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. With that, could I go here to the key highlights? Key highlights: revenue of EUR 5.3 billion. 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 GW, up 4% year-on-year, driven by U.S. 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 driving 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 EUR 150 million will be initiated and will be starting as of tomorrow morning. 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. 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 also see 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 is continuing, and we are dealing and planning and executing well in it.
When we look at the market environment, there is a heightening 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. Of course, that is then leading to the result we are also seeing in Power Solutions today, which I am sure Jakob will talk us much more in detail about. When we look at the Power Solutions in Q3 2025, strong quarter across all key markets. When we look at the Q3 order intake of 4.6 GW, that is up 4% compared to last year. The increase was mainly driven by strong order intake in the Americas, especially in the U.S., 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 EUR 1 million per MW in Q3 compared to EUR 1.1 million per MW in the prior quarter.
The decline was driven by a change in the order mix with a higher share of supplier-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 in power solution, it increased to EUR 31.6 billion. That is up EUR 3.3 billion compared to one year ago, as our energy solutions continue to have good traction with customers across our core markets. You can see more of the details in the charts to the right. With that, onto service. Service outlook revised, and also the recovery plan is progressing, as we go through, and we are now three quarters in. The service order backlog increased to EUR 36.6 billion, from EUR 35.1 billion a year ago, despite EUR 1.5 billion headwind from foreign exchange rate movements, year to date.
When we see service, it reads 159 GW 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. I think we can now start seeing that some of it also shows, at least in the service, under 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.
Of course, we'll continue working with that, and we look forward to talk more in details over the coming days. However, earnings and 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: EUR 36.6 billion overall, of which EUR 31 billion is onshore, 159 GW 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 do not have new order intake, it also is limited to how much you grow gigawatt under service. With that, take you through 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. As you can also see, the environment right now is a lot of focus on in the key markets to progress projects, and we have not really progressed anything in Q3. I am 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 were stable around 27 GW with Australia, U.S., 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. I will 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 tons of greenhouse gas emissions over the course of their lifetime. You will see that here to the right. 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. Therefore, keeping scope one and two at the current level is a testament to the focus and execution of our operations across. It is also saying when we ramp up offshore, it is a significant change in business mix. 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. 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. 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?
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. Jakob, take it away.
Thank you, Henrik. Let me take us through details. I'll just flip the slides. Let us take through the details of the income statements 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 EUR 772 million in the quarter, the highest ever in a third quarter. The record was achieved by improved profitability in onshore, lower warranty cost, partly offset by manufacturing ramp-up costs.
Earned EBIT margin before special item was 7.8% in the third quarter. As mentioned throughout the year, 2025 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 a 3% currency headwind. Service generated EBIT of EUR 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. Networking 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 notice, compared to Q3 last year, we have seen a EUR 1.4 billion improvement in the networking 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 EUR 840 million in the quarter, a significant improvement compared to last year. The improvement was driven by better profitability and a favorable development in networking capital, as you just saw. Adjusted free cash flow in the quarter amounted to EUR 508 million, also a substantial improvement driven by the same reasons as mentioned in above. Finally, we ended the quarter with a net cash position of EUR 0.5 billion, EUR 500 million. Total investments in the quarter amounted to EUR 274 million in quarter three.
The spending is primarily related to tangible investments such as transport equipment and tools, as well as property, plants, and equipment across our turbine portfolio, such as the offshore 15 MW EnVentus and our 4 MW 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 EnVentus 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 EUR 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 EUR 206 million for the quarter. The higher consumption level in the quarter is related to the above-mentioned repairs. Finally, ending on a high, we can report our best EPS and ROSI in five years. Net debt to EBITDA ended the quarter at - 0.2x 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 EUR 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.
Finally, our strong financial position and improved key metrics allow us to return cash to shareholders. Thus, we are initiating a share buyback of EUR 150 million starting tomorrow. Now back to Henrik to take us to the outlook.
Thank you. Thank you so much. Thank you, Jakob, and thanks. Very nice slide to finish with. 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, the outlook for the year, revenue narrowed to EUR 18.5 billion-EUR 19.5 billion from previous EUR 18 billion-EUR 20 billion. Of course, there are some negative foreign exchanges you picked up on. The EBIT margin before special items, 5%-6%, narrowed from 4%-7%. Service is expected to generate an EBIT before special items of around EUR 625 million. Total investments remain stable at EUR 1.2 billion, as we also had in our previous outlook. With that, I will just say thank you for listening in. I'll pass to the operator, and we will go to the Q&A.
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. Questioners 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 McLoughlin 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 2026 and 2027 and potential underutilization thereafter? Ultimately, what would it take in your mind to kind of put that blade expansion back on track? Thank you.
Thank you, Sean. 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 is actually an old decision that was paused 18 months ago. It got interrupted a bit and probably got its own life. 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 do not see that. It is a piece of land we have.
If we at some point in time wanted to do a further capacity expansion, then it's an opportunity and option for us. Right now, we are working well. We are progressing well with our own capacity planned upgrade, and 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. We are ramping up and therefore, in a call like this, start talking about capacity downwards.
That's not that, we have a backlog of more than EUR 10 billion of projects, and we will be throughout this year, next year, and into 2027, reach what we will call a more stable, full capacity utilization.
Thank you. And if I could just follow-up on offshore as, you know, looking at the moving part 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, if we look at 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. Generally, if we are laying around EUR 2.5 billion in turnover, now we are above EUR 5 billion. We have a very good quarter. It is a lot easier to absorb it when we have a higher turnover. 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. Therefore, coming into 2026, we should start seeing also it is reducing and disappearing over time.
That is sort of the, in our heads, the timing of it. 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 happen in the world. We are actually very pleased with what is in here, and we are 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 sequential, 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?
No, 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. Therefore, compared to last year, we are looking into a Q4 that looks fairly much as execution of Q3. 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. It is a busy quarter.
We got 56 days to go and we will always be subject to the normal variables in Q4. That, yeah, we will not try to make it worse, that is for sure, in the onshore execution, which we so far have had a really good run at this year.
Okay. Helpful. Thank you. On the service guidance, 625 as the updated guide, I wanna 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. 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 whistles and a lot of people at sea in a Q4, it will drag something. When we see that in a Q4 of a service which, let's just say between us, we maybe end up around EUR 1 billion in turnover, then you can easily invest EUR 20 million in some of these offshore sites in a quarter. That is why we are guiding towards the EUR 625 million.
Okay. Thank you. The next question comes from the line of Kristian Tornøe from SEB. Please go ahead.
Yes, thank you. I have two questions. First one is about the production ramp-up in offshore and onshore as well. You have been fairly clear stating that it has a material earnings dilution impact this year. Considering the progress you have done so far, how confident are you that this will have a materially lower dilution next year?
How material are we? We at least, we know that it's ordinary ramp. That means the longer you get in, the better we get at it, Christian. It is also here for both the onshore U.S. and offshore. We see a tendency too that we are further into the onshore U.S That should definitely be disappearing over the coming 2026. As I said, in the offshore ramp, listen, we opened these 13 nacelle factory less than six months ago. Therefore, we are at a maximum of both onboarding and running the education and training there. 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 2026.
Will it be totally done in 2026? I, I don't know because there'll always be things. That we will talk more about when we get to 2026 outlook in February. But we are, 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 then offsea. We see that progressing. 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 Asia Pacific region, which, again, this quarter was fairly low. Just any commentary on the outlook and your optimism for actually seeing Asia Pacific orders pick up?
I will just say nothing more than he should be doing better as a whole region out there in Asia Pacific. We are encouraging him to do that. 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 that it's a whole region and not wanting to show us and you that they are good, they're doing zero in fourth quarter because that's not the intention. We will see where they end on 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 Togo Jensen from DNB Carnegie. 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 my 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 your offshore side? Can you maintain this level here or is there a risk that we will start to see level, or an increase in that ratio? Then, a question on this, on the share buyback, the EUR 150 million. Can you elaborate a bit about the math behind reaching the EUR 150 million? I mean, free cash flow generation was more than EUR 500 million and you have almost EUR 500 million in cash by end Q3. How should we think of it by end Q4?
Will you again be, you know, possibly in a position where Shababx could, could roll into, or the current program be released by a new program? Thanks.
Dan, this is Jakob 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. 2023 we had more than 5%. 2024, we were down to 4.3%. And then this year we are hovering around the 3%. It is something we are really proud of, and it is an outcome of our focus on quality. We also see the underlying LPF reducing, as we say, except for these couple of sites. Our ambition is to continue that journey down. Again, looking at next year, we will talk about after Q4, but it is 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 not share buyback.
It is share buyback. I think, always when we do these things, we look at it in a bigger, bigger scheme of things. We have had the highest EPS, as Jakob mentioned, highest EPS and highest return on capital employed for five years. As you know, our Chairman very well, it is probably also the highest EPS for most of the 10 years. Therefore, when we look into this, we think it is 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. We ended at EUR 150 million because it is also the time of the year where we can get this done until the 17th of December. Of course, we get together again in the beginning of February.
As you are rightly saying, we are 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. 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.
That's good. 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, is on service. So I think when we look at your Q4, implied Q4, it's slightly over EUR 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? Can you also talk about, growth rates for service in Q4, given last year we had 30% year-on-year growth in, in service top line? So that's 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 on Q, there are differences in the top line that can relate to special things like that. You will also appreciate we do have transactional sales as part of it, which can vary it. We do not, we do not comment much about that and do not want to comment much about it. 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.
Therefore, we have to give you a bit more guidance on some of these. That is not a recurring thing. Therefore, when you are 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. I'm not so, so nervous of that, but we got to pick it up with you when we have, already now a month into, to Q4. That is the reason why we are seeing it. As I said, it relates to something specifically, in offshore, that is, in the quarter dragging it down.
Are these offshore, offshore sites, are same as where you were fixing some quality issues where you took provisions, or they are, they are different?
They are partly, partly different. Therefore, it is not related to any of that, and it is not related to the 236 either. This is something where we just know that when you are in this season and you got to have it, then it is a focus from us and it is a focus from the customers. 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 GW, 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, and expectations for Q4? Thank you.
No, I will say, here, and I think Jakob 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. We have been better able to control inventory. If we do that, then we are also to some extent in some quarters, you cannot adjust it completely from what is going to be delivered and constructed next quarter. We are being better at that. We have not yet seen any influence of any supply chain disorder. This, then we would not have used the expression of very good execution in onshore. We actually, again, coming into Q4, we will not be many weeks away from when we have all what we need on site.
Therefore, Akash, we see good traction on execution towards the end of 2025 as well.
Thank you, Henrik.
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 contingencies release? Could you help us understand how much of a contributor this was? Generally, should there be some more in Q4 to come? Generally on contingencies, do you recognize the benefits of that release every quarter as you, 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've always done. If we have a project, we do a pre and post-cal cap. When we get the final payment from the customer, we put it into our P&L. Therefore, I can't comment on what others are doing in contingencies or whatever. We run whatever we do when we have a project, as you would expect us to do. There's always something in a project where you have, what if something goes wrong? Of course, that gets released when you also have the broad project completed. It's a quarter where onshore execution has been and delivered this.
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. 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 on top line as you saw in Q1 and Q2. That is what you should read into it. There is nothing else. It is just a clean execution and profitability. That is also what we are looking in for the full year.
Understood. I mean, 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, you know, July Safe Harbor coming up in 2026, how do you think about order developments going forwards? Am I right in thinking that you should not 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. I, as I said, it's always difficult to predict, in individual quarters. I, you know, my statistics in that have been relatively poor as Claus Almer will remind me of. 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. Therefore, it's a buildout process 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. Outside that, no, we love getting close to our customers in the U.S. and keep developing that plan for the coming years. We are in, we are in good state. I won't comment on when orders are coming because that's simply too difficult to predict. 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. Of course, 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 comfort situation and confidence situation between us and customers in the U.S
Understood. Thank you.
The next question comes from the line of Claus Almer from Nordea. Please go ahead.
Thank you. First of all, congratulations with a solid Q3. I will not ask about orders, but about the tariffs. First of all, did tariffs in Q3 have an impact on the profitability in Power? That would be the first one.
Yes, it will, it will always have, now because if you are paying and you are sourcing and you are constructing, Claus, you can see the deliveries in the table we have in the interim report. Therefore, of course, part of that is already under influence of tariff. Of those, that will be fully booked under it and also split in the ratio between customer and us.
Henrik, it's the quota that you are expecting to be able to mitigate some of these effects. 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. 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 U.S 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. Therefore, we keep that execution with us and our customers. They understand what we are doing and they support what we are doing.
I think we are in the 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. There have been some quotes out today from you, Jakob, that U.S. customers are holding back due to the tariffs uncertainty, which also was mentioned on this call. I guess this is mainly, you know, the ongoing U.S.-China situation, which may last for quite a while. Is there any way that you can reduce this uncertainty and thereby unlock some of these projects in the pipeline?
I would just say, maybe Jakob better comment on his, himself. We fully agree on that. Of course, as I also said to the previous one, we would probably have taken more if it was not for the tariff. That is absolutely right. There is also probably a contingent backlog sitting and waiting for clearance on a few of these things. Therefore, let's see what happens there. As I said, I am not trying to predict macroeconomics and geopolitics these days because it is simply not predictable. Therefore, we do what we do whenever there is clarity and wherever 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 get to your electricity and your energy supply. Yesterday we have more than 2 GW of orders and our U.S. team are doing a cracking job in doing that. We do what we can to support them, Claus. I think here, really, really good progress.
There's no doubt on 1.8 GW from the U.S. was quite amazing in the quarter. That was all for me. Thanks so much.
Thanks, Claus.
The next question comes from the line of Ajay Patel from Goldman Sachs. Please go ahead.
Good morning and thank you for the presentation. A couple of questions, please. Firstly, on offshore, we are largely through this year. I am 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. I am thinking beyond because that is a slight size and proportion of the reflection on this, on the profitability of SLAs. 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? The second question I had was, you know, you are 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 cashflow, that buybacks were 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 are asking me quite a number of questions in the question. I will try to sort of, we believe very much in our three business areas. Onshore, very mature, very well developed. You can say the onshore has been, if I was an inside business 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 Vestas but for a few around and also for our customers. 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 2026. Therefore, second half 2026 into 2027, you're right, offshore would start looking much more like what we are also seeing in the offshore, profitability. That comes together with that we are doing the right things in service. So yeah, you can definitely, 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. 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.
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 turnaround, when was it we were comfortable of the turnaround we are done and is it working? I think today we can definitely say to people, this is the first sign of it's working. Of course everyone can do their predictions. The more cash we had 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, very kind.
The next question comes from the line of Alex Jones from Bank of America. Please go ahead.
Great. Thank you. If I can, first just to follow-up on tariff costs. To what extent were those already hitting the P&L this quarter? 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? 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 and I can leave the tariff a bit more on to Jakob, I think we have 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 is not related to the sort of back in Q3 and Q4 last year where we had a component failure in one of the platforms. 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. Therefore, of course, we are also investing in that.
That is in a winter and a high season for offshore is a way of also us saying we are, we are investing with, in also prioritizing, cost here. That is what we have done and that is what we are sort of pre, pre, guiding you on for Q4.
On the question around tariffs, it is hitting our books right now, as Henrik also answered in the previous question, continue hitting in Q4. What is important is, and that's what we are also saying with our narrowed guidance, we can keep that within the narrowed guidance. You will see during the math that we have the same midpoint as we had basically since the beginning of the year. In that sense, yes, it's in there and it will continue to be in there.
Thank you.
The next question comes from the line of Max Yates from Morgan Stanley. Please go ahead.
Thank you. Just one question for me. Just on the services business, could you give us an update on, you know, how the turnaround program is going? Are customers kind of accepting the renegotiated terms? I guess maybe if you could just help us with 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%-18% margin. I appreciate you won't want to give guidance for 2026, but do we still see sort of 2026 as a year, you know, where the groundwork is being laid for future margin improvements?
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 do not 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 could not agree with you more. This is a global business that has 159 GW under service and we have more than 15,000 employees. When you do a reset and a turnaround of the business, it will take longer time. Please do not start making things in 22% or 25% service margin in 2026. We have said it takes the two years. We are five quarters away from finishing this work because it does take some time. I am really pleased with where we are and the service team and Christian Venderby, 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 under service, then surprisingly it did not 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 multi-brand, it does not make an awful lot of value for shareholders and it does not 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. Therefore, you will see now that we are actually having a real firm grip of what is happening from quarter to quarter. We are in good momentum.
We are 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. That includes even escalations to me as well. We are actually pretty pleased of where we are with the commercial reset. We are not done with it. That would be wrong, but that is because you cannot fix that much in one or two quarters. The run rate up until third quarter is the run rate, I will say, and that is 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 Ferhani 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 EUR 10 billion of projects in the backlog. Those 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 U.K., that was maybe slightly below expectations. It depends on who you ask too. How do you feel about kind of the ability to get those redone and then rebid and then the orders coming through to the turbine suppliers kind of roughly on time? Thank you.
Yeah. No, as I said, it's a good 10 GW we are sitting at, we are sitting and muscling around. We have more PSAs, but there are also more PSAs in discussion. I'm not so worried about that. When you look at the near term right now, we have a lot to do in the coming three to four years. That is also the cycle of it. Where you come from, and I keep encouraging you, compare, but don't compare between the backlog and the process we are 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 in, 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. It seems like every country in Europe chooses to go through a failed auction before they get it right. Of course that takes time. We've seen a number of countries, including the Danish government, went through a thing last year. That also means now you have a CFD backed. Even with the CFDs, that will significantly improve the Danish electricity price as well. Therefore it works and it works across. We are not so nervous about that.
When we look at AR7 in the U.K., I can only give a praise. Maybe I will also be one of the ones that would like to have a bit larger budget committed. On the other hand, the government and the Secretary of State that knows a lot about it at Millervan, yeah, he has conditioned himself that he can take individual projects out and also potentially progress that. I think we got to work through this. If somebody wants to characterize it as an offshore crisis, I'm not in that category. I think it's a proven technology. It's a proven market access that works. Therefore, now is the time to show leadership both from developers and OEMs to get it built out. We are more positive on that. We see a 2025-2026, 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. We do not have that. We are comfortable executing on it. 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. Just a quick follow-up on tariff. I think most of what we are seeing and what has impacted you so far is more the section 232 on maybe steel or specific components. There is 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 is not much information out there, but how do you look at that, about risk of what could come out of this probe? Thank you.
I know when, and there are sections and there are EU tariffs and there are other tariffs that seem to be changing every quarter. We are basically taking the stand that we will deal with it as it's being flown at us. Therefore, we are also dealing with these 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. Therefore, it's priced in. 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 goes, I think the last week we've seen initiatives that seem to be maybe talking to tariffs returning towards the zero again in some areas. 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. That is where we have a fantastic team in the U.S. and North America that are absolutely on the details with that.
Perfect. Okay. Thanks.
The next question comes from the line of Henry 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? It sort of, volumes look relatively stable. Pricing seems to level out. How are you seeing sort of cost trends and mix? Do you think there's more, a little more juice left in that onshore margin as you look out? Or are we already sort of performing as well as you can hope?
Thanks, Henry. I think, I do not know, juice left. Maybe I should comment differently. I think on 2026 we will comment on the 5th of February. I have learned that lesson over the years. We do nothing in the onshore business to try to make it run worse right now. We are actually doing reasonably well. What we have seen here, expect more of the same. If we can do more and we can get more is probably where we have more concurrent projects where we can avoid having change cost and other stuff in the onshore. I am really just pleased with seeing what is happening in the onshore. Of course, we do not do that. I think that is also only fair because there are limited players.
There is no need for them to sit and read the P&L of individual business segments, between onshore and offshore. Onshore really well. We will see if we can do more of the same next year. 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 referenced 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, you know, 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, yeah, Romania and others, I think they're leading the way and saying, this is how we can get more done and built. 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 detail 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. 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.
Secondly, it's a fantastic way of increasing the energy production in Europe. 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. I think on the permitting side and the flow of projects in Spain, there's probably still some outstanding to wish for. Therefore, in Europe, we see really positive underlying. 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. 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 also is being considered. Some of the countries are a bit newer on the block, getting into that. As I said, there is still some firm order intake to be shown from our colleagues in Asia Pacific. In Latin America, similar, we have had a Brazil that has probably gone very low in PPAs. We will see when Brazil returns to that. We do have some good feelings around that, also that Latin America will start showing some strength again because some of the data centers and others are moving into LATAM across. 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. That, I think, is a trend that we see continuing.
Okay. Thanks very much, Henrik.
The next question comes from the line of Casper Blom from Danske Bank. Please go ahead.
Thank you very much. A bit of, an, another kind of question from my side. I think it's been close to seven years since you launched the EnVentus turbine platform. And, we now see that more and more of the orders you get in are for these larger 6, 7 MW , 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, 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?
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, EnVentus, we are super pleased. And you can say that, that you are, 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. 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. 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 has seen a cost inflationary, which of course also for some projects have either potentially dangered the project for being built.
Now it's also about getting and returning and getting it built. Therefore, cost out is absolutely name of the game for all of us. That goes through the supply chain and it goes into our factories. The more volume you have, the better you get at it. That's an overarching one. I think you saw some of that if you take the V163-4.5 MW that are now selling across most of the world, but particularly in North America and in the U.S That was developed as probably an 80% components from a 4 MW platform. That also means that we are running high cost out programs on. Of course, that's a school and textbook example of how we want also to build the EnVentus.
You're right, Casper. I think some of it we'll be using to continue to 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 investment cases 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 when, 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 in total, maybe it is a little simplified. 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. 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. Therefore it's a combination. 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.
Therefore, that's the prime target and that pays for the rest. Therefore, Casper, what you've seen today is we can now definitely say and prove that we are out of the dark days of 2022. 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. Thanks for your question, answers.
The next question comes from the line of Deepa Venkateswaran from Bernstein. Please go ahead.
Thank you so much. I had two questions. Henrik, 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. This year you're spending over 6% of revenues on CapEx. You've also said that your big investment program on offshore is nearly done. 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 percentage of revenues, of course assuming no big investments in further platforms, right? That was my first question. Secondly, I think on demand, particularly in the U.S., there's a lot of hype about demand from AI. You know, people want to be building a gigawatt a week and so on.
What are you sensing in terms of the opportunity for Vestas to kind of capture, you know, 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. I will sort of.
Maybe that was global.
Okay. As I said here, the reality is real. That is maybe the way to properly answer it. In AI terms, the reality is real. It's happening and the electricity demand is going up. We can always discuss, sometimes the demand and supply are out of sync. Of course, it only gives one thing, which is an underlying increase of electricity prices, which unfortunately you are seeing in part of the U.S I think, for that matter, it will come to Europe as well. I think there's something in this AI where, as I said, we are part of the underlying baseload. Therefore, we are the ones that have to build part of the baseload together with many others.
Therefore, energy in demand is definitely it. 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. 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. Somebody is taking bigger upfront decisions than probably the rest of the world are doing. For me, as a pretty fact-based person, I like to see that we take some of these decisions maybe a bit quicker. That also goes for the U.S U.S. are in a demand for energy and electricity, and therefore we will continue to see that build out.
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 is supporting the U.S. in its energy supply. That is really on the CapEx side. Do not underestimate. There will still be tools and there will still be factories and other stuff that from time to time will affect the CapEx. I think Jakob is nodding that when we look at EUR 1.2 billion, that is probably a bit where we spent quite a lot this year. If a factory or other footprint comes in, that will then variate and deviate to the theme.
As we said all along, it should start going slightly lower, but we will not give a guidance for it until we are in February for the coming year. As you can see, we are not nervous for actually using the cash to buybacks because if we are not forced to invest more, then actually buying our own shares is with a pretty good return on the multiples we are seeing. Could we have the last question, operator?
The next question comes from the line of Martin Wilkie from Citi. Please go ahead.
Thank you. Yeah, 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 to understand regionally how we could think about that. Thank you.
I, 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 U.S That's where the AI balancing act is happening. We are behind in Europe. If we get a data center somewhere in Europe and we are building it, yeah, sure, we will applaud it. 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 buildouts.
That's probably why you are 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 U.S. as well. Thanks, Martin.
Thank you. Can I just have one related 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. You obviously in the past when you have percentage of completion, then you can amortize these costs over the life of service contracts. We should not read anything into the revised outlook for the fourth quarter in terms of what it could mean for 2026. I know you are not guiding 2026 yet, but just so we can understand that these costs should be contained in the fourth quarter.
You're absolutely right. Should be contained in fourth quarter. We don't intend that. That also sits outside any POC for the service contracts in offshore. 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. Therefore, thanks again, year to date. See you soon.