Exchange: NYSE | Sector: Industrials | Industry: Engineering Construction
Q2 2026
Published: Sep 4, 2025
Earnings Highlights
Revenue of $237.74M up 4.7% year-over-year
EPS of $2.50 increased by 89% from previous year
Gross margin of 18.6%
Net income of 35.28M
""We have $572 million of cash, cash equivalents, and investments generating meaningful investment yields. Our net liquidity was $344 million, and we had no debt at 07/31/2025."" - David Watson
Argan Inc (AGX) QQ2 2026 Results Analysis — Record Backlog and Profitability Driven by Power EPC Execution in a Growing Energy/Data Center Buildout
Executive Summary
Argan Inc delivered a standout second quarter of fiscal 2026, underscored by strong execution in its Power Industry Services segment and a return to robust profitability amid a highly active project backlog. Consolidated revenue rose 5% year over year to $237.7 million (reported as $238 million in commentary), with a notable sequential uptick of approximately 23% versus the prior quarter. The company posted a record net income of $35.3 million ($2.50 per diluted share) and EBITDA of $36.3 million (EBITDA margin of 15.2%), alongside an 18.6% gross margin, up from 13.7% in the prior-year period. The quarterly results were supported by a blockbuster backlog of about $2.0 billion, with backlog composition heavily skewed toward natural gas (approximately 61%) and renewable (29%). This backlog quality supports visibility into multi-year project execution across the three reportable segments: Power Industry Services, Industrial Fabrication and Field Services (Industrial Construction Services), and Telecommunications Infrastructure Services. Argan closes the quarter with a debt-free balance sheet, approximately $572 million of cash and investments, and net liquidity of $344 million, while returning capital to shareholders via a 37.5 cent quarterly dividend and ongoing stock repurchases. Management also highlighted a favorable long-term demand backdrop from electrification, AI data-center growth, and the aging natural gas infrastructure, positioning Argan to benefit from a sustained build-out of energy infrastructure. The guidance is intentionally non-GAAP and lumpy given project-based economics, but management signaled expectations for continued backlog growth and stronger execution in H2, with capacity to handle roughly 10–12 power projects concurrently. Key near-term milestones include progress on the Trumbull 950 MW natural gas-fired plant (first fire achieved in Q2, second unit in August) and ongoing development of Ireland’s 170–300 MW facilities and related data-center/vessel fabrication programs.
Key Performance Indicators
Revenue
237.74M
QoQ: 22.76% | YoY:4.73%
Gross Profit
44.27M
18.62% margin
QoQ: 20.09% | YoY:42.31%
Operating Income
30.06M
QoQ: 23.47% | YoY:60.92%
Net Income
35.28M
QoQ: 56.43% | YoY:93.84%
EPS
2.57
QoQ: 55.76% | YoY:88.97%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $237.7M in Q2’26, up 5% YoY; QoQ growth approx. 23% from the prior quarter. - Gross margin: 18.6% in Q2’26 (vs. 13.7% in Q2’25); first six months gross margin: 18.8% vs. 12.8% LY. - Net income: $35.3M in Q2’26; EPS (diluted): $2.50; six-month diluted EPS: $4.90. - EBITDA: $36.2M in Q2’26; EBITDA margin 15.2%; six-month EBITDA: $66.5M. - Backlog: approximately $2.0B as of 07/31/2025, up 5% from 04/30/2025; management expects to add a couple more projects by year-end. - Segment mix: Power Industry Services revenue $197M (83% of Q2’26), Industrial Construction Services $36M, Telecommunications Services 2%. Power segment gross margin 19.6%; Industrial Construction 12.5%; Telecom 24.7%. - Balance sheet: no debt; cash and investments $572M; net liquidity $344M. - Cash flow: operating cash flow $34.6M for the quarter; free cash flow $32.9M; net change in cash −$11.4M for the period. - Shareholder returns: quarterly dividend $0.375 per share; six months of 2026 dividends totaled $25M; stock buybacks of $0.199M in the period. - Backlog quality: ~61% natural gas, ~29% renewable; backlog concentration supports visibility through several years of activity.
Financial Highlights
- Revenue: $237.7M in Q2’26, up 5% YoY; QoQ growth approx. 23% from the prior quarter. - Gross margin: 18.6% in Q2’26 (vs. 13.7% in Q2’25); first six months gross margin: 18.8% vs. 12.8% LY. - Net income: $35.3M in Q2’26; EPS (diluted): $2.50; six-month diluted EPS: $4.90. - EBITDA: $36.2M in Q2’26; EBITDA margin 15.2%; six-month EBITDA: $66.5M. - Backlog: approximately $2.0B as of 07/31/2025, up 5% from 04/30/2025; management expects to add a couple more projects by year-end. - Segment mix: Power Industry Services revenue $197M (83% of Q2’26), Industrial Construction Services $36M, Telecommunications Services 2%. Power segment gross margin 19.6%; Industrial Construction 12.5%; Telecom 24.7%. - Balance sheet: no debt; cash and investments $572M; net liquidity $344M. - Cash flow: operating cash flow $34.6M for the quarter; free cash flow $32.9M; net change in cash −$11.4M for the period. - Shareholder returns: quarterly dividend $0.375 per share; six months of 2026 dividends totaled $25M; stock buybacks of $0.199M in the period. - Backlog quality: ~61% natural gas, ~29% renewable; backlog concentration supports visibility through several years of activity.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
237.74M
4.73%
22.76%
Gross Profit
44.27M
42.31%
20.09%
Operating Income
30.06M
60.92%
23.47%
Net Income
35.28M
93.84%
56.43%
EPS
2.57
88.97%
55.76%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategic backdrop and backlog quality: Management emphasized electrification and AI-driven data center demand as key growth catalysts and highlighted a backlog around $2B with a mix heavily tilted toward natural gas (61%) and renewables (29%), supporting diversified project flow. (David Watson) - Strong liquidity, no debt, and capital return: Argan finished Q2 with roughly $572M in cash/investments, net liquidity of $344M, and no debt, plus a 37.5c quarterly dividend and ongoing buyback authorization, illustrating a disciplined capital allocation approach. (David Watson) - Execution discipline and capacity outlook: The company has the capacity to handle 10–12 power projects, reflecting deliberate headcount additions and a focus on on-time, on-budget project delivery, even as the backlog expands. Management expects to see increased revenues in H2 as backlog conversions accelerate and project milestones (e.g., Trumbull’s two-unit completion) advance. (David Watson) - Backlog progression and project timing: Backlog rose 5% from 04/30/2025 to 07/31/2025 and management anticipates adding several more power projects by year-end, potentially driving backlog meaningfully above the $2B level. (David Watson)
"We have $572 million of cash, cash equivalents, and investments generating meaningful investment yields. Our net liquidity was $344 million, and we had no debt at 07/31/2025."
— David Watson
"Our backlog of approximately $2 billion at July 31 includes several power plant projects, and we expect to add more through the balance of this year."
— David Watson
Forward Guidance
Argan does not provide formal revenue or EPS guidance, reflecting the lumpiness of EPC construction. However, management articulated a constructive outlook anchored in: (1) backlog trajectory remaining robust with potential to exceed $2B by year-end, (2) execution-driven margin expansion supported by Power Industry Services, and (3) capacity to manage 10–12 concurrent power projects given recent headcount investments. The attribution of growth to natural gas and renewables suggests a balanced mix that could cushion against sector-specific shocks. Monitoring points for investors include: progress milestones on key projects (e.g., Trumbull’s completion timeline in H1’2026), backlog intake in the second half of 2026, changes in commodity and labor costs impacting project economics, and potential M&A activity that could augment geographic footprint or capabilities. Overall, the outlook remains positive but remains contingent on project execution and continued demand for energy infrastructure interplay with AI/data-center energy needs.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
AGX Focus
18.62%
N/A
N/A
N/A
APG
28.30%
7.69%
2.43%
35.74%
GLDD
17.80%
8.33%
1.84%
18.72%
GVA
15.20%
7.80%
3.96%
17.98%
ACA
20.80%
8.80%
1.89%
21.52%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Bullish. Argan’s QQ2’26 results demonstrate both strong execution and meaningful leverage to the secular growth in energy infrastructure, electrification, and AI-driven data-center support. The combination of a debt-free balance sheet, substantial cash reserves, and a large, high-quality backlog provides a solid platform for continued cash generation and shareholder-friendly capital allocation (dividends and buybacks). The Power segment remains the primary growth engine, with the company signaling the capacity to manage multiple major projects concurrently, supported by a diversified backlog mix and recent workforce investments. The main risk is the lumpiness of EPC awards and execution risk on large-scale projects; however, management’s commentary on consistent backlog progression and the potential to exceed $2B by year-end, along with a favorable macro backdrop (IEA demand growth, PJM capacity auctions), underpins a constructive longer-term thesis. Investors should monitor backlog progression, project milestones (notably Trumbull and other large-scale builds), commodity/labor cost dynamics, and any M&A activity that could materially alter the risk/return profile.
Key Investment Factors
Growth Potential
Backlog-driven growth potential supported by a diversified portfolio of natural gas, renewables, and industrial services projects; capacity to manage 10–12 power EPC projects in parallel; ongoing pipeline enhancements from data-center and water-treatment/industrial projects.
Profitability Risk
Execution risk and lumpiness of construction projects; exposure to cyclicality of energy capex and potential delays/cost overruns; reliance on large-scale natural gas and combined-cycle projects; macro shifts in energy policy, supply chains, and inflation could impact margins and timing.
Financial Position
No debt; robust liquidity with $572M in cash/investments and net liquidity of $344M; strong cash flow generation (operating cash flow $34.6M for the quarter); disciplined capital allocation (dividends, buybacks, potential M&A).
SWOT Analysis
Strengths
Record quarterly net income and EBITDA driven by Power Industry Services execution
Backlog near $2B with high visibility (61% natural gas, 29% renewable)
No debt and strong liquidity (cash/investments ~$572M; net liquidity ~$344M)
Diversified service mix across Power EPC, Industrial Construction, and Telecom infrastructure
History of dividend growth and active share repurchase program
Weaknesses
Revenue mix heavily weighted to Power segment (83% of Q2 revenue) which elevates cyclic risk
Margin in Industrial Construction and Telecom segments can be more volatile (12.5% and 24.7% respectively)
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