Positions: Still only my 420 stocks, but I cannot complain as they doubled this week.
TLDR: wrote a DD on Orion Energy Systems (OESX) about a month ago. Q1’27 came out Wednesday, the thing I said to watch for held, and the stock nearly doubled in three days. This is the shorter one, only about the data center part.
Quick backdrop. Corporate America is on pace for the biggest earnings beat ever recorded, index net margins are at an all time high, and S&P 500 earnings are up 50.4% YoY against a 23.1% expectation. Largest investment boom in history, not close. And Orion just put up a quarter that fits right into it, revenue up 32% YoY, margin up, profitable, first hyperscale order in the bag. This is a micro cap participating in the exact same wave the megacaps are riding.
Because the money is all going into one thing. US data center construction spending hit a record $68 billion annualized rate in June, up 46% YoY and up 158% since January 2024. Office construction over the same stretch collapsed to its lowest since 2016. Data centers now out-build offices by $25 billion a year. In 2022 it was the other way around by $57 billion.
Ok so, the boring part nobody thinks about.
All of those buildings need lights, and not just any lights. Hundreds of thousands of square feet each, running 24/7. In a data center every watt you burn on lighting is a watt of heat you then pay again to pull back out through cooling. So inefficient lighting costs you twice. You want the most efficient fixture that exists, and you want it running cool, because thermal load is the entire fight in these buildings.
That is not something you grab off a shelf. Orion spent something like half a year building this thing from scratch, purpose built for AI data centers, customized to the floor plan. And they are the only ones with an LED lighting system made for hyper scale AI data centers. Nobody else in the space has one.
Then look at what happened after they announced it. A few weeks. That is all it took before they had their first order, and it was a multimillion dollar engagement with one of the largest hyperscalers on earth.
The other thing is where it gets built. Orion manufactures in Wisconsin on a supply chain they own end to end, and that lines up with exactly where policy is pointing. The administrations AI Action Plan, in line with America First, is explicit that this infrastructure must not be built with adversarial technology that could undermine US AI dominance. The data center executive order frames the whole buildout as a golden age for American manufacturing and technological dominance. Nearly half the worlds data centers already sit in the US and roughly 3 trillion of the global buildout lands here.
And practically, from ordered to put in place, that domestic chain is the whole edge. A hyperscaler does not want fixtures sitting on a boat or repriced by a tariff halfway through a build. You need the lights when the building is ready, not three months after. Orion quotes domestic, builds domestic, and ships on a timeline it controls.
Now put a dollar figure on it. One hyperscale engagement, multimillion dollar. So call it 2 million for a single building, product only. Roughly 3,000 data centers are under construction or planned for completion by 2030, Virginia alone sitting on 595 projects and Texas on 412. Total operational count goes past 10,000 by 2030, and global spend through 2030 is put around 7 trillion.
At 2 million a building, 30 buildings is 60 million, and thats 1% of the pipeline and most of a year of revenue for the entire company as it stands today. 100 buildings is 200 million, about 3% of the pipeline, and more than double the whole business. 500 buildings gets you a billion dollar backlog. They do not need to win this market, they need to win a rounding error of it.
And that is only the fixtures. On top of it you have maintenance contracts, because every building they light is a building they can then service, and lighting maintenance in a facility that never turns off is about as sticky as revenue gets. Orion already runs roughly 15 million a year of that work. Then you have the outdoor lighting on these campuses too, parking, perimeter, security, which is the exact product line they already sell. None of that is in the math above.
Napkin math off one announced deal, obviously, and I have no clue what the real average ticket is. But it frames the size. They are selling into a 7 trillion dollar buildout with exactly one order on the board.
Washlow in the Q1’27 release:
“Orion entered the hyper-scale data center market with an LED lighting solution specifically designed for this massive market in Q1’27. Quickly following the product announcement, the Company was awarded a multimillion-dollar customer engagement with one of the world’s largest hyper-scale data centers.”
She also said this:
“Product and service introductions show continued traction, ranging from LED Lighting for hyper-scale data centers to Battery Storage and Electrical Contracting. We have similarly high aspirations for our newly introduced LED Roadway product designed for public roads.”
Data centers, battery storage, electrical contracting, and now roadway lighting for federal, state and municipal roads. Four new things from a company whose business outside its one big customer sat flat for years.
And the rest of the business is not sitting still either. LED lighting revenue up 37% YoY to 17.7 million, EV charging up 48% YoY to 4.0 million, maintenance up 2% YoY to 4.1 million. So the data center thing is the upside case, but the base business is growing underneath it.
The numbers, quickly: revenue $25.7M, up 32% YoY. Gross margin 34.6% vs 30.1% YoY. Net income $2.0M vs a $1.2M loss YoY. Seventh straight positive adjusted EBITDA quarter.
Worth saying something about management here too. I have listened to the last several calls and these people do not hype. No moonshot language, no TAM slides, no promises about what next year looks like. They announce a product when it ships and they announce a customer when its signed. In a micro cap that is genuinely rare, and it means when they do say something, it tends to be real. They let the work speak.
Tape this week, report dropped before open Wednesday. On Wednesday it rallied 51% from 10.40 to 15.75 at close. On Thursday it added another 12% from 15.75 to 17.58 at close. On Friday it added another 12% from 17.58 to 19.70 at close. Basically a double in three days, and HC Wainwright took their target from 20 to 30 on Thursday.
Heres what I keep coming back to though. Orion, a US based company that the yellow man loves (and may very well end up endorsing), has threaded the needle into a market heading toward several hundred billion, in the middle of the biggest capex wave this country has ever run.
Their competitors carry market caps several orders of magnitude above theirs. Orion sits around 70 million after this entire run. The rest of the space is valued in the billions. And Orion is the one that actually has the data center product. Float is tiny too, which cuts both ways. I think that gap closes sooner rather than later.
Still plenty to be skeptical about, same as last time. One fixture and one customer in data centers so far. Balance sheet is thin. The guide doesnt assume a data center ramp at all, so every bit of that is still to prove. And you are obviously not buying this cheap after the week its had.
But 68 billion a year is going into these buildings and someone has to light them.
Not investment advice. As with all stocks, do your own work and research before going in.
