Eaton Corporation plc

(New York Stock Exchange)
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Bullish +65

Forgent vs. Eaton: Which Data Center Power Stock Is the Better Buy?

Acquisition Capacity expansion Company update AI-generated analysis

πŸ“Š Eaton Corporation reported a total Electrical backlog 43% higher than a year ago, with data-center revenues in Electrical Americas rising approximately 65% in the second quarter.

🏭 Eaton plans to invest about $3 billion in R&D over the next decade and is acquiring COL Group for roughly $923 million to add medium-voltage technology in Europe.

πŸ“ˆ Forgent Power Solutions ended fiscal 2026 with a record $3 billion backlog, which covers more than 90% of its fiscal 2027 revenue guidance of $2.4-$2.6 billion.

⚑ Forgent's data-center revenues grew 161% in fiscal 2026, significantly outpacing the estimated market growth of 37%, driven by orders from frontier AI labs and hyperscalers.

πŸ’° Forgent is guiding to adjusted EPS of $1.26-$1.40 for fiscal 2027, implying a 95% increase compared to the prior year, while targeting adjusted EBITDA between $575 million and $625 million.

πŸ›‘οΈ Eaton maintains a diversified revenue stream serving utilities, commercial aerospace, defense, and industrial customers, which cushions performance if any single market slows down.

πŸš€ Forgent is gaining market share with grid revenues growing 69% against an estimated market growth of only 10%, aided by vertical integration and short lead times.

πŸ“‰ Both stocks have slipped over the past six months, with Eaton down 4.4% and Forgent down 7.4%, presenting a buying opportunity for investors seeking exposure to the AI infrastructure build-out.

πŸ† The article recommends Forgent as the better buy due to its higher upside potential and Zacks Rank #1 status compared to Eaton's Rank #2, despite execution risks for the smaller company.

Bullish Signals
  • Eaton Corporation reported a total Electrical backlog 43% above a year earlier, indicating sustained demand from data center and utility customers.
  • Data-center revenues in Eaton's Electrical Americas segment rose approximately 65% in the second quarter, reflecting strong growth in its core high-growth market.
  • Eaton plans to invest about $3 billion in research and development over the next decade to support its expansion into new technologies and markets.
  • The acquisition of COL Group for roughly $923 million will add medium-voltage technology and manufacturing capacity in Europe, diversifying Eaton's global footprint.
  • Management expects organic growth of 11-13% for 2026 with segment margins targeting 24.1-24.5%, demonstrating confidence in maintaining profitability during expansion.
  • Eaton serves a diversified portfolio including utilities, commercial aerospace, and defense, reducing reliance on the volatile AI data center theme alone.
  • The planned separation of its Mobility business is expected to sharpen focus on higher-growth Electrical and Aerospace operations by early 2027.
  • Eaton's total U.S. data-center backlog has reached 307 gigawatts, providing a long runway for deliveries extending into 2028 and beyond.
Risk Factors
  • Both Eaton and Forgent stocks have slipped over the past six months, with Eaton down 4.4%, potentially reflecting broader market headwinds or sector rotation pressures.
Full Analysis
The AI data center boom has highlighted electrical equipment makers, specifically Eaton Corporation (ETN) and Forgent Power Solutions (FPS), which compete in transformers and modular power systems. While both stocks have slipped recently, the article compares their investment cases based on growth trajectories, backlog visibility, and diversification. Eaton is characterized as a larger, diversified player with a long runway, whereas Forgent is a newer specialist offering faster growth rates. Eaton Corporation reports strong demand signals with its total Electrical backlog up 43% year-over-year and data-center revenues in Electrical Americas rising 65% in the second quarter. The company plans to invest approximately $3 billion in R&D over the next decade and is executing a major acquisition of COL Group for roughly $923 million to expand European capacity. Management forecasts organic growth of 11-13% for 2026, with segment margins targeting 24.1-24.5% and adjusted EPS between $13.40 and $13.60. Forgent Power Solutions distinguishes itself through exceptional backlog visibility and rapid revenue expansion driven by AI data center demand. The company ended fiscal 2026 with a record $3 billion backlog, covering over 90% of its fiscal 2027 revenue guidance, which implies roughly 76% growth at the midpoint. Data-center revenues surged 161% in fiscal 2026, and the firm is guiding for adjusted EPS of $1.26-$1.40 in fiscal 2027, representing a 95% increase from the prior year. The analysis concludes that while Eaton remains a solid buy due to its diversification across utilities, aerospace, and defense, Forgent offers more upside potential with higher growth rates and a Zacks Rank #1 rating. The primary risk identified for Forgent is execution, but its clear visibility into future sales and faster growth profile makes it the preferred pick in this comparison against Eaton's steady expansion.