SU: Data Center And AI Demand Will Drive Outperformance Over The Next Two Years

Analysts have raised their price target on Schneider Electric to approximately EUR 271 from about EUR 264, reflecting modestly lower discount rates, slightly stronger margin expectations, and recent supportive upgrades citing structural growth and accelerating profitability.

Analyst Commentary

Recent Street research has skewed decisively positive, with multiple upgrades and price target hikes pointing to improving confidence in Schneider Electric's medium term earnings power and strategic positioning.

Bullish Takeaways

• Bullish analysts see the higher price targets in the mid to high EUR 260s and up to EUR 280 as justified by stronger, more resilient earnings visibility and an improving risk reward profile.
• Upgrades highlight Schneider Electric's exposure to structural growth drivers, particularly data centers and an anticipated recovery in the European construction market from 2026, which are expected to support sustained top line expansion.
• Forecasts for consistent high single digit organic growth through 2025 to 2027 are viewed as likely to outpace most peers, underpinning a premium valuation versus the broader sector.
• Analysts are increasingly confident in accelerating margin expansion, arguing that operational efficiency gains and mix improvements can drive further upside to consensus profit expectations and justify the recent target upgrades.

Bearish Takeaways

• More cautious analysts flag that much of the structural growth narrative, including data center demand and the 2026 construction recovery, is now reflected in the share price, leaving less room for multiple expansion if execution wobbles.
• There is concern that delivering high single digit organic growth over several years requires flawless execution across regions and end markets, making Schneider Electric vulnerable to macro or regulatory setbacks.
• Some observers point to rising expectations for margin acceleration as a potential risk, warning that any delay in efficiency initiatives or weaker than expected pricing power could put pressure on the newly raised valuation benchmarks.
• With targets moving into the high EUR 260s to EUR 280 range, skeptics argue that the valuation leaves limited buffer for unexpected cyclical headwinds, heightening sensitivity to quarterly results and guidance updates.

What's in the News

• Signed a $373 million Supply Capacity Agreement with Digital Realty for UPS, low voltage switchgear, and prefabricated skids to secure guaranteed capacity and enhance data center supply chain resilience. (Client announcement)
• Entered a two phase, $1.9 billion supply capacity agreement with Switch to deliver prefabricated power modules and large scale chiller solutions for hyperscale and AI data centers in North America, Schneider Electric's largest cooling engagement to date. (Client announcement)
• Launched the One Digital Grid Platform, an AI enabled software suite that unifies planning, operations, and asset management for utilities to modernize grids and improve reliability and efficiency. (Product related announcement)
• Reaffirmed 2025 earnings guidance, targeting organic revenue growth of 7% to 10%, and indicating confidence in medium term demand and execution. (Corporate guidance)
• Opened its first manufacturing facility in Mt. Juliet, Tennessee, as part of a two building campus exceeding 1 million square feet to ramp production of medium voltage power distribution equipment for critical infrastructure and data centers. (Business expansion)

Valuation Changes

• Fair Value: risen slightly from approximately €264.25 to about €270.55 per share, reflecting a modest reassessment of upside potential.
• Discount Rate: fallen marginally from around 8.94% to roughly 8.87%, indicating a small decrease in perceived risk.
• Revenue Growth: edged down slightly from about 7.53% to around 7.47% annually, implying a very modest tempering of top line expectations.
• Net Profit Margin: increased slightly from roughly 13.80% to about 14.04%, signaling incremental optimism on profitability.
• Future P/E: risen marginally from approximately 28.56x to around 28.74x, suggesting a small uplift in the valuation multiple applied to forward earnings.