Is Sterling's E-Infrastructure Segment the Real Growth Star?

Sterling Infrastructure, Inc.’s STRL E-Infrastructure Solutions segment is increasingly standing out as the primary growth engine, given the surging demand for large, mission-critical data center projects. Holding about 55% of the total revenues in the first nine months of 2025, the E-Infrastructure Solutions segment’s revenues grew 37.1% year over year. Higher volume from data centers and the inclusion of $41.4 million of revenues from the electrical and mechanical business acquired late in third-quarter 2025 added to the uptrend.

Notably, data center-related revenues more than doubled, underscoring Sterling’s strong positioning as hyperscalers and enterprise customers accelerate capacity expansion. This demand is not only robust but also long-cycle in nature, providing multi-year visibility rather than short-term project bursts. The E-Infrastructure Solutions segment accounts for the majority of STRL’s record backlog, with signed awards, unsigned electrical work and future phase opportunities together representing a multibillion-dollar pipeline. As of Sept. 30, 2025, the Remaining Performance Obligations (RPOs) of this segment were up 75.2% at $1.81 billion from Dec. 31, 2024.

Apart from the favorable market trends, the acquisition of CEC has deepened Sterling’s electrical capabilities, enabling the company to offer integrated site development and electrical solutions. This highlights an attractive combination for data center and advanced manufacturing customers.

Summing up, the growth rate, margin profile and backlog visibility suggest the E-Infrastructure Solutions segment is no longer just a fast-growing segment, but it is the strategic core of Sterling’s investment thesis. If data center and power-intensive industrial demand remain durable, the E-Infrastructure Solutions segment is well-positioned to stay STRL’s dominant growth driver for years to come.

Sterling’s Competitive Position

Being exposed to the data center-driven market, Sterling faces notable competition from the key market players, including Quanta Services, Inc. PWR and EMCOR Group, Inc. EME.

Quanta is the largest player tied to data center demand through its dominance in power generation, transmission and high-voltage electrical infrastructure. Its growth is leveraged more to grid-scale investments than to the data center site itself. As hyperscalers push for new capacity, Quanta benefits indirectly from transmission buildouts, substation upgrades and utility interconnections. Conversely, EMCOR is more directly involved in data center construction through its mechanical, electrical and specialty contracting services. EMCOR’s exposure is broad and recurring, particularly in electrical and HVAC systems, but data centers represent one of several verticals rather than the core growth engine.

Sterling differentiates itself by combining site development with mission-critical electrical services, allowing it to capture earlier phases of data center projects and benefit from faster revenue conversion. This integrated positioning gives Sterling a more concentrated and higher-growth exposure to data center demand than either Quanta or EMCOR.

STRL Stock’s Price Performance & Valuation Trend

Shares of this Texas-based infrastructure services provider have gained 26% over the past six months, outperforming the Zacks Engineering - R and D Services industry, the broader Construction sector and the S&P 500 Index.

STRL stock is currently trading at a premium compared with its industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 24.75, as shown in the chart below.

Earnings Estimate Revision of STRL

STRL’s earnings estimates for 2025 and 2026 have remained unchanged over the past 60 days. However, the estimated figures for 2025 and 2026 imply year-over-year growth of 71% and 14.6%, respectively.

Sterling currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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