Shares of IES Holdings (NASDAQ:IESC) soared more than 33% on Friday after the company reported fiscal third-quarter earnings that showcased a massive shift toward data-center-related operations. The stock was trading at $762.00 by early afternoon, after reaching an intraday high of $774.78.
The Houston-based electrical services provider reported revenue of $1.24 billion for the quarter ended June 30, a 40% increase from the prior-year period. Adjusted earnings per share came in at $6.70, up 71% year over year, while GAAP EPS rose 99% to $7.57, helped by a $26.2 million gain on marketable securities.
Data Center Dominance
The earnings release highlighted a dramatic shift in the company's business mix. Three segments that serve data centers — Communications, Infrastructure Solutions, and Commercial & Industrial — collectively generated $918.6 million in revenue, accounting for 74% of total sales. More notably, these segments delivered $191.3 million in segment operating income, representing 92% of total segment profit before corporate costs.
This is a significant jump from the same period last year, when those segments accounted for 61% of revenue and 74% of segment operating income. The combined operating margin for these data-center-focused businesses expanded to 20.8% from 17.2%, with revenue surging 68.8% and operating income more than doubling.
Jeffrey T. (Jeff) M. (Matt) Simmes, IES's Chief Executive Officer, attributed the strong performance to strategic capital allocation that "positioned us to grow revenue and improve margins." The company has increased its production capacity by approximately one million square feet over the past year.
Segment Performance
The Commercial & Industrial segment was the standout, with revenue more than doubling to $241.4 million and operating income quadrupling to $54.3 million. The segment's operating margin expanded by 1,126 basis points to 22.5%, driven by a surge in short-term data-center projects with strong margins.
Infrastructure Solutions also delivered robust growth, with revenue up 73.1% to $224.1 million and operating margin of 23.8%. Communications saw revenue increase 51.4% to $453.1 million, with an operating margin of 18.5%.
In contrast, the Residential segment continued to struggle, with revenue declining 6.3% to $324.1 million and operating income falling 51.2%. The segment's operating margin contracted by 462 basis points to 5.0%, reflecting ongoing weakness in the housing market.
Backlog and Balance Sheet
Total backlog climbed to $4.53 billion, a 91% increase from September 2025, with 91.6% of that coming from the data-center-focused segments. The company also reported remaining performance obligations of $2.80 billion, up 66%.
IES ended the quarter with no debt, holding $77.3 million in cash and $310.6 million in marketable securities. Operating cash flow for the first nine months of fiscal 2026 increased 55% to $239.4 million. Capital expenditures totaled $123.0 million, up 160%, and the company raised its full-year capex guidance to $145-$160 million.
Peer Comparison and Stock Split
The company's performance contrasted sharply with some peers. Quanta Services (NYSE:PWR) gained 2.4% after its own earnings, while MasTec (NYSE:MTZ) dropped 17.2% despite reporting revenue growth of 23%.
IES also announced a two-for-one stock split, with shareholders of record as of August 14 receiving additional shares after the market close on August 21. Management expects the split to enhance trading liquidity.
Analysts caution that of the $4.53 billion backlog, $1.72 billion (38%) is not yet legally enforceable. Labor supply challenges persist, and the company expects working capital requirements to increase through the first quarter of fiscal 2027. A 10% swing in marketable securities could impact pre-tax income by roughly $31.1 million.
The key question going forward is whether IES can sustain its data-center margins while expanding capacity and workforce to convert its record backlog. With data centers now the dominant profit driver, the company's fortunes are increasingly tied to the AI infrastructure boom.
