There is no doubt that there has been a renewed focus on the energy grid as well as other critical infrastructure in the US. The power outages due to extreme weather and natural disasters appear to be happening more frequently and for longer durations.

Additionally, an aging infrastructure as well as increased demands due to more electrification are also contributing to the stress on the grid.

Here we highlight 2 small caps with business models focused on the power industry.

Preformed Line Products Company (PLPC Quick QuotePLPC - Free Report) is a designer and manufacturer of electrical components and parts for energy distribution, transmission, and substations. The products include splicers, ties, connectors, insulators, and a host of other component parts for the electric utility industry.

Image Source: Zacks Investment Research

The energy segment generates about 71% of revenue while the communications segment contributes about 24%. The communication segment’s products are categorized into fiber networks, copper networks, and pole line hardware.

 
We have been on the sidelines at a Neutral since launching coverage 2 years ago. Lack of profitability conversion, tariff exposure, margin compression, and a rich EBITDA multiple remain our primary reasons for the Neutral. 

Additionally, utility cap ex spending can be lumpy and cyclical. 

But the market has rewarded the sales growth which appears sustainable at this point. Ideally, we would prefer a pull-back and better entry point.

In Q1 consolidated sales grew 19% YOY. According to Preformed Line Products Company (PLPC Quick QuotePLPC - Free Report) , energy segment sales saw a 22% year-over-year increase, with PLP-USA energy market sales rising 41% due to transmission-related demand.
 
While Preformed Line Products Company (PLPC Quick QuotePLPC - Free Report) products are the nuts and bolts of power transmission, Acorn Energy Inc. (ACFN Quick QuoteACFN - Free Report) is focused on the remote monitoring of industrial and residential power equipment like generators, compressors, and turbines.

Image Source: Zacks Investment Research

Importantly, its business model is based on monitoring-led economics and recurring revenue. The razor is the hardware whereas the razor blade is the monitoring service. Therefore, consolidated revenue can be lumpy because of intermittent hardware sales.

However, the company maintains a consolidated Gross Margin of 80.2%, with a 94.1% Gross Margin on monitoring revenue.

Acorn Energy Inc. (ACFN Quick QuoteACFN - Free Report) announced a potential major catalyst to topline in the form of a strategic partnership with Israel based AIO Systems. Per the agreement Acorn will sell AIO products under its own brand names in exchange for a 50/50 split on SAAS revenue. The deal applies to Canada, Mexico, and the US and is expected to begin contributing in the second half of 2026.

For context, AIO presently services 110,000 sites across 15 countries, mostly cell towers and utility infrastructure. Data Centers are presently a small but promising part of the overall business.
Acorn believes the relationship will yield site economics which are 5-6x greater than current economics.
 
Zacks currently has an Outperform rating on ACFN. The bet is that Acorn can execute on the AIO deal as well as continue growing their high-margin recurring revenue with the hope that the sales multiple re-rates higher to a SAAS model level.

In terms of data center exposure, the continued rapid growth in data centers should benefit the business of PLPC due to increased stress on the grid. For ACFN, the data center monitoring business is presently small but with substantial upside potential.