Forgent (NYSE: FPS) lifts full-year outlook after first-quarter sales jump 69%

What happened

Forgent Power Solutions, Inc. (NYSE: FPS) beat the top of its guidance for fiscal first quarter 2027 and raised its full-year outlook.

Revenue reached $479 million for the quarter ended Sept. 30, up 69% from $283.27 million a year earlier. The company called it the highest quarterly revenue in its history. Forgent had earlier said revenue and Adjusted EBITDA would exceed the high end of their ranges.

Management tied the higher outlook to the quarter's results and to backlog that it says fully covers fiscal 2027 guidance. It credited the beat to strong production ramp execution, which drove higher throughput and better cost absorption.

Key numbers

Metric	Latest	Change	Source
Revenue, fiscal Q1 2027	$479 million	from $283.27 million, +69%	SEC 8-K, Exhibit 99.1
Net income	$55 million	from $15.56 million, +252%	SEC 8-K, Exhibit 99.1
Adjusted EBITDA	$105 million	from $65.10 million, +61%	SEC 8-K, Exhibit 99.1
Adjusted EBITDA margin	21.9%	from 23.0%, -1.1 percentage points	Calculated from SEC 8-K, Exhibit 99.1
Cash flow from operations	$136 million	from $5.94 million, +$130 million	SEC 8-K, Exhibit 99.1
Fiscal 2027 Adjusted EBITDA guidance	$587 to $637 million	from $575 to $625 million (prior guidance), +$12 million at each end	Calculated from SEC 8-K, Exhibit 99.1

Read more: Forgent Power Solutions (FPS) company research

The new fiscal 2027 outlook

Forgent raised every guidance range. Revenue guidance is now $2.45 billion to $2.65 billion, from $2.4 billion to $2.6 billion, a $50 million rise at both ends. Adjusted EBITDA guidance is $587 million to $637 million, up $12 million at each end from $575 million to $625 million.

Adjusted EPS guidance is $1.30 to $1.44, up from $1.26 to $1.40. At the midpoints, the company says the ranges imply year-over-year growth of 80% in revenue, 90% in Adjusted EBITDA and 101% in Adjusted EPS. Adjusted EBITDA and Adjusted EPS are non-GAAP measures.

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Profit grew faster than sales, but margins were mixed

Net income rose 252% to $55 million from $15.56 million. Net income margin rose to 11.5% from 5.5%. The company said higher gross profit drove the gain, partly offset by higher selling, general and administrative costs. Gross profit was $158.28 million, up from $97.95 million.

Adjusted EBITDA grew more slowly than sales. It rose 61% to $105 million from $65.10 million. Its margin slipped to 21.9% from 23.0%, a drop of 1.1 percentage points. Forgent said the margin still beat its own expectations because of higher throughput and better cost absorption.

By OptimistFi's calculation, gross profit was 33.1% of revenue, down from 34.6% a year earlier. Diluted EPS was $0.18 and Adjusted EPS was $0.24. Adjusted EPS is reported only for the current quarter, because the year-earlier period came before the company's IPO and related reorganization.

Cash flow got a timing lift

Cash flow from operations was $136 million, up $130 million from the year-earlier quarter. Forgent said the figure benefited from higher earnings and favorable timing of customer deposits and milestone payments.

The cash flow statement shows deferred revenue added $159.41 million, while inventory absorbed $98.80 million. The company described the inventory build as planned investment to support the production ramp.

Capital expenditures were $32 million. Cash and equivalents stood at $199.92 million on Sept. 30, up from $97.48 million on June 30.

Why it matters

OptimistFi has argued that Forgent wins engineered-to-order work with short lead times and turns backlog into high-margin revenue and cash. The quarter supports the conversion half of that view. Sales and profit rose sharply and every full-year range went up.

Holders should look closely at the margin and the cash. Adjusted EBITDA margin fell while sales jumped. Part of the cash gain came from the timing of customer deposits and milestone payments, not earnings alone.

Management points to that gap. It says much of its new manufacturing capacity is online and the next phase is turning scale into operating leverage. It expects meaningful margin expansion over the next several years. Amy Ard, newly promoted to chief financial officer, is to focus on margins, working capital and cash flow.

What's next

The next test is Forgent's fiscal second quarter 2027 report. An Adjusted EBITDA margin above this quarter's would support management's operating-leverage argument. Another slip as revenue grows would weaken it. Operating cash flow without the deposit and milestone timing lift would show how much of this quarter's cash was durable.

The CEO also said Forgent expects orders from multiple frontier AI labs and hyperscalers to build through fiscal 2027 and into fiscal 2028. He said the company is winning these customers through its direct sales strategy.

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