Key Points
Sterling Infrastructure’s third-quarter revenue rose 127% to $1.56 billion, with 70% organic growth, and the company raised its 2026 guidance.
The pipeline is softer than the headline backlog suggests.
Sterling Infrastructure's (NASDAQ:STRL) third-quarter revenue rose 127% to $1.56 billion, including 70% organic growth, and it raised 2026 guidance. Shares opened about 8% lower in regular trading Thursday, then recovered to about 1% higher. The data center growth is real, but Sterling used up signed contracts faster than it replaced them, so pipeline growth now rests on awards it hasn't signed.
Key Numbers
- Revenue: $1.56 billion, up 127% year over year.
- GAAP diluted EPS: $6.92, up 133%; adjusted EPS was $7.58.
- E-Infrastructure Solutions revenue: $1.30 billion, up 212%.
- Signed backlog: $4.14 billion, up 61% year over year.
What It Means
The backlog needs a closer look. Signed-backlog book-to-burn was 0.9x, so Sterling worked off more signed work than it added. Growth came from unsigned awards, jobs won but not yet under contract. Data center owners often build campuses in phases and sign one piece at a time, so these usually convert. They're still softer than signed work.
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Margins are diluting by design. E-Infrastructure operating margin fell about three percentage points as CEC, the electrical contractor Sterling bought last year, became a bigger share of the segment. Electrical work is labor-heavy and earns thinner margins than earthmoving. Site development margins held and CEC's improved, so this is mix, not slipping execution.
Cash is trailing profit. Receivables more than doubled since December as billings on bigger projects outran collections, so year-to-date operating cash flow lags net income. That's normal for a contractor growing this fast, and advance billings to customers rose too.
What to Watch Next
Watch whether signed-backlog book-to-burn climbs back above 1x as unsigned awards convert. Also check fourth-quarter revenue against the roughly $1.1 billion that guidance implies, well below the third quarter.
David Kretzmann has positions in Sterling Infrastructure. The Motley Fool has positions in and recommends Sterling Infrastructure. The Motley Fool has a disclosure policy.