US ▾
FPS
Earnings call · Jun 2026 (Q4 FY26)

Forgent Power Solutions Q4 FY26 earnings call FPS

Sep 15, 2026 Source

Executive summary

Forgent Power Solutions Q4 FY26 — Record Performance Driven by Strong Demand and Capacity Expansion

Forgent Power Solutions closed FY26 with record Q4 results, significantly exceeding prior guidance across revenue and profitability metrics, driven by robust demand, particularly in data centers. The company's strategic investments in manufacturing capacity and direct customer engagement have yielded substantial backlog growth and market share gains. Management is confident in its FY27 outlook, anticipating continued strong growth and margin expansion, supported by a record $3 billion backlog.

Highlights

5

  • Record Q4 revenues of $462 million, up 94% year-over-year, exceeding guidance.

  • Record Q4 adjusted EBITDA of $113 million, up 163% year-over-year, with margin expansion of 200 bps sequentially to 24.4%.

  • Record Q4 bookings of $1.5 billion, up 375% year-over-year, leading to a record book-to-bill ratio of 3.3x.

  • Backlog reached an all-time high of $3 billion, up 256% year-over-year, providing over 90% coverage for FY27 revenue guidance.

  • Secured first direct order from a Frontier AI lab and signed an MSA with a hyperscaler, expanding direct customer engagement.

Concerns

2

  • Q1 FY27 adjusted EBITDA margin expected to be 21%, lower than the full-year FY27 guidance of 24%, due to approximately $10 million in one-time costs for accelerated hiring and capacity expansion startup.

  • Quarterly orders and backlog reporting will be discontinued due to increasing order size volatility, potentially reducing short-term visibility for investors.

Guidance & targets

CategoryTargetConfidence
Full-year FY27 Revenue
$2.4 billion to $2.6 billion
high materiality
High
Full-year FY27 Adjusted EBITDA
$575 million to $625 million
high materiality
High
Full-year FY27 Adjusted EBITDA Margin
approximately 24%
high materiality
High
Full-year FY27 Adjusted EPS
$1.26 to $1.40
high materiality
High
Full-year FY27 Operating Cash Flow
more than $300 million
medium materiality
High
Full-year FY27 Capital Expenditures as % of Sales
roughly 3% of sales
medium materiality
High
Q1 FY27 Revenue
$445 million to $465 million
medium materiality
High
Q1 FY27 Adjusted EBITDA
$90 million to $100 million
medium materiality
High
Q1 FY27 Adjusted EBITDA Margin
about 21%
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Powertrain Solutions
Revenue growth well ahead of original demand assumptions for capacity expansion plans. Nearly tripled the size of this business in 6 months.
Percentage of total backlog: ~40%Percentage of FY26 revenue: 25% (up from 13% in FY25)
$147 million187%48%—
Custom Products
Led revenue growth in Q4, primarily for data center customers.
$292 million73%——
Services
Significant growth opportunity ahead for this business, driven by attaching start-up and commissioning work to equipment orders.
Service backlog: ~3x FY26 service revenue
$12 million69%——
Standard Products
$11 million3%——

FPS operating KPIs by quarter

FPS operating KPIs stated on its earnings calls, by fiscal quarter
KPI Dec 2025 Q2 FY26 Mar 2026 Q3 FY26This call 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 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 transcript
$3B Backlog increased to $3 billion at year-end, an all-time high, up 256% year-over-year and 53% sequentially. Source transcript
—
Orders
$762M In the second quarter, we booked $762 million of orders. Source 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 transcript
$1.5B Fourth quarter bookings reached $1.5 billion, a new company record, increasing 375% year-over-year and 73% sequentially. Source 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 transcript
2.3 ratio Our book-to-bill ratio was 2.3x in the quarter despite delivering record revenue. Source transcript
3.3 ratio Our book-to-bill ratio reached a new record of 3.3x also on a much larger revenue base. Source transcript
+43.5%

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Total Backlog $3 billion End of FY26

Up 256% YoY, 53% sequentially

All-time high; more than 3.5x higher than $850 million at end of FY25; represents more than 2x FY26 revenue (vs. 1x FY25 revenue); covers more than 90% of FY27 revenue guidance, remainder scheduled for FY28 delivery. Consists of 100% firm purchase orders.

Q4 FY26 Bookings $1.5 billion Q4 FY26

Up 375% YoY, 73% sequentially

New company record; more than total revenue for all of FY26. Broad-based across all 3 end markets, led by data centers and extended across both custom products and Powertrain Solutions.

Deals & partnerships

Frontier AI lab First direct order for electrical equipment

Secured first direct order from a Frontier AI lab in Q4 FY26, representing a significant proof point for penetrating this customer segment directly.

Hyperscaler Master Service Agreement (MSA)

Signed an MSA with a hyperscaler, laying the foundation for meaningful direct orders as fiscal '27 progresses.

Capital programs

Tijuana Powertrain Solutions facility announced

Benefit:Increase Powertrain Solutions manufacturing capacity by more than 50% to over 1 million square feet; increase total revenue capacity to approximately $5.8 billion (an increase of about $800 million).

Incremental investment to build a dedicated 385,000 square foot facility, roughly 80% the size of largest plant today, to meet outsized demand for modular solutions.

Manufacturing Capacity Expansion completed $190 million
Start: FY25

Benefit:Added more than 1.8 million square feet of new manufacturing capacity; expanded footprint from roughly 480,000 sq ft to 2.3 million sq ft (fivefold increase).

Investment across multiple campuses, expanding in each of 5 campuses, creating a broader, more flexible, and geographically advantaged manufacturing network.

Risks & headwinds

Q1 FY27 Margin Impact from Investments Q1 FY27

Approximately $10 million in one-time costs

Mitigation:These investments are necessary to support future growth and will be absorbed as production ramps in subsequent quarters, leading to sequential margin improvement.

Discontinuation of Quarterly Orders/Backlog Reporting Beginning FY27

Reduced short-term visibility for investors

Mitigation:Annual reporting will continue, and quarterly revenue and adjusted EBITDA guidance will be provided on a rolling basis to maintain transparency.

What to watch in Q1 FY27

Adjusted EBITDA margin trajectory

Q2 FY27
Current Q1 FY27 guided at ~21%
Target Sequential improvement towards 24% full-year target

Why it matters

Verifies the company's ability to absorb Q1 startup costs and achieve operating leverage as volumes ramp, crucial for profitability.

The first quarter were coming in at about 21% is what we're guiding to for EBITDA margins. And that obviously does include the higher investments that Gary talked about on the call. and that's really going to help us achieve that significant step-up that we expect in Q2 and beyond.

Q&A highlights

Inquired about the quality of the $3 billion backlog, how pricing and terms are evolving with new customer types, and if there are any signs of project slowdowns or push-outs.

Management confirmed backlog consists of 100% firm purchase orders, with no significant changes in pricing. They reported no meaningful push-outs or delays for their products, indicating a healthy market.

“anything in our backlog is a firm purchase order. So there's no LOIs. There's no handler to use. We don't book that type of stuff when it enters into backlog. So backlog is 100% firm commitments and purchase orders from our customers.”

asked by Andrew Obin · answered by Gary Niederpruem

2 min read 6 chapters

Detailed narrative

Record Performance and IPO Commitments

Forgent Power Solutions concluded fiscal 2026 with its strongest quarter ever, achieving record revenues, adjusted EBITDA, and adjusted net income. The company significantly exceeded the financial forecasts provided during its IPO process in December 2025, with FY26 revenue 12% above forecast and adjusted EBITDA 6% above forecast. This outperformance demonstrates the company's ability to scale rapidly while expanding margins and managing significant operational growth, including a fivefold increase in manufacturing capacity.

Strategic Market Share Gains

The company's commercial strategy successfully drove growth well above market rates across all three end markets. Data center revenue grew 161% year-over-year, approximately 4x the estimated market growth of 37%. Grid revenue increased 69%, about 7x the estimated market growth of 10%. This growth was fueled by both new customer acquisition and a significant expansion in average revenue per customer, indicating a successful strategy of deepening relationships and selling more complex, higher-value integrated solutions.

Modular Solutions and Capacity Expansion

Demand for modular solutions is rapidly increasing, expected to grow from 40% of data center construction today to 60% by 2030. Forgent's Powertrain Solutions revenue grew 187% year-over-year and 48% sequentially to $147 million in Q4 FY26, nearly tripling the business size in six months. To meet this demand, the company announced an incremental investment in a new 385,000 square foot Powertrain Solutions facility in Tijuana, Mexico, expected to come online in Q4 FY27, increasing total revenue capacity to $5.8 billion.

Enhanced Demand Visibility and Backlog

Forgent entered FY27 with a record $3 billion backlog, more than 3.5x the $850 million backlog at the end of FY25. This backlog provides over 90% coverage for the FY27 revenue guidance, offering substantially greater confidence in the outlook. The book-to-bill ratio reached a new record of 3.3x in Q4 FY26, underscoring strong and durable demand across all end markets.

Direct Customer Engagement and Hyperscaler Penetration

The company has successfully evolved its data center business from selling point products through intermediaries to direct engagement with technically demanding customers. Forgent secured its first direct order from a Frontier AI lab in Q4 FY26 and signed a Master Service Agreement (MSA) with a hyperscaler. These milestones are seen as foundational for significant organic growth opportunities within the hyperscaler and Frontier AI lab segments over the next 24 months.

Talent and Operational Scaling

To support its rapid growth, Forgent nearly doubled its manufacturing headcount and significantly invested in engineering talent, with application engineering headcount growing 54% and process/field/design engineering headcount increasing 78%. The company also strengthened its leadership team with key hires. This focus on talent acquisition and development has allowed Forgent to scale without workforce constraints, which is highlighted as a competitive advantage.

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