US ▾
POPOWL

Powell Industries (POWL) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q2 FY26)· May 5, 2026

Source: earnings call transcript

Executive summary

Powell Industries Q2 FY26 — Record Backlog and Strong Data Center Orders Drive Growth

Powell Industries delivered a solid quarter with robust order growth, particularly from data center, LNG, and utility projects, leading to a record $1.8 billion backlog. The company is strategically expanding manufacturing capacity and engineering resources to meet sustained demand, while also investing in R&D and exploring inorganic opportunities. Management is cautiously optimistic about the petrochemical market's cyclical inflection.

Highlights

5

  • New orders of $490 million in Q2, nearly double prior year, bringing midyear total to nearly $1 billion.

  • Backlog reached a record $1.8 billion, up 12% sequentially and 33% year-over-year, providing visibility into FY28.

  • Post-quarter end, secured a mega data center project exceeding $400 million, the largest in company history.

  • Revenue grew 6% year-over-year to $297 million, driven by strong project execution.

  • Generated $51 million in operating cash flow, driven by higher earnings.

Concerns

3

  • Petrochemical market revenue declined 37% year-over-year due to softness.

  • Gross profit margin slightly lower by 30 basis points year-over-year to 29.6%.

  • SG&A expenses increased $4 million year-over-year, primarily due to higher compensation.

Guidance & targets

CategoryTargetConfidence
R&D Expense as % of Revenue
between 1% and 1.5%
low materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Domestic
Revenues were higher by $4 million.
—+2%——
International
Primarily driven by offshore projects in the Far East and Africa, as well as an uptick in project volume across our U.K. operation.
$64M+$14M——
Commercial and Other Industrial
Includes data center, which is in the low 20s of this 29% backlog.
Backlog % of total: 29%
—+35%——
Electric Utility
Backlog % of total: 30%
—+14%——
Oil and Gas
Excluding petrochemical.
Backlog % of total: 29%
—+11%——
Petrochemical
Versus the same period 1 year ago on the softness across this end market over the past several quarters.
Backlog % of total: 5%
—-37%——
Light Rail Traction Power
On relatively light volume as a percentage of the total business revenue.
Backlog % of total: 6%
—-10%——

POWL operating KPIs by quarter

POWL operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Mar 2026 Q2 FY26 Jun 2026 Q3 FY26Change vs prior quarter
Orders
$490M We recorded $490 million of new orders in the quarter, bringing our midyear total to nearly $1 billion in new awards. Source: earnings call transcript
$934M Overall, Powell's awarded a record $934 million of new orders in the third quarter which is nearly 3x higher than the prior year and nearly double the order total from last quarter. Source: earnings call transcript
+90.6%
Backlog
$1.8B Our backlog now sits at $1.8 billion, 12% higher than the prior quarter and 33% higher than 1 year ago. Source: earnings call transcript
<$2.4B Our backlog is now nearly $2.4 billion, again, the highest in Powell's history and it is notable that we have booked over $1.8 billion of new awards over the past 3 quarters. Source: earnings call transcript
—
Book-to-bill ratio
1.7 ratio As a result of the strong commercial activity across our key end markets, the book-to-bill ratio for both the second quarter as well as the first half of fiscal 2026 is 1.7x. Source: earnings call transcript
3 ratio The resulting book-to-bill ratio for the third fiscal quarter is 3.0x while this ratio on a fiscal year-to-date basis is 2.2x, with reported backlog reaching a new high of $2.4 billion at the end of the third fiscal quarter, $967 million higher versus 1 year ago and $619 million higher sequentially. Source: earnings call transcript
+76.5%

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

Total Backlog $1.8B March 31, 2026

up 12% sequentially, up 33% YoY

Provides visibility well into fiscal 2028. Composition: Electric Utility 30%, Oil and Gas 29%, Commercial and Other Industrial 29% (data center in low 20s of this), Petrochemical 5%, Light Rail Traction Power 6%.

New Orders Booked $490M Q2 FY26

nearly double prior year

Midyear total nearly $1B. Included 2 mega orders >$75M each (utility, data center). Book-to-bill ratio for Q2 and H1 FY26 is 1.7x.

Mega Data Center Order (post-quarter end) in excess of $400M early April 2026

largest project award in company history

Not reflected in Q2 FY26 orders or backlog. Will be included in Q3 FY26 numbers. Expected 2-2.5 year burn through end of FY28. For first phase of new greenfield data center, behind-the-meter design, couple of gigawatts initial phase.

Deals & partnerships

Remsdaq Complementary products and/or capabilities, building out services franchise, expanding in utility market.

Acquisition continues to progress well and has quickly proven synergistic and accretive across the company. Added resources in the states to start expanding that business, along with some of the synergistic adds found in the data center market in the short term.

Capital programs

Jacintoport fabrication yard expansion progressing on schedule $12M-$13M
Period spend: $1.8M (Q2 FY26)

Benefit:incremental 335,000 square feet of capacity; support all end markets, specifically oil and gas customers with premier domestic facility for engineered-to-order power distribution solutions

Investments in property, plant and equipment in the fiscal second quarter totaled $1.8 million, reflecting modest capital spending on equipment maintenance and production assets as well as capital expenditures related to the Jacintoport expansion project.

New leased facility near Mosley campus evaluating $8M

Benefit:approximately 50,000 square feet, new fabrication equipment for short-term rapid expansion of metal fabrication capacity

We are evaluating a smaller lease facility of approximately 50,000 square feet near our Mosley campus. This space would help support a new $8 million investment in fabrication equipment for short-term rapid expansion of our metal fabrication capacity.

Greenfield facility build-out under assessment $70M-$100M

Benefit:upwards of an additional 250,000 to 300,000 square feet of factory capacity; potential to run $100M to $250M in revenue

We have previously shared our efforts to evaluate a larger investment in a facility that would require $70 million to $100 million of capital and provide upwards of an additional 250,000 to 300,000 square feet of factory capacity. We are being very thoughtful throughout this process and expect a decision within the next few quarters.

Satellite engineering center (Houston) opened
Start: Q2 FY26

Benefit:enhance ability to add critical members to electrical and mechanical engineering and design teams

This past quarter, we leased office space in the Houston Metro area, which will serve as a second satellite engineering center. This center complements our initial satellite engineering office that we announced and opened last year.

Risks & headwinds

Petrochemical market softness over the past several quarters

Revenue declined by 37% versus the same period 1 year ago.

Mitigation:Cautiously optimistic that the petrochemical market is in the early stages of a cyclical inflection; seeing some activity in the gas to chemicals market and encouraged by recent upward price revisions within the global polyethylene market.

Supply chain and talent constraints for rapid growth moving forward

Constraints would be people and supply chain, which neither of those is easily to unlock.

Mitigation:Proactively adding short-term capacity (e.g., metal fab), evaluating larger leased spaces, reengaging offshore engineering centers, attracting additional talent to Houston satellite centers, engaging partners to broaden and deepen relationships and optimize supply chain.

What to watch in Q3 FY26

Greenfield facility expansion decision

Next few quarters
Current Under assessment, evaluating complementary options (leased vs greenfield)
Target Decision made on larger facility investment

Why it matters

This decision will dictate Powell's long-term manufacturing capacity and ability to capitalize on sustained market demand, particularly from data centers.

We are being very thoughtful throughout this process and expect a decision within the next few quarters.

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

Q&A highlights

How should investors think about future order trends and cost management in light of strong Q2 orders and the recent $400M+ data center award?

Management expects strong order outlook to continue, driven by core markets (commercial/industrial, oil & gas, utility). SG&A will trend in upper single digits as % of revenue due to investments in new programs (services, automation, Remsdaq integration, government initiatives). R&D is expected to remain between 1%-1.5% of revenues as new product development ramps up.

“You can expect this to probably hold in that range between 1% and 1.5% as the team ramps up the organic initiatives to develop and commercialize new products.”

asked by Tomohiko Sano · answered by Michael Metcalf

2 min read 6 chapters

Detailed narrative

Strong Order Momentum and Record Backlog

Powell reported $490 million in new orders for Q2 FY26, nearly doubling the prior year and bringing the midyear total to almost $1 billion. This strong activity, including two mega projects exceeding $75 million each (one for data center, one for utility), propelled the backlog to a record $1.8 billion, up 12% sequentially and 33% year-over-year. This backlog provides visibility well into fiscal 2028, with a healthy mix of project sizes to maximize productivity.

Largest Project Award in Company History

Subsequent to quarter end, Powell secured a mega project for the first phase of a new greenfield data center, valued in excess of $400 million. This award, the largest in Powell's history, supports a behind-the-meter design for a multi-phase campus and is expected to have a 2-year burn rate, running through the end of fiscal 2028. The project leverages Powell's multi-division, multi-country execution capabilities.

Strategic Capacity Expansion and Engineering Investment

To support accelerating growth and meet demanding timelines, Powell is prudently adding manufacturing capacity. This includes the ongoing expansion of the Jacintoport facility (a $12M-$13M investment), leasing incremental space near its Ohio facility, and opening a second satellite engineering center in Houston. The company is also evaluating a smaller 50,000 sq ft leased facility for an $8 million investment in fabrication equipment, while continuing assessment of a larger $70M-$100M greenfield facility, with a decision expected in the next few quarters.

Diversified Market Strength and Cyclical Inflection

The company's backlog is well-diversified, with electric utility, oil and gas, and commercial and other industrial markets each accounting for approximately 29-30% of the total. Notable strength was observed in LNG projects, electric utility distribution and generation, and data centers. Management is cautiously optimistic about the petrochemical market entering a cyclical inflection after several years of softness, citing activity in gas-to-chemicals and upward price revisions in polyethylene.

Focus on Government and Defense Markets

Powell has begun investing resources to build a wider funnel of government-related work, including U.S. military and defense applications. This initiative aims to leverage the company's U.S.-centric supply chain and workforce for markets with secular long-term growth drivers and recurring revenue profiles, conducive to expanding its services franchise. The White House's recent designation of substations and switchgear as essential to national defense is seen as a supportive development.

Competitive Landscape and Engineering Efficiency

Despite an increasingly competitive landscape with new entrants, Powell maintains its edge through long-tenured talent, a family approach, and strategic talent acquisition. The company is observing early returns on its thesis of engineering efficiency for large data center projects, which are becoming more product-centric. This efficiency is expected to reduce the engineering burden and allow for better resource allocation across segments.

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