Shares of Generac (NYSE: GNRC) jumped nearly 35% in premarket trading on Thursday, reaching $235.55, after the backup power provider revealed a significant supply agreement with Amazon (NASDAQ: AMZN) for data center backup generators, with initial deliveries slated for 2027 and 2028. The contract is valued at $2.4 billion and could ultimately generate up to $8 billion in revenue for Generac and its affiliated entities.

As part of the agreement, Generac issued warrants to an Amazon subsidiary, permitting the purchase of up to 1.69 million Generac shares at an exercise price of $200.9266 per share. Analysts have largely welcomed the scale and potential impact of this deal, which follows a previous supply agreement announced in July with a second hyperscale data center operator.

Barclays analyst Christine Cho, who rates Generac as "Equal Weight" with a $278 price target, noted that the magnitude of this announcement exceeds expectations and validates the company's stated goal of tripling production capacity, as highlighted during the last earnings call.

Bloomberg Intelligence analyst Christina Feehery commented that the long-term contract with Amazon represents a "significant upside opportunity for earnings growth," with calculations suggesting the deal could boost 2027 earnings per share by 15% compared to current estimates. She added that while the warrants issued to Amazon could create some dilution, the benefits to performance should outweigh this if delivery volumes exceed $1 billion next year.

JPMorgan analyst Mark Strouse, who maintains an "Overweight" rating on Generac, described the transaction's scale as "encouraging" and expressed anticipation for continued capacity expansion to support fiscal 2027 deliveries as the backlog materializes.