Power Solutions Lifts Second-Half Sales Outlook
Sequential sales rose 32.5% to $202.1 million as the company now expects second-half 2026 sales to exceed a year earlier.
Power Solutions International (PSIX), a maker of emission-certified engines and power systems, raised its second-half 2026 net sales outlook to exceed second-half 2025 results after a sequential increase in net sales, reversing a prior expectation that the two halves would be approximately in line.
Net sales for the quarter ended September 30, 2026 were $202.1 million, up 32.5% from $152.5 million in the second quarter, following an 18.6% sequential increase from $128.6 million in the first quarter. Year over year, sales were down 1% from $203.8 million a year earlier.
Chief Executive Officer Richard Hu said larger Power Systems orders moving into production underpinned the higher outlook, although shipment timing and quarterly results may vary. The company previously had expected second-half 2026 net sales to be approximately in line with the year-earlier period.
Gross margin expanded 580 basis points to 29.7% from 23.9% in the third quarter of 2025. The company said the year-over-year increase primarily reflected operational improvement initiatives at its Wisconsin operations, which reduced elevated production costs tied to capacity ramp-up for data center-related applications, and a $3.8 million tariff refund recognized as a reduction in cost of sales that contributed about 188 basis points. Unfavorable product mix from lower oil and gas sales partially offset those gains. Sequentially, gross margin improved about 260 basis points from 27.1% in the second quarter.
Operating income reached a record $40.9 million, up 44.2% from $28.4 million a year earlier, and operating margin expanded to 20.2% from 13.9%. EBITDA was a record $42.7 million, or 21.1% of net sales, compared with $29.8 million, or 14.6%, a year earlier.
Net income was $29.9 million, or $1.30 a share, up 8% from $27.6 million, or $1.20 a share, in the third quarter of 2025. The prior-year quarter included a $7.0 million, or $0.30 a share, tax benefit from the release of a valuation allowance on deferred tax assets. Sequentially, net income grew 77.5% from $16.9 million in the second quarter of 2026.
Power systems sales fell $6.2 million and transportation sales $1.1 million year over year, while industrial sales rose $5.6 million. The company said power systems declined primarily on softness in oil and gas demand, partially offset by higher sales of data center-related products. It continues to see strong demand for data center power solutions, though it is not predicting a specific level of data center revenue in any future period.
Operating cash flow was $40.9 million in the third quarter, compared with $3.3 million in the year-earlier period. Cash and cash equivalents were about $72.0 million and total debt about $37.7 million as of September 30, 2026, producing a net cash position of about $34.3 million versus net debt of about $55.3 million at the start of the year. Total debt had been about $72.6 million at June 30, 2026.
The company closed a new $220.0 million committed revolving credit facility on September 25, 2026, maturing September 25, 2029, with a borrowing spread 80 basis points lower than the prior facility. Chief Financial Officer Kenneth Li said the facility provides liquidity to fund working capital and capacity investments as larger Power Systems orders move through production.
Apart from the expected non-recurrence of the $3.8 million tariff refund, the company expects fourth-quarter 2026 gross margin to be modestly lower than in the third quarter, citing less favorable product mix as data center products generally carry lower gross margins than oil and gas products. It does not expect the third-quarter gross margin level, which included the refund, to be sustained in the fourth quarter. Softness in oil and gas demand is expected to continue, offset by higher sales of data center products. The company is not providing formal full-year guidance and expects to provide additional perspective on 2027 with its fourth-quarter results.
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