Construction Partners: Riding Data Center Waves and the New Federal Highway Bill

A Record Quarter That Masks a Strategic Shift

Construction Partners delivered its strongest quarter yet, with revenue of $999.4 million (up 28.2% year-over-year), record backlog of $3.36 billion, and a raised fiscal 2026 outlook. But the most consequential development isn't the numbers – it's the company's increasingly explicit embrace of data center projects as a core growth engine. Management noted that an estimated 70–75% of new data center construction is occurring in its eight-state footprint, and it is already bidding and building projects in Texas, Oklahoma, and elsewhere. “Clearly, there are great opportunities. And we're doing more and more of them simply because we're building relationships with the people that are building them,” — F. Smith, Chief Executive Officer · 2026-08-07 CEO Jule Smith said in Q&A.

This isn't a completely new theme – the keyword AI data center has appeared in prior calls – but the specificity and scale have changed. The company now quantifies a pipeline exceeding $230 million in just two states, and the Ellsworth acquisition in Oklahoma directly adds data center capabilities. “Jule, when you talk about data centers, I mean, maybe for you, just is there anything different on how you guys are tackling this opportunity?” — Patrick Brown, Analyst · 2026-08-07 an analyst asked, reflecting the market's curiosity about whether this is a temporary shift or a permanent part of the story.

What makes this more than a side bet is the margin profile. Management explicitly described data center work as "nice margin projects," and the company's Total Revenue has grown from $119 million in 2018 to $769 million in the latest quarter, a compound annual growth rate north of 20%. The mix shift toward commercial work, including data centers, is part of the plan to reach ROAD 2030 targets.

Federal Funding: The Long Game

With the surface transportation reauthorization in play, management spent significant prepared time addressing the BUILD America 250 Act and the possibility of a continuing resolution (CR). “We do not expect any disruption to federal funding or project activity in either fiscal 2026 or fiscal 2027,” — F. Smith, Chief Executive Officer · 2026-08-07 CEO Smith said. This confidence is rooted in history: Executive Chairman Ned Fleming recalled that the company grew through multiple CRs during the Obama administration.

Those 4.5 years were some of the best years the company had.

The fundamentals back this up. With ~45% of IIJA funding still unspent and state DOT budgets at record levels, the demand tailwind is real. The company's backlog coverage of 80–85% of next-12-month revenue provides stability even if a CR does occur. This is a company that has successfully outgrown the political noise for two decades.

M&A and the 20-Mile March

The M&A engine remains strong. The Ellsworth acquisition (completed in July) adds ~$140 million of annualized revenue rolling into FY2027, and management expects to keep the tape busy. “As far as your modeling questions, so the remaining 6 months, we'll have about $225 million, $235 million of acquisitive revenue,” — Gregory Hoffman, Chief Financial Officer · 2026-05-08 CFO Greg Hoffman said in the prior quarter, and the story hasn't changed. The company's organic growth remains high-single digits, and the pass-through model protects margins from energy cost swings.

Investors should see this quarter as confirmation that Construction Partners is no longer a typical regional contractor. It's a consolidator riding two megatrends – AI-driven data center demand and a once-in-a-decade infrastructure bill – while maintaining discipline on margins and leverage. The stock is down 20% from its May peak, but the underlying business has never been stronger.