ETN
Eaton Corporation
Hybrid Industrial
★ Quality 49/100Price today
$410.85
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What this business is made of
The business
Once it's inside the data center, ripping out Eaton means redesigning everything.
Eaton makes electrical power management equipment: circuit breakers, transformers, distribution systems, and aerospace and industrial components. It earns by selling critical hardware for data centers, power grids, and buildings, with $27.4B in revenue and a 38% gross margin. The electrical business is the engine; aerospace and industrial fill out the rest.
The real moat is in the spec: once Eaton's equipment goes into a data center or a power grid, replacing it means redesigning and recertifying everything. Decades of installations generate recurring parts and service. It's not an impenetrable moat, but switching costs and regulatory reliability keep the cheap buyer away.
Revenue history
From $20.8B to $29.9B in 4 years. The business grows steadily.
Where each $100 of sales goes
Revenue $27.4B · FY2025
Of every $100 in sales, $85 goes to costs and operations; $15 is left as net profit (15% margin).
Catalysts and risks
AI data center demand pushing the electrical backlog, which already tops $14B.
U.S. grid electrification with billions from the IRA flowing through 2030.
Commercial aerospace recovery lifting segment margins toward 2026.
$8.8B in debt against just $0.6B in cash — little cushion if the cycle cools.
38% gross margin is decent, not exceptional; cost pressure in copper and labor.
The AI euphoria is already in the price; any slowdown in data center spending hits.
Charlie's note
“At 15.87x for a business growing 9% with a 38% gross margin and switching costs baked into the spec of every data center and grid, you're not overpaying for real quality. Patience here is rewarded by recurring service, not euphoria.”
Analysis · June 2026
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