Siemens Energy's Turnaround Hinges on a Single Unit's Performance

Siemens Energy stock soars 40% YTD, fueled by a €6B buyback and a €146B order backlog. The key test is the wind unit's turnaround in Q2 results.

Siemens Energy shares are trading near record highs, buoyed by a powerful combination of a multi-billion euro share buyback and a core business operating at full capacity. The stock gained 3.63% on Wednesday to close at exactly €172.00, setting a new all-time high. Year-to-date, the advance stands at 40%, extending a 12-month rally of over 160%.

This investor confidence is built on a robust operational foundation. The company's order backlog has swelled to an unprecedented €146 billion. Its gas turbine manufacturing capacity is fully booked through the 2028 fiscal year, and slots for 2029 are filling rapidly. For the first quarter of fiscal 2026, new orders surged by a third to €17.6 billion, helping to nearly triple the net profit.

To further support the share price, management is aggressively repurchasing stock. Between April 13 and 19 alone, the company bought back over one million shares. Since the program began on March 4, total repurchases amount to roughly 9.5 million shares. An initial tranche of up to €2 billion is set to run until September, part of a broader €6 billion buyback plan extending through 2028.

Yet, the entire investment thesis faces a critical test on May 12th with the release of second-quarter results. All eyes will be on two specific metrics: the free cash flow and, most importantly, the margin trajectory at the troubled wind unit, Siemens Gamesa.

The long-term success of Siemens Energy is inextricably linked to a turnaround at Gamesa. After years of deep losses that dragged the parent company into the red, the wind division is showing tentative signs of improvement. Its most recent operational loss narrowed dramatically to €46 million, down from €374 million previously. This follows a staggering annual loss of €1.36 billion for fiscal 2025.

Management's stated goal remains unchanged: achieve breakeven for the full 2026 fiscal year. The path to get there is expected to be rocky, with losses anticipated in the first half of the year requiring a massive recovery in the second half. Improved execution in the offshore wind segment is seen as key to closing that gap.

This recovery plan is under scrutiny from activist investor Ananym Capital. The hedge fund is pushing for a strategic review of Gamesa, including a potential spin-off, arguing the unit could be worth around €10 billion as a standalone entity within two years. However, major institutional shareholders including DWS, Deka Investment, and Union Investment have reportedly backed the current stabilization strategy, opposing an immediate separation.

Beyond the wind division, Siemens Energy faces industry-wide supply chain pressures, particularly for turbine blades and guide vanes. The company has budgeted approximately €2.5 billion in capital expenditures for 2026, targeting revenue growth of 11-13% and an adjusted profit margin between 9% and 11%. Geopolitical risks, such as potential US tariffs, are mitigated by its network of 28 factories in the United States.

The upcoming quarterly report will be decisive. If Gamesa's numbers align with its breakeven trajectory, activist pressure may subside and the company's target of up to €4 billion in net profit for the year will appear within reach. Should the wind unit miss its marks, the debate over its future will intensify, testing the resilience of the stock's remarkable run.