Eaton's Data Center Backlog Jump Points to Sustained Power Demand

Eaton Corp. reported second-quarter earnings that showed its electrical segment backlog climbed 48% from a year earlier. Data center infrastructure orders drove the gain. The company's electrical Americas revenue rose 12% to $3.1 billion, with organic growth of 10%. Total revenue came in at $6.35 billion, up 8% year-over-year.

The data center buildout pulls through demand for switchgear, transformers, and power distribution equipment – the physical layer between the utility grid and the server rack. Eaton's electrical backlog now stands at roughly $12 billion, with data centers accounting for more than a third of the total, the company said on its earnings call.

Adjusted earnings per share came in at $2.73, beating the company's own guidance range of $2.60 to $2.70. Eaton raised its full-year adjusted EPS guidance to a range of $11.00 to $11.20, up from the prior $10.70 to $10.90. The guidance increase reflects both the backlog strength and improved pricing power in the electrical segment.

Caterpillar, which reports next week, saw its Power Generation revenue rise 41% year-over-year in the first quarter, with data center demand cited as the primary driver. The two companies sit at different points in the data center power supply chain. Eaton handles electrical distribution inside the facility. Caterpillar supplies the backup generators and prime-power systems that keep the lights on when the grid falters.

The hyperscaler capital spending cycle shows no sign of peaking. Amazon, Microsoft, and Google have collectively committed more than $200 billion in data center capex for 2025, with much of that flowing into power infrastructure. The Department of Energy projects data center electricity consumption will double by 2028, which implies a sustained multiyear procurement cycle for electrical equipment.

Eaton's electrical segment operating margin expanded 120 basis points to 24.1%. The improvement came from a mix shift toward higher-margin data center products and pricing that outpaced input cost inflation. The company's electrical corporate segment, which includes the legacy Cooper Industries business, posted a 9% revenue gain.

Free cash flow for the quarter was $1.1 billion, up from $800 million a year earlier. Eaton used $400 million of that for share buybacks during the quarter. The company's stock market analysis profile shows the stock trades at roughly 28 times forward earnings, a premium to the industrial sector median of 22 times.

The ETN stock page carries an Alpha Score of 43 out of 100, labeled Mixed. The score reflects the tension between strong fundamental momentum and a valuation that already prices in several years of data center growth. The backlog provides visibility through 2026. The stock's multiple leaves little room for execution misses.

Eaton's electrical backlog grew 48% year-over-year. The question for the second half is whether that backlog converts to revenue at the same margin rate, or whether project delays and labor constraints eat into the conversion.