The AI-driven data center construction boom has put chipmakers like Nvidia in the market spotlight. But keeping these massive facilities running takes far more than just AI chips — from power distribution and voltage management to power conditioning, an enormous network of electrical equipment forms an indispensable layer of behind-the-scenes infrastructure. One Canadian company is capitalizing on this “pick-and-shovel” role, translating the computing race into tangible growth.
Hammond Power Solutions (TSX:HPS.A), headquartered in Guelph, Ontario, specializes in dry-type transformers, power quality products, related magnetics, and power conversion systems. Its products are used across electrical distribution networks and serve industries ranging from data centers and commercial construction to mining, oil and gas, and wind power. If AI chips are the “brain” of a data center, then Hammond provides the “blood vessels” that deliver and regulate the power.
The company’s latest financial results confirm the strength of data center investment. In the second quarter, Hammond posted record sales of approximately C$325 million, up nearly 45% year-over-year. The U.S. and Mexico markets were particularly strong, with sales surging 73% year-over-year to roughly C$273 million, driven primarily by higher data center shipments, modestly improving industrial markets, and better price realization. In contrast, the Canadian home market saw sales decline about 24%, weighed down by the timing of large custom projects, softer market conditions, and increasingly competitive pricing.
Profitability improved in tandem. Gross margin rose to 31.5% in the second quarter, up from 30.7% a year earlier, as price increases helped offset tariff-related input costs. A higher mix of custom products and operational improvements also contributed positively.
Even more noteworthy is the company’s backlog position. As of the end of the second quarter, Hammond’s backlog remained roughly 97% above the year-ago level, primarily supported by large project orders tied to data center activity. Although the backlog declined 6.9% sequentially as shipments exceeded new bookings, the absolute level remained significant. This provides ample visibility for the company to utilize its expanded manufacturing capacity and improve lead times in the near term.
Over the past year, Hammond’s stock has rallied approximately 105%, currently trading at around C$239.69 per share, giving the company a market capitalization of C$2.2 billion. However, the shares have pulled back about 20% over the past three months, offering a potential entry point for investors focused on the data center infrastructure theme. The company also offers a modest dividend yield of approximately 0.5%.
Looking ahead, Hammond’s capacity expansion and strategic initiatives are positioned to support continued growth. The company’s new facility in Mexico is already operational, helping improve operating leverage, while the recent completion of its acquisition of AEG Power Solutions is expected to further unlock long-term growth opportunities.
Data center capital expenditure cycles typically span multiple years, and the lead-time nature of electrical equipment orders gives suppliers like Hammond relatively high earnings visibility. The nearly 97% year-over-year increase in backlog suggests that revenue for the coming quarters is already well underpinned. That said, investors should also keep an eye on the weakness in its Canadian operations and the risks associated with order concentration.
Against the backdrop of intensifying AI infrastructure investment, Hammond Power Solutions offers a differentiated way to participate in the data center theme — not by betting on computing power performance, but by betting on the power infrastructure that underpins it. Record sales, elevated backlog, expanded manufacturing capacity, and robust U.S. demand make this Canadian stock, after its recent pullback, one worth watching.
