Hammond Power Solutions (TSX: HPS.A) has been one of the standout growth stocks on the Toronto Stock Exchange lately. It generated an extraordinary 625% return over three years, leading to its inclusion on the 2026 TSX30 ranking. The fast-growing manufacturer of dry-type electricity transformers and power quality equipment has capitalized directly on the secular tailwinds of grid electrification and the artificial intelligence (AI) data centre investment boom. As the company prepares to report its third-quarter earnings, probably next week on October 27 (unconfirmed), long-term investors should keep a close watch on one critical operational health indicator: its order backlog.
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Strong regional performance driving surging orders
By the end of the second quarter of 2026, Hammond Power’s order backlog was 96.9% higher than it was at the end of the second quarter of 2025. This massive year-over-year surge underscores relentless market demand across North America, led by its U.S. and Mexico geographical segment where quarterly revenue surged 73% year-over-year.
Chief Executive Officer Adrian Thomas noted that demand continues to be propelled by heavy data centre buildouts, power infrastructure upgrades, and industrial electrification. Although Canadian sales fell 23.7% due to project timing and broader market softness, strong U.S. execution lifted overall consolidated revenue by 44.7% year-over-year.
Momentum remains strong, overall.
How Hammond Power reports its backlog metric
Backlog is a precursor to future revenue. At Hammond Power, backlog represents “all unfinished customer orders”. To deeply understand Hammond Power’s backlog, investors must evaluate how management communicates this metric.
Unlike many industrial capital goods manufacturers, HPS does not publish absolute dollar figures for its order backlog in its financial statements. Instead, management reports backlog movement strictly as relative percentage shifts alongside qualitative commentary. That’s understandable, as customers may cancel or alter orders any time, especially when shipping dates aren’t confirmed. And customers for such capital equipment often aren’t so sure about such dates at order placement. So its ok to be conservative about the hard numbers.
However, since Hammond Power’s exact backlog dollars remain proprietary, Bay Street often evaluates Hammond Power’s demand trajectory by comparing sales growth against the company’s annualized manufacturing capacity, which management has been expanding toward the $1.2 billion mark. This capacity recently expanded in September.
Similarly, while balance sheet disclosures show contract liabilities; representing customer prepayments and deposits (deferred revenue) rising to $10.3 million at the end of the second quarter, up from $5.9 million at year-end 2025; this accounting measure reflects only a narrow fraction of total unfulfilled customer commitments.
Hammond Power Solutions Backlog growth rates
| Period Ending | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | Q2 2026 |
| Backlog Change (YoY) | +58.8% | +117.1% | +19.9% | -0.3% | +122% | +96.9% | |
| Contract Liabilities ($,000) | $204 | $5,027 | $10,607 | $5,721 | $4,277 | $5,946 | $10,334 |
Understanding HPS stock’s sequential contraction versus long-term demand
Heading into next week’s third-quarter earnings release, investor concerns center on whether the backlog will expand further or continue a slight sequential contraction noted in June.
On a quarter-over-quarter basis, the second-quarter 2026 backlog dipped 6.9% from the first quarter and contracted by 3.1% from December 2025 year-end levels as record quarterly shipments exceeded new order bookings.
Rather than indicating an operational slowdown, this minor sequential decline demonstrates the company’s continued success in converting unfulfilled orders into recognized revenue. Following management’s September 22 announcement regarding expanded manufacturing capacity across North America, Hammond Power can now process custom transformer orders faster, reducing customer lead times and improving fulfillment efficiency.
The strategic investment question for the third quarter is how this added production capacity impacts backlog dynamics over the coming quarters.
On one hand, faster manufacturing throughput accelerates backlog conversion into revenue, which could naturally pull down total backlog levels if order intake remains static. On the other hand, expanded capacity may allow major data centre operators and utility customers to place even larger bulk orders, knowing that Hammond Power can meet tighter delivery schedules. If order intake adjusts upward to match this higher capacity, the business could establish a new, higher equilibrium of recurring order flow.
Investor takeaway
With its recent margin expansion supported by pricing power and a favourable custom product mix, Hammond Power stock is facing its third-quarter earnings release from a position of operational strength. Watching how management balances rapid order conversion against fresh booking momentum on October 27 (unconfirmed date) will offer the clearest window into the stock’s next growth leg.
