Forgent Power Solutions, Inc. (FPS) Earnings & Analysis

Latest quarter

Forgent reported Q4 FY2026 revenue of $461.7 million, above the $425.6 million consensus. Adjusted earnings per share were $0.25, compared with the consensus of $0.23. The company reported diluted earnings per share of $0.21.

Revenue increased 94.3% from $237.6 million a year earlier. CFO Ryan Fiedler said growth was led by Custom Products and Powertrain Solutions for data center customers. He reported that Powertrain Solutions revenue rose 187% to $147 million, while Custom Products revenue rose 73% to $292 million.

Forgent reported gross margin of 36.1%, up from 33.5% a year earlier, and operating margin of 19.9%, compared with 3.49%. Fiedler said gross profit increased on higher volume and a favorable product mix, while revenue grew faster than operating costs. Free cash flow was $42.6 million, compared with −$48.2 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Gary Niederpruem said fourth-quarter bookings reached $1.5 billion and fiscal year-end backlog reached $3 billion. He said demand came from all three end markets, led by data centers, and that Powertrain Solutions represented approximately 40% of backlog. Customers increasingly want factory-built modular systems, he said, to reduce reliance on field labor and accelerate power delivery.

Niederpruem said Forgent received its first direct order from a frontier AI lab during the quarter and signed an agreement with a hyperscaler. He expects direct orders from both customer types as fiscal 2027 progresses. In the Q&A, he said backlog consisted of firm customer purchase orders, pricing remained consistent with the prior quarter, and Forgent was not seeing meaningful product-order pushouts.

To expand capacity, Niederpruem said Forgent plans a dedicated Powertrain Solutions facility at its Tijuana campus, expected online in Q4 FY2027. He said the facility would increase Powertrain Solutions manufacturing capacity by more than 50%. Asked why Forgent was expanding again, he pointed to demand in its backlog and customer pipeline.

On margins, CFO Ryan Fiedler said higher volumes supported operating leverage. He expected margins to improve through fiscal 2027, following first-quarter investment in people and capacity. Niederpruem said the call’s first-quarter outlook included approximately $10 million of one-time costs that production would not fully absorb until later quarters.

Asked about Powertrain Solutions margins, Niederpruem said third-party equipment in integrated systems can carry lower margins than Forgent’s own content. He also said Forgent would continue adding hundreds of employees each quarter, identifying hiring and training as an execution challenge. On competition, he said Forgent aimed to combine engineering capabilities and manufacturing capacity to win business from incumbents.

Guidance

On October 22, Forgent said it expected Q1 FY2027 revenue and adjusted EBITDA to exceed the high ends of its previously provided ranges. On the September call, those ranges were $445 million to $465 million for revenue and $90 million to $100 million for adjusted EBITDA.

Niederpruem also said Forgent would stop reporting orders and backlog quarterly, while continuing to disclose both annually. He said the company would instead provide rolling guidance for the next quarter’s revenue and adjusted EBITDA.