Shares of Regal Rexnord surged 10.2% to $177.40 after the industrial manufacturer posted third-quarter results that blew past Wall Street expectations, powered by an explosive jump in data center revenue that signals the company's pivot toward AI-driven infrastructure is gaining real traction. Regal Rexnord's Data Center Explosion Drives a 10% Rally — But Can This Old-Line Industrial Really Become an AI Infrastructure Play?
Shares of Regal Rexnord jumped 10.2% to $177.40 after the Milwaukee-based industrial manufacturer delivered a third-quarter earnings beat that reframed the company's investment story around one booming end market: data centers. The question now is whether a 307% surge in one business line can sustain a broader re-acceleration — or if investors are paying up for a growth narrative that masks lingering portfolio problems.
• The Earnings Beat Was Bigger Than It Looks on Paper. Adjusted EPS of $2.90 topped the S&P consensus of $2.67 by 8.7% , while sales rose 6% to $1.59 billion, beating the $1.56 billion estimate. Management raised full-year adjusted EPS guidance to $10.60–$10.90 , a midpoint of $10.75 that slightly exceeds analyst consensus of $10.61. For shareholders, the raised guidance signals management confidence that data center momentum carries into Q4 and beyond.
• Data Centers Are Rewriting the Revenue Mix — With a Catch. Data center sales climbed 307%, or 169% excluding the company's newer modular power distribution units.
Data center revenue is projected near $900 million by 2027 once those units ship at scale — a staggering leap from just $120 million in total data center sales in 2025. But lower margins on these high-volume projects create a tension between revenue growth and profitability — essentially, more sales with thinner profits per dollar. Industrial Powertrain Solutions sales also fell 1.9% , showing the rest of the portfolio isn't uniformly healthy.
• A $119 Million Write-Down Reveals a Portfolio Cleanup Underway. A $119.3 million non-cash goodwill impairment tied to the autonomous mobile solutions business swung GAAP results to a $0.19 loss per share. The company is now exploring a sale of that business as part of a broader portfolio review. New CEO Aamir Paul, four months in, is signaling he will prune underperformers and channel capital toward data center and automation — a strategic reset investors appear to welcome.
• Falling Debt Opens a New Chapter. Net debt-to-adjusted-EBITDA hit 2.9x , with interest expense declining to $77 million from $87 million as debt is paid down.
One bull case estimates leverage could fall to 1.5x by early 2028, unlocking share buybacks once it reaches 2.5x. Every dollar of interest saved flows directly to the bottom line — a tailwind that compounds alongside data center growth.
The rally prices in real progress, but the stock's trajectory hinges on whether data center margins improve as aftermarket revenue — the higher-profit follow-on work — materializes over years, not quarters.