Is Forgent Power Solutions’ Next Big Thing Already Here

Forgent Power Solutions (FPS) stock gained 25% over the month through October 6, 2026, compared with a 1.3% return for the S&P 500. The company manufactures electrical equipment for data centers and the power grid. Investors may be betting on a group of customers that the company has barely sold to directly. Management itself describes that business as largely untapped. So who are these customers, and have they started ordering?

Which Buyers Has Forgent Barely Sold To?

These buyers are hyperscalers, the companies that build the largest data centers, and the labs that develop AI models. While Forgent already sells equipment for data centers, it has barely sold to these two groups directly.

The first proof arrived in fiscal Q4 2026, the quarter that ended on June 30. During that period, Forgent received its first direct order from an AI lab. The company also signed a master agreement with a hyperscaler, establishing a contract that sets terms for later orders.

These initial steps signal that new customers have arrived, although one order and a single agreement represent a start and not yet a business. Yet Forgent was seeing fast data center sales growth even with those buyers largely untapped. During the fiscal Q4 2026 call, management noted that data center revenue grew 161% in fiscal 2026. Executives placed that at roughly four times the broader market's growth, which they estimated at about 37%.

Forgent Ended Fiscal 2026 With A $3 Billion Backlog

Forgent's backlog, representing orders the company has taken but still needs to deliver, stood at $3 billion when fiscal 2026 ended. That figure was up 256% from a year earlier.

Management is forecasting sales well above current levels. Forgent reported revenue of $1.42 billion for fiscal 2026. Looking ahead, management guided fiscal 2027 revenue to a range of $2.4 billion to $2.6 billion, stating that this represents 76% growth at the midpoint. Executives also described hyperscalers and AI labs as a significant organic growth opportunity over the next two years.

Investors appear to have priced much of that anticipated growth into the stock. Forgent currently trades at 130.8 times earnings, against 21.5 for the S&P 500. Yet even after the past month's gain, the stock remains 41% below its 52-week high of $66. This suggests some of the earlier optimism appears to have come out of the price.

Can Forgent Deliver What It Has Sold?

Forgent has built the factory space, and management said it nearly doubled its workforce over twelve months, to about 3,500 from roughly 1,800. It expects to keep adding hundreds of employees every quarter in fiscal 2027. Across fiscal 2025 and 2026, the company expanded its plants from roughly 480,000 square feet to 2.3 million. Management called talent a known constraint across the industry, particularly in manufacturing and engineering, but said workforce constraints have not limited Forgent's growth.

More space is on the way as well. A new plant in Tijuana, Mexico, is expected to open in fiscal Q4 2027. Management said this facility will lift revenue capacity by about $800 million, bringing the total to about $5.8 billion.

During the fiscal Q4 2026 call, Forgent was asked whether the backlog remains as solid now that new kinds of customers are in it. Management responded that every entry is a firm purchase order, with no letters of intent. Investors will get fewer updates on that backlog going forward, however. Management announced it will report orders and backlog annually instead of every quarter, explaining that larger orders have made the quarterly figures less representative.

As a result, revenue will become the way to track deliveries. Management guided revenue of $445 million to $465 million for fiscal Q1 2027, compared with the $462 million it reported for fiscal Q4 2026. The midpoint, $455 million, sits slightly below fourth-quarter revenue. Management said a significant portion of the backlog is scheduled for delivery in the following three quarters, which would need to average about $682 million each to reach the full-year midpoint. Fiscal Q1 has now ended, with results still to come. Revenue coming in above the top of the guided range would indicate that Forgent is turning its orders into sales faster than it planned.

How To Act On FPS?

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