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    POWL
    Earnings call· Mar 2026(Q2 FY26)

    POWELL INDUSTRIES Q2 FY26 earnings call POWL

    May 5, 2026 Source

    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

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

    Segment performance

    7
    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%——

    Operational metrics

    8
    Revenue growth
    +6%YoY
    Q2 FY26

    Total revenue of $297 million compared to $279 million.

    Gross profit margin
    29.6%down 30 bps YoY, up 120 bps QoQ
    Q2 FY26

    Gross profit increased by $5 million to $88 million.

    SG&A expenses
    $26Mup $4M YoY
    Q2 FY26

    Primarily driven by higher compensation expenses across the business.

    Diluted EPS
    $1.25vs $1.27 in Q2 FY25
    Q2 FY26

    Net income of $45.9 million compared to $46.3 million.

    Capital expenditures
    $1.8M
    Q2 FY26
    Cash and short-term investments
    $545Mvs $476M at Sep 30, 2025 and $501M at Dec 31, 2025
    as of March 31, 2026

    The company does not hold any debt.

    Total debt
    $0
    as of March 31, 2026

    The company does not hold any debt.

    R&D expense as % of revenue
    1.4%
    Q2 FY26

    R&D is trending higher. We view that as a favorable attribute.

    Industry KPIs

    6
    MetricValueDetails
    Book to bill ratio1.7xratio
    Orders bookings growth$490MUSD
    M a acquisition contribution—
    Backlog by segment end market$1.8BUSD
    Data center exposure pipelinein excess of $400MUSD
    Incremental flow through margin—

    Orderbook & backlog

    3
    Total Backlog$1.8BMarch 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$490MQ2 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 $400Mearly 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

    1
    RemsdaqComplementary 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

    4
    Jacintoport fabrication yard expansionprogressing 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 campusevaluating$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-outunder 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

    2
    Petrochemical market softnessover 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 growthmoving 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

    4

    Greenfield facility expansion decision

    Next few quarters
    CurrentUnder assessment, evaluating complementary options (leased vs greenfield)
    TargetDecision 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⏳.

    Q&A highlights

    6

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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⏳.

    04

    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.

    05

    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.

    06

    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.

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