Amazon took its Generac warrant at roughly 14% above the pre-deal close

Generac stock was up 16% to $203.76 in Thursday morning trading.

Generac shares were up more than 19% in Thursday's midday trading to just under $209, and Amazon shares gained about 2%.

Generac shares rose more than 34% in the after-hours session Wednesday, after ending the regular trading day up less than 0.1%.

More than 300,000 of the warrant shares vest immediately; the remaining shares will vest in tranches tied to Amazon's purchases of backup generators through 2033.

Generac is a $10 billion company by market capitalisation, compared with Amazon's $2.7 trillion.

Generac management said it will invest to increase its capacity to manufacture large megawatt generators "to add further capacity as our pipeline of opportunities materializes".

William Blair analyst Brian Drab wrote: "Amazon is expected to spend $2.4 billion on Generac generators in 2027 and 2028. For frame of reference, Generac reported total company revenue of $4.2 billion in 2025."

Baird's Michael Halloran wrote: "From previously getting little value ascribed to the DC business, this adds exceptional near-term profit/return contribution, long-term incentives, and durability/multiple on the business." Baird has an outperform rating and a $305 price target and called the stock a "top idea".

Buy, outperform and overweight ratings on Generac were held on Thursday by Stephens, William Blair, Baird, Canaccord Genuity, Stifel, Jefferies, Wells Fargo and Cantor Fitzgerald; neutral and equal weight ratings were held by Barclays, Guggenheim and Citi.

In a July earnings report Generac said its backlog for products serving the data-center market was about $1.6 billion at the time.

In a March presentation to investors Generac forecast data-center sales of $1 billion by 2028, calling it a "generational growth opportunity".

Generac had previously disclosed a finalised deal with an undisclosed hyperscale data center company securing $700 million in volume, and in its second-quarter earnings statement said it signed a contract on June 24 with a second hyperscale company and was negotiating terms for 2027 and 2028 volume; the SEC filing makes clear the second customer was Amazon.

A 34% after-hours move on a $10 billion company adds about $3.4 billion of market value.

Citi analyst Vikram Bagri wrote: "While the announcement is clearly positive, the after-hours reaction appears to reflect a valuation of roughly 15x the implied ~$1.2B annual revenue at a 20% EBITDA margin, which appears aggressive."

Citi's Vikram Bagri said the deal was "substantially larger than expected", has a neutral rating on Generac and a price target of $300.

The Industrial Select Sector SPDR ETF was up 0.1% to $168.89 and the SPDR S&P 500 ETF Trust was up 0.9% to $760.8.

Caterpillar stock was up 2% to $799.43 and Cummins stock was unchanged at $527.48.

24/7 Wall St. wrote that Cummins is the closest listed comparable on standby-generator work for hyperscale customers and that the absence of a move in Cummins is the clearest indication that the day's action in Generac is one-company specific rather than a category repricing.

Amazon recently increased its planned capital expenditure from $200 billion to $220 billion this year.

Generac maintained full-year guidance for sales growth in the mid-teens percentage range and raised its net income margin guidance to a range of 9% to 10%, up from 8% to 9%.

A 16% gain to $203.76 implies a prior close of about $175.70.

The $200.93 warrant strike is about 14% above the implied pre-announcement close of roughly $175.70.

The contracted $2.4 billion spread over 2027 and 2028 is $1.2 billion a year.

The $2.4 billion of contracted deliveries equals about 57% of Generac's $4.2 billion of 2025 revenue.

The 1.69 million warrant shares are worth about $344 million at $203.76, roughly 3.4% of a $10 billion market capitalisation.

The Amazon contract's $1.2 billion a year is 20% above the $1 billion of 2028 data-center sales Generac forecast in March.

The $2.4 billion of contracted deliveries is about 1.5 times the roughly $1.6 billion data-center backlog reported in July.

A 20% EBITDA margin on $1.2 billion of annual revenue is $240 million, and 15 times that is $3.6 billion.

The $2.4 billion of deliveries equals about 1.1% of Amazon's $220 billion planned capital spending for this year.

William Blair's Brian Drab said the agreement provides strong visibility, with an indication of $8 billion in spend over seven years, at a time when many investors are questioning the durability of capital spending trends in the data center industry.

Generac shares are up 52% for the year.

Generac shares had gained 28% so far this year, compared with gains of around 10% for the S&P 500 index.

$8 billion of spend over seven years is about $1.14 billion a year.

If the $8 billion is additional to the $2.4 billion, the total of $10.4 billion over seven years is about $1.49 billion a year.

The two published readings of the $8 billion figure differ by about $343 million a year of implied run rate.

With the stock up 28% for the year before the announcement and 52% after it, roughly 24 percentage points of the year-to-date gain came in one session.