Quantum services (NYSE: PWR) is in a sweet spot as it is positioned to benefit from the infrastructure buildout needed to boost artificial intelligence (AI) and modernize the power grid. The company’s order book has never been larger, reaching a record $48.5 billion at the end of the first quarter.
The stock has more than doubled over the past year, driven by the growing pipeline of secured jobs. For long-term investors, business quality is undeniable, but valuation appears to have gotten ahead of fundamentals.
Did Nvidia miss out in 2009? This rare signal flashes again. In 2009, a “double down” signal appeared for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company that is 1/100th the size of Nvidia. Continue “
A higher share of complex work is driving margin expansion
Quanta provides engineering, construction and maintenance services to the utilities, energy and technology industries. Their services are essential for building substations that power data centers and improving the transmission lines that keep the lights on.
The growth of Quanta’s total order book, which increased 37.5% year over year, according to the most recent report, is impressive. Additionally, the trailing 12-month order book of $28 billion increased 45% and is now equal to the company’s full-year 2025 revenue.
More importantly, the company is getting higher quality jobs. The business is shifting toward larger, fixed-price contracts, which accounted for about 63% of total revenue in the first quarter. These complex projects, such as the construction of large-scale data centers and transmission lines, carry a higher potential margin than routine maintenance.
This was demonstrated during the first quarter in its metro and infrastructure segment. Even though organic revenue declined 17%, the segment’s operating margin improved to 7.5% from 6% a year ago. The improvement was driven by contributions from acquired companies that specialize in higher-margin mechanical and electrical work within data centers.
This shift towards more profitable projects, combined with operating leverage, is improving results. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew 36% in the quarter while margins expanded 60 basis points to 8.7%.
A compelling story at a high price.
Last year, free cash flow margin fell from 6.2% to 5.7% as growth consumed more working capital. While cash flow remains healthy, growth comes at a cost.