Power Solutions (PSIX) told investors it was riding the AI data center wave. High growth. Higher margins. A booming future. But behind the scenes, it’s alleged that the story was starting to crack.
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Investors who purchased Power Solutions International, Inc. (NASDAQ: PSIX) shares during the proposed class period may have claims in a federal securities lawsuit alleging the company misled the market about the profitability and operational challenges of its data center business. The stock dropped sharply on two separate occasions after the company disclosed margin pressures it had previously characterized as temporary.
A complaint filed on March 20, 2026, in the United States District Court for the Northern District of Illinois covers a class period running from May 8, 2025, through March 2, 2026. During that period, the complaint alleges the company made repeated public statements describing its pivot to data center power systems as a higher-margin, high-growth opportunity, while failing to adequately disclose the costs and structural nature of manufacturing inefficiencies that were eroding those margins. The first significant stock decline of 19.14% occurred on November 7, 2025, following a third-quarter earnings release that revealed a 5.0-percentage-point year-over-year decline in gross margins. A second, larger decline of 28.97% followed on March 3, 2026, after the company reported fourth-quarter results showing an 8.0 percentage-point gross margin decline and acknowledged that improvements would take time to materialize.
Investors who purchased PSIX shares during the class period and suffered losses may wish to learn more about their legal options.
Power Solutions International: What the Company Does
Power Solutions International designs, manufactures, and sells engines and power systems. The company primarily produces small engines used in industrial equipment, such as forklifts, transportation vehicles, including transit buses, and micro-power systems. As described in the complaint, the company operates out of Wood Dale, Illinois, is incorporated under the laws of Delaware, and its common stock trades on the NASDAQ under the ticker symbol PSIX.
Beginning in the first half of fiscal year 2025, Power Solutions shifted its strategic focus away from a declining transportation end market and toward the fast-growing data center sector. The complaint alleges the company positioned this pivot as a source of both immediate and future financial benefit, describing the data center business as a high-growth, higher-margin opportunity that was actively driving sales growth and profitability across reporting periods.
What the Lawsuit Claims Went Wrong
The lawsuit centers on allegations that Power Solutions made materially false or misleading public statements throughout the class period by overstating its ability to capture demand in the data center market and understating the severity and duration of manufacturing inefficiencies that were weighing on gross margins. According to the complaint, the company repeatedly attributed margin declines to what it called temporary inefficiencies related to its accelerated production ramp-up, a characterization plaintiffs allege was misleading given the actual scope and persistence of those operational problems.
The complaint identifies three core failures: first, that the company overstated its capacity to meet data center sales demand; second, that it understated the costs and structural nature of its manufacturing expansion; and third, that positive statements about the business lacked a reasonable basis given what management knew or should have known at the time. Investors who relied on those statements when making trading decisions allegedly purchased shares at artificially inflated prices.
Investors who traded PSIX shares during the class period can review case updates and learn more about how this litigation may affect them.
What Company Executives Said During the Class Period
Throughout the class period, CEO Dino Xykis was quoted in multiple press releases making optimistic statements about the company’s strategic direction and financial performance. In the first quarter 2025 earnings release dated May 8, 2025, Xykis described the results as the best first quarter performance in the company’s history, citing 42% year-over-year sales growth and a 168% increase in net income as reflecting the strength of our strategic focus and our team’s relentless execution.
In the second quarter 2025 press release issued August 7, 2025, Xykis called the period the strongest sales and profit performance in the company’s history, attributing a 74% year-over-year sales increase to strong demand for our power systems solutions and the disciplined execution of our strategy. That same release attributed the decline in gross margins solely to comparatively lower-margin products and temporary inefficiencies related to our accelerated production ramp-up. An investor presentation published on September 5, 2025, similarly framed the data center segment as offering margin expansion opportunities and reiterated that margin pressure was temporary in nature.
Following the third-quarter disclosure on November 6, 2025, Xykis highlighted record sales and continued demand while acknowledging that production ramp-up activities were affecting efficiency. It was not until the fourth quarter results were released on March 2, 2026, that the company stated it was only beginning to see measurable improvements and that margin recovery would build over time.
How and When the Alleged Truth Emerged
The complaint identifies two corrective disclosure events. The first occurred on November 6, 2025, when Power Solutions released its third quarter 2025 results after the market closed. Those results showed gross margin had fallen to 23.9%, a decline of 5.0 percentage points year-over-year, attributed to temporary inefficiencies related to our accelerated production ramp-up for key data center product lines. The company also revised its full-year 2025 sales growth outlook down to approximately 45%, a sharp deceleration from the 74% and 62% year-over-year growth rates posted in the second and third quarters, respectively. On the following trading day, November 7, 2025, PSIX shares fell $15.55, or 19.14%, closing at $65.69 on unusually heavy volume.
The second corrective disclosure came on March 2, 2026, when the company issued its fourth-quarter and full-year 2025 earnings release after the market close. That release revealed that gross margin had declined 8.0 percentage points year-over-year in the fourth quarter due to operating inefficiencies related to its accelerated production ramp-up for data center product lines. The 2026 outlook referenced only moderate margin improvement from data center products, and the company acknowledged it was executing specific actions to address supply chain performance and manufacturing cost structures, with improvements only beginning to appear. PSIX shares fell $24.84, or 28.97%, on March 3, 2026, closing at $60.91 on unusually heavy trading volume.
Why This Matters for Shareholders
Investors who purchased PSIX shares during the class period, which ran from May 8, 2025, through March 2, 2026, were allegedly buying into a narrative of accelerating growth and expanding margins in the data center market. The complaint argues that this narrative was supported by a series of press releases, quarterly filings with the SEC, and an investor presentation, all of which characterized operational challenges as temporary while projecting continued profitability. The alleged result was that shares traded at artificially inflated prices throughout that period.
When the full scope of margin deterioration and operational challenges was disclosed in stages, the stock declined significantly on both occasions. The combined drop across the two disclosure dates represented a substantial loss for investors who held shares through those events. Because the class period high of $115.78 per share was reached on September 23, 2025, investors who purchased near that peak and held through the March 2026 disclosure faced particularly steep losses, according to the price history cited in the complaint.
Legal Basis and Claims Against the Defendants
The complaint asserts two legal claims under the Securities Exchange Act of 1934. The primary claim is brought against all defendants under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, which prohibit making materially false or misleading statements in connection with the purchase or sale of securities. The plaintiff alleges that Power Solutions, CEO Dino Xykis, and CFO Xun Li employed devices and artifices to defraud, made untrue statements of material fact or omitted material facts, and engaged in a course of business that operated as a fraud on purchasers of company securities.
A second claim under Section 20(a) of the Exchange Act is brought against the individual defendants, Xykis and Li, as controlling persons of the company. The complaint alleges that, by virtue of their senior positions and direct involvement in preparing and disseminating public statements, both executives had the power to influence and control the content of the company’s SEC filings and investor communications. The plaintiff seeks compensatory damages, attorney’s fees, and other relief to be determined at trial.
Investors who purchased PSIX shares during the class period and wish to understand their rights should consider consulting qualified securities counsel.
About Levi & Korsinsky, LLP
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