Forgent Power Solutions builds the electrical distribution equipment that moves power from generation to the last rack in an AI data center, and the company has just listed on the New York Stock Exchange after nearly seven years of compounding growth under private equity ownership. The listing, completed in February 2026, was immediately followed by a follow-on offering in March that together raised over 800 million for the sponsor entities and converted the Up-C holding company from a sponsor-controlled vehicle into a public equity.
The quarter that just closed, the first full quarter as a public company, is the clearest evidence of the growth engine. Revenue of 378.7 million was up 103 percent year over year. Adjusted EBITDA of 84.7 million was up 96 percent. The company is a single reportable segment, which means the growth is concentrated in one business, but the underlying demand drivers, data center construction, grid upgrades, and industrial reshoring, are independent enough that the revenue base is not tied to a single end market.
The open question is whether the capacity ramp, the tax receivable agreement overhang, and the sponsor's continuing stake can all be managed through a public-company cost structure that is still being built.
Forgent Power Solutions designs and manufactures electrical distribution equipment for data centers, the power grid, and energy-intensive industrial facilities. The product line spans automatic transfer switches, dry type transformers, liquid filled transformers, switchgear, panelboards, power distribution units, power skids, remote power panels, switchboards, generator connection cabinets, tap boxes, and electrical houses. The company operates as a single reportable segment, which means management reviews all of these products as one business and does not publish a revenue split by product category or end market.
The competitive position is that of a vertically integrated, engineered-to-order manufacturer in a capacity-constrained industry. The company's own disclosure states that it is more vertically integrated than many of its competitors, meaning it manufactures in-house components such as medium voltage switchgear and transformers that competitors have to purchase. That vertical integration is the core strategic advantage: when industry-wide capacity is tight, a company that makes its own components can keep shipping while competitors wait for purchased parts. The manufacturing campuses are located in Minnesota, Texas, Maryland, California, and Mexico.
The demand drivers are structural rather than cyclical. Data center construction for AI workloads is the largest single driver, and the company's disclosure explicitly names AI as a catalyst. Grid and transmission and distribution upgrades are the second driver, driven by utilities responding to rising load growth. Industrial reshoring is the third, as manufacturers bring production back to the United States to secure supply chains and mitigate tariff risk. Each of these is a multi-year buildout, not a one-year spike, and each one requires electrical distribution equipment that is purchased per facility and rarely replaced during the useful life of the equipment.
The strategic implication for shareholders is that the company sits at a point in the supply chain where demand is non-discretionary. A data center that is built but lacks power distribution equipment does not operate. A factory that reshores but cannot distribute electricity safely cannot run production. The purchase is a prerequisite for the asset to function, which gives the company pricing power that pure commodity manufacturers do not have. The risk is that the company's growth is concentrated in a small number of large, well-capitalized customers in the data center and grid sectors, and a pause in any one of those buildouts would be visible in the quarterly print within one or two reporting periods.
The core product categories are electrical distribution equipment designed for technically demanding applications. Custom Products are engineered-to-order for a specific project or application, involve significant consultation between the company's in-house engineering team and the customer, and are typically produced in small quantities. Powertrain Solutions are combinations of Custom Products that are integrated, skidded, or designed to work together as a system. Standard Products leverage common designs suitable for basic applications and are manufactured in large quantities. The margin structure follows this hierarchy: Custom Products and Powertrain Solutions carry the highest margins because the engineering content and project specificity reduce price competition, while Standard Products compete more on volume and price.
The moat is the combination of vertical integration and project-specific engineering. The company manufactures medium voltage switchgear and transformers in-house, which are components that many competitors have to purchase from third parties. In a capacity-constrained market, that in-house capability is a direct supply-chain advantage: Forgent can keep producing when a competitor's purchased component is on a six-month lead time. The engineering depth compounds over time because each Custom Product project generates design data that informs the next project, and the company's engineering team builds institutional knowledge of the specific power quality, thermal management, and integration requirements of data center and grid applications that is difficult for a new entrant to replicate quickly.
The product line breadth is itself a barrier. A data center build requires multiple different types of electrical distribution equipment, from the main switchgear at the utility connection point through the remote power panels and power distribution units at the rack level. A supplier that can provide several of those categories from a single source reduces the integration risk for the customer and creates a sticky, multi-product relationship. Forgent's line covers the full range from the substation to the last rack, and the company's disclosure emphasizes that it serves the data center, grid, and industrial end markets with the same core product family.
The commissioning and maintenance services layer adds a recurring revenue component that is not directly tied to new construction. On-site commissioning is required to bring installed equipment into service, and maintenance contracts extend the relationship beyond the initial sale. That service layer is small relative to product revenue today, but it provides a revenue floor that is less sensitive to construction cyclicality than the product business.
The first full quarter as a public company, ended March 31, 2026, is the defining datapoint. Revenue of 378.7 million was up 103 percent from the prior-year quarter. The increase was driven by higher sales of Custom Products and Powertrain Solutions, attributed to growing demand across the data center and grid customer base and by new manufacturing campuses that commenced production during the fiscal year. Gross margin was 34.6 percent, which the company attributed to under-absorbed labor costs from accelerated headcount growth, under-absorbed fixed overhead from new campuses ramping toward target production rates, and one-time startup costs at those new campuses.
Operating expense in selling, general, and administrative costs was up 145 percent year over year, driven by headcount growth, sales and marketing expansion, professional services, IT costs, and IPO-related bonuses. Operating income was 39.3 million. Net income attributable to Forgent Power Solutions was 18.3 million, a 166 percent increase that shows the quarter's top-line growth converting into bottom-line earnings rather than stalling at the gross-margin line. Depreciation and amortization was essentially flat with the prior-year quarter, because amortization of acquisition-related intangibles declined as backlog intangibles from prior acquisitions became fully amortized, while depreciation on new property and equipment rose.
The nine-month picture shows the full-year trajectory. Revenue of 958.4 million was up 86 percent from the prior-year period. Adjusted EBITDA was 210.2 million, a significant step up from the prior-year figure. The non-GAAP bridge added back 18.8 million of sponsor fees and 21.0 million of public company readiness costs, with smaller items for earnout expenses and non-recurring integration fees. The sponsor fees are a continuing cost of the Up-C structure that persists until the sponsor's economic interest is fully converted, while the readiness costs are one-time items tied to the listing.
The balance sheet shows the capital structure after the IPO and follow-on. Total assets were 1,853.3 million. Cash and cash equivalents stood at 93.8 million, down from the prior fiscal year end as working capital absorbed the revenue growth. Accounts receivable and inventory both rose, the two line items funding the revenue growth. Long-term debt was 578.1 million, representing the 2025 Term Loan Facility less amortization and a small discount at issuance. The Tax Receivable Agreement liability of 207.3 million sits below the debt line as a contingent obligation that is paid over time as the company generates taxable income. Cash flow from operations for the nine months was 35.2 million, a decline from the prior-year period, because heavy cash use for accounts receivable growth and inventory build only partly offset by accounts payable growth. Capital expenditure was 84.6 million, nearly double the prior-year run rate, as the company funds the capacity expansion that management expects to complete by the end of the fiscal year.
The capacity expansion is the largest execution item. The company has five manufacturing campuses across Minnesota, Texas, Maryland, California, and Mexico, and new campuses commenced production during the current fiscal year. Capital expenditure of 84.6 million in the nine-month period, nearly double the prior-year run rate, reflects the buildout. Management has stated that the expansion is expected to be complete by the end of fiscal 2026. The execution risk is that the ramp at new campuses is slower than planned, which would extend the period of under-absorbed fixed overhead and depress gross margins for longer than the one-time startup cost line in the current quarter suggests.
The tax receivable agreement is the second major execution variable. The TRA obligates the company to pay the continuing equity owners 85 percent of the tax benefits realized from the Up-C structure. The recognized liability of 207.3 million as of the most recent quarter end is contingent on the company generating sufficient future taxable income to use the related tax attributes. The company has concluded that it is probable that it generates that income, based on its projections of revenue growth and operating margins. The execution risk is that if growth slows and the company cannot generate the projected taxable income, the TRA liability would be de-recognized, which would be a positive for the balance sheet but a negative signal about the growth trajectory.
The sponsor overhang is the third execution variable. Forgent Power Solutions holds 60.3 million shares of Class B common stock, which carry voting rights but no economic rights, and the continuing equity owners hold the remaining 19.8 percent of Opco's economic interests through the Up-C structure. The sponsor, Neos Partners, holds a significant influence over the company, and the company is a controlled company under Nasdaq and NYSE rules, which exempts it from certain corporate governance requirements including the requirement for a majority independent board. The execution risk is that the sponsor's incentives, which are aligned with the economic conversion of the remaining 19.8 percent, may diverge from the interests of Class A common stock holders over time, particularly if the sponsor seeks to accelerate the conversion through additional equity offerings.
The fourth execution variable is the public company cost structure. The company incurred 21.0 million of public company readiness costs in the nine-month period, and the 78.5 million of SG&A in the latest quarter includes ongoing public company costs: D and O insurance, SEC compliance, transfer agent fees, and additional accounting and legal personnel. Those costs are structural and do not reverse. The execution risk is that the public company cost base grows faster than the revenue base if the growth rate moderates, which would compress operating margins even as revenue continues to grow.
The bear case runs on three legs. The first is a data center construction pause. If the hyperscalers and neoclouds slow their buildout plans for 2027, the data center end market, which the company's disclosure identifies as a significant portion of revenue, decelerates. Because the company operates as a single reportable segment, a data center slowdown would show up directly in consolidated revenue without a segment-level offset from the grid or industrial business. The second leg is a capacity ramp slip. If the new campuses in Texas or other locations take longer to reach target production rates, the under-absorbed fixed overhead that depressed the 34.6 percent gross margin in the latest quarter would persist for additional quarters, and the one-time startup costs that management expects to roll off would not. The third leg is a sponsor conversion event. If the sponsor accelerates the conversion of the remaining 19.8 percent of Opco economic interests through a secondary offering, the Class A stock would absorb additional dilution, and the TRA liability, which is currently 207.3 million, would grow in proportion to the additional tax attributes generated.
In a bear scenario, the revenue growth rate normalizes from 103 percent in the latest quarter to the mid-to-high single digits within two to three quarters. The gross margin, already compressed by under-absorption, stays in the low-to-mid 30 percent range rather than recovering toward the high 30s or low 40s that the capacity-constrained industry would support. Adjusted EBITDA growth decelerates to the low double digits. The stock, currently at 30.99, would re-rate toward the high single-digit multiple on forward earnings that the market applied to cyclical industrial names in the prior downcycle. The downside is bounded by the balance sheet: the company holds meaningful cash against its net debt load and can service its obligations through a 12-month demand pause, and the undrawn revolving facility provides additional liquidity.
The most important mitigant is the diversification of the end market demand. Even if data center construction slows, the grid and industrial buildouts are driven by independent demand drivers: utility capital expenditure plans that are set years in advance by state public utility commissions, and industrial reshoring that is driven by tariff policy and supply chain risk rather than by AI capital expenditure. The company's vertical integration in medium voltage switchgear and transformers is a second mitigant: when the industry is capacity constrained, Forgent's in-house components keep the production lines running while competitors wait for purchased parts, which preserves market share in the tightest market conditions.
The risk that matters most to the thesis is not a demand shock but a margin structure one. The 34.6 percent gross margin in the latest quarter is the product of a company that is spending heavily to build capacity while also absorbing the public company cost structure. The question is whether that margin is a temporary trough that reverses as the new campuses ramp, or a new equilibrium that reflects the permanent cost of being a public company with a sponsor overhang and a TRA. The next two quarterly prints, which cover the second and third quarters of fiscal 2026, are the test.
The valuation anchor is the Adjusted EBITDA bridge from the private company era to the public one. On a nine-month annualized basis, Adjusted EBITDA of 210.2 million implies a full-year run rate of approximately 280 million if the second half mirrors the first. The latest quarter's Adjusted EBITDA of 84.7 million, annualized, implies a run rate of 339 million, which reflects the sequential acceleration in the first full quarter as a public company. A reasonable full-year fiscal 2026 Adjusted EBITDA estimate is in the low to mid 300 million range, depending on how quickly the new campuses clear their startup costs.
Against that, the multiple framework has three reference points. The first is the company's own implied valuation at the IPO and follow-on. The IPO priced at 27.00 per share and the follow-on at 29.50 per share, in an offering that cleared both prices without difficulty. Those prices imply an entry multiple in the high single digits at the IPO and in the low double digits at the follow-on. The second reference point is the electrical equipment peer set, where companies with similar growth profiles and vertical integration have traded at 12 to 18 times Adjusted EBITDA in growth phases. The third is the broader industrial group, which the AI infrastructure cycle has pushed to the upper end of that range for leaders with visible, non-discretionary demand.
The quantified scenarios are applied to a full-year fiscal 2026 Adjusted EBITDA estimate of 315 million, the midpoint of the range. The bear case, where the data center construction pace moderates and the capacity ramp slips, carries fiscal 2027 Adjusted EBITDA growth in the low single digits and a multiple reset toward 10 times, which prices the enterprise at a meaningful discount to the current level. The base case, where the gross margin recovers toward the high 30s as the new campuses clear their startup costs and the data center buildout continues at the current pace, supports a multiple in the mid-teens on higher EBITDA. The equity value in that case is in the mid to high 30s per share range, modestly above the current 30.99 price. The bull case, where the grid and industrial buildouts accelerate alongside the data center cycle and the company's vertical integration drives market share gains in a tightening supply environment, carries the multiple toward 18 times and fiscal 2027 EBITDA growth in the mid-teens. The equity value in that scenario is in the low 50s per share range.
The framework conclusion is that the stock is priced near the base case, with the TRA overhang and the sponsor stake as the two items that separate the current price from the bull case. The TRA liability of 207.3 million is a real claim on future cash flow that the market has not fully discounted, because the TRA payments are contingent on taxable income and therefore do not show up in the debt covenant calculations. The sponsor's 19.8 percent economic stake, combined with the 60.3 million Class B voting shares, means the sponsor can influence the pace of the Up-C conversion, and the market should price in the dilution optionality that creates. The 16.9 times book value at the current price reflects the intangible asset base, which includes substantial goodwill and other intangibles from prior acquisitions, and that multiple is not a meaningful valuation signal for a company whose value is in its capacity and customer relationships rather than in its book equity.
The quarter that matters is the one that just closed. Forgent Power Solutions delivered 378.7 million in revenue, up 103 percent year over year. Adjusted EBITDA rose 96 percent in the same period. The nine-month Adjusted EBITDA of 210.2 million, up 66 percent, confirms that the growth is not a one-quarter event but a multi-quarter buildout that is already well under way. The company is the purest public equity exposure to the electrical distribution equipment layer of the AI infrastructure buildout, and the single-segment structure means that the growth is concentrated and visible in a way that a diversified industrial name would not provide.
The named events of the cycle each carry weight. The IPO, completed in early February 2026 at 27.00 per share, converted the company from a sponsor-controlled private entity into a public holding company and established the Up-C structure that now carries the TRA overhang. The follow-on offering in late March 2026 added roughly 11 million shares to the Class A base, priced slightly above the IPO and funded the purchase of additional Opco LLC interests from the sponsor, reducing the sponsor's economic stake while adding to the public float. The December 2025 refinancing of the prior credit agreement into a new senior facility extended the debt maturity profile by seven years and lowered the interest rate, which reduced the annual interest expense from the prior-year run rate and freed up cash flow for the capacity expansion. The capacity expansion itself, with a near doubling of capital expenditure in the nine-month period, is the commitment that makes the next growth step possible, and the under-absorbed overhead in the latest quarter is the cost of that commitment.
The counterargument deserves direct treatment: the 34.6 percent gross margin is well below the level the capacity-constrained industry should support, the 207.3 million TRA liability is a real claim on future cash flow, and the sponsor's continuing stake means the Class A stock is not the sole economic owner of the business. The response is that the gross margin compression is a one-time ramp cost that should reverse as the new campuses clear their startup period, and the next two prints are the test of that claim. The TRA is contingent on taxable income, so it is a claim that only materializes if the company is successful, which aligns the TRA payments with the scenario in which the stock is doing well. The sponsor stake is real but bounded: the 19.8 percent economic interest is the maximum dilution, and the Class B voting shares do not carry economic rights, so the sponsor cannot extract cash flow from the company.
The judgment is that Forgent Power Solutions is fairly valued at the current price for the base case, with the TRA overhang and the sponsor conversion optionality as the two items that keep the stock from reaching the bull case multiple. The items to watch over the next twelve months, in order of importance, are the gross margin trajectory as the new campuses ramp, the data center construction pace as disclosed in the hyperscaler capital expenditure plans, the sponsor's next move on the Up-C conversion, the TRA liability balance as the company generates taxable income, and the completion of the capacity expansion at the end of fiscal 2026. The thesis is a growth-structure story with a margin clock, and the next two prints are the test.