Sterling Infrastructure reported second-quarter revenue of $1.17 billion on Monday, up 90% from a year ago, and raised full-year guidance on every line. Net income was $155.8 million, up 120%. Backlog closed the quarter at $4.33 billion, up 116%, with combined backlog at $5.62 billion, up 150%.
Those are extraordinary numbers for a site development contractor. The number underneath them is more interesting.
92% is not a diversified backlog
Mission-critical projects, meaning data centers and the semiconductor and manufacturing site work adjacent to them, account for 92% of Sterling’s E-Infrastructure backlog. The company has effectively stopped being a general site development firm and become a data center specialist that still owns a transportation and building solutions business.
That’s a growth story and a concentration risk in the same sentence. Every earthwork contractor in the country has watched this segment reprice over two years, and Sterling’s results are now the benchmark owners will pull out when they benchmark your pricing. If you’re bidding pad prep and utilities against these margins, expect the conversation.
Acquisitions did a quarter of the work
Of the revenue growth, $250.8 million came from acquisitions. Adjusted EBITDA reached $256.7 million, up 104%, and adjusted EPS was $5.80, up 116%. Guidance moved to revenue of $5.48 billion to $5.58 billion, net income of $536 million to $555 million, and diluted EPS of $17.25 to $17.85.
Buying growth is a legitimate strategy in a fragmented trade, and site development is about as fragmented as construction gets. It also means the organic number is a lot smaller than the headline, which is worth remembering when the results get quoted as evidence of market-wide demand. The June Census data showed total construction spending down 3.2% year over year. Both things are true at once.
What it says about where the work is
Sterling is headquartered in The Woodlands, Texas, and its concentration mirrors what the wider data shows: nonresidential construction is being held up by one category. Heavy industrial site work outside the data center world is still finding customers, including greenfield builds like the Saronic Port Alpha shipyard at the Port of Brownsville, but the volume isn’t comparable.
The question for anyone reading these results as a signal is what happens to a 92% concentration when hyperscaler capex plans change. That’s not a prediction that they will. It’s an observation that Sterling’s backlog has one customer profile, and backlogs that look like this are the ones that reprice fastest in either direction.
Filing detail via Sterling Infrastructure.