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Forgent Power Solutions (FPS) is sharply higher after closing FY26 on a strong note. FPS went public earlier this year and is a designer and manufacturer of electrical distribution equipment used in data centers, the power grid and energy-intensive industrial facilities. Q4 (Jun) adjusted EPS of $0.25 modestly beat, while revenue soared 94.3% yr/yr to $461.7 mln, nicely above expectations. FPS also encouraged with FY27 guidance, guiding EPS to $1.26-1.40 on revenue of $2.40-2.60 bln, both nicely above expectations.

• Drivers: Growth was led by data-center Custom Products and Powertrain Solutions, with revenue up 73% yr/yr to $292 mln and 187% to $147 mln, respectively. FPS continues to expand its penetration of the data-center market, including an initial award from a frontier AI lab for one of the largest AI build-outs in the U.S., while also broadening its reach into neoclouds and hyperscalers.
• Bookings + backlog: Bookings soared 375% yr/yr and 73% sequentially to a record $1.50 bln, producing a company-record 3.3x book-to-bill ratio, with Q4 orders alone exceeding FY26 revenue. Backlog closed the year at a record $3.02 bln, up 256% yr/yr and 53% sequentially, providing substantial visibility into FY27.
• Margins: Gross margin expanded roughly 260 bps yr/yr to 36.1%, while adjusted EBITDA margin reached 24.4%, increasing 200 bps sequentially for the second consecutive quarter. Higher volumes and favorable mix supported gross margin. FPS expects FY27 adjusted EBITDA margin of roughly 24.0% at the midpoint, with operating leverage partially offset by startup costs and labor investments.
• Outlook: FPS expects revenue and adjusted EBITDA to increase sequentially throughout FY27, with backlog already covering more than 90% of full-year guidance. Q1 will include roughly $10 mln of one-time hiring, training and startup costs as FPS adds capacity and headcount, leaving adjusted EBITDA and margin at their FY27 lows before improving.

Briefing.com Analyst Insight

FPS closed FY26 on a strong note, but what stood out was its initial FY27 outlook, which reinforces the robust demand environment as data-center development and broader power needs continue to expand. At the midpoint, FY27 revenue guidance of $2.50 bln is roughly equal to the FY28 revenue level contemplated in its IPO model, effectively putting the company a year ahead of plan. The outlook is being supported by larger customer relationships and growing adoption of Powertrain Solutions, which now represents roughly 40% of backlog. Demand for these modular solutions is also driving additional capacity investment, including a new dedicated facility that will expand production capacity and lift total revenue capacity to roughly $5.8 bln. With backlog already covering more than 90% of FY27 guidance, visibility remains strong, though execution around the capacity and headcount ramp will be important as FPS absorbs elevated startup costs in Q1. FPS also expects cash generation to improve in FY27 as the business scales and capacity investment moderates, though cash flow will be weighted toward 2H. On a final note, shares had fallen sharply from their post-IPO highs heading into the report, which is likely adding to the favorable response to the stronger-than-expected quarter and outlook.