Global Electrification Will Drive Demand For Data Centers And IoT

Key Takeaways

• Strong growth in data center and electrification markets, combined with early market consolidation, is poised to accelerate revenue and boost operating margins.
  
• Persistent high margins are supported by pricing power and innovative, energy-efficient product lines, positioning Legrand for sustained earnings outperformance.
  
• Heavy reliance on data centers, slow innovation, and market shifts toward software-centric solutions expose Legrand to risks of stalled growth, margin pressures, and loss of competitiveness.

Catalysts

Manufactures, distributes, and sells electrical and digital building infrastructures in Europe, North and Central America, and internationally.

• While analyst consensus expects sustained double-digit data center growth, the latest results show Legrand is already achieving over 30% organic growth in H1 2025 with momentum to potentially deliver 25% or more for the full year and high teens compound annual growth to 2030, suggesting consensus underestimates the scale and longevity of the data center upcycle and its contribution to top-line acceleration.
  
• Analysts broadly expect robust margin expansion driven by operational leverage and acquisitions, but Legrand's execution shows five consecutive years with operating margins above 20%, and management signals this high-margin regime can persist structurally due to pricing power, efficient tariff management, and further normalization of tariffs, implying a higher sustainable run-rate for net margins and earnings than currently priced in.
  
• Legrand's positioning in accelerating global electrification and urbanization, especially in emerging markets, is set to drive structurally higher demand beyond current expectations, as the company's strong balance sheet and acquisition track record allow it to consolidate market share and capitalize early on electrification spending cycles-amplifying revenue and operating margin potential.
  
• The accelerating shift toward energy-efficient and smart building solutions, propelled by regulatory and climate imperatives, brings upside to Legrand's connected infrastructure and IoT product lines, which command above-average gross margins and are now supported by an intense pace of product launches and innovation, suggesting long-term net margin uplift.
  
• Legrand's proven agility in pricing, combining direct sales channels in high-growth segments and sophisticated cost pass-through strategies, enables superior margin capture in highly dynamic input cost environments and positions the company to outperform on earnings and free cash flow even amid inflationary or tariff-challenged periods.

Legrand Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Legrand compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Legrand's revenue will grow by 9.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 13.2% today to 13.5% in 3 years time.
• The bullish analysts expect earnings to reach €1.6 billion (and earnings per share of €6.17) by about August 2028, up from €1.2 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 33.2x on those 2028 earnings, up from 28.4x today. This future PE is greater than the current PE for the GB Electrical industry at 15.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.53%, as per the Simply Wall St company report.

Legrand Future Earnings Per Share Growth

Risks

• Legrand's outsized growth is currently almost entirely dependent on the data center market, while its core building segment and major geographies like Europe and non-data center North America remain stagnating, which poses a risk to long-term revenue growth if the data center cycle normalizes or slows.
  
• The company's hardware-focused business model faces potential disruption from the accelerating shift toward more software-centric, decentralized, and integrated digital building solutions, which could erode Legrand's market share and put long-term pressure on both revenues and margins.
  
• Commoditization and saturation in mature European markets, compounded by intense competitive pressure, could compress gross margins and stall top-line growth, especially given only tepid current improvement in permits and construction and the business's late-cycle exposure.
  
• Heightened global trade tensions, tariffs, and localization pressures have required active cost management and price increases; persistent or worsening trade barriers could drive up input costs, limit M&A expansion, and squeeze net margins if Legrand cannot fully pass increased costs on to customers.
  
• Execution risk remains significant in adapting the product portfolio to rapid "smart home" and energy-efficiency trends; slow innovation or inability to ensure product interoperability could lead to elevated R&D costs, loss of competitiveness, and ultimately reduced future earnings.

Valuation

• The assumed bullish price target for Legrand is €160.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Legrand's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €160.0, and the most bearish reporting a price target of just €82.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €12.0 billion, earnings will come to €1.6 billion, and it would be trading on a PE ratio of 33.2x, assuming you use a discount rate of 8.5%.
• Given the current share price of €132.0, the bullish analyst price target of €160.0 is 17.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.