Power Solutions International

PSIX

Market cap $1.4B

Power Solutions is making a transition from industrial and transportation engine products to the data center market. Revenue growth shows the transition is working, but it's coming with some margin compression.

WOOD DALE, Ill., March 02, 2026 (GLOBE NEWSWIRE) -- Power Solutions International, Inc. (Nasdaq: PSIX), a leader in the design, engineering and manufacture of emissions-certified alternative-fuel and conventional power systems, is pleased to announce that it has acquired MTL Manufacturing & Equipment Inc. (MTL), a metal and steel manufacturing company based in Beloit, Wisconsin in close proximity to PSI's enclosure manufacturing facilities.

Quarter Sales of  $191.2 million , up 33% from a year earlier,

Data center demand lifts Power Solutions International, but the engine lineup skews small, limiting upside. Weichai control plus $309 million purchase commitments raise tariff and conflict risks. PSIX's valuation looks only modestly discounted; hold rating balances tailwinds versus governance concerns.

Gagnon Securities sold 64,770 shares of Power Solutions International in the fourth quarter. The quarter-end position value decreased by $6.36 million due to the sale of the entire position.

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Power Solutions International is deeply undervalued despite robust earnings growth and a strategic pivot toward high-margin data center power systems. PSIX trades at 14x 2025 earnings, a steep discount to peers CMI and GNRC, yet delivers superior revenue growth and an 18% net income margin. Recent results show 62% YoY sales growth and a pristine balance sheet, with $49M cash and significant liquidity.

Power Solutions International is upgraded to a cautious Buy after a significant valuation reset and two consecutive quarters of robust revenue and earnings growth. PSIX's pivot to data center power systems is gaining traction, with management guiding for 45% sales growth in 2025, though gross margin pressure persists. Valuation multiples have contracted from ~4.35x to ~2.4x EV/forward revenue, improving risk-reward and bringing fair value estimates closer to current levels.

AI power demands have been a massive tailwind for Power Solutions International, but the stock is trading like all of those tailwinds have vanished. A low P/E ratio and excellent revenue growth make the decline more confusing.

After a parabolic run and brutal 54% drawdown, Power Solutions now trades like a cyclical industrial despite increasingly structural exposure to AI data centers and resilient power demand. Q3 sales surged 62% YoY and EPS rose 60% YoY, despite a 500 bps gross margin decline driven by mix and ramp-up costs. PSIX is strategically shifting toward higher-margin, data center-focused products, positioning for cyclical resilience and margin recovery.