Equipment Rental

# Executive Summary * The equipment rental industry is experiencing a demand bifurcation, with strong growth from large-scale infrastructure, energy, and data center projects offsetting weakness in interest-rate-sensitive local construction markets. * Persistently high equipment purchasing costs and a focus on capital efficiency are accelerating a long-term structural shift from equipment ownership to rental. * Technology adoption, particularly integrated software platforms and AI-driven tools, is becoming the primary differentiator for operational efficiency and profitability, creating a gap between leaders and laggards. * The competitive landscape is consolidating through significant M&A activity, increasing the scale of top players and raising barriers to entry. * Revenue growth is highly divergent based on end-market exposure, while profitability is increasingly tied to specialization and technological advantage. * Leading companies are balancing aggressive capital returns to shareholders with strategic investments in fleet, technology, and acquisitions. ## Key Trends & Outlook The Equipment Rental industry is navigating a complex macroeconomic environment where elevated interest rates and inflationary pressures are creating a stark bifurcation in demand. Robust demand from government-backed infrastructure projects, data center construction, and the onshoring of manufacturing is driving growth for well-positioned firms. This strength contrasts sharply with persistent softness in local commercial and residential construction, which has been dampened by high borrowing costs. This environment simultaneously accelerates the fundamental shift from ownership to rental, as high equipment purchase prices and the desire for capital flexibility make renting a more attractive proposition for customers. This dynamic creates clear winners and losers based on their end-market exposure, as exemplified by Custom Truck One Source (CTOS), which reported a 12.1% year-over-year growth in its Equipment Rental Solutions (ERS) revenue in Q3 2025, driven by surging infrastructure demand. Technology is the key lever for margin improvement and competitive differentiation within the industry. Leaders are deploying integrated platforms that use telematics, IoT, and AI to optimize fleet utilization, streamline logistics, and implement dynamic pricing. With only 16% of operators having fully integrated systems, companies that successfully invest in these technologies are building a significant operational and cost advantage. United Rentals (URI), with its Total Control platform, and WillScot Holdings (WSC), with its AI-enabled pricing engine, are prime examples of leveraging technology to create a competitive edge. The greatest opportunity for the equipment rental industry lies in serving the needs of large, complex "mega projects" and by providing specialized, tech-enabled rental solutions that improve customer efficiency. The primary risk is a broader economic slowdown that could eventually stall even the large-scale projects that are currently driving growth, coupled with the ongoing margin pressure from inflation. ## Competitive Landscape The equipment rental market is characterized by a mix of large national players and numerous smaller, specialized regional players, with the top 10 companies controlling 49% of the global market share. This structure fosters diverse competitive approaches, ranging from broad-based scale to highly focused niche specialization. Some of the largest players, such as United Rentals, compete on the basis of immense scale and a diversified offering, acting as a "one-stop shop" solution for national accounts. This strategy leverages a vast network of over 1,700 locations and a comprehensive fleet to provide superior logistics, equipment availability, and significant purchasing power. Their capacity to invest heavily in proprietary technology, such as the Total Control platform, further reinforces their market leadership. In contrast, other successful firms build their business around deep specialization in a particular niche. Companies focusing on markets like utility infrastructure or energy services can achieve higher margins by offering tailored equipment and expertise that generalists cannot match. Natural Gas Services Group (NGS) exemplifies this model with its strategic pivot to focus exclusively on high-margin large horsepower compression rentals for the oil and gas industry, leading to superior gross margins. M&A activity is a primary tool for reshaping the competitive landscape. Herc Holdings' $4.8 billion acquisition of H&E Equipment Services, with its integration completed by September 15, 2025, is a key example of a major player scaling up to compete more effectively with the market leader, significantly expanding its footprint and market density. ## Financial Performance Revenue growth in the equipment rental industry is highly bifurcated, ranging from double-digit growth to slight declines, based on end-market exposure. This divergence is a direct result of the macroeconomic environment, where companies with fleets serving resilient sectors like infrastructure, utilities, and data centers are seeing robust growth. In contrast, companies more exposed to the cyclical and interest-rate-sensitive residential and general commercial construction markets are experiencing flat to declining revenues. Custom Truck One Source (CTOS) reported a 12.1% year-over-year growth in its Equipment Rental Solutions (ERS) revenue in Q3 2025, definitively proving the strength in infrastructure-focused demand. {{chart_0}} Profitability also shows significant divergence, with adjusted gross margins ranging from the high 20s to over 60% for specialized rental segments. The most profitable companies command pricing power through deep specialization in niche markets where equipment and expertise are scarce. Technology adoption also drives margin expansion by increasing fleet utilization and reducing operating costs. Natural Gas Services Group (NGS) exemplifies the high end of the margin spectrum, with adjusted gross margins in its rental segment exceeding 58.6% in Q1 2025, demonstrating the power of its strategic focus on a high-margin niche. {{chart_1}} Capital allocation strategies reflect a dual focus on returning significant capital to shareholders and making strategic investments in growth through M&A and fleet expansion. United Rentals (URI) plans to repurchase $1.90 billion of common stock in 2025, showcasing a strong commitment to shareholder returns. Simultaneously, Herc Holdings (HRI) executed a transformative $4.8 billion acquisition of H&E Equipment Services, representing an aggressive pursuit of growth through consolidation. Balance sheets across the industry are generally healthy and resilient, with a focus on maintaining flexibility. Leverage varies, with some companies operating with very low debt while others take on leverage for strategic acquisitions but maintain clear deleveraging plans. United Rentals (URI) maintains a low net leverage of 1.86x as of September 30, 2025, well within its target range, which is representative of the financial discipline shown by industry leaders. Most companies have secured ample liquidity through expanded credit facilities to fund growth and navigate uncertainty. {{chart_2}}