Everus Construction Group (ECG) Q2 2026 earnings review
Data Center Boom and M&A Drive Massive Beat and Raise
Everus delivered an exceptionally strong Q2, sending revenue up 34% and EBITDA up 53%. The company is riding a wave of data center construction that pushed its Electrical and Mechanical (E&M) segment backlog up 62% year-over-year. Management is aggressively shifting capital allocation toward M&A, having closed the SE&M acquisition in Q2 and immediately announcing the purchase of Epsilon Industries in July. Driven by this dual-engine growth (organic + inorganic), management raised full-year 2026 EBITDA guidance by an impressive 18% at the midpoint.
🐂 Bull Case
The E&M segment is firing on all cylinders. Q2 revenue grew 42%, and backlog surged to $4.16B. The company is securing early engagement on complex, multi-year data center projects.
Despite management's previous warnings of margin normalization, Q2 EBITDA margins accelerated to 10.4% from 9.1% a year ago, driven by exceptional project execution and timing.
🐻 Bear Case
Transmission & Distribution (T&D) grew revenue by only 7.1% and actually saw its backlog shrink by 5.3% year-over-year, significantly lagging the broader business.
SG&A expenses jumped 50.2% year-over-year to $71.2 million, outpacing top-line growth. As M&A integration continues, managing overhead will be critical to protect margins.
⚖️ Verdict: 🟢
Bullish. Everus is executing perfectly against secular tailwinds in data center infrastructure. While the T&D segment's weakness is a concern, the sheer size of the E&M backlog and the aggressive, low-leverage M&A strategy signal accelerating earnings power.
Key Themes
Data Centers Fueling E&M Dominance
The commercial and industrial end markets, heavily driven by data center construction, propelled E&M segment revenue up 41.6% to $1.01 billion. Even excluding the SE&M acquisition, organic growth was a blistering 36.9%. The backlog story is even stronger: E&M backlog jumped 62.1% YoY to $4.16 billion, ensuring high revenue visibility well into 2027.
M&A Playbook Activated
After signaling intent for a year, Everus is moving aggressively. They closed the SE&M acquisition on April 2 (adding $33.4M to Q2 revenue) and announced an agreement to buy Epsilon Industries on July 31. Epsilon brings vital off-site modular construction capabilities. Despite spending $147.6M on SE&M, net leverage remains exceptionally low at 0.3x, leaving the powder dry for more deals.
Gross Margin Defies Gravity
Management frequently cautions that legacy margins will normalize around 8%, yet Q2 gross margin stepped up to 14.9% (from 13.0% last year) and EBITDA margin hit 10.4%. The company attributes this to 'increased workloads, solid project execution, and project timing.' If Everus has structurally shifted to a 10%+ EBITDA margin business, current FY26 guidance remains conservative.
Transmission & Distribution Segment is Shrinking
Management previously touted a 'multiyear tailwind' from grid upgrades needed for data centers and EVs. However, the data contradicts this narrative: T&D backlog actually declined 5.3% YoY to $388.4M. Revenue grew a sluggish 7.1%. If grid upgrades are a mega-trend, Everus is currently struggling to convert that narrative into booked contracts.
SG&A Expenses Outpacing Revenue
Selling, general and administrative expenses surged 50.2% YoY in Q2, significantly faster than the 33.7% revenue growth. Management blamed higher labor costs, operational growth support, and SE&M amortization. While gross margins absorbed the hit this quarter, unchecked overhead growth could erode future operating leverage.
Execution vs. Timing Pull-Forwards
As seen in previous quarters, Everus frequently benefits from 'project timing' that pulls high-margin closeout work into the current quarter. A higher mix of early-stage jobs in H2 could make workflow and margin visibility difficult, meaning the 10.4% EBITDA margin seen in Q2 is likely the peak for the year rather than the new baseline.
Tech Innovation: Prefabrication Expansion
The pending acquisition of Epsilon Industries is a direct investment in off-site modular construction. Prefabrication improves labor efficiency, lowers costs, and enhances safety. By shifting work from the field to controlled facilities, Everus is addressing the skilled labor shortage that threatens the broader construction industry.
Other KPIs
Accelerating dramatically from just $6.5M in H1 2025. This massive improvement was driven by a $164.3M increase in operating cash flow as working capital dynamics stabilized despite intense revenue growth. This self-funds the M&A strategy without needing fresh debt.
Stable and exceptional. Despite a $147.6M cash outflow for the SE&M acquisition in Q2, net leverage actually dropped sequentially from 0.4x at year-end 2025. The company’s long-term target is 1.5x - 2.0x, implying over $500M in immediate debt capacity for future acquisitions.
Guidance
Accelerating. Raised significantly from the prior $4.3 - $4.4 billion range. The midpoint of $4.6B implies robust 22.8% YoY growth over FY25's $3.75B, driven by the massive E&M backlog and the integration of SE&M.
Accelerating. Management crushed their previous estimate of $345 - $360 million. The new midpoint of $417.5M represents a 30.5% YoY leap over FY25's $319.8M. The implied full-year margin is roughly 9.1%, suggesting a modest step-down in H2 from Q2's 10.4% peak.
Stable. Unchanged from prior guidance. This represents ~2.0% of forecasted revenues, perfectly in line with management's long-term framework of 2.0% to 2.5%, indicating disciplined capital intensity despite top-line acceleration.
Key Questions
T&D Backlog Contraction
Given the persistent macro narrative around grid modernization and utility upgrades required for AI load growth, why has the T&D segment backlog contracted 5.3% year-over-year? Is this a function of competitive pricing, project delays, or intentional selectivity?
Epsilon Industries Margin Profile
With the definitive agreement to acquire Epsilon Industries, how does its margin profile compare to the legacy E&M business, and will the expanded modular construction capabilities structurally lift consolidated gross margins in 2027?
SG&A Expense Leverage
SG&A grew 50% YoY in Q2, heavily outpacing revenue growth. How much of this is strictly related to one-time SE&M integration and amortization versus permanent overhead increases to support the larger $4.5B+ revenue run-rate?