Sterling Rides on E-Infrastructure Boom: What's Driving the Momentum?

Sterling Infrastructure, Inc. STRL is capitalizing on a powerful surge in e-infrastructure demand, delivering a standout first quarter in 2025. The company reported an 18% year-over-year revenue increase in its E-Infrastructure Solutions segment, with adjusted operating income surging 61% and margins expanding by more than 600 basis points to 23%. This growth is largely fueled by rising investments in AI-driven data centers, which now make up more than 65% of Sterling’s e-infrastructure backlog. Strong project execution and the ability to finish mission-critical projects ahead of schedule have helped Sterling deepen relationships with large customers, reinforcing its competitive position.

On the financial front, Sterling posted adjusted earnings per share (EPS) of $1.63, up 29% year over year, and adjusted EBITDA rose 31% to $80 million. The company ended the quarter with a record $1.2 billion in e-infrastructure backlog and future-phase visibility nearing $2 billion, a milestone reflecting both demand strength and Sterling’s execution capabilities. Sterling’s exposure to onshoring trends, such as semiconductor and biopharma facility construction, further amplifies its growth runway. The company’s phase-by-phase pricing model also minimizes risk from raw material and fuel cost fluctuations, helping preserve margins even amid volatility.

Looking ahead, management expects mid-to-high teens revenue growth for the E-Infrastructure segment in 2025, with adjusted operating margins continuing in the mid-20% range. Backed by structural trends in AI, e-commerce, and digital infrastructure, Sterling appears well-positioned to sustain its upward trajectory as the e-infrastructure boom gains speed.

How Sterling Competes in the Infrastructure Boom

As Sterling rides the e-infrastructure wave, it faces competition from peers also targeting high-growth sectors like data centers, semiconductors, and transportation buildouts. Two notable players in this space are Quanta Services PWR and EMCOR Group EME.

Quanta Services, a leader in specialty contracting for power and infrastructure, has aggressively expanded into data center development and grid modernization. With deep expertise in electric power and network systems, Quanta Services is benefiting from rising AI energy needs and utility-scale connectivity, areas that overlap increasingly with Sterling’s growth zones.

EMCOR, on the other hand, brings strong capabilities in mechanical and electrical construction, particularly in mission-critical environments like health care, semiconductor fabs, and advanced manufacturing. EMCOR’s emphasis on integrated infrastructure solutions mirrors Sterling’s push into turnkey E-Infrastructure projects.

While Sterling boasts superior margins and backlog momentum, both Quanta Services and EMCOR offer broader national footprints and diversified customer bases, keeping competitive pressure intense in this expanding market.

STRL’s Price Performance, Valuation and Estimates

Sterling stock has surged 72% in the past three months, outpacing the Zacks Engineering - R and D Services industry’s rise of 24.6%.

From a valuation standpoint, Sterling is currently trading at a premium with a price-to-earnings ratio of 22.7X compared with the industry’s average of 20.54X.
 

The Zacks Consensus Estimate for Sterling’s 2025 and 2026 EPS estimates have moved upward over the past seven days. The estimated figure indicates 40.3% and 9.7% year-over-year growth, respectively.
 

STRL stock currently carries a Zacks Rank #2 (Buy). 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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