Best Smidcap Ideas: Picks & Shovels Data Center Winner

Research evidence excerpt

Best Smidcap Ideas: Picks & Shovels Data Center Winner

TD Cowen Forgent Power Solutions

Global Research June 22, 2026

With our latest checks pointing to continued record data center demand strength which limits

NT valuation risk in our view, we are raising our PT to $73.

What Is Underappreciated Or Misunderstood?

Forgent's stock price performance is a function of NT earnings revisions (proxied by bookings)

and valuation. We believe that investors underappreciate the magnitude of near-term demand,

thus the recurrence of bookings strength, and the stock's valuation on a growth-adjusted basis.

To that point, it is important to contextualize the demand backdrop to understand the NT

bookings and earnings upside. We first noted a significant uptick in data center leasing strength

in CY3Q25 with ~7.4GW of U.S. data center leasing. Given the approximate one quarter lag in

MEP procurement following a signed lease, we saw leasing strength translate into bookings

strength in C4Q25 with Vertiv reporting TTM organic bookings growth of ~81% Y/Y to $8.4B and

Forgent report bookings growth of ~268% Y/Y to $762MM. We most recently observed a similar

dynamic, with our C1Q26 channel checks indicating another record ~9.4GW of U.S. HSP/AI lab

data center leasing, representing a ~5x Y/Y increase, with a record forward pipeline of ~11.0GW

potentially landing in CY2Q26/3Q26. Against this backdrop, we see a similar setup to year-end

2025, and anticipate the C1Q26 record U.S. data center leasing to drive Forgent's bookings

strength from FY4Q26 onwards. As we further highlighted in our most recent takeaways from

Datacloud in June, U.S. Hyperscaler/AI lab data center demand remains at record levels, and

we are seeing a broadening internationally. Accordingly, we expect the continued data center