Earnings Call Insights: Sterling Infrastructure, Inc. (STRL) Q3 2025
Management View
- CEO Joseph Cutillo stated that “Sterling delivered another outstanding quarter as we achieved strong revenue growth, expanded margins, grew backlog and generated excellent cash flow.” He reported that revenue increased 32% year-over-year, led by 58% growth in the E-Infrastructure Solutions segment, including 42% organic growth. The Transportation segment grew 10%.
- Cutillo highlighted that “adjusted earnings per share” grew 58% to $3.48 and “delivered adjusted EBITDA of $156 million, an increase of 47%.” Gross profit margins expanded 280 basis points to 24.7%. Operating cash flow was $84 million. Backlog reached $2.6 billion, up 64% year-over-year, or 34% excluding the CEC acquisition. E-Infrastructure Solutions backlog grew 97%, driven by data center demand, with 45% growth excluding CEC. The total pool of opportunities, including signed and unsigned awards, exceeds $4 billion.
- Cutillo noted that the CEC acquisition contributed $41.4 million in revenue in September and provided adjusted operating margins “in line with our expectations.” He said, “We see tremendous opportunities ahead to leverage our expanded service portfolio.”
- CFO Nicholas Grindstaff stated, “Our third quarter backlog totaled $2.58 billion, a 64% increase from the prior year second quarter. CEC contributed $475 million to backlog.” He noted combined backlog of $3.44 billion, up 88%. Year-to-date operating cash flow was $253.9 million. The company ended the quarter with $306.4 million in cash and $294.6 million in debt. “Our $150 million revolving credit facility remained undrawn during the period.”
- Grindstaff raised 2025 guidance to revenue of $2.375 billion to $2.390 billion, diluted EPS of $8.73 to $8.87, adjusted diluted EPS of $10.35 to $10.52, EBITDA of $448 million to $453 million, and adjusted EBITDA of $486 million to $491 million.
Outlook
- Cutillo said, “We remain very bullish on the multiyear opportunity in each of our markets. Our strong backlog, future phase opportunities and discussions with our customers contribute to our confidence.”
- For E-Infrastructure site development, management anticipates “current strength in data center demand will continue for the foreseeable future” and expects “E-Infrastructure revenue growth of 30% or higher on an organic basis and approaching 50%, including CEC.”
- Adjusted operating profit margins for E-Infrastructure are projected to “approximate 25% for the full year including CEC, as compared to 23.7% in 2024.”
- Transportation Solutions is forecast to achieve “revenue growth in the low teens on an adjusted basis in 2025,” with adjusted operating profit margins in the “13.5% to 14% range compared to 9.6% in 2024.”
- Building Solutions is expected to see “a mid- to high single-digit decline” in revenue, with “adjusted operating margins in the low double digits as compared to 14.8% in 2024.”
- The company continues to seek “small to midsized acquisitions that are the right strategic fit to enhance our service offerings and geographic footprint.”
Financial Results
- Revenue grew 32% year-over-year in Q3 2025, adjusted earnings per share rose 58% to $3.48, and adjusted EBITDA increased 47% to $156 million.
- E-Infrastructure Solutions revenue rose 58%, with data center revenue up more than 125% year-over-year. Adjusted segment operating income increased 57% (48% excluding CEC), and legacy E-Infrastructure operating margins reached 28.4%.
- Transportation Solutions revenue increased 10%, with adjusted operating profit up 40%. Backlog in this segment was $733 million, up 23% year-over-year.
- Building Solutions revenue declined 1%, and adjusted operating income decreased 10%. Legacy residential business revenue dropped 17%.
- Year-to-date operating cash flow was $253.9 million, with $84 million generated in Q3 2025. The balance sheet remains strong with $306.4 million in cash and $294.6 million in debt.
Q&A
- Brent Thielman, D.A. Davidson: Asked about CEC’s momentum and how large data center projects will convert over 12 months. CEO Cutillo: “They had very good and strong bookings and wins in the quarter…we’re really excited about the reception that we’re getting from our end customers.”
- Thielman asked about margin expansion. CEO Cutillo: “On just the pure site development, the size of these projects continue to get bigger and bigger…We’ve seen margins improve 40% just by combining that with the site development.”
- Thielman inquired about project sizes. CEO Cutillo: “We haven’t redefined anything, just the project size of these data centers…e-commerce distribution is up 150% in backlog growth. Those jobs are about 2x to 2.5x the size of historical ones.”
- Julio Romero, Sidoti: Asked about backlog and pipeline mix. CEO Cutillo: “$3 billion of the $4 billion is in E-Infrastructure. The highest percentage…is going to be data center, which would probably be 75% or 80%.”
- Romero asked about Transportation Solutions margin drivers. CEO Cutillo: “We have best-in-class margins, and they continue to get better. It’s really around project selection and focus.”
- Adam Thalhimer, Thompson Davis: Asked about prioritizing megaproject bids. CEO Cutillo: “Our biggest limitation to capacity is around project management…if the pricing is not right, the margins are not right or the complexity of the contracts don’t make sense for us, we’re okay to pass.”
- Thalhimer asked about asset use in Texas. CEO Cutillo: “The smaller assets that we have there are very capable of doing some of the utility and underground work.”
- Noah Levitz, William Blair: Asked about government shutdown impact. CEO Cutillo: “No impacts from government shutdown. The funding that’s on these jobs has already been allocated.”
- Levitz asked about data center growth. CEO Cutillo: “It’s a combination. Some of that is new projects.”
- Alexander Rygiel, Texas Capital: Asked about permitting delays. CEO Cutillo: “The permitting process certainly is longer today than it was pre-COVID…what used to take 6 weeks for a permit now takes 3 months.”
- Rygiel asked about Building Solutions outlook. CEO Cutillo: “We have not seen anything that would tell us we’re going to see an uptick here anytime soon.”
Sentiment Analysis
- Analyst sentiment was generally positive, with focus on understanding the sustainability of strong backlog and margin expansion, as well as details on new project conversion and growth drivers.
- Management maintained a confident tone in both prepared remarks and responses, frequently citing strong growth, backlog visibility, and multi-year opportunities. CEO Cutillo expressed excitement with phrases like “we’re really excited about the reception” and “we feel very good on continued margin enhancement.”
- Compared to the previous quarter, the confidence level remained strong, with even more bullishness on E-Infrastructure prospects following the CEC acquisition and rising data center demand.
Quarter-over-Quarter Comparison
- Guidance for 2025 was raised, with revenue now targeted at $2.375 billion to $2.390 billion (previously $2.1 billion to $2.15 billion), and adjusted diluted EPS increased to $10.35 to $10.52 (from $9.21 to $9.47).
- E-Infrastructure organic revenue growth expectation was significantly raised to 30% or higher (previously 18% to 20%), and backlog visibility expanded beyond $4 billion from $2 billion.
- Management’s tone remains confident, with more emphasis on the breadth of opportunities and expanded service portfolio post-CEC acquisition.
- Analysts’ focus shifted more toward the integration and margin potential of CEC, as well as the increasing size and complexity of projects.
- Transportation Solutions margin guidance increased (now 13.5% to 14% vs. “low teens” previously), while Building Solutions guidance continues to anticipate near-term softness.
Risks and Concerns
- CEO Cutillo highlighted permitting delays as a significant challenge: “What used to take 6 weeks for a permit now takes 3 months.”
- Ongoing softness in the Building Solutions segment, with no near-term improvement expected: “We have not seen anything that would tell us we’re going to see an uptick here anytime soon.”
- Management noted capacity limitations related to project management for large new projects, and the importance of passing on projects with unfavorable pricing or contract complexity.
Final Takeaway
Sterling Infrastructure delivered strong revenue and margin growth in Q3 2025, driven by continued expansion in E-Infrastructure Solutions and a record backlog now exceeding $4 billion in pipeline opportunities. The company increased its full-year 2025 guidance for both top and bottom line results, citing strong visibility and multi-year tailwinds in core markets, particularly data centers and transportation infrastructure. While Building Solutions remains soft, management remains confident in the company’s ability to capitalize on growth opportunities across its diversified portfolio, supported by a robust balance sheet and ongoing strategic acquisitions.