IES Sees Data Center Boom, Plans $650M DBM Global Acquisition

Key Points

• Data centers are driving IES’s growth as demand from generative AI, cloud computing and digital infrastructure shifts revenue away from residential markets. Data center-related expansion has helped lift operating margins from under 4% to more than 11% over five years.
• IES reported $389 million in operating income for the first nine months of fiscal 2026, a 39% year-over-year increase, while commercial and industrial revenue more than doubled in the June quarter and reached a record backlog.
• IES plans to acquire structural steel fabricator DBM Global for approximately $650 million, its largest acquisition to date. Expected to close around Dec. 31, 2026, the deal would add a fifth operating segment and expand IES’s capabilities for data center and other large construction projects.

IES NASDAQ: IESC outlined continued growth in data center-related markets, expanding operating margins and plans for its largest acquisition to date during a presentation at the Midwest IDEAS Conference.

Chief Executive Officer Matt Simmes said the electrical and technology services company generated approximately $3.4 billion in revenue, $384 million in operating income and adjusted earnings per share of $13.66 for fiscal 2025, which ended Sept. 30, 2025. The company has more than 170 locations and over 11,000 employees across the United States.

Over the past five years, IES has increased revenue at a 23% compound annual growth rate and operating income at a 50% compound annual growth rate, Simmes said. Operating margins rose from just under 4% to more than 11% during that period.

Data centers reshape revenue mix

IES serves markets including data centers, e-commerce, distribution, high-tech manufacturing, semiconductor plants, industrial manufacturing, healthcare, education and residential housing. Simmes said data center spending tied to generative artificial intelligence, cloud computing and digital usage is currently the company’s largest growth driver for its communications, infrastructure solutions, and commercial and industrial businesses.

The company’s revenue mix has shifted as those markets expanded. Residential represented more than half of revenue two years ago, declined to 39% in fiscal 2025, and was tracking below 30% year to date in fiscal 2026, according to Simmes. He said the change reflects both slower housing starts and rapid growth in other markets, particularly data centers.

In response to an analyst question, Simmes said data center-related growth was “probably an even split between price and volume.” Labor rates have increased, while the amount of fiber installed in data centers is now about 10 times the level of four years ago, he said. Modern facilities require substantially more interconnections among network nodes, server banks, buildings and campuses.

Simmes also said IES performs both construction and operational work at data centers, including rack and stack, patching and network turn-up services. He said the company has greater visibility into campus-style projects than in the past, allowing it to staff longer-term assignments and develop more efficient crews.

Nine-month operating income rises 39%

Chief Financial Officer Tracy McLauchlin said operating income for the first nine months ended June 30, 2026, totaled $389 million, up 39% from the comparable 2025 period. The improvement was primarily driven by demand and operating performance in the communications and infrastructure solutions segments, as well as expanded capabilities in commercial and industrial operations.

McLauchlin said these gains more than offset challenging conditions in the residential segment, where elevated mortgage costs and weaker consumer sentiment have continued to pressure single-family housing starts. IES is seeking to gain market share in residential electrical services while expanding plumbing and HVAC offerings into markets where it previously provided only electrical services.

The company said multifamily backlog declines experienced in 2024 and 2025 have stabilized, while its sales pipeline has begun to improve. However, McLauchlin said newly booked multifamily work is expected to begin benefiting results in 2027.

Commercial and industrial revenue for the quarter ended June 30 more than doubled from the prior-year quarter, McLauchlin said, as IES increased hiring and training for larger data center projects. The segment exited the quarter with record backlog, which management expects to support additional growth in fiscal 2027.

Capacity investments and DBM Global transaction

Infrastructure Solutions has expanded through capacity investments and acquisitions. McLauchlin said the Gulf Island acquisition, completed in January, contributed $89 million in revenue during the nine-month period ended June 30. Excluding Gulf Island, the segment’s 57% year-to-date growth included 32% organic growth.

IES now has approximately 3 million square feet of manufacturing space, with roughly one-third still being redeveloped or retooled. McLauchlin said that capacity is expected to begin contributing to results in fiscal 2027. The segment manufactures products including generator enclosures, switchgear, bus duct and electrical and mechanical components.

Separately, IES has agreed to acquire structural steel fabrication provider DBM Global for approximately $650 million. Simmes said the transaction, expected to close near Dec. 31, 2026, subject to regulatory approval, would be IES’s largest acquisition and create a fifth operating segment. DBM has 3,400 employees and works with many general contractors that are already IES customers, he said.

IES had no outstanding debt as of June 30, 2026, according to Simmes, though it expects to assume some debt for the DBM acquisition. He said the company generally uses operating cash flow to fund acquisitions and aims not to maintain debt above one times trailing 12-month EBITDA.

About IES (NASDAQ:IESC)

IES Holdings, Inc NASDAQ: IESC is a specialty contractor providing integrated electrical and mechanical construction services, engineering, and systems integration across North America. The company focuses on delivering end-to-end solutions for commercial, industrial and mission-critical facilities, combining design, build, commission and maintenance capabilities to serve a wide range of markets.

Through its subsidiaries, IES offers a comprehensive portfolio of services including electrical distribution and infrastructure, mechanical contracting, process piping, controls and automation, energy management, and ongoing service and maintenance.

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