Jim Cramer: Power Solutions' 50% drop is a 'terrific entry point' for data center play

"Management has identified the key drivers and is executing specific actions to improve supply chain performance and manufacturing cost structures. We are beginning to see measurable improvements, which we expect to build and support margin expansion over time."

"The company reported Q4 2025 revenue of $191.2 million, beating consensus estimates by nearly 20%. Full-year 2025 results were genuinely impressive: annual revenue of $722.4 million, up 51.78% year-over-year, with net income climbing 64.53% to $113.99 million."

"PSIX traded as high as $121.78 on a 52-week basis and has since fallen to $55.74, with a 35.79% decline over just the past month alone. But Q4 gross margins told a different story. Gross margin compressed to 21.9% from 29.9% the prior year."

Power Solutions International experienced a sharp stock decline despite strong financial performance. Q4 2025 revenue of $191.2 million beat consensus by nearly 20%, and full-year 2025 revenue reached $722.4 million with 51.78% year-over-year growth and 64.53% net income increase. However, Q4 gross margins compressed to 21.9% from 29.9% due to manufacturing capacity expansion for high-demand data center backup power products. A going concern warning from auditor BDO and a securities investigation announcement triggered the selloff. Management addressed concerns by expanding credit facilities to $135 million and acquiring MTL Manufacturing for vertical integration. The margin compression reflects scaling challenges rather than demand problems, with management identifying specific improvement actions.

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