Key Points
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Sterling’s third-quarter revenue rose by 127%, far ahead of analysts’ estimates.
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The company’s backlog grew 78% to $6.14 billion.
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Management raised its full-year revenue forecast by about $600 million at the midpoint.
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When most investors think about the AI boom, they think about chipmakers and cloud providers. But before a data center can house a single server, someone has to prepare the site and install the electrical systems. That’s where Sterling Infrastructure (NASDAQ:STRL) comes in, and demand for its work is surging.
Sterling recently reported its third-quarter results, beating expectations on both the top and bottom lines and looking generally impressive throughout. Revenue rose 127% year over year to $1.56 billion, compared with the roughly $1.2 billion analysts expected. Adjusted earnings per share more than doubled to $7.58, well above the consensus of about $6.10.
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Data centers are driving the growth
Sterling’s largest segment, E-Infrastructure Solutions, handles site development and electrical work for data centers, manufacturing plants and semiconductor facilities. This is the AI-related part of this infrastructure business, and to be clear, it now accounts for the bulk of the company’s sales and backlog, and is the main growth engine. In the third quarter, the segment’s revenue more than tripled to $1.30 billion, and management says about 95% of the segment’s opportunities are mission-critical projects such as data center campuses.
To be fair, a big part of that growth came from Sterling’s acquisition of CEC, an electrical contractor, in September 2025. But even excluding acquisitions, total revenue grew about 70%.
Sterling’s backlog keeps growing
Perhaps most importantly, Sterling’s visibility into future revenue continues to improve. The signed backlog, which is work under contract that hasn’t been completed yet, rose 61% year-over-year to $4.14 billion. Including awards that haven’t been formally signed, the backlog reached $6.14 billion, up 78%. As CEO Joe Cutillo put it, “Demand remains strong, and our multi-year visibility continues to expand.”
With that in mind, management raised its 2026 revenue forecast to $4.68 billion at the midpoint of the range, about $600 million higher than its previous outlook. It also expects adjusted EPS of $21.83 at the midpoint, implying that at the current share price (about $365 as of this writing), Sterling trades at just 16.7 times full-year expected adjusted EPS.
What could go wrong?
To be sure, Sterling isn’t a risk-free investment by any definition. Its growth depends heavily on the AI infrastructure build-out continuing at an aggressive pace, and if large tech companies slow their data center spending, Sterling would feel it quickly. Revenue in its Building Solutions segment, which serves homebuilders, fell about 5% in the quarter, and management expects that market to stay challenging. The stock has also been volatile, falling about 27% in the month leading up to the report.
Having said all that, Sterling’s results show that the AI build-out is creating opportunities well beyond chipmakers. For investors seeking a less obvious way to invest in AI infrastructure, Sterling deserves a spot on the watch list, as its current valuation could be a strong entry point from a risk-reward perspective.
Should you buy stock in Sterling Infrastructure right now?
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Matt Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sterling Infrastructure. The Motley Fool has a disclosure policy.
