AFRY’s Pivot to Organic Growth: Record Backlog and Data-Center Tailwinds

In its Q2 2026 earnings call, AFRY (AFRY.ST) delivered a clear message: the restructuring era is over, and the company is now shifting to organic growth. The tone set by CEO Linda Pålsson was confident as she highlighted progress across multiple fronts, from a record order backlog to improving utilization rates. But the real story lies in how AFRY plans to convert these operational improvements into sustained profitability — and the role data centers will play in that journey.

The Strategic Pivot

AFRY has spent the past year executing an extensive restructuring agenda, which included capacity adjustments, portfolio pruning, and the acquisition of AMC in the mining and metals segment. With this program now complete, management is deliberately turning its attention to growth. “We are now shifting focus to organic growth to capture profitability uplift from the actions we have taken.” — Linda Pålsson, CEO · 2026-07-15 CFO Bo Sandström reinforced this in the Q&A, explaining that the “vast majority of that is volume driven.” — Bo Sandström, CFO · 2026-07-15 The deliberate capacity reductions have suppressed revenue – organic sales declined 5.3% in the quarter – but they have also laid the groundwork for a more efficient operating platform.

The shift is also evident in the company’s own language. Keywords such as price development and sales volumes dominated the discussion, but now the focus is on growth and profitability uplift. Management’s confidence is underpinned by a record order backlog of SEK 22.4 billion, up 8% year-over-year. “The order backlog continued to develop favorably and is reported at SEK 22.4 billion, an improvement of 8% to last year and 4.2% sequentially.” — Bo Sandström, CFO · 2026-07-15 This backlog gives AFRY visibility that many peers lack, and the company expects roughly 50% of it to convert to revenue within the next 12 months.

Utilization: The Efficiency Engine

A key metric that management has been driving is utilization. After 14 consecutive quarters of decline, the utilization rate has now improved for three straight quarters, reaching 73.5% in Q2. This is a direct result of the restructuring and the new resource management platform. As CEO Linda Pålsson noted in a prior call, “It has been a clear priority and focus for us to keep the business momentum and keep the development on these important metrics that we have.” — Linda Palsson, CEO · 2026-02-05 The improved utilization, combined with lower group costs, is expected to drive margin expansion as volumes recover. The company’s long-term ambition is to reach 74% utilization by 2028, a target that now seems increasingly achievable.

However, the path to profitability is not without challenges. Management acknowledged that the weak price development in segments like automotive and construction continues to pressure margins. Yet, they are actively repositioning the portfolio toward higher-growth areas, including defense, healthcare, and most notably, data centers.

Data Centers: Riding the Global Wave

AFRY is positioning itself as a key player in the fast-growing data-center infrastructure market. CEO Linda Pålsson made this a central theme of the call, emphasizing the company’s full-lifecycle capabilities.

The demand for data center is growing rapidly, driven by cloud adaptation, digitalization, and investments in AI infrastructure around the world. According to our estimates, the market for engineering, project management, and advisory services that are related to data centers is expected to grow by more than 20% annually through 2030.

The timing is serendipitous. The global keyword trajectory shows a surge in data centers and AI-related themes across many companies, and AFRY is clearly riding that wave. The company’s own recent keyword list includes AMC acquisition and order backlog, both of which support the growth narrative. In the prior quarter’s call, Linda had already hinted at this direction: “we see that continuously, we will improve, but it's difficult to say exactly what kind of revenue is converted from the order backlog in Q4” — Linda Palsson, CEO · 2025-10-24 – now the backlog is not just growing, it is increasingly composed of large, higher-margin projects, particularly in energy and data centers.

Navigating Pricing Pressure

Despite the optimism, AFRY is not ignoring the market headwinds. The company has seen prolonged weakness in certain end markets, leading to price pressure. In the Q&A, Linda explained how they are addressing this: “To address that, we are going into pockets where we see growth and where we see where we have a strong position… we are going to the parts of the building business where we are relevant and where we can find the right margins for AFRY going forward.” — Adela Dashian, Analyst · 2026-07-15 This selective approach is reflected in the order backlog, which is heavily skewed toward energy, transmission/distribution, mining, and defense – areas with better pricing power.

The AMC acquisition is a perfect example of this strategy. It strengthens AFRY’s position in mining and metals, a segment with strong structural demand. While the acquisition added SEK 15 million in transaction costs in the quarter (excluded from IAC), management sees it as a high-quality addition that will yield synergies on both revenue and cost sides.

In summary, AFRY is at a critical juncture. The restructuring is behind them, the order backlog is at record levels, and the data-center market offers a powerful tailwind. The shift to organic growth is well-timed, but execution will be key. As CFO Bo Sandström noted,

As a rule of thumb, if you look at AFRY overall, you could estimate that in the next 12 months, we will carry approximately 50% of the backlog as revenue.