MYR Group (MYRG) Q2 2026 earnings review
Record Top-Line Obscures Severe Cash Flow Reversal and Segment Divergence
MYR Group delivered a visually stunning Q2, breaking the $1 billion revenue mark for the first time ($1.08B, up 20% YoY) and driving Net Income up 88% to a record $49.9 million. However, beneath the headline records lies a tale of two vastly different businesses. The Commercial & Industrial (C&I) segment is accelerating wildly, growing 41.5% YoY and officially overtaking Transmission & Distribution (T&D) as the company's largest revenue engine. Meanwhile, T&D growth decelerated to a sluggish 3.5%. Most concerningly, the high-octane growth is heavily consuming cash: Free Cash Flow reversed sharply from a positive trajectory into a $25.6 million deficit, driven by a massive spike in uncollected receivables. The record $3.16 billion backlog guarantees future work, but investors must watch the working capital closely.
🐂 Bull Case
Total backlog surged by nearly 20% YoY to a record $3.16 billion. Adding over $300 million to the backlog in a single quarter provides exceptional multi-year revenue visibility.
Gross margin expanded to 13.2% from 11.5% a year ago. The company is structurally shifting to a more profitable baseline through better project close-outs and favorable execution.
🐻 Bear Case
Despite reporting nearly $50M in net income, operating cash flow collapsed to just $3.3 million for the quarter, plunging Free Cash Flow into the red. Growth is currently trapping capital.
Historically the company's bedrock, T&D growth decelerated to just 3.5%. If the grid-modernization narrative is as strong as previously claimed, this segment should not be drastically lagging the corporate average.
⚖️ Verdict: ⚪
Neutral. Top-line and backlog growth are undeniable and deeply impressive. Yet, a severe cash burn and total reliance on the C&I segment for growth demand caution. The quality of earnings this quarter is questionable given the working capital drain.
Key Themes
C&I Segment Hypergrowth Accelerating
The C&I segment is on a parabolic trajectory. Revenues surged 41.5% YoY to $557.7 million, powered largely by the massive data center construction boom. For the first time, C&I represents more than half of the company's total revenue (51.6%). With fixed-price contracts dominating this space, the scale of this growth is the primary engine behind MYR's earnings beat.
Free Cash Flow Reversing Under Working Capital Strain
A glaring red flag: Net Income and Operating Cash Flow are moving in violently opposite directions. Q2 Net Income was $49.9M, but Operating Cash Flow crashed to $3.3M (down from $84.7M in Q1). Accounts receivable ballooned by $51.4 million in the first half of the year. After $28.9 million in quarterly CapEx, Free Cash Flow printed a deeply negative -$25.6 million. The company is funding its C&I growth spurt at the expense of its liquidity.
T&D Segment Stalling
T&D growth decelerated dramatically to just 3.5% YoY ($524.0M). This segment is materially lagging the company average of 20% growth. While management has previously touted a "multi-year grid investment supercycle," the actual numbers show a segment struggling to maintain momentum, relying heavily on existing unit price and time-and-materials (T&E) contracts while fixed-price transmission work shrinks.
Strategic M&A Execution to Fuel C&I
To pour fuel on the C&I fire, MYR closed the acquisition of Valley Electric and Comet Electric on July 1, 2026. This will immediately expand their commercial and industrial capabilities into new West Coast geographies. Because this closed right after the quarter ended, Q3 will see a notable inorganic jump in C&I revenues, cementing its dominance in the portfolio.
Persistent Project Inefficiencies
Despite the overall gross margin improvement to 13.2%, the earnings release explicitly flagged that gains were "partially offset by an increase in costs associated with project inefficiencies on certain projects." This is a lingering echo from the problem projects that plagued the company in early 2024. While the net effect was positive this quarter, operational risk remains highly elevated in the fixed-price C&I backlog.
Other KPIs
Accelerating. Backlog exploded from $2.84B in Q1 to $3.16B in Q2, representing an astonishing $320 million sequential addition. C&I makes up the lion's share at $1.89B. This heavily de-risks future quarters but shifts focus to execution capability.
Stable sequentially (vs 13.4% in Q1) but substantially higher than the 11.5% printed in Q2 2025. Driven by better-than-anticipated productivity and favorable job close-outs, though offset partially by localized project inefficiencies.
Increased 17.5% YoY from $63.3 million. However, as a percentage of revenue, SG&A actually improved to 6.8% from 7.0% last year, indicating healthy operating leverage even as the company invests in headcount to support rapid growth.
Guidance
The Q2 2026 earnings release did not include formal quantitative guidance updates. Forward visibility is primarily inferred from the record $3.16 billion backlog and the upcoming inorganic revenue contribution from the July 1 Valley/Comet acquisitions.
Key Questions
Working Capital Disconnect
Operating cash flow plunged to just $3.3 million this quarter despite nearly $50 million in net income, driven by a surge in accounts receivable. Is this a temporary timing issue with billing milestones, or are customers stretching payment terms on the larger C&I projects?
T&D Growth Deceleration
T&D growth slowed to just 3.5% YoY, severely lagging the C&I segment. Is this driven by permitting delays pushing high-voltage projects out to 2027, or are utilities pulling back on near-term distribution spend?
Valley & Comet Electric Margin Profile
With the acquisition of Valley and Comet Electric closing on July 1, how do the historical margins of these entities compare to MYR's consolidated 13.2% gross margin, and will integration temporarily weigh on the C&I segment's profitability?