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Forgent Power Solutions (FPS) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q3 FY26)· Industrials· May 14, 2026

Source: earnings call transcript

Executive summary

Forgent Power Solutions Q3 FY26 — Record Bookings and Raised Guidance

Forgent Power Solutions delivered a strong Q3 FY26, marked by accelerating demand in data center and grid markets, leading to record bookings and backlog. The company raised its full-year guidance, demonstrating confidence in its ability to gain market share through customized solutions and efficient execution, while also signaling a transition towards cash generation as capacity expansion nears completion.

Highlights

5

  • Revenue increased 103% to a record $379 million.

  • Adjusted EBITDA rose 96% to a record $85 million, with margin expanding 200 bps sequentially to 22.4%.

  • Record bookings of $867 million, up 308% YoY, leading to a book-to-bill ratio of 2.3x.

  • Backlog reached a record of nearly $2 billion, up 157% YoY, providing strong visibility.

  • Powertrain Solutions revenue increased 248% YoY to almost $100 million, driving 109% YoY growth in average customer spend.

Concerns

2

  • Gross margin improvement was partially offset by growth-related costs, including under-absorbed fixed costs and one-time start-up costs at new facilities, and under-absorbed labor costs.

  • Working capital investments continue to be significant to support revenue growth.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Revenue
$1.35 billion to $1.39 billion
high materiality
High
Full-year 2026 Adjusted EBITDA
$310 million to $320 million
high materiality
High
Full-year 2026 Adjusted Net Income
$197 million to $207 million
medium materiality
High
Q4 FY26 Revenue
$392 million to $432 million
medium materiality
High
Q4 FY26 Adjusted EBITDA
$100 million to $110 million
medium materiality
High
Q4 FY26 Adjusted Net Income
$67 million to $77 million
low materiality
High
Full-year 2026 Adjusted EBITDA Margin
approximately 23%
medium materiality
High
Capital intensity
stepping down
medium materiality
High
Cash flow dynamics
continue improving with increasing cash generation potential
high materiality
High
Q4 FY26 Adjusted EBITDA Margin
around 25%
medium materiality
High

FPS operating KPIs by quarter

FPS operating KPIs stated on its earnings calls, by fiscal quarter
KPI Dec 2025 Q2 FY26This call Mar 2026 Q3 FY26 Jun 2026 Q4 FY26Change vs prior quarter
Backlog
$1.5B Over the last 12 months, we've generated $1 billion of revenue, $212 million of adjusted EBITDA, which is a 21% margin, and we had a $1.5 billion backlog at the end of December 31, 2025. Source: earnings call transcript
<$2B As of March 31, 2026, backlog was at a record of nearly $2 billion, up 157% year-over-year and 33% sequentially. Source: earnings call transcript
$3B Backlog increased to $3 billion at year-end, an all-time high, up 256% year-over-year and 53% sequentially. Source: earnings call transcript
—
Orders
$762M In the second quarter, we booked $762 million of orders. Source: earnings call transcript
$867M In the third quarter, we delivered record bookings of $867 million, up 308% year-over-year and 14% sequentially, building on what was an already record level of bookings in the second quarter. Source: earnings call transcript
$1.5B Fourth quarter bookings reached $1.5 billion, a new company record, increasing 375% year-over-year and 73% sequentially. Source: earnings call transcript
+73%
Book-to-bill ratio
2.6 ratio Our book-to-bill ratio in the second quarter was 2.6x, reflecting the pace of the demand acceleration that we are seeing. Source: earnings call transcript
2.3 ratio Our book-to-bill ratio was 2.3x in the quarter despite delivering record revenue. Source: earnings call transcript
3.3 ratio Our book-to-bill ratio reached a new record of 3.3x also on a much larger revenue base. Source: earnings call transcript
+43.5%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Bookings $867 million Q3 FY26

up 308% year-over-year, 14% sequentially

Book-to-bill ratio 2.3x Q3 FY26

Highlights strength of current demand and increasing visibility into future periods.

Total Backlog nearly $2 billion March 31, 2026

up 157% year-over-year, 33% sequentially

Highest backlog level in Forgent's history, providing strong visibility into future revenue. 55%-60% scheduled to ship in FY27, with a chunk in Q4 FY26 and some in FY28.

Deals & partnerships

new Neo-Cloud customer Powertrain Solution order for a multi-gigawatt plus data center campus greater than $100 million

Scope includes medium-voltage switchgear, medium-voltage transformers, low-voltage switchboards, and service. Differentiated by early engineering engagement, integrated solution, tailored solutions, and speed (delivery starting 6 months after PO).

repeat customer Low-voltage equipment order across multiple data center campuses over $100 million

Involves a single product category (low-voltage equipment). Customer previously supplied with medium voltage transformers. Forgent's ability to offer dedicated capacity and start deliveries within 5 months of PO was a clear advantage, enabled by vertically integrated manufacturing.

Capital programs

Current Capacity Expansion Program nearing completion $205 million

Should be meaningfully complete by the end of FY26, with a little bleeding into H1 FY27. Spend and factory progress are on track.

Risks & headwinds

Growth-related costs impacting gross margin Q3 FY26

Gross margins would have been approximately 180 basis points higher absent these costs.

Mitigation:Expected to moderate as new capacity becomes more fully utilized, leading to continued gross margin improvement.

Significant working capital investments Ongoing

Working capital needs in the 10% to 15% range.

Mitigation:Actively working to improve, with opportunities for free cash flow generation over time.

Tariff impacts Kicked in 45 days ago (early Q3 FY26)

Generally neutral-ish for Forgent; a couple of products got a little worse, a couple got a little better.

Mitigation:Backlog protection includes securing supply quickly and incorporating tariff/inflation protection clauses in most contracts over the last 9-12 months.

What to watch in Q4 FY26

FY27 Outlook

Next quarter (Q4 FY26 earnings call)
Current Will provide more detail on next earnings call
Target Full FY27 guidance for revenue, adjusted EBITDA, and adjusted net income

Why it matters

Provides the first official forward look for the next fiscal year, crucial for investment thesis.

As you think about 2027, we'll be providing more detail on what that looks like in our next earnings call, and we'll be able to share some additional detail at that point, Joe.

Find out whether FPS delivers this. Inve re-checks your case every morning.

Q&A highlights

Given the 2:1 book-to-bill ratio, how much of the March backlog is expected to ship in the next 12 months, and are lead times extending?

Gary Niederpruem confirmed the strong book-to-bill and noted that lead times are extending to 12-15 months on average, primarily due to customers locking in capacity for their project timelines rather than Forgent's lead times. He stated that 55% to 60% of the current backlog is scheduled to ship in FY27, with a significant portion also in Q4 FY26 and some in FY28.

“I would say 55% to 60% of what is in backlog right now is scheduled to ship in '27. The other chunk of that is going to be in fiscal Q4. The other chunk of that is going to be out in '28.”

asked by Julian Mitchell · answered by Gary Niederpruem

2 min read 6 chapters

Detailed narrative

Accelerating Demand and Market Share Gains

Forgent Power Solutions reported a significant acceleration in demand, with Q3 FY26 revenue growing 103% year-over-year to $379 million. The company estimates aggregate market growth in its primary end markets (data center, grid, energy-intensive industrials) at approximately 20% annually, while Forgent has been growing at 3x to 5x that rate, indicating substantial market share gains driven by its ability to deliver customized solutions at scale with short lead times.

Record Bookings and Backlog Providing Visibility

The quarter saw record bookings of $867 million, a 308% year-over-year increase and 14% sequentially, building on prior records. This resulted in a book-to-bill ratio of 2.3x and a record backlog of nearly $2 billion as of March 31, 2026, up 157% year-over-year. This robust backlog provides strong visibility into future revenue, with 55% to 60% of the current backlog scheduled to ship in FY27.

Margin Expansion Trajectory

Adjusted EBITDA margin expanded 200 basis points sequentially to 22.4% in Q3 FY26. While gross margin improved 30 basis points, it was partially offset by growth-related costs (under-absorbed fixed costs, start-up costs, accelerated hiring). SG&A as a percentage of sales declined 230 basis points quarter-over-quarter due to operating leverage. Management expects further sequential margin expansion in Q4 FY26 and meaningful long-term opportunity as new facilities ramp to full utilization.

Transition to Cash Generation

Operating cash flow improved by $37 million year-over-year to $29 million in Q3 FY26. The company anticipates free cash flow to inflect positively as its current $205 million capacity expansion program nears completion by the end of FY26, with capital intensity expected to step down in FY27. This transition will provide greater flexibility for strategic M&A.

Strategic Wins and Powertrain Solutions Growth

Forgent's strategy of engaging early with engineering and offering integrated powertrain solutions is driving customer wins. Powertrain Solutions revenue grew 248% year-over-year to nearly $100 million, more than doubling sequentially, and now represents 26% of total revenue. Average customer spend increased 109% year-over-year and 20% sequentially, reflecting increased wallet share and broader customer engagement.

Grid and Data Center Market Dynamics

Demand in core data center and grid markets remains exceptionally strong, with expanding investment budgets and growing project pipelines. The company noted that behind-the-meter power configurations for data centers, regardless of power source, represent a net positive for Forgent due to increased needs for voltage step-up/down and distribution.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.