Artificial intelligence (AI) is amazing, but it doesn't live in the ether. It is a fancy computer program running on servers housed in data centers.
That's the story behind Eaton's (ETN +1.94%) $4.3 billion business providing electrical products that manage power for data centers. There could be years of growth ahead for this business as AI continues to expand.
What does Eaton do?
Roughly 75% of Eaton's revenue comes from electrical products. The rest is a mix of auto and aviation products.
All the company's offerings help to manage power in some way. This is increasingly important as the world's demand for power, which is basically the backstop of modern society, grows. Electricity is the power source that enables artificial intelligence to function.
Image source: Getty Images.
Eaton is at the "center" of this developing technology, noting the $4.3 billion size of its data center-related business. However, that's not the end of the story.
The company is specifically leaning into data center construction. For example, Eaton recently agreed to acquire Boyd Thermal, a maker of liquid-cooling technology for data centers. It is a $1.5 billion business that further entrenches Eaton in the AI data center space.
Eaton is growing quickly, but investors are hot on the stock
Eaton has an exciting story to tell. Investors who own it should be very pleased with the moves it is making and its recent financial results. In the third quarter of 2025, the industrial giant's sales rose 10%, while adjusted earnings rose a solid 8%. Notably, the company's backlog has grown 51% over the past two years, hinting at more growth to come.
NYSE: ETN
Key Data Points
However, Wall Street is aware of the growth, pushing the price-to-earnings ratio up to 33x, a touch above its five-year average of 32x. The price-to-sales and price-to-book value ratios are also above their long-term averages. For investors with a value bias, the stock looks a bit expensive right now, even as it sits 15% below recent highs.
Keep Eaton on the wish list
The good news is that Eaton is prone to material drawdowns. If the pullback hits 25%, the stock could be worth a second look. That said, more aggressive growth investors might view the expanding AI opportunity as a good justification for buying at the current price. Just go in knowing that you are paying full price, if not a little more, for the stock.
