Stantec (STN) Q3 2025: $8.4B Backlog Signals 15% Demand Surge, Margin Expansion Ahead
Stantec’s $8.4 billion backlog—up nearly 15% year-over-year—anchors visibility into 2026, with margin expansion and robust cash flow reinforcing the firm’s diversified, resilient model. Strategic wins in water, infrastructure, and buildings are accelerating organic growth across geographies, while disciplined cost management and successful M&A integration support record EBITDA margins. Leadership remains confident in sustained demand drivers, even as procurement cycles and macro volatility introduce near-term uncertainty in the U.S. and select global markets.
Summary
- Backlog Momentum: Backlog growth outpaces revenue, extending visibility and supporting multi-year growth plans.
- Margin Leverage: Operational discipline and scale drive EBITDA margin to record highs, with cost controls and efficiency gains.
- M&A and Diversification: Acquisition integration and geographic mix underpin resilience amid mixed regional outlooks.
Performance Analysis
Stantec delivered double-digit organic revenue growth in water, energy and resources, and infrastructure, with overall net revenue up nearly 12% year-over-year. The U.S. led regional performance, bolstered by the Page acquisition and strong public sector demand, while Canada and global operations posted high single-digit and double-digit growth respectively. Notably, the water business achieved almost 13% organic growth, and the buildings segment surged over 40% in the quarter, reflecting both acquisition and organic momentum.
Adjusted EBITDA margin reached a record 19%, up 100 basis points, propelled by lower admin and marketing expense as a percentage of net revenue, improved project utilization, and operational scale. Operating cash flow nearly doubled year-over-year, and DSO (days sales outstanding) improved by four days, reflecting ongoing collection discipline and working capital focus. Backlog expanded to $8.4 billion, representing approximately 13 months of work and a 15% year-over-year increase, with organic growth led by the U.S. and global regions.
- Water and Infrastructure Strength: Double-digit organic growth in water and infrastructure reflects long-cycle public sector demand and project wins.
- Cash Flow Acceleration: Operating cash flows surged 86% year-over-year, with DSO improvements signaling sustainable working capital gains.
- Regional Outperformance: Canada and global markets delivered above-trend growth, offsetting U.S. procurement delays.
Stantec’s performance demonstrates the leverage of its diversified model, with margin and cash flow benefits compounding as scale increases and new acquisitions integrate successfully.
Executive Commentary
"Global trends across water, transportation, energy transition and mission critical sectors continue to drive strong demand for our services. And our diversification across sectors and geographies creates resilience within our operations."
Gord Johnston, President and Chief Executive Officer
"We achieved an all-time high adjusted EBITDA margin of 19% in the quarter, a 100 basis point increase compared to Q3 of last year. The increase in margin primarily reflects lower administration and marketing expenses... and higher utilization."
Vito Camoni, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Backlog as Growth Engine
Stantec’s $8.4 billion backlog—up 15% year-over-year—provides a substantial revenue base and extends visibility into 2026. Organic backlog growth of 5.6%, with U.S. and global operations leading, demonstrates that demand drivers are intact even as procurement cycles slow in some regions. Backlog composition is diversified across water, buildings, and infrastructure, reducing exposure to any single sector or geography.
2. Operational Efficiency and Margin Expansion
Management’s focus on project selection, pricing discipline, and utilization has delivered record margins. Admin and marketing costs fell as a share of revenue, and utilization rates improved, reflecting both scale and process improvements. The company’s ability to expand EBITDA margin while investing in people and offerings signals operational leverage that can persist even as growth moderates.
3. M&A Integration and Revenue Synergies
The Page acquisition (architecture and engineering services) has been rapidly integrated, with financial systems on track for full integration by year-end and revenue synergies already materializing. Stantec’s disciplined M&A approach—prioritizing strategic fit and long-term value—positions it to capitalize on a robust pipeline of potential targets, particularly in fragmented markets and geographies where bolt-on deals can accelerate growth.
4. Geographic and Sector Diversification
Exposure to a broad mix of end-markets—including water, energy transition, healthcare, and data centers—buffers Stantec against regional volatility. In Canada, public sector infrastructure and land development are key drivers, while in global markets, long-term framework agreements (e.g., AMP8 in the UK) underpin growth. The U.S. remains a core market, but procurement delays and macro uncertainty are being offset by strength elsewhere.
5. Capital Allocation and Financial Flexibility
Net debt to EBITDA of 1.5x remains within target, providing capacity for additional M&A. Management emphasized continued discipline in capital allocation, balancing organic investment, dividends, and opportunistic buybacks, with a clear preference for accretive acquisitions as the primary value driver.
Key Considerations
Stantec’s Q3 reflects a business firing on multiple cylinders, but investors should weigh the following strategic dynamics:
Key Considerations:
- Procurement Cycle Drag in U.S.: U.S. backlog is flat year-to-date, reflecting slower procurement and contract signings, though management expects a rebound as awarded projects convert to backlog.
- Water and Data Center Growth: Water remains a secular growth engine, with double-digit organic growth in both Canada and the U.S.; data centers now contribute 2-3% of revenue, with upside capped to maintain diversification.
- Margin Expansion Levers: Operational scale, cost discipline, and project mix continue to drive margin gains, but further expansion depends on sustained organic growth and successful integration of acquisitions.
- M&A Pipeline Robustness: Active deal discussions and a supportive board signal continued inorganic growth, especially in fragmented markets and new geographies like Germany.
Risks
Procurement delays and macroeconomic uncertainty in the U.S. could weigh on near-term organic growth, particularly if federal funding cycles remain unpredictable. Global markets face currency and client risk (e.g., AMP8 participants), though Stantec’s framework agreements mitigate some exposure. Integration risks remain for recent and future acquisitions, and sector-specific slowdowns (e.g., environmental services) could drag results if not offset by other segments.
Forward Outlook
For Q4, Stantec guided to:
- Adjusted EBITDA margin of 17.2% to 17.5% for the full year
- Mid-single-digit U.S. organic growth, with stronger trends in Canada and global segments
For full-year 2025, management raised its adjusted EPS growth outlook to 18.5% to 21.5% and expects adjusted ROIC above 12.5%. Commentary emphasized:
- Continued demand in water, infrastructure, and energy transition
- Resilience from geographic and sector diversification, with M&A as a lever for upside
Takeaways
Stantec’s Q3 validates the strength of its diversified, project-driven model.
- Backlog Depth Secures 2026 Visibility: The 15% backlog increase anchors future growth, mitigating near-term U.S. procurement headwinds.
- Margin Expansion Reflects Operational Leverage: Cost discipline, utilization gains, and accretive M&A are compounding returns.
- Monitor Regional Mix and Award Conversion: Investors should watch for U.S. backlog conversion and global market execution as key drivers of sustained outperformance.
Conclusion
Stantec’s Q3 2025 results showcase a resilient, diversified engineering platform with expanding margins, robust cash flow, and a deepening backlog. While regional procurement dynamics introduce some uncertainty, the company’s strategic positioning and disciplined capital allocation provide confidence in its ability to deliver on multi-year growth targets.
Industry Read-Through
Stantec’s results reinforce secular tailwinds in water infrastructure, energy transition, and public sector investment—critical themes for the global engineering and design sector. The company’s ability to expand backlog and margins amid mixed macro signals suggests that diversified, multi-sector platforms with disciplined execution are best positioned to weather volatility. Peers should note the importance of backlog quality, M&A integration, and geographic mix as differentiators, particularly as public funding cycles and procurement processes become less predictable. The ongoing strength in water and data center projects offers a read-through for firms exposed to these high-growth end-markets.