair to assume that as long as you can stick to current pricing and you continue to get better, then it's in favor of your margin? Or is that too simple?

I think it's maybe a bit from an industrial company of nearly 20 billion. And so maybe it is a little simplified. But I will say here, now you bring 5% in as a price reduction and other stuff. I think we are now back at a profitable area for investors. So it's not this morning we got up and said, now we need to lower prices. As I said, we like the commercial discipline. We need to make money. If we don't make money, we don't invest in the technology for the future either. So therefore, it's a combination. But as I said here, we will share it in a reasonable ratio with our partners. And customers, come on, there's nothing better than having a signature and winning a business with a customer. So therefore, that's the prime target and that pays for the rest. So therefore, Kasper, what you've seen today is we can now definitely say and prove that we are out of the dark days of 22. And I think that's really what we want to say to both you and the rest of the market with what we are doing today.

That's absolutely fair, and thanks for your answers.

The next question comes from the line of Deepa Venkaraswaran from Bernstein. Please go ahead.

Thank you so much. I had two questions. I wanted to pick up on something that you mentioned, which probably is not something a lot of investors focus on, which is your capex. So this year you're spending over 6% of revenues on CapEx. You also said that your big investment program on offshore is nearly done. So on an ongoing basis, particularly given cash is king and can be buybacks in the future, what is a more reasonable level of capex for your business going forward, either absolute or a percentage of revenues? Of course, assuming no big investments and further platforms, right? So that was my first question. And secondly, I think on demand, particularly in the U.S., There's a lot of hype about demand from AI. People want to be building a gigawatt a week and so on. So what are you sensing in terms of the opportunity for Westas to kind of capture and what are you hearing from your customers on the impact from this new AI demand?

First of all, a gigawatt a week, then I will not get much sleep. That's for sure.

Maybe that was global.

Okay. But as I said here, the reality is real. And that's maybe the way to proper answer it. In AI terms, the reality is real. It's happening and the electricity demand is going up. then we can always discuss sometimes is the demand and supply out of sync. Then, of course, it only gives one thing, which is an underlying increase of electricity prices, which unfortunately you are seeing in part of the US. And I think for that matter will come to Europe as well. So I think there's something in this AI where So I said we are part of the underlying baseload. So therefore, we are the ones that has to build part of the baseload together with many others. So therefore, energy in demand is definitely it. And I think if we look at a country that normally does very long-term planning, namely China, you can see how they have built out energy sources in the last three, four years. And namely last year, they built as much renewable, they built as much coal, they built as much some of the nuclear as the rest of the world did together. So somebody is taking bigger upfront decisions than probably the rest of the world are doing. And so for me, as a pretty fact-based person, I like to see that we take some of these decisions maybe a bit quicker, and that also goes for the U.S. So U.S. are in a demand for energy and electricity, and therefore we will continue to see that build out. And wind is part of it. Maybe we should call it something else than wind, but it actually is with a low LCOE, and it does local manufacturing, and therefore it's supporting the U.S. in its energy supply. So that's really it. On the CapEx side, don't underestimate there will still be tools and there will still be factories and other stuff that from time to time will affect the CapEx. But I think Jacob is nodding that. When we look at 1.2 billion, that's probably a bit where we spent quite a lot this year. But if a factory or other footprint comes in, that will then variate and deviate to the theme. But as we said all along, it should start going slightly lower, but we won't give a guidance for it until we are in February for the coming year. And then, as you can see, we are not nervous for actually using the cash to buybacks and Because if we're not forced to invest more, then actually buying our own shares is with a pretty good return on the multiples we are seeing. And could we have the last question, operator?

So the next question comes from the line of Martin Wilkie from Citi. Please go ahead.

Thank you. Good morning. It's Martin. Thanks for squeezing me in. Just a follow-up to that question on data centers. When we look at some of the hyperscalers and where they're signing renewable PPAs, a lot of it seems to be in Latin America and Europe and actually not very much in the U.S. When you look at the outlook and potential for data center orders, is that how you see it as well, that actually it's more realistic in those regions? Or is there actually sort of pent-up demand opportunity in North America, where obviously the volume of data center is probably a lot higher? Just understand regionally how we could think about that. Thank you.

Martin, I will say I don't think so. I think when you see other continents like Europe and Latin America wanting to announce data centers, I think it's actually because they want to have a bite of the party. I think the two main places to have these data centers will be China and the US. That's where the AI balancing act is happening. We are behind in Europe. So if we get a data center somewhere in Europe and we are building it. Yeah, sure. We will we will we will applaud it. But I think the underlying is that U.S., but they are probably not just announcing it to the same extent as you are seeing, because as much as you see the demand and supply, the demand side is right now higher than the supply side of possible build outs. And that's probably why you're seeing less of those announcements in the U.S. working for an American bank, I'm pretty sure you will know a lot of what goes on in the US as well. So thanks, Martin. Thank you.

Can I just have one unrelated follow-up just on service? Obviously, you talked about these costs in the fourth quarter. But just to clarify, these will be effectively a one-time hit in the fourth quarter. And obviously, in the past, when you have percentage of completion, then you can amortise these costs over the life of service contracts. But we shouldn't read anything into that. the revised outlook for the fourth quarter in terms of what it could mean for 26. I know you're not guiding 26 yet, but just so we can understand that these costs should be contained in the fourth quarter.

You're absolutely right. It should be contained in the fourth quarter, and we don't intend that. And that also sits outside any POC for the service contracts in offshore. So you're absolutely right. Assumption's right, Martin. Thank you very much. Okay. With that, thank you so much. Thank you for listening in. Thank you for all your interest and question. Really look forward to meet many of you over the coming days. And therefore, thanks again year to date and see you soon.