Reason 1. Rising electrical products demand amid digital infrastructure expansion

The modern economy requires a broad range of electrical products, components, and equipment. These are essential for building data centers, power grids, transmission infrastructure, renewable power systems, smart infrastructure, and telecommunications networks. They include a wide variety of products, such as cables, optical fibers, routers, edge gateways, racks, enclosures, signal extension and matrix switching systems, inverters, and power optimizers, among others.

First, the race to expand AI capacity is reshaping industrial equipment markets, driven by hyperscale providers’ unprecedented investments. According to BCA Research, combined hyperscaler capital expenditure is expected to exceed $700 billion in 2026, soaring by 80% from the 2025 level and 250% from the 2024 level. Around 75% of this spending will be directed toward data centers, GPUs, high-bandwidth servers, and networking equipment. Capital expenditure is projected to continue rising and peak at nearly $1.0 trillion by 2029.

This unprecedented buildout is driving enormous demand for equipment. The physical construction of data centers, including power systems, cooling infrastructure, transformers, switchgear, and numerous other components, accounts for a substantial share of total facility costs. An analysis of a hypothetical 400-megawatt data center estimates total project costs at around $11 billion, with 29% attributable to electrical and cooling equipment. For equipment providers, this implies an estimated annual addressable market of ~$220 billion over the next five years, more than three times the $60 billion estimate from just two years ago.

Hyperscalers’ historical and forecast capital expenditure; source: BCA Research

Second, surging power needs of data centers have accelerated global electricity consumption. Amid this electricity demand surge, power grids are facing a convergence of structural pressures. The existing infrastructure is aging and still operating under its original design specifications, despite having exceeded its rated operating life.

In both Europe and the U.S., much of the power grid infrastructure was built between the 1950s and 1980s. Key equipment, such as transformers, substations, and circuit breakers, is typically designed for a service life of 30–40 years, and many of these assets have already exceeded it. By 2050, around 90% of Europe’s power lines are expected to be more than 40 years old. In the U.S., around 70% of grid transformers have already been in operation for more than 25 years. Modernizing power grids requires a wide range of equipment and components, including transformers, switchgear, HVDC equipment, and inverters.

Average age of power grids by region; source: Goldman Sachs

On top of that, the ongoing expansion of digital infrastructure extends beyond data centers and AI-related infrastructure. Robotics and industrial automation infrastructure appear to be one such area. It includes warehouse automation, the Industrial Internet of Things (IIoT), edge inference, sensors, robot operating systems, and fleet management infrastructure.

2025 was a relatively muted year for the robotics and industrial automation industry, with order intake remaining below revenue for many companies. However, Roland Berger has upgraded its long-term outlook and expects 2026 to mark the beginning of renewed growth. Similarly, the International Federation of Robotics (IFR) estimates that the number of newly installed industrial robots will increase slightly in 2025 following two years of stagnation, with stronger growth expected in 2026.

Beyond 2026, potential catch-up investments could support a CAGR of up to around 9% through 2030. Roland Berger forecasts growth rates to fall within the 6%–7% range, although they may vary across regions and end industries. Leading industrial automation players are gradually recovering from the 2022–2024 slowdown, and early signs of recovery are now becoming visible.

Industrial automation market outlook; source: Roland Berger

Therefore, the ongoing transformation of the modern economy is driving strong demand for electrical equipment. The rapid expansion of AI and digital infrastructure, including data centers and industrial automation, requires a wide range of electrical products and components, benefiting companies that design and manufacture them.

Reason 2. Focus on data centers and cable production expansion

Prysmian is an Italian manufacturer of cables and systems for the energy and telecommunications industries. It operates in more than 50 countries worldwide, with 109 plants and 30 R&D centers, offering a wide range of electrical equipment.

Its business is divided into four operating segments:

Transmission: It focuses on the transmission of renewable energy through cable solutions. The segment serves transmission system operators, utilities, and power generation plants.
Power Grid: The segment supports the modernization of power grids and includes the HVAC, Power Distribution and Overhead Lines business units. Its client base encompasses distribution system operators, utilities, and industrial plants.
Electrification: It includes various energy-related businesses serving industries such as construction, automotive, marine, rail and e-mobility.
Digital Solutions: It includes the Fiber and Optical Cables, Connectivity, and Multimedia & Inside Plant Cables (MMS) businesses. The segment manufactures fiber optics, optical cables, connectivity components and accessories, OPGW (Optical Ground Wire) cables and copper cables used in telecommunications networks.

The Electrification segment is Prysmian’s core and largest segment, accounting for 55.8% of total revenue in 2025. The Power Grid segment accounted for another 19.4% of total revenue, followed by Transmission (16.6%) and Digital Solutions (8.2%).

Revenue mix by segment in 2025; source: compiled by the author

Digital Solutions is currently a key focus area for Prysmian. Management plans to transform it into a leading supplier of data-center infrastructure. In July 2026, Prysmian announced a 10-year supply agreement with Molex, part of Koch Inc., for optical cables deployed inside data centers. The deal is valued at ~€5.5 billion, including a €550 million upfront payment.

The agreement forms part of a broader set of Prysmian’s contracts with hyperscalers and data-center infrastructure providers. Together, these agreements are expected to generate cumulative incremental revenue of more than €10 billion through 2035 compared to the 2025 baseline, including up to €1.1 billion in annual revenue from 2031 onward.

Digital Solutions revenue upside; source: Q2 2026 Earnings Presentation

To fulfill its obligations under these agreements, Prysmian is planning a significant capacity expansion to increase the production of optical cables and fiber, including the glass preforming stage, across its plants in the U.S. and Europe. It plans to allocate €1.25 billion for this purpose. In the U.S., Prysmian will more than double its optical fiber production capacity, with ~40% of the eventual run-rate capacity expected to be in place by 2028 and full run-rate capacity reached by the end of 2029. The investment will further strengthen Prysmian’s position as one of only three U.S. manufacturers of fiber and optical cables.

In addition, management noted that Prysmian is considering a second wave of capacity expansion, as significant unmet demand remains in the market. The company continues to receive requests for additional volumes from both existing and new customers. As a result, management expressed confidence that Prysmian is likely to sign new agreements over the next two quarters, in addition to its recent deals.

At the same time, Prysmian is seeking to gain market share in North America through M&A:

In 2025, it acquired Channell Commercial Corporation, a U.S. provider of integrated connectivity solutions, for ~$950 million, plus a $200 million earn-out based on Channell’s performance. Channell’s product portfolio includes vaults, fiber optics, and thermoplastic and metal enclosures. The acquisition complemented Prysmian’s Digital Solutions business through Channell’s vertical integration and U.S. manufacturing footprint.
In August 2026, Prysmian announced the acquisition of Atkore for $95 per share in cash. Atkore’s enterprise value is estimated at ~$3.8 billion. It provides cable-adjacent electrical conduits (steel, PVC and aluminum tubes that protect electrical cables), cable management systems, and armoring and framing solutions. The transaction is expected to expand Prysmian’s presence in North America and will be funded through a combination of debt, including hybrid bonds, and equity, including the disposal of treasury shares.

Meanwhile, Prysmian divested its remaining stake in Yangtze Optical Fibre and Cable in 2025, generating €565 million in cash, which was used to fund reinvestment and reduce debt.

Revenue impact of Atkore acquisition; source: Atkore Acquisition Presentation

As a result, Digital Solutions delivered the second-highest organic revenue growth among Prysmian’s segments in H1 2026, with revenue increasing 13.8% YoY organically. The Power Grid segment ranked first, with organic revenue growing 14.5% YoY. The Transmission and Electrification segments reported 7.3% YoY and 3.9% YoY growth rates, respectively. In addition, Digital Solutions’ total revenue increased by 36.5% YoY to €991 million in H1 2026.

Reason 3. Upgraded full-year outlook driven by strong performance across all segments

Prysmian’s other segments also demonstrated strong results in H1 2026, and management has upgraded the full-year 2026 outlook.

Transmission. As of June 30, 2026, Prysmian’s Transmission segment had an order backlog of ~€17 billion, comprising €12.9 billion from the Submarine Power division and €3.8 billion from HVDC. An additional €2.2 billion in contract awards had not yet been reflected in the backlog.

Management expects the tender environment to become more active in H2 2026 compared to H1 2026. Overall, they estimate that ~€10 billion of new transmission projects will be awarded across the market in 2026, with an even larger opportunity set expected in 2027–2028 as pipeline projects convert into awards.

In H1 2026, the Transmission segment delivered 7.3% YoY organic revenue growth. The segment’s EBITDA is also expected to increase by €200 million in FY2026 compared to FY2025, when it stood at €580 million. The increase is expected to be driven by both submarine and land-based HVDC systems supporting offshore wind interconnection and grid-strengthening projects in Europe and other markets.

Power Grid. The Power Grid segment’s organic revenue growth reached 14.5% in H1 2026, with outstanding double-digit organic growth recorded across all regions.

Management described the division as currently operating at full capacity in Europe and North America, indicating that growth is constrained by available capacity rather than demand. Two waves of capacity expansion have been approved over the past year: an increase in power cable production capacity in the U.S. and Europe one year ago, followed by a further expansion in the U.S. two months ago. These expansions are forecast to add megawatt cable capacity in both the U.S. and Europe to serve both utility grid-hardening needs and industrial/EPC and data-center-linked demand.

As a result of its strong track record of execution across all business segments, Prysmian has upgraded its 2026 guidance:

Adjusted EBITDA is now expected to fall within the range of €2.8 billion–€2.9 billion (€2.85 billion at the midpoint), up from the previous guidance of €2.625 billion–€2.775 billion (€2.7 billion at the midpoint).
Free cash flow (FCF) guidance was also raised to €1.65 billion–€1.75 billion (€1.7 billion at the midpoint) from the previous range of €1.3 billion–€1.4 billion (€1.35 billion at the midpoint).

Although management has not provided revenue guidance, analysts expect Prysmian to generate €22.3 billion of revenue in 2026 (+13.5% YoY) and €24.5 billion in 2027 (+9.8% YoY).

Revenue forecast; source: compiled by the author

Thus, Prysmian offers a broad range of electrical components across various markets and sectors. The company continues to expand its product portfolio to capitalize on the long-term transformation of global power and digital infrastructure.

Financial performance

Prysmian’s financial results for the trailing 12 months (TTM) ended June 30, 2026, can be summarized as follows:

Revenue increased to €21.2 billion, up 8.1% from 2025.
Gross profit grew by 2.8%, from €6.87 billion in 2025 to €7.06 billion TTM. Gross margin decreased from 34.9% to 33.3%.
Operating income declined by 2.3% and amounted to €1.93 billion TTM. Operating margin dropped from 10.0% to 9.1%.
Net income grew by 11.3%, from €1.27 billion in 2025 to €1.41 billion TTM. Net margin expanded from 6.5% to 6.7%.

Dynamics of annual financial results; source: compiled by the author

TTM cash flow from operations (CFFO) amounted to €1.89 billion, down by 12.5% from 2025. FCF dropped 14.9%, from €1.37 billion in 2025 to €1.17 billion TTM, despite lower capital expenditure.

Dynamics of annual financial results; source: compiled by the author

Prysmian’s financial performance for Q2 2026 is presented below:

Revenue increased by 23.3% YoY, from €4.88 billion to €6.02 billion.
Gross profit grew by 11.4% YoY, from €1.68 billion to €1.87 billion.
Operating income declined by 13.7% YoY, from €461.0 million to €398.0 million.
Net income soared by 17.0% YoY, from €276.0 million to €323.0 million.

Dynamics of quarterly financial results; source: compiled by the author

Prysmian maintains a robust balance:

The leverage ratio, defined as the ratio of total debt to assets, stands at 25%, which corresponds to the industry average of 25%.
As of June 30, 2026, total debt amounted to €5.48 billion, up by 5.2% from €5.21 billion at the end of 2025.
Cash and short-term investments declined 36.1%, from €2.08 billion as of December 31, 2025 to €1.33 billion as of June 30, 2026 due to higher net working capital. As a result, net debt stood at €4.15 billion.
The company earned €2.65 billion of TTM EBITDA, and, consequently, the Net Debt-to-EBITDA ratio equaled 1.57x. This proves that the company is financially healthy and is not likely to face credit risk in the foreseeable future.
TTM interest expenses decreased by 6.7%, from €210.0 million in 2025 to €196.0 million. With TTM EBIT of €1.93 billion, the interest coverage ratio amounted to 9.83x.

Valuation and upside potential

Prysmian trades at a discount to the average multiples of its peers: P/E stands at 25.70x, P/CFFO at 21.68x, EV/Revenue at 1.92x, and EV/EBITDA at 14.55x. Thus, Prysmian offers an attractive risk-reward profile relative to many of its peers.

Comparable valuation; source: compiled by the author

The minimum price target set by Baader Europe is €91.7 per share, while Equita SIM values Prysmian at €181.0 per share. According to the Wall Street consensus, the share’s fair market value stands at €165.0, implying a 34.1% upside potential.

Price targets of investment banks; source: compiled by the author

Key risks

Prysmian’s operating results could be affected by volatility in raw material prices. The company’s primary raw materials include copper, aluminum, and lead, which together account for more than 50% of the total cost of raw materials used in production.
Despite relatively high barriers to entry, high-value-added segments such as high-voltage underground and submarine cables and optical cables are facing increasing competition from both established manufacturers and new market entrants.
Macroeconomic conditions, including inflation, interest rates, and tariffs, can significantly affect market demand. A deterioration in economic conditions could also lead to reduced government incentives and investment in renewable energy and telecommunications infrastructure.
Prysmian relies on a broad network of suppliers, some of which are critical sources of raw materials, including metals and polymer compounds, particularly for its high-voltage and submarine cable businesses. Dependence on key suppliers exposes the company to risks related to supply disruptions and delays, quality issues, and higher input costs.

* This investment idea is provided as part of the "Investment Research and Financial Analysis" supplemental service in accordance with License 275/15.

** The company may participate in the trading of financial instruments mentioned in this material as a counterparty or liquidity provider. However, all recommendations and information presented in this material are independent and are not related to the company's trading positions. We take all necessary measures to prevent conflicts of interest and ensure the objectivity of the information provided.

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