Forgent Power Solutions shares plunge despite record first-quarter revenue
Key Facts
The company said revenue and Adjusted EBITDA exceeded the high end of their previously issued ranges and announced it was raising its fiscal 2027 outlook. Management attributed the outperformance to strong execution in ramping production, improving productivity and enhancing cost absorption. Diluted earnings per share were $0.18, while adjusted earnings per share were $0.24. The results put revenue growth and the higher outlook at the forefront of the report, while the company’s statement does not establish the reason for the stock’s move.
The financial figures showed an improvement in operating cash alongside business growth. Cash flow from operations rose $130 million year over year to $136 million in the first quarter. The company said improved earnings contributed to the increase, along with favorable timing of customer deposits and milestone payments. Capital expenditures totaled $32 million during the period. Management said planned investment in working capital, particularly inventory, is continuing to support the production ramp. These expenses link the operational expansion described by the company with its need to prepare production.
Chief Executive Gary Niederpruem said strong customer demand and execution of the production ramp bolster confidence in the raised outlook. He added that the company expects orders from advanced AI labs and hyperscale computing operators to grow during 2027 and continue growing into 2028. The company based its updated guidance on its backlog, expected production schedules, current business conditions and other factors. It said its backlog fully covers fiscal 2027 guidance. This visibility into demand and production provides a framework for the company’s outlook, while management links improved results to commercial and operational execution. The CEO quoted key customers as saying, "We expect orders from these customers to increase during fiscal 2027 and extend into fiscal 2028."
The results follow a strong fourth fiscal quarter in 2026, when the company posted revenue of $462 million, up 94% year over year, and orders worth $1.5 billion. As of June 30, 2026, its backlog stood at $3.0 billion, up 256% from June 30, 2025, and 53% from March 31, 2026. The CEO at the time said fourth-quarter orders exceeded $1.5 billion, a figure greater than full-year fiscal revenue. These figures provide context for the demand growth the company points to in its new outlook. They relate to earlier periods, however, while the current announcement centers on the first fiscal quarter ended September 30, 2026.
The company had announced a $35 million investment to expand manufacturing capacity at its campus in Tijuana, Mexico. It expects the expansion to enter service in the fourth quarter of fiscal 2027. The company said the project will raise total revenue capacity to about $5.8 billion. The expansion is part of the operational backdrop to the production ramp that management said improved productivity and cost absorption in the first quarter. As the next step in the announcement schedule, the company set a call to discuss results and guidance for November 12, 2026, at 11 a.m. Eastern time.