Forgent Power Solutions NYSE: FPS reported record fiscal third-quarter results and raised its full-year outlook, citing stronger-than-expected demand from data center and grid customers, expanding backlog and early signs of operating leverage as it scales production.
Chief Executive Officer Gary Niederpruem said revenue in the quarter rose 103% year over year to a record $379 million, while adjusted EBITDA increased 96% to $85 million. Adjusted net income grew 132% to $55 million. The company’s adjusted EBITDA margin expanded 200 basis points sequentially to 22.4%, driven primarily by SG&A leverage and improved labor and overhead absorption.
“Demand for our products continues to exceed our expectations, and we are raising our fiscal 2026 guidance to reflect the strength of that demand,” Niederpruem said. He said the company’s core data center and grid markets remain “exceptionally strong,” with customers expanding investment budgets and project pipelines.
Bookings and Backlog Reach Records
Forgent reported record bookings of $867 million in the third quarter, up 308% from a year earlier and 14% sequentially. Niederpruem said order growth was led by data center and grid customers. The company’s book-to-bill ratio was 2.3 times, despite record revenue in the period.
Backlog reached nearly $2 billion as of March 31, 2026, up 157% year over year and 33% sequentially. Niederpruem said customers are increasingly securing production capacity into fiscal 2027 and beyond.
On the call’s question-and-answer portion, Barclays analyst Julian Mitchell asked how much of the backlog is expected to convert to revenue over the next 12 months. Niederpruem said orders that previously averaged about nine to 12 months are now closer to 12 to 15 months on average, due more to customers engaging earlier and locking in capacity than to Forgent’s own lead times. He said roughly 55% to 60% of the March backlog is scheduled to ship in fiscal 2027, with other portions expected in the fiscal fourth quarter and fiscal 2028.
Guidance Raised for Fiscal 2026
Forgent raised its fiscal 2026 revenue outlook to a range of $1.35 billion to $1.39 billion, an increase of $70 million from prior guidance. The company now expects adjusted EBITDA of $310 million to $320 million, up $10 million from prior guidance, and adjusted net income of $197 million to $207 million, up $7 million.
At the midpoint, the updated full-year forecast implies 82% revenue growth, 86% adjusted EBITDA growth and 128% adjusted net income growth, according to management.
Chief Financial Officer Ryan Fiedler said the company expects fourth-quarter revenue of $392 million to $432 million, representing 73% year-over-year growth at the midpoint. Forgent expects fourth-quarter adjusted EBITDA of $100 million to $110 million and adjusted net income of $67 million to $77 million. Fiedler said adjusted EBITDA margins are expected to expand to around 25% in the fourth quarter as production volumes rise and operating leverage improves.
Powertrain Solutions Lead Growth
Management highlighted rapid growth in Powertrain Solutions, which Forgent defines as integrated combinations of custom products designed to work together as a system. Revenue from Powertrain Solutions increased 248% year over year to nearly $100 million in the third quarter and more than doubled sequentially. The category represented 26% of total revenue, up from 16% in the prior quarter.
Fiedler said custom products revenue rose 82% year over year to $259 million, representing 68% of total revenue. Standard products revenue increased 53%, while services revenue grew 4% and represented 2% of total revenue. Fiedler said services remain a strategic priority as Forgent looks to monetize commissioning and related services tied to higher volumes of equipment deliveries.
Niederpruem cited two orders of more than $100 million each as examples of the company’s expanding customer relationships. One was a Powertrain Solutions order from a new NeoCloud customer for the first building of a planned multi-gigawatt-plus data center campus. The order includes medium-voltage switchgear, medium-voltage transformers, low-voltage switchboards and service, with deliveries starting six months after the purchase order.
The second was a repeat customer order for more than $100 million of low-voltage equipment across multiple U.S. data center campuses. Niederpruem said Forgent had previously supplied medium-voltage transformers to that customer and expanded the relationship based on its execution record and ability to provide dedicated capacity.
Margins and Cash Flow Improve
Forgent said it is still in the early stages of its margin expansion opportunity. Gross margin improved 30 basis points sequentially in the third quarter. Niederpruem said growth-related costs, including under-absorbed fixed costs, one-time start-up costs at new facilities and under-absorbed labor costs tied to accelerated hiring, weighed on results. Excluding those costs, he said gross margins would have been about 180 basis points higher.
SG&A as a percentage of sales declined 230 basis points sequentially, reflecting revenue growth outpacing operating cost growth. Fiedler said adjusted EBITDA margins expanded in line with expectations and that the company expects sequential expansion again in the fourth quarter.
Operating cash flow improved by $37 million year over year to $29 million in the quarter. Niederpruem said the company is beginning to transition from cash consumption toward cash generation as its current capacity expansion program nears completion. He said the company expects free cash flow to improve as capital intensity declines, providing more flexibility for potential strategic M&A.
Analysts Press Management on Demand, Tariffs and Capacity
In response to a question from Goldman Sachs analyst Joe Ritchie about fourth-quarter margins, Fiedler said the company expects continued top-line growth and operating leverage, along with some favorable mix dynamics. He said fiscal 2027 margin details will be provided on the next earnings call.
Asked by Jefferies analyst Tanner James about grid-related orders, Niederpruem said Forgent is relatively agnostic to generation type, including coal, gas, nuclear and alternative energy. He said alternative energy can be beneficial because it often requires voltage step changes, creating opportunities for Forgent’s equipment.
Wolfe Research analyst Nigel Coe asked about inflation and tariffs. Niederpruem said recent tariff changes were “generally neutral-ish” for the company, with some products affected positively and others negatively. He said price-cost dynamics are generally neutral to slightly favorable, aided by Forgent’s vertical integration and supply chain visibility. He added that most contracts signed over the past nine to 12 months include some form of tariff and inflation protection.
On capacity and cash flow, Niederpruem told KeyBanc Capital Markets analyst Jeff Hammond that the company expects to be meaningfully complete with its $205 million capacity expansion by the end of the fiscal year, with a small amount carrying into the first half of fiscal 2027. Fiedler said working capital remains in the 10% to 15% range, with opportunities for improvement over time.
Niederpruem closed the call by saying the quarter reflected accelerating demand, expanding customer relationships and continued execution as Forgent scales. The company said it plans to provide its fiscal 2027 outlook on its fiscal fourth-quarter earnings call.
About Forgent Power Solutions NYSE: FPS
We are a leading designer and manufacturer of electrical distribution equipment used in data centers, the power grid and energy-intensive industrial facilities. Demand for our products is growing rapidly as (i) companies accelerate investment in data centers to meet the computational requirements for cloud computing and AI, (ii) independent power producers build new generation capacity to satisfy rising electricity demand, (iii) utilities upgrade and expand T&D infrastructure to address rapid load growth and (iv) manufacturers reshore their factories to secure their supply chains and mitigate the impact of tariffs.
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