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    FPS
    Earnings call· Mar 2026(Q3 FY26)

    Forgent Power Solutions Q3 FY26 earnings call FPS

    May 14, 2026 Source

    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

    10
    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

    Operational metrics

    14
    Revenue
    $379 millionup 103% year-over-year
    Q3 FY26

    Record revenue, accelerating growth both year-over-year and sequentially.

    Adjusted EBITDA
    $85 millionrose 96% year-over-year
    Q3 FY26

    Record adjusted EBITDA.

    Adjusted Net Income
    $55 milliongrew 132% year-over-year
    Q3 FY26

    Record adjusted net income.

    Adjusted EBITDA Margin
    22.4%expanded 200 basis points sequentially
    Q3 FY26

    Sequential expansion driven by operating leverage.

    Aggregate Market Growth
    approximately 20%
    annually

    Forgent is growing at 3x to 5x this rate, indicating share gains.

    Powertrain Solutions Revenue
    almost $100 millionincreased 248% year-over-year
    Q3 FY26

    Fastest-growing part of the business, reflecting ability to deliver comprehensive, higher-value solutions.

    Average Customer Spend
    —increased 109% year-over-year
    Q3 FY26

    Indicates broadening customer engagement and capturing greater share of project spend.

    Gross Margin
    —increased 30 basis points
    Q3 FY26

    Meaningful opportunity for further improvement as growth-related costs moderate and new capacity is utilized.

    SG&A as a percentage of sales
    —declined 230 basis points quarter-over-quarter
    Q3 FY26

    Expected to contribute to further margin expansion.

    Custom Products Revenue
    $259 millionincreased 82% year-over-year
    Q3 FY26

    Led by strong end market demand and share gains.

    Standard Products Revenue
    —increased 53% year-over-year
    Q3 FY26

    Part of broad-based strength across the portfolio.

    Services Revenue
    —grew 4% year-over-year
    Q3 FY26

    Strategic priority with attractive long-term potential as installed base expands.

    Working Capital Needs
    10% to 15%
    Q3 FY26

    Management continues to see themselves in this range, with active efforts to improve.

    Capital Spend
    1% to 1.5%
    FY27

    Assessing FY27 plans, but current expectations align with prior guidance.

    Industry KPIs

    4
    MetricValueDetails
    Book to bill ratio2.3x
    Orders bookings growth308%%
    Backlog by segment end marketnearly $2 billionUSD
    Data center exposure pipelinemore than doubled

    Orderbook & backlog

    3
    Bookings$867 millionQ3 FY26

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

    Book-to-bill ratio2.3xQ3 FY26

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

    Total Backlognearly $2 billionMarch 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

    2
    new Neo-Cloud customerPowertrain Solution order for a multi-gigawatt plus data center campusgreater 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 customerLow-voltage equipment order across multiple data center campusesover $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

    1
    Current Capacity Expansion Programnearing 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

    3
    Growth-related costs impacting gross marginQ3 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 investmentsOngoing

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

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

    Tariff impactsKicked 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

    5

    FY27 Outlook

    Next quarter (Q4 FY26 earnings call)
    CurrentWill provide more detail on next earnings call
    TargetFull 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.

    Q&A highlights

    7

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.