Primoris (PRIM) Q2 2025: Utility Segment Margins Reach 12%, Expanding Multi-Year Earnings Power
Primoris delivered a record quarter, propelled by double-digit growth in both energy and utility segments and a step-change in utility margin structure. The company’s margin improvement and backlog expansion reflect disciplined execution and robust demand across transmission, renewables, and data center infrastructure. Management’s guidance raise and commentary signal durable, multi-year tailwinds as Primoris leverages its diversified infrastructure platform to capture secular grid and energy investment cycles.
Summary
- Margin Expansion Accelerates: Utility segment margins reached new highs, reflecting successful contract repricing and productivity gains.
- Backlog and Bookings Strengthen: Record backlog and robust new awards in renewables and power delivery support visibility into 2026.
- Secular Demand Tailwinds: Data center, grid hardening, and generation projects set up sustained growth across core business lines.
Performance Analysis
Primoris posted record results in Q2 2025, with both revenue and operating income at all-time highs, driven by double-digit growth in energy and utility segments. The energy segment surged on the back of renewables, including utility-scale EPC (engineering, procurement, and construction) and battery storage, while the utility segment benefited from broad-based strength in gas, communications, and power delivery. Gross profit rose sharply, with utility segment gross profit up over 50% year-over-year, and power delivery margins more than doubling from the prior year, a direct result of contract repricing and operational initiatives.
Operating leverage was evident as SG&A (selling, general, and administrative) expense growth was contained, falling as a percentage of revenue. Cash flow from operations hit a record for the second quarter, and net debt to EBITDA fell to 0.5x, positioning Primoris to fund organic growth and pursue strategic M&A. Backlog ended just under $11.5 billion, with MSA (master service agreement, recurring contract) backlog up over $600 million sequentially, supporting multi-year visibility. Management increased full-year earnings guidance and raised capital expenditure plans to meet demand, signaling confidence in further margin and earnings expansion.
- Utility Margin Inflection: Utility segment gross margins rose to 12.1%, driven by higher rates, productivity, and favorable project mix.
- Renewables Outperformance: Renewables revenue is tracking toward $2.5 billion for 2025, up from $2.2-2.3 billion initial guidance, with $1.4 billion realized in the first half.
- Cash Flow and Balance Sheet Strength: Operating cash flow improved by $157 million year-over-year, supporting increased investment and debt paydown.
Primoris’ performance this quarter demonstrates both strong execution and a favorable demand environment, with margin and cash flow gains translating into higher guidance and multi-year growth optionality.
Executive Commentary
"Primoris had a record second quarter, achieving new highs in the revenue, operating income and earnings. Our results exhibit the effectiveness of our financial and operational strategy to grow profitably through disciplined capital allocation."
David King, Chairman and Interim President & Chief Executive Officer
"Gross profit for the second quarter was $231.7 million, an increase of $45 million or 24.1% compared to the prior year. This is primarily due to increased revenue in both segments and improved margins in the utility segment."
Ken Dodgen, Chief Financial Officer
Strategic Positioning
1. Utility Segment Margin Reset
Primoris’ utility segment is experiencing a structural margin uplift, with gross margins now targeted at 10-12% for 2025 and beyond, compared to high single digits historically. This is the result of repriced MSA contracts, improved crew productivity, and a favorable mix shift to higher-margin transmission and substation work. Management’s commentary and Q&A confirm that these gains are sustainable, not merely a function of one-off project closeouts or weather.
2. Renewables and Energy Diversification
The energy segment’s growth is anchored in utility-scale renewables EPC and battery storage, with incremental upside from natural gas generation and pipeline work. Renewables revenue is set to exceed initial expectations, and management continues to see a multi-year runway of solar and storage projects, supported by legislative clarity and robust customer demand. While battery storage faces near-term supply chain uncertainty, the segment remains a core growth engine.
3. Data Center Infrastructure Opportunity
Primoris is positioning itself as a premier partner for data center infrastructure, with $1.7 billion in active bids and a growing pipeline of projects. The company’s offerings—site prep, power generation, utility infrastructure, and fiber—are in high demand as hyperscale and enterprise customers race to expand capacity. Management emphasized that most of this opportunity is incremental to prior plans, providing an additional secular growth lever.
4. Backlog and Bookings Visibility
Robust backlog and bookings trends support multi-year revenue visibility, with MSA backlog up sharply and fixed backlog poised to rebound in the second half as renewables and energy awards accelerate. Management expects a strong finish to 2025 and a solid backlog position entering 2026, underpinned by secular investment cycles in grid modernization, renewables, and data centers.
5. Capital Allocation Discipline
Primoris continues to prioritize organic investment in high-growth, high-margin areas, while maintaining balance sheet flexibility for opportunistic M&A. Cash flow strength and low leverage enable the company to fund growth, pay down debt, and pursue strategic acquisitions, supporting long-term shareholder value creation.
Key Considerations
Primoris’ Q2 results reflect a business executing on multiple secular growth drivers while maintaining operational discipline. The combination of margin reset, backlog strength, and capital allocation discipline positions the company for sustained outperformance.
Key Considerations:
- Secular Grid and Energy Investment: Transmission, substation, and renewables projects are fueling multi-year demand, with customer plans expanding beyond prior expectations.
- Data Center Infrastructure as Incremental Upside: Data center-related work is largely additive, with Primoris leveraging its cross-segment capabilities to capture this fast-growing market.
- Margin Sustainability and Productivity: Margin gains in utilities are not solely due to one-time items; they reflect structural improvements in pricing and execution.
- Balanced Capital Deployment: The company is investing in growth areas while paying down debt and preparing for M&A, enabled by record cash generation and low leverage.
- Pipeline and Gas Opportunities: Large diameter pipeline work and natural gas generation projects are expected to contribute more meaningfully in late 2025 and into 2026.
Risks
Key risks include regulatory and tariff volatility, particularly in renewables and battery storage, where supply chain constraints or policy changes could disrupt project timing or margins. Weather and seasonality remain swing factors for quarterly margin realization, as does the pace of utility customer spending. Management’s guidance assumes continued demand strength, but any slowdown in grid or data center investment would pose downside risk to backlog and earnings trajectory.
Forward Outlook
For Q3 2025, Primoris guided to:
- Continued margin strength in utilities, though sequentially lower than Q2 due to seasonality and absence of one-time closeouts
- Accelerated renewables and energy bookings, with a heavier contribution in Q4
For full-year 2025, management raised guidance:
- EPS: $4.40 to $4.60 per share
- Adjusted EPS: $4.90 to $5.10 per share
- Adjusted EBITDA: $490 to $510 million
- Gross CapEx: $100 to $120 million (raised $10 million at midpoint)
Management highlighted several factors that support the outlook:
- Strong customer demand across utilities, renewables, and data centers
- Structural margin improvement and disciplined capital allocation
Takeaways
Primoris is executing on a multi-year earnings expansion, driven by utility margin reset, renewables outperformance, and emerging data center infrastructure demand.
- Margin Reset Is Durable: Utility segment margin gains are structural, supported by contract repricing and operational initiatives, not just one-off events.
- Backlog and Pipeline Provide Visibility: Record backlog and robust new awards in key growth areas underpin revenue visibility into 2026.
- Secular Demand Tailwinds Persist: Investors should watch for continued data center and grid investment as drivers of incremental growth and margin expansion.
Conclusion
Primoris’ Q2 results mark a turning point in margin structure and backlog visibility, with the company well-positioned to capitalize on secular infrastructure cycles. Disciplined execution, balanced capital allocation, and exposure to high-growth end markets set up a durable, multi-year earnings power story.
Industry Read-Through
Primoris’ strong quarter underscores the broad-based secular tailwinds driving North American infrastructure investment, including grid hardening, renewables buildout, and surging data center demand. Peers in engineering, construction, and specialty contracting should benefit from similar margin and backlog dynamics, especially those with exposure to utility and renewables end markets. Data center infrastructure is emerging as a major incremental opportunity across the value chain, while disciplined capital allocation and operational leverage will differentiate winners as the cycle matures. Investors should monitor margin resets and backlog trends as leading indicators of multi-year earnings power across the sector.