Argan NYSE: AGX reported record second-quarter results for fiscal 2027, with revenue, net income and adjusted EBITDA rising sharply as activity increased across its power, industrial and Teledata segments.
For the quarter ended July 31, 2026, revenue increased 62% year over year to $384 million. Net income reached a record $53.3 million, or $3.76 per diluted share, compared with $35.3 million, or $2.50 per diluted share, in the prior-year quarter. Adjusted EBITDA rose to a record $70 million from $38.5 million, while adjusted EBITDA margin expanded to 18.2% from 16.2%.
Chief Executive Officer David Watson said the results reflected operational momentum across the company’s businesses. “Each of our operating segments recorded substantially improved revenue,” Watson said, citing 53% growth in power revenue, 111% growth in industrial revenue and 40% growth in Teledata revenue.
Power Segment Drives Revenue Growth
The power segment remained Argan’s largest business, generating $301 million in quarterly revenue, or 78% of consolidated revenue. Segment revenue increased 53% from the comparable period last year, and the business reported pre-tax book income of $66 million.
Argan’s consolidated gross margin was 19.3%, up from 18.6% a year earlier, while the power segment’s gross margin was 22.4%. Chief Financial Officer Josh Baugher said the improvement in gross profit and margin was primarily driven by the power segment, including project and contract mix and project execution.
However, Baugher noted that consolidated margins have declined from 25% in the fourth quarter of fiscal 2026 and 21% in the first quarter of fiscal 2027. He attributed the sequential movement to project mix and the stages of construction of current projects. Earlier completion of certain jobs benefited margins in prior periods, while second-quarter revenue included earlier-stage work on current power projects.
Watson said Argan’s power backlog includes four U.S. gas-fired plants totaling more than 4.1 gigawatts. The company’s backlog at July 31 was approximately 80% natural gas projects, 11% renewable projects and 8% industrial work. He said complex combined-cycle projects are expected to represent most of the backlog in the near and medium term, although the company intends to maintain its renewable-energy capabilities.
Among projects in progress, Argan said its 1.2-gigawatt combined-cycle natural-gas plant for Sandow Lakes Energy Company in Texas is advancing as expected. Construction is also ramping at a 1.4-gigawatt Texas project with Competitive Power Ventures and an 860-megawatt Texas project. The company is also working on a 700-megawatt U.S. combined-cycle plant, a 300-megawatt biofuel plant in Ireland for SSE Thermal, and a 170-megawatt thermal facility in Ireland.
Watson said the company expects to reach substantial completion ahead of schedule on a 405-megawatt Midwest solar project later in the month. Its final project in a three-part Midwest solar and battery portfolio has reached final completion.
Industrial Expansion and Teledata Acquisition
Industrial segment revenue more than doubled to $76 million, representing 20% of company revenue, while pre-tax book income was approximately $4 million. The segment’s backlog was $210 million at the end of the quarter.
Industrial gross margin was 7.3%, below management’s expectations. Watson said estimates to complete on a couple of projects unrelated to the company’s data-center work declined from initial estimates, affecting quarterly profitability. Argan expects to complete those projects over the next six months, and Watson said industrial margins may remain below historical norms for one or two quarters as they wind down.
The company is constructing a second fabrication facility in North Carolina, which Watson said is on track for completion in the third quarter. The facility is initially intended to support a $125 million data-center project involving fabrication of thermal expansion and energy-storage tanks. Management expects the facility to contribute more than $10 million of quarterly industrial revenue later this year and into next year.
Teledata revenue increased 40% to $7 million. Near the end of the quarter, Argan acquired ValCor Communications, a Connecticut-based provider of installation and repair services for information, communications and data networks. Watson said the acquisition provides a New England presence and adds Fortune 500 technology, defense and aerospace customers.
Management expects organic growth, ValCor-related synergies and execution of the Teledata strategy to potentially double the segment’s revenue from fiscal 2026 levels and support EBITDA growth in coming quarters.
Backlog, Pipeline and Outlook
Argan’s consolidated backlog of fully committed projects was $2.5 billion at July 31, down from $2.9 billion at the beginning of the fiscal year. Watson said the company only includes contracts in backlog after receiving a notice to proceed, making the balance sensitive to the timing of project awards, starts and completions.
Despite not adding a major power project during the quarter, management said it offset part of backlog usage through more than $260 million of scope additions on existing work, smaller new jobs and intra-quarter revenue. Watson said Argan expects to add “a handful” of new projects over the next seven to 15 months, but did not provide a specific backlog target.
Management said recent regulatory scrutiny and media reports involving data-center development have not changed customer or developer behavior. Watson said developers still must secure milestones including power purchase agreements, permits, gas access, water permits, turbines and financing before projects proceed.
For fiscal 2027, Watson said revenue is expected to be “significantly above” fiscal 2026. He cautioned that especially strong second-quarter results could limit sequential growth in the third quarter, particularly because industrial revenue is expected to decline from second-quarter levels for the remainder of the year.
Cash Position and Capital Returns
Argan ended the quarter with approximately $1 billion in cash and investments, net liquidity of $440 million and no debt. Net liquidity increased from $421 million at Jan. 31, even as the company returned $51.7 million to shareholders during the first six months of fiscal 2027.
The company continued to pay a quarterly dividend of $0.50 per share, equivalent to a $2 annualized rate. Argan also has a share repurchase authorization of up to $200 million through Jan. 31, 2030. Since the repurchase program began in November 2021, the company has returned approximately $123.8 million through buybacks, according to management.
About Argan (NYSE:AGX)
Argan, Inc NYSE: AGX is a holding company that provides professional technical and management services to the power generation and renewable energy industries. Through its wholly owned subsidiaries, the company delivers engineering, procurement and construction management (EPCM), commissioning and operations and maintenance (O&M) services for a broad range of energy facilities. Argan focuses on projects for utility, industrial and municipally owned clients, helping to bring efficient thermal and renewable energy plants into operation and maintain optimal performance over the asset life cycle.
The company's principal subsidiaries include Gemma Power Systems, which specializes in turnkey construction of combined-cycle, simple-cycle, cogeneration and renewable energy plants; Atlantic Projects Company, which provides electrical balance-of-plant, control systems, instrumentation and commissioning services; and Infrastructure Solutions, which offers industrial maintenance, outage support and modification services.
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