We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Data Center Demand Keep Driving Sterling's Margins in 2025?
Read MoreHide Full Article
Key Takeaways
STRL's E-Infrastructure segment revenues rose 18% in Q1 2025, fueled by strong data-center demand.
Data-center work now makes up over 65% of STRL's E-Infrastructure backlog, boosting revenue visibility.
Backlog gross margin rose to 17.7% from 16.7%, led by higher-margin E-Infrastructure project growth.
Sterling Infrastructure, Inc. (STRL - Free Report) has steadily carved out a strong position in the data-center construction space, capitalizing on growing demand for E-Infrastructure projects. The company’s ability to efficiently manage complex, mission-critical projects and consistently deliver high-quality outcomes has made it a trusted partner for data-center developers.
With E-Infrastructure projects becoming an increasingly strategic focus, sustained data-center demand appears to be a key driver supporting the company’s margin strength. At the end of the first quarter, the company's total backlog was $2.1 billion. The gross margin of the backlog reached 17.7%, up 100 basis points (bps) from 16.7% at the end of 2024. The improvement was driven by higher E-Infrastructure backlog and its margin growth. E-Infrastructure Solutions accounted for $1.2 billion, representing approximately 57% of the total backlog. The company continues to concentrate on opportunities that offer solid returns while managing factors within its control.
Sterling’s E-Infrastructure segment showed solid growth in the first quarter of 2025, driven largely by increasing demand in the data-center market. Revenues in this segment rose 18% year over year, with data center-related activity expanding roughly 60% compared with the prior year. Data-center projects now represent more than 65% of the segment’s backlog, highlighting its critical role in future revenue visibility. This robust demand expanded adjusted operating margins by 618 bps year over year to 23%.
Going forward, the company expects data-center demand to remain strong as customers plan multiyear capital deployments and seek partnerships to support these projects.
Other Industry Players Poised to Benefit From Data Center Growth
Jacobs Solutions Inc. (J - Free Report) and Dycom Industries, Inc. (DY - Free Report) are among the key competitors positioned to capitalize on the rising demand for data-center infrastructure.
Jacobs is strengthening its position in the data-center space by securing key roles in emerging technology projects across global markets. In the first quarter of 2025, the company reported double-digit revenue growth in both life sciences and data-center markets. Recent contract awards reflect Jacobs’ alignment with high-growth markets and support its efforts to maintain steady and profitable expansion. On May 19, 2025, Jacobs partnered with NVIDIA to support the development of data centers under the NVIDIA Omniverse Blueprint. (Read more: Jacobs & NVIDIA Partner for AI Factory Digital Twins Blueprint).
Dycom is broadening its work with hyperscalers by connecting fiber networks and data centers. Fiber demand linked to data centers continues to grow as Artificial Intelligence infrastructure expands. The company is seeing more opportunities to build long-haul and middle-mile routes. This growth is expanding Dycom’s addressable market and supporting its digital infrastructure services.
From a valuation standpoint, STRL is currently trading at a premium with a price-to-earnings ratio of 23.21X compared with the industry’s average of 20.43X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for STRL’s 2025 and 2026 earnings implies a year-over-year uptick of 38.5% and 11.6%, respectively. The EPS estimates for 2025 have remained unchanged in the past 30 days.
Image: Shutterstock
Can Data Center Demand Keep Driving Sterling's Margins in 2025?
Key Takeaways
Sterling Infrastructure, Inc. (STRL - Free Report) has steadily carved out a strong position in the data-center construction space, capitalizing on growing demand for E-Infrastructure projects. The company’s ability to efficiently manage complex, mission-critical projects and consistently deliver high-quality outcomes has made it a trusted partner for data-center developers.
With E-Infrastructure projects becoming an increasingly strategic focus, sustained data-center demand appears to be a key driver supporting the company’s margin strength. At the end of the first quarter, the company's total backlog was $2.1 billion. The gross margin of the backlog reached 17.7%, up 100 basis points (bps) from 16.7% at the end of 2024. The improvement was driven by higher E-Infrastructure backlog and its margin growth. E-Infrastructure Solutions accounted for $1.2 billion, representing approximately 57% of the total backlog. The company continues to concentrate on opportunities that offer solid returns while managing factors within its control.
Sterling’s E-Infrastructure segment showed solid growth in the first quarter of 2025, driven largely by increasing demand in the data-center market. Revenues in this segment rose 18% year over year, with data center-related activity expanding roughly 60% compared with the prior year. Data-center projects now represent more than 65% of the segment’s backlog, highlighting its critical role in future revenue visibility. This robust demand expanded adjusted operating margins by 618 bps year over year to 23%.
Going forward, the company expects data-center demand to remain strong as customers plan multiyear capital deployments and seek partnerships to support these projects.
Other Industry Players Poised to Benefit From Data Center Growth
Jacobs Solutions Inc. (J - Free Report) and Dycom Industries, Inc. (DY - Free Report) are among the key competitors positioned to capitalize on the rising demand for data-center infrastructure.
Jacobs is strengthening its position in the data-center space by securing key roles in emerging technology projects across global markets. In the first quarter of 2025, the company reported double-digit revenue growth in both life sciences and data-center markets. Recent contract awards reflect Jacobs’ alignment with high-growth markets and support its efforts to maintain steady and profitable expansion. On May 19, 2025, Jacobs partnered with NVIDIA to support the development of data centers under the NVIDIA Omniverse Blueprint. (Read more: Jacobs & NVIDIA Partner for AI Factory Digital Twins Blueprint).
Dycom is broadening its work with hyperscalers by connecting fiber networks and data centers. Fiber demand linked to data centers continues to grow as Artificial Intelligence infrastructure expands. The company is seeing more opportunities to build long-haul and middle-mile routes. This growth is expanding Dycom’s addressable market and supporting its digital infrastructure services.
STRL’s Price Performance, Valuation and Estimates
Sterling stock has jumped 12.4% in a month, outpacing the Zacks Engineering - R and D Services industry’s rise of 6.8%.
Image Source: Zacks Investment Research
From a valuation standpoint, STRL is currently trading at a premium with a price-to-earnings ratio of 23.21X compared with the industry’s average of 20.43X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for STRL’s 2025 and 2026 earnings implies a year-over-year uptick of 38.5% and 11.6%, respectively. The EPS estimates for 2025 have remained unchanged in the past 30 days.
Image Source: Zacks Investment Research
STRL currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.