Major Power Contract Fuels Babcock & Wilcox Rally
Babcock & Wilcox Enterprises, Inc. (NYSE: BW) saw its stock price jump approximately 31% in early trading Wednesday following the announcement that the company has received full notice to proceed on a substantial $2.4 billion contract. The agreement involves supplying critical power generation equipment for artificial intelligence data center campuses developed by Applied Digital Corporation.
Contract Details and Financial Terms
The definitive design-build agreement, finalized on February 26, 2026, replaces a previously disclosed limited notice to proceed. According to a U.S. securities filing, the contract's total potential value could reach $2.4 billion. This sum comprises a fixed fee of approximately $434.8 million, supplemented by variable charges that will depend on the scope of work completed. The project calls for Babcock & Wilcox to engineer, procure, and construct four separate 300-megawatt natural gas-fired boiler and steam-turbine generator systems, representing a combined capacity of 1.2 gigawatts.
The news coincided with the company's fourth-quarter earnings report, which revealed revenue of $161.0 million, surpassing the analyst consensus estimate of $155.6 million according to LSEG data. Operating income for the quarter showed significant improvement, reaching $12.2 million compared to $2.6 million in the same period last year. Adjusted EBITDA from continuing operations was reported at $16.4 million.
AI-Driven Power Demand Creates Market Opportunity
This massive contract underscores the escalating energy demands of the rapidly expanding artificial intelligence sector. AI data centers are notoriously power-intensive, creating a surge in need for reliable, dedicated electricity generation. Kenneth Young, CEO of Babcock & Wilcox, directly attributed the project to the "rapidly expanding power needs" driven by AI infrastructure. Wes Cummins of Applied Digital framed the initiative as essentially "turning power into operational AI capacity."
The focus on power supply for data centers was highlighted at a White House event the same day, where leading technology firms committed to securing dedicated power sources for their operations. Industry experts, such as Jon Gordon of Advanced Energy United, noted that simply financing generation does not accelerate its deployment timeline.
Broader Market Context and Industry Moves
The deal places Babcock & Wilcox firmly within the burgeoning market for data center power solutions. The company, traditionally known for manufacturing energy and environmental equipment for utilities and industrial clients, is expanding its footprint with this strategic move. Siemens Energy (SIEGY) has been tapped to handle the design and supply of the steam turbine generator sets for the project.
This trend is reflected across the energy sector. NextEra Energy, the nation's largest electricity provider, recently informed investors of plans to add between 15 and 30 gigawatts of new generation capacity specifically for U.S. data centers over the next nine years, with natural gas expected to form the backbone of this expansion.
To finance its own development, Applied Digital (NASDAQ: APLD) has arranged a $2.15 billion offering of 6.750% senior secured notes due in 2031, priced at 98% of their face value. The offering is anticipated to close around March 10, with proceeds earmarked for building out 200 megawatts of critical IT load at its Polaris Forge 2 AI Factory campus in North Dakota. A new entity, Base Electron, has been established as an independent power producer to build and operate generation assets for both the grid and contracted clients.
Financial Outlook and Company Backlog
For the full year 2025, Babcock & Wilcox reported revenue of $587.7 million and adjusted EBITDA of $43.7 million. CEO Young pointed to "strong operating results" and progress on debt reduction. The company's backlog, after incorporating this new data center project, has climbed to $2.8 billion. Furthermore, Babcock & Wilcox indicated its pipeline of potential projects under discussion exceeds $12 billion. The company has scheduled a conference call to discuss results for March 16 at 5:00 p.m. Eastern Time.
In its filing, the company included standard risk disclosures, noting that backlog figures may not directly translate to future operating results and could be subject to revision or cancellation. It also cautioned that projects in the discussion pipeline are not guaranteed to convert into revenue as planned, or at all. The scale of the contract introduces potential execution risks if project timelines slip or costs escalate.
