PRIM Q2 Deep Dive: Data Center Momentum and Utilities Margin Expansion Drive Outperformance

Infrastructure construction company Primoris (NYSE:PRIM) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 20.9% year on year to $1.89 billion. Its non-GAAP profit of $1.68 per share was 55.4% above analysts’ consensus estimates.

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StockStory’s Take

Primoris delivered Q2 results that significantly outpaced Wall Street expectations, highlighted by strong revenue growth and margin expansion. Management attributed the outperformance to robust demand in its Utility and Energy segments, citing improved productivity, successful project execution, and favorable project mix. CEO David King emphasized the company’s ability to capture growth in power generation and utility infrastructure, noting, “Our results exhibit the effectiveness of our financial and operational strategy to grow profitably through disciplined capital allocation.” Additionally, increased activity in gas operations and communications contributed to the quarter's upside, as did higher productivity and margin improvement in power delivery.

Looking forward, management sees continued strength in the underlying markets driving its updated guidance. The company is optimistic about new contract opportunities in data centers, renewable energy, and traditional power generation, with King stating, “We see significant opportunities on the horizon to increase our exposure” to data center projects. CFO Ken Dodgen added that the favorable market environment, solid backlog, and operational discipline support the company’s outlook for higher earnings and expanded margins through the rest of 2025. Management also flagged ongoing investment in talent and equipment to address anticipated demand in utility, renewables, and pipeline projects.

Key Insights from Management’s Remarks

Primoris’ strong Q2 was driven by execution across core business lines and rising demand in key end markets, particularly utility services and renewables.

• Utility segment margin improvement: Margin gains in the Utility segment, especially in power delivery, were driven by better rates on contract renewals, increased transmission and substation work, and improved crew productivity. Management credited strategic initiatives for moving margins closer to long-term targets, with gross profit in power delivery more than doubling year-over-year.
• Renewables demand accelerating: The Renewables business, a part of the Energy segment, exceeded prior expectations due to high demand for utility-scale EPC (engineering, procurement, construction) and battery storage projects. Management highlighted that solar project execution and favorable legislative changes have sustained momentum, while battery storage remains a smaller but growing contributor.
• Data center project pipeline: Management is tracking approximately $1.7 billion in potential data center-related work, expecting a significant portion of these contracts to be awarded by year-end. The company’s ability to deliver site preparation, power generation, utility infrastructure, and fiber construction positions it well in a market with tight supply for such services.
• Communications business growth: Continued investment in fiber-to-the-home and network builds, including those supporting data centers, drove double-digit year-over-year growth in communications. Customers are requesting Primoris to expand into new geographies, and high-margin EPC network projects are a growing opportunity.
• Backlog and bookings momentum: Backlog reached $11.5 billion, up sharply from the prior year. Growth in master service agreement (MSA) work and new project awards, particularly in renewables and utilities, underpin management’s confidence in sustained revenue and margin growth for upcoming quarters.

Drivers of Future Performance

Primoris anticipates sustained growth ahead, fueled by demand in renewables, data centers, and utility infrastructure, though execution and market timing remain important variables.

• Data center and power generation tailwinds: Management expects continued growth from the expanding need for power delivery and data center infrastructure, with $1.7 billion in data center-related bids and growing demand for transmission lines and substations. The company’s focus on projects outside the data center “walls” and disciplined bidding is expected to drive organic growth and help manage project risk.
• Utility and renewables market strength: Utility segment growth is supported by both gas and communications markets, with management now projecting mid-single-digit growth instead of previously anticipated low single digits. In renewables, solar and battery storage project demand remains robust, and legislative clarity has supported customer investment, though battery storage growth could decelerate due to supply chain limitations.
• Margin sustainability and risks: Management believes margin improvement in utilities is sustainable, with guidance reflecting a structural shift upward. However, seasonality, weather impacts, and project closeouts can introduce volatility, particularly in the Energy segment. The company plans ongoing investment in talent, equipment, and disciplined capital allocation to support future growth.

Catalysts in Upcoming Quarters

Our analyst team is closely watching (1) the pace and size of new data center and renewable energy contract awards, (2) the sustainability of margin gains in the Utility segment as project mix evolves, and (3) the ability to convert a robust backlog into revenue growth without margin erosion. Additional focus will be on execution in expanding communications and pipeline segments and the impact of regulatory or supply chain developments on renewables.

Primoris currently trades at $114.59, up from $93.16 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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