Quanta Services (PWR) Q2 FY26 earnings call: guidance and Q&A

To what extent is Quanta more positive about longer-term margin potential, especially with increased self-perform work and large load projects?

Duke Austin confirmed that the business has structurally changed, and he sees room for margin improvement, particularly in the Electric segment, which could reach 10-12%. He noted that while guidance is prudent, baking in risks, there is upside potential for margins.

“Look, structurally, fundamentally, the business has changed. We're seeing it change. We have 2 addressable TAMs, both of which are growing... I do think there's room for margin improvement in the backside.”

asked by Steven Fisher · answered by Earl Austin

How is the technology business scaling, is it with existing or new customers, and what is the M&A strategy for this segment?

Duke explained that they acquired a platform (Cupertino) and are leveraging self-perform capabilities to build balance-of-plant for hyperscalers and large customers. This collaborative approach leads to more addressable market, with evident synergies from labor crossing between T&D and data centers. M&A focuses on strategic fits that enhance capabilities.

“We talked about the technology customers that we thought that we could take our collaborative approach and build another TAM that's ever as big as our utility TAM. We're doing that. It's showing up to the hyperscaler, direct to the larger customers showing them what we can do, our self-perform capabilities...”

asked by Julien Dumoulin Smith · answered by Earl Austin

What share of RFPs have modular capability, what's the 5-year outlook, and how does it impact labor costs and pricing?

Duke stated they have 7 million sq ft of modular capacity, recently adding 0.5 million sq ft. This integrated fabrication is solution-based, leveraging engineering to design for construction efficiency. It leads to fewer people needed and lower overall costs, especially with collaborative clients, enabling certainty and cost reduction.

“We can really design from a construction nature and work with the client and what they're trying to accomplish... the fabrication is exponential... the more collaborative the client is with us, the -- what I would consider the total cost goes down significantly for them.”

asked by Chad Dillard · answered by Earl Austin

Is the strong free cash flow due to sustainable changes like prepayments from large load customers, or is it a one-off?

Jayshree Desai confirmed strong free cash flow is due to favorable contracting terms across the business, particularly in MEP, EPC, and Renewables, improving working capital. She expects continued strength, reiterating a long-term conversion rate of 55-60%, with potential to be at the high end or better.

“We are getting favorable contracting terms across the business. But the growth of the MEP business, our EPC business, our Renewables business is contributing to that free cash flow growth. So we believe that we're going to continue to see those types of factors coming into our free cash flow profile.”

asked by Justin Hauke · answered by Jayshree Desai

How much of Percheron's revenue is third-party, will it focus on Quanta work, and does it help with front-end data center or T&D work?

Duke clarified Percheron's revenue was almost entirely third-party (utilities, hyperscalers), not Quanta-related. It's a right-of-way acquisition that provides a unique front-end solution to clients, helping to accelerate land acquisition and permitting for both technology and utility T&D projects.

“Percheron will allow us to provide a unique solution to the client on the front end where we believe we can move right away faster and a more economical way to get our people in the field, both on the technology market and actually technology pipeline and Utility T&D.”

asked by Sangita Jain · answered by Earl Austin

How is the traditional T&D business trending versus initial expectations, and what are the long-term expectations from electric utility customers?

Duke stated the T&D business is on target, currently experiencing double-digit growth. Larger projects are still in engineering and will hit backlog later in the year, with field execution in H2 2027, leading to a compounding stacking effect that will extend well past 2030. He expects record backlog to continue.

“I think double-digit type growth there today, and it's going to get much greater than that as we start our compounding big work there. look much like it did, call it, before '15, was it 12 to 15, somewhere in there. We were on a bunch of big projects and started compounding.”

asked by Adam Thalhimer · answered by Earl Austin

Is there a path for Underground & Infrastructure margins to approach Electric segment margins, especially with new acquisitions?

Duke believes it's possible for Underground & Infrastructure margins to reach parity with Electric, depending on work mix and risk. He notes that labor is fungible across segments, allowing electricians and underground workers to move between data centers, industrial bases, and gas compression, which helps improve efficiencies.

“Yes, look, I do think you can pull them up. We got -- let me get to double digits first, and then I'll go from there. But I do think we have opportunities to get at parity to electric. You can do it. It just depends on what the mix looks like.”

asked by Jamie Cook · answered by Earl Austin