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    FIX
    Earnings call· Jun 2026(Q2 FY26)

    COMFORT SYSTEMS USA INC FIX

    Jul 24, 2026 Source

    Executive summary

    Comfort Systems USA Q2 FY26 — Record Revenue, EPS, and Backlog Driven by Technology Sector

    Comfort Systems USA delivered an exceptional second quarter, achieving record revenue, EPS, and backlog, primarily fueled by robust demand in the technology sector and strong execution across its Mechanical and Electrical segments. The company is strategically expanding its modular capacity and integrating recent acquisitions to capitalize on sustained market opportunities, particularly in data centers. Management remains optimistic about future performance, balancing significant capital investments with shareholder returns and a strong net cash position.

    Highlights

    5

    • Quarterly revenue exceeded $3 billion for the first time, reaching $3.3 billion, an increase of $1.1 billion YoY.

    • Diluted EPS was $12.53, a 92% increase compared to Q2 FY25.

    • Gross profit percentage increased to 25.9% from 23.5% in Q2 FY25, and operating income percentage surged to 17.1% from 13.8%.

    • Backlog reached a new record high of $14.1 billion, up $5.9 billion or 73% YoY, with $5.6 billion of the increase being same-store.

    • Free cash flow for the quarter was $999 million, contributing to a net cash position of over $1.8 billion.

    Concerns

    3

    • The Q2 gross profit percentage of 25.9% ticked down slightly from Q1, though it increased from Q1's adjusted 25.2% when excluding unique gains.

    • Full-year CapEx expenditures are estimated to be approximately 5% of revenue, including significant investments in production facilities.

    • The company faces "really, really heavy comparables" in Q3 and particularly Q4, which will impact reported growth rates.

    Guidance & targets

    4
    CategoryTargetConfidence
    Full-year 2026 same-store revenue growth
    Mid- to high 30% range
    high materiality
    High
    Full-year effective tax rate
    Around 23%
    medium materiality
    High
    Full-year CapEx expenditures as % of revenue
    Approximately 5%
    medium materiality
    High
    Modular business capacity
    Approximately 5 million square feet
    high materiality
    High

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Mechanical
    Experienced a sharp increase in profitability.
    Gross profit percentage: 25.6% (vs 22.9% last year)
    		—40%—25.6%
    Electrical
    Performed exceptionally well, margins increased by a full percentage point.
    Gross profit percentage: 26.4% (vs 25.3% last year)
    		—81%—26.4%
    Industrial Customers
    Major drivers of pipeline and backlog.
    Share of total revenue: 75% (in H1 2026)
    		————
    Technology
    Substantial increase, major driver of pipeline and backlog.
    Share of total revenue: 58% (up from 40% in prior year)
    		————
    Institutional Markets
    Includes education, healthcare, and government; remains strong.
    Share of total revenue: 17%
    		————
    Commercial Sector
    Now a smaller part of the business.
    Share of total revenue: 8%
    		————
    Construction
    Projects for new buildings represented 75% of revenue, existing building construction 15%. Modular is included in new building construction.
    Share of total revenue: 90%
    		————
    Service
    Remains very profitable; investments to meet future demand are a key strategy.
    Share of total revenue: 10%
    		—7%——

    Operational metrics

    21
    Total Revenue
    $3.3 billionUp $1.1 billion YoY
    Q2 FY26

    First time quarterly revenue exceeded $3 billion.

    Same-store revenue growth
    44%YoY
    Q2 FY26

    Extraordinary growth.

    Same-store revenue growth
    47%YoY
    YTD FY26

    Same-store revenue growth for the first 6 months.

    Gross profit
    $844 millionUp $334 million YoY
    Q2 FY26
    Gross profit percentage
    25.9%Up from 23.5% in Q2 FY25
    Q2 FY26

    Noteworthy percentage, expected to continue in strong ranges.

    SG&A expense
    $287 millionUp from $210 million in Q2 FY25
    Q2 FY26

    Investment in people and innovation.

    SG&A expense as % of revenue
    8.8%Down from 9.7% in Q2 FY25
    Q2 FY26

    SG&A leverage.

    Operating income
    $558 millionUp 86% from $300 million in Q2 FY25
    Q2 FY26

    Surged due to strong gross profit margins and SG&A leverage.

    Operating income percentage
    17.1%Up from 13.8% in Q2 FY25
    Q2 FY26
    Effective tax rate
    22.5%
    YTD FY26

    Benefited from a discrete tax item in Q2.

    Net income
    $442 millionUp from $231 million in Q2 FY25
    Q2 FY26

    More than 90% higher than prior year.

    Diluted EPS
    $12.53Up 92% from $6.53 in Q2 FY25
    Q2 FY26
    EBITDA
    $600 millionUp 80% from $334 million in Q2 FY25
    Q2 FY26

    Reflects great execution and strong demand.

    Trailing 12-month EBITDA
    Approximately $2 billion
    LTM Q2 FY26
    Net cash position
    Over $1.8 billion
    Q2 FY26

    Despite funding acquisition and capital investments.

    Modular capacity
    Over 3.5 million
    Q2 FY26

    Dedicated to Modular business.

    Modular capacity
    More than 4 million
    Year-end FY26

    On track for production.

    Modular revenue share
    17%
    YTD FY26

    Included in new building construction.

    Quarterly dividend per share
    $0.90Increased by $0.10
    Q2 FY26

    Increased quarterly dividend.

    Changes in estimates on projects
    7.7%Close to double the impact year ago
    Q2 FY26

    Reflects net gains on jobs, excellent pricing, and increased project size/complexity.

    Modular bookings
    $510 million
    Q2 FY26

    Booked enough to cover burn rate and add to backlog.

    Industry KPIs

    6
    MetricValueDetails
    Total backlog$14.1 billionUSD
    End market pipeline75%%
    Acquisition contribution$250 millionUSD
    Self perform activity mix90%%
    Same store organic revenue growth44%%
    Craft skilled labor headcount capacityOver 25,000employees

    Orderbook & backlog

    2
    Total backlog$14.1 billionQ2 FY26

    Up $5.9 billion or 73% YoY; Up $1.6 billion or 13% sequentially

    $5.6 billion of YoY increase was same-store; $1.4 billion of sequential increase was same-store. Most of the construction backlog burns in the next 18 to 24 months. Modular backlog is booked farther out.

    Same-store backlognullQ2 FY26

    Up 69% YoY

    Entering Q3 with this level of same-store backlog.

    Deals & partnerships

    1
    Hunt ElectricElectrical business based in Utah.

    Acquisition mentioned last quarter, closed on May 1. Strategic fit with mechanical contractors in the Utah market.

    Risks & headwinds

    2
    Heavy comparables in Q3 and Q4 FY26Q3 FY26, Q4 FY26

    really, really heavy comparables

    Mitigation: Management acknowledges the challenge but expects continued growth.

    Public sentiment/moratoriums on data centersCurrent

    news about the moratoriums on data centers in New York

    Mitigation: Existing backlog is planned and permitted. Data centers will get built; locations might shift. Modular buildout is less impacted as it's programmatic to specific locations. Company is betting on continued data center construction.

    What to watch in Q3 FY26

    4

    Full-year same-store revenue growth

    Next quarter (Q3 FY26 results)
    CurrentYTD 47%; Q2 44%
    TargetMid- to high 30% range for FY26

    Why it matters

    Indicates the underlying organic growth trajectory of the business, especially given heavy comparables in H2.

    we estimate the 2026 same-store revenue growth will likely finish with a full year increase that is in the mid- to high 30% range.

    Q&A highlights

    6

    How to understand the $1 billion free cash flow in a single quarter and its implications for future cash flow.

    The extraordinary cash flow is due to advanced cash from customers, excellent payment terms, and strong project execution leading to happy customers. It's broad-based and indicative of a healthy business, with no single unique item other than some advanced cash. Over time, cash flow will match net income plus non-cash expenses.

    “The interesting thing about this, there is definitely an element of advanced cash. People who know us what we're calling a year or 2 ago, we received a lot of orders and we were able to fill a percentage of those orders far ahead of when we would actually incur the cost to do the work. So we have begun to build a position of advanced cash as well.”

    asked by Adam Thalhimer · answered by William George

    2 min read5 chapters

    Detailed Narrative

    01

    Record Performance and Growth Drivers

    Comfort Systems USA achieved record financial results in Q2 FY26, with revenue exceeding $3 billion for the first time and diluted EPS increasing 92% YoY to $12.53. This strong performance was driven by exceptional execution from both Mechanical and Electrical segments, with the Electrical segment growing 81% and Mechanical 40%. The company's gross profit percentage expanded to 25.9%, and operating income surged 86% to $558 million, reflecting strong gross margins and SG&A leverage.

    02

    Backlog and Demand Strength

    The company's backlog reached an all-time high of $14.1 billion, representing a 73% increase YoY, with $5.6 billion of this growth being same-store. This robust backlog is primarily fueled by strong demand in the technology sector, which now accounts for 58% of total revenue, up from 40% in the prior year. Industrial customers, including technology, represent 75% of total revenue, indicating sustained pipeline strength.

    03

    Modular Business Expansion

    The modular operations continue to be a significant growth driver, with current capacity over 3.5 million square feet, on track to reach 4 million square feet by year-end, and projected to expand to 5 million square feet by late summer 2027. This expansion is supported by strong customer demand and multi-year commitments, primarily from existing hyperscaler clients, with pilot contracts also being explored with Frontier labs and colocation providers.

    04

    Strategic Capital Allocation

    Comfort Systems USA generated nearly $1 billion in free cash flow this quarter, resulting in a net cash position of over $1.8 billion despite significant capital investments and the acquisition of Hunt Electric. The company plans to allocate approximately 5% of revenue to CapEx for facility expansion and automation, while also maintaining a patient approach to acquisitions and share repurchases, having increased its quarterly dividend by $0.10 to $0.90 per share.

    05

    Project Execution and Margin Quality

    The company consistently realizes net gains on projects, a historical trend in construction, with Q2 FY26 gains being larger than usual due to excellent pricing and the increased size and complexity of projects. Management emphasizes disciplined project selection and the high performance of its skilled workforce as key factors in maintaining strong margins and successful project execution, even as the risk profile of larger projects increases.

    AI-generated summary of the company’s earnings call. Not investment advice.