Published
# Quanta Services, Inc. (PWR) — Narrative, FY26Q2
Sources: Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (accession 0001050915-26-000006, filed February 19, 2026); Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 (accession 0001050915-26-000025, filed July 30, 2026); second-quarter 2026 earnings release furnished as Exhibit 99.1 to Form 8-K (accession 0001193125-26-324855, July 30, 2026); and the later Forms 8-K cited in place below.
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## Business
*From the FY2025 10-K, accession 0001050915-26-000006, unless noted.*
Quanta Services is a specialty infrastructure contractor. It designs, engineers, procures, builds, upgrades, repairs and maintains the physical infrastructure behind the power grid and energy systems, mainly for electric and gas utilities, power developers, large-load customers (data centers, advanced manufacturing, semiconductor, healthcare and industrial facilities), communications providers, and pipeline and downstream energy companies. Its work spans electric transmission and distribution lines, substations, wind, solar and gas generation, battery storage, the electrical and mechanical systems inside data centers and factories, gas utility systems, pipelines and refinery or petrochemical plants. Revenue comes from performing that work under master service agreements (MSAs), repair and maintenance contracts, and fixed-price, unit-price and cost-plus construction and engineering contracts. The business is labor-intensive and decentralized: work is self-performed by a craft-skilled workforce through many local "operating companies," backed by a fleet of roughly 80,000 owned and leased vehicles and pieces of equipment, plus a large helicopter fleet.
**Scale and mix (2025).** Revenues were $28.48 billion. Quanta operates primarily in the United States; foreign operations, mainly Canada and Australia, contributed 7.0% of revenues, down from 8.7% in 2024 and 14.2% in 2023. Management's directional estimate of revenue by customer type was Utility and Power 70% (74% in 2024), Energy and Other 17%, and Technology, Manufacturing and Communications 13% (9% in 2024, 6% in 2023). The largest customer was 8% of revenues and the ten largest were 30%. Representative customers include American Electric Power, Duke Energy, Exelon, NextEra, PG&E, Southern Company, Xcel, National Grid, Sempra, Williams and Comcast. Headcount was about 69,500 (roughly 64,400 in the U.S.), and about 36% of employees were covered by collective bargaining agreements.
**Segments.** Since the first quarter of 2025 Quanta has reported two segments. The former Electric Power and Renewable Energy segments were combined.
- **Electric Infrastructure Solutions (Electric)** had 2025 revenue of $23.00 billion (80.8% of total) and an operating margin of 10.3%. It builds and maintains overhead and underground transmission, distribution and substation infrastructure, including grid modernization, hardening and generation interconnection. It also provides EPC, repowering and maintenance for utility-scale wind, solar, hydro and battery storage; emergency storm and fire restoration; energized ("hot") work using bare-hand, hot-stick and robotic-arm methods; and electrical systems for data centers and other large load centers. Smaller lines are communications network construction, commercial and industrial wiring, and utility aviation services. The segment also includes Quanta's manufacturing of power transformers, circuit breakers and other equipment, its training businesses (the Quanta Advanced Training Center and Northwest Lineman College), and its equity earnings from integral affiliates. The largest of those affiliates is a 50% interest in LUMA Energy, the joint venture that operates, maintains and modernizes Puerto Rico's roughly 18,000-mile transmission and distribution system.
- **Underground Utility and Infrastructure Solutions (Underground and Infrastructure)** had 2025 revenue of $5.48 billion (19.2%) and an operating margin of 7.3%. It does gas utility system work, pipeline integrity, rehabilitation and replacement, and larger pipeline, storage and compressor-station construction. It also provides downstream industrial services such as turnarounds, catalyst replacement, piping, fabrication and tank work, concentrated on the U.S. Gulf Coast. Since recent acquisitions it adds civil and site-preparation services and turnkey mechanical, plumbing and process infrastructure for data center, semiconductor and other large-load facilities. Management describes the gas utility and integrity work as regulated, recurring and relatively predictable. Large pipeline projects, by contrast, are cyclical and have declined in recent years.
**Demand drivers.** The 10-K points to rising electricity demand from data centers and AI, manufacturing reshoring and electrification. That demand is driving utility investment in transmission, substations and distribution, along with generation investment in renewables, storage and gas-fired combined-cycle and peaker plants. Grid hardening against storms and wildfires and California resiliency programs add to it. Quanta positions itself to deliver data center projects end to end: low-voltage electrical work inside the facility, high-voltage substation and interconnection work to connect it, and the generation to power it. It has also invested in domestic manufacturing of power transformers and in utility-pole supply to ease customers' supply-chain constraints. As customers ask Quanta to procure materials under EPC contracts, more of its revenue now carries materials pass-through, which earns lower margins.
**Acquisition-led build-out.** Acquisitions have built out the platform, especially in technology and load-center work. The 10-K names Cupertino Electric (July 2024, Electric) and Dynamic Systems (July 25, 2025, mainly Underground and Infrastructure). Dynamic Systems was bought for about $1.26 billion in cash plus 518,772 shares valued at $218.8 million, with up to $216.0 million of contingent consideration (10-Q Note 4). Quanta made seven other acquisitions in 2025, covering civil solutions, utility construction, T&D with helicopter services, low-voltage electrical, and Australian electrical engineering. Excluding Dynamic Systems, the 2025 business combinations cost about $2.01 billion in cash plus 789,824 shares valued at $284.5 million (10-Q Note 4). Total 2025 cash paid for acquisitions, net of cash acquired, was $3.05 billion.
**Competition.** Markets are highly competitive and some have low barriers to entry. Larger players have an edge on safety record, breadth, scale and balance sheet. Utilities' in-house crews perform some of the same services, and subcontractors can become competitors.
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## Risk factors
*Condensed from Item 1A of the FY2025 10-K, accession 0001050915-26-000006. The Q2 2026 10-Q (accession 0001050915-26-000025) reports no material changes to these risk factors.*
**Project execution and contract risk**
- **Fixed-price and EPC exposure is growing.** Quanta has deliberately expanded large fixed-price and EPC work: transmission and substation projects, power generation and data center facilities. Their size and scope keep increasing. Cost estimates on these bids are hard to make, and overruns, liquidated damages for missed schedules or performance guarantees, and project terminations can be material. Fixed-price contracts were 63.7% of Q2 2026 revenue, up from 58.3% a year earlier (10-Q Note 2).
- **Change orders and claims.** Unapproved change orders and claims recognized as revenue stood at $983.6 million at December 31, 2025. The largest piece related to a large renewable transmission project in Canada that suffered COVID-era productivity losses and delays. Failing to collect such amounts would reverse revenue and profit already recognized. By June 30, 2026 the balance had fallen to $411.1 million after the customer approved the Canadian project balance (10-Q Note 2).
- **Estimates.** Percentage-of-completion accounting (about 63.8% of 2025 revenue) relies on revenue and cost estimates. Remaining performance obligations and backlog are estimates, and most contracts, including MSAs, can be cancelled on short notice with no committed volumes.
- **Subcontracting.** Roughly 20% of work is subcontracted, which carries lower margins and third-party performance risk. Customer or regulatory diversity requirements can force more subcontracting.
**Operational hazards, wildfire and insurance**
- Quanta's work involves electricity, explosions, helicopter operations, and pipeline and refinery work, often in dense, high-value areas such as California, the New York metro area and wildfire-prone regions. Wildfires that may have been started by infrastructure Quanta worked on are a specific exposure. Operating companies have received tenders of defense, preservation demands and subpoenas in wildfire investigations. Insurers have cut wildfire coverage and raised its price, so coverage may not be enough. Quanta self-insures heavily through retentions and a captive insurer. In the 10-K the captive's exposure could reach $70.0 million per occurrence, and the 10-Q (Note 12) puts it at up to $100.0 million. "Nuclear" jury verdicts are pushing up excess-coverage costs.
- **Silverado Fire.** Southern California Edison has tendered defense and indemnity claims to two Quanta subsidiaries for lawsuits over the October 2020 Silverado Fire in Orange County, which burned about 13,000 acres. A Quanta subsidiary had replaced the two utility poles in question in March 2019. As of June 30, 2026, Quanta believed a material loss was not probable and that insurance would cover liabilities above the deductible (10-Q Note 12).
- Climate change is increasing the frequency of severe weather and wildfire. It also creates restoration work, which typically earns higher margins.
**Labor**
- The business depends on scarce craft labor such as journeyman linemen, supervisors and program managers. Labor shortages and inflation raise costs, and Quanta spends heavily on recruiting and training.
- About 36% of employees are unionized and unionization attempts have increased. Participation in multiemployer pension plans, some of which are in endangered or critical status, creates potential withdrawal liabilities.
**Customers, markets and regulation**
- The ten largest customers account for 30% of revenue. Customers' capital budgets, access to financing, bankruptcies (especially project-specific entities) and disputes can delay or prevent payment.
- Demand depends on regulation and policy: permitting and right-of-way rules, renewable tax credits and mandates, reliability standards, and climate rules affecting hydrocarbon customers. Tariffs and sourcing restrictions on components such as solar panels and transformers have caused delays before. Shortages of power transformers persist.
- The Underground and Infrastructure segment is exposed to oil and gas commodity prices and production volumes.
- Technology changes could reduce demand. Examples are a shift to a decentralized grid, or large-load customers bypassing utilities that cannot serve them affordably.
- Operations outside the continental U.S. (Canada, Australia and Puerto Rico through LUMA) carry political, currency, FCPA and tax risk, and LUMA is named as a reputational exposure.
**Acquisitions and investments**
- Growth relies heavily on acquisitions. The risks include integration, retaining key people, unknown liabilities, weaker cybersecurity at acquired companies, and antitrust scrutiny. Contingent consideration obligations are significant: an aggregate maximum of $921.4 million was outstanding at June 30, 2026 (10-Q Note 4). Joint ventures carry joint-and-several liability, and investments are often illiquid.
**Cybersecurity** — The decentralized IT environment and acquired companies widen the attack surface. Customers' energy infrastructure is a strategic target. Quanta also faces DoD CMMC compliance requirements.
**Financing**
- Long-term debt was about $5.23 billion at year-end 2025. Senior credit facility and commercial paper borrowings carry floating rates. Dropping below investment grade would shut Quanta out of commercial paper. Bonding capacity is essential: outstanding performance bonds were about $14.9 billion at year-end 2025 and about $21.5 billion at June 30, 2026 (10-Q Note 12).
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## Management's discussion — FY2025
*From Item 7 of the FY2025 10-K, accession 0001050915-26-000006.*
| | 2025 | 2024 | Change |
|---|---|---|---|
| Revenues | $28.48B | $23.67B | +20.3% |
| Gross margin | 15.0% | 14.8% | |
| Operating income | $1.61B (5.7%) | $1.35B (5.7%) | +19.7% |
| Net income attributable to common stock | $1.03B | $904.8M | +13.7% |
| Electric revenue / operating margin | $23.00B / 10.3% | $19.01B / 10.3% | +21.0% |
| Underground and Infrastructure revenue / operating margin | $5.48B / 7.3% | $4.66B / 5.7% | +17.5% |
| Corporate and non-allocated costs | $(1.15)B | $(877.3)M | +30.8% |
- **Growth drivers.** Demand rose in both segments. In Electric, utilities' multi-year grid modernization, reliability and hardening programs and strong transmission, substation and distribution demand drove growth, together with data center, technology and renewable/storage work, which Cupertino Electric expanded. About $1.87 billion of Electric's revenue increase came from acquired businesses. Underground and Infrastructure gained about $925 million from acquisitions, led by Dynamic Systems, partly offset by lower large-pipeline revenue in Canada. Its margin expansion reflected better fixed-cost absorption and mix. The 2024 margin had also absorbed an $11.9 million loss on disposing of a non-core business.
- **Corporate costs and below the line.** Corporate costs rose mainly because of a $115.8 million increase in intangible amortization from acquisitions, a $54.0 million rise in compensation, $44.5 million more acquisition and integration costs, and a $24.1 million increase in contingent-consideration fair value. Interest expense rose with the August 2025 issuance of $1.50 billion of senior notes, which repaid borrowings used for Dynamic Systems. The effective tax rate rose to 25.0% from 23.5%, mainly because equity-award vesting produced a smaller tax benefit.
- **Cash and capital allocation.** Operating cash flow was $2.23 billion (+7.1%). Quanta deployed $3.30 billion on acquisitions and investments, $134.6 million on buybacks and $60.4 million on dividends. Capital expenditures were $609.2 million, and management guided 2026 capex to roughly $750 million to $800 million. DSO was 60 days, against a five-year average of 75. The Canadian renewable transmission project's change orders and claims weighed on DSO and cash flow. Liquidity (available credit-facility commitments plus cash) was $2.86 billion at year-end.
- **Backlog.** Remaining performance obligations were $23.76 billion (+41.8%) and total backlog was $43.98 billion (+27.3%). MSAs were 44% of total backlog.
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## Current quarter — Q2 2026 (three months ended June 30, 2026)
*From the Q2 2026 10-Q, accession 0001050915-26-000025, unless marked as from the July 30, 2026 earnings release (8-K accession 0001193125-26-324855, Exhibit 99.1).*
**Results.** Revenues rose 41.1% to $9.56 billion from $6.77 billion. Operating income nearly doubled to $694.8 million from $370.3 million (+87.6%), and operating margin widened to 7.3% from 5.5%. Gross margin improved to 16.2% from 14.9%. Net income attributable to common stock was $451.4 million versus $229.3 million (+96.9%), or $2.96 per diluted share versus $1.52. Adjusted EBITDA (non-GAAP) was $1.07 billion versus $668.8 million. For the six months, revenues rose 34.0% and net income attributable to common stock rose 79.9%. The six-month effective tax rate was 20.9%, down from 24.6%, helped by a $35.9 million larger tax benefit from vested equity awards.
**Segments (Q2).**
- *Electric*: revenue $7.84 billion (+43.6%), operating income $898.2 million, margin 11.5% versus 10.1%. Growth came from higher demand plus about $575 million of revenue from acquired businesses. Management credits the margin gain to demand and improved execution across electric and power generation services.
- *Underground and Infrastructure*: revenue $1.72 billion (+30.7%), operating income $155.8 million, margin 9.1% versus 6.9%. Growth was mostly the roughly $355 million contributed by acquired businesses. Revenue from the civil and mechanical acquisitions improved fixed-cost absorption. For the six months, lower U.S. large-pipeline revenue partly offset the acquired growth.
- *Corporate and non-allocated costs* rose to $359.2 million, mainly from a $43.8 million increase in intangible amortization and a $28.2 million increase in compensation, largely non-cash stock compensation.
**Mix shift.** Fixed-price contracts were 63.7% of Q2 revenue, up from 58.3%, while unit-price contracts fell to 18.5% from 25.6%. U.S. work was 95.2% of revenue, up from 92.8%, while Canada fell to 2.3% from 3.5%.
**Backlog.** Remaining performance obligations reached $33.55 billion at June 30, 2026, up 41.2% from year-end; about 70% is expected to convert to revenue within 12 months. Total backlog (non-GAAP) was a record $53.44 billion (+21.5%): Electric $43.79 billion and Underground and Infrastructure $9.65 billion. Management attributes the increase partly to the 2026 acquisitions and partly to new awards and higher volume with existing customers. The MSA share of total backlog fell to 41% from 44%.
**Cash and balance sheet.** Six-month operating cash flow was $1.49 billion, up 176% from $538.9 million. DSO improved to 57 days from 62 days a year earlier. The earnings release reports Q2 operating cash flow of $1.1 billion and free cash flow of $0.9 billion. Uses over six months were $930.3 million net cash for acquisitions, $451.0 million of capex, $153.0 million of tax withholding on vested stock awards and $33.7 million of dividends, funded in part by $124.3 million of net borrowings. Quanta bought back no stock in the first half. A new $1.00 billion repurchase program took effect May 21, 2026, replacing the expired 2023 program, and the full $1.00 billion remained available at June 30. The quarterly dividend is $0.11 per share. At June 30, 2026 the term loan had $637.5 million outstanding and matures October 8, 2026. Commercial paper outstanding was $448.0 million, and liquidity (available commitments plus cash) was $2.77 billion.
**Acquisitions in the quarter.** Quanta closed three businesses in the first half of 2026, all in the second quarter. The 10-Q does not name them; the earnings release does:
- **Phalcon, Ltd.** (Farmington, Connecticut; about 4,100 employees) does electrical work for utility, technology/load-center and commercial customers in the Northeast and Mid-Atlantic. It is reported in Electric.
- **Percheron Holdings** (Katy, Texas; about 1,050 professionals) provides front-end services: land and right-of-way, surveying and geospatial, and engineering design. It is reported in both segments.
- **PSD Global Holdings Pty Ltd** (Adelaide, South Australia; 170 employees) provides engineering, fabrication and manufacturing, including transportable substation buildings and switchgear. It is reported in Electric.
Consideration for the three was about $1.09 billion in cash, including $188.4 million of cash held by the businesses, plus 182,733 Quanta shares valued at $128.3 million. Contingent consideration of up to about $242.3 million is payable over periods of up to four years. Two of the deals closed on June 18, 2026 (10-Q Part II, Item 2). The earnings release says these companies did not contribute materially to Q2 results.
**Guidance.** With Q2 results, management raised its full-year 2026 revenue outlook to $39.3 billion–$39.7 billion, up from $34.7 billion–$35.2 billion in April. Adjusted diluted EPS (non-GAAP) and every other guided metric were raised as well (earnings release). Management attributes the raise to the quarter's outperformance, better visibility into the second half and the contribution expected from the 2026 acquisitions, which it expects to fall mostly in the Electric segment.
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## Subsequent events
*Events after June 30, 2026. The acquisition and credit-facility items come from the Q2 2026 10-Q, accession 0001050915-26-000025 (Note 4, Note 7, and Part II, Items 2 and 5). The other items come from the Forms 8-K cited.*
- **Enerfab acquisition (closed July 10, 2026).** After quarter-end Quanta acquired a U.S. multi-craft heavy industrial contractor, to be reported mainly in Underground and Infrastructure. At closing it issued 64,889 shares of common stock valued at $45.0 million, and the purchase price remains subject to post-closing adjustments (10-Q Note 4; Part II, Item 2). The earnings release identifies the July 2026 acquisition as **Enerfab Holdings, Inc.**: founded in 1901, based in Cincinnati, about 2,100 employees, providing fabrication, electrical, mechanical, construction and maintenance services to industrial, utility, power generation and energy customers. Neither filing discloses Enerfab's cash price separately; the release gives only a combined figure for Enerfab and the three second-quarter acquisitions.
- **Credit facility amended (July 29, 2026).** Aggregate revolving commitments under the senior credit facility rose to $2.98 billion from $2.80 billion, and the revolver maturity moved to July 31, 2031 from July 31, 2030. Bank of America, N.A. is administrative agent (10-Q Part II, Item 5).
- **Commercial paper program enlarged (effective August 8, 2026).** The maximum outstanding rose to $2.98 billion from $2.80 billion, matching the revolver that backs it (10-Q Note 7; Part II, Item 5).
- **$2.0 billion senior notes issued (August 6, 2026).** The issue comprised $500 million of 4.850% notes due 2029, $750 million of 5.300% notes due 2033 and $750 million of 5.550% notes due 2036. The pricing release says net proceeds will go to general corporate purposes, including repaying commercial paper and senior credit facility borrowings (8-K accessions 0001193125-26-331400 and 0001193125-26-337945).