Vestas Wind Systems – Tailwind or Headwind?

Overview

Vestas is the largest wind turbine manufacturer by installed capacity and offers both onshore (90% of power it installed in 2024) and offshore (10%). The Danish company employs about 30,000 people globally and has manufacturing plants across the world.

Share price

Its shares have been on a turbulent journey since 2020 when the shares doubled in value to €35 due to investor enthusiasm for renewable energy rose but by 2022 they had almost halved back to around €25 with supply chain issues, inflation and weak earnings. They then halved again in 2024 to a nadir of €12 with perceived risk and project cancellations across the industry, before rebounding back to their current level of €21 (Dec-25).

The share price has been dragged down by the collapse of major projects at fellow Danish company Orsted but Vestas has escaped the worst of it as Orsted's share price has collapsed 90% from its peak.

Growth

The nature of the business means revenue is expected to be somewhat lumpy but MW of onshore energy installed has fallen in both years to 2023 (-6%) and 2024 (-1%). The smaller offshore solutions devision has seen double digit rises (14% and 33% respectively) in installed capacity which is driven by growth in the Asia Pacific region. Total capacity installed in 2024 is 3% lower than in 2022 but 2% higher than 2023. Despite this, revenue has grown over this period due to the company increasing pricing by around 20% over the two years. As of Q3 2025 earnings, Vestas has a backlog of wind turbine orders of €32bn which is the equivalent of two year's revenue.

Earnings

Vestas had net income of €489m in 2024, a margin of only 3% but an improvement on 2023 when the margin was less than 1%. This is a precarious position and profitability is under some near-term pressure but assuming costs are held steady, the company should be in a decent position for gradual improvements in profitability in the meduim term. Management must also believe this as they have announced a €150m buyback program supported by a fairly strong balance sheet.

Critical Factors

We see competition from growing Chinese operators being a significant risk to the company for the same reasons China dominates the wider manufacturing landscape. Also a risk is whether the company can keep costs under control and whether any supply-chain bottlenecks cause implementation issues which have been seen in the industry in the last few years.

In the Americas, although Trump has concerns over turbines causing a noise nuisance to whales, this is not material as Vestas only has a small amount of offshore activity in the region. It is notable that coastal states tend to be politically blue. More of a problem is tariffs where costs are likely to increase over time and which will probably favor GE. The wider wind power industry is also a direct competitor of the politically favored oil industry. Almost half of onshore power revenue is located in the Americas so this could be a material problem for a company with thin profit margins and little ability to absporb cost increases.

On the upside, the modularization strategy for building turbines is likely to have a large upside for supply chain robustness, ongoing maintenance and upgrades. It makes perfect sense for things that are made up of 3 big components; tower, blades and a turbine. This design style will also make an already extremely sustainable power supply more so.

We think that on the whole, wind energy has huge potential for adding clean energy to the worldwide mix and that it is a relatively cheap and straight forward energy source (if unreliable hour to hour). In particular, wind is an obvious contender for creating energy security in Europe and this is likely to be reflected in countries' energy strategies.

Bonus – Financial Modelling Tip of the Day

Understanding EBITDA vs EBIT is crucial for evaluating a company’s financial health. While EBITDA highlights operating performance by ignoring depreciation and one-off costs, profit accounts for all expenses, including capital expenditures. As Warren Buffett often emphasizes, who ultimately pays for capital matters: one-off projects are typically funded from cash reserves or financing, while ongoing capex is part of sustaining the business.

It is also important to consider what is being purchased. Capex—investments in real, appreciating assets (like land or buildings) differ from computing or depreciating assets (like servers or machinery) that lose value over time. In modelling, remembering these distinctions helps you assess cash flow sustainability and long-term value creation.