What Comfort Systems USA (FIX) Said on Its Q3 Earnings Call

Key Points

• Q3 results surged: Net income rose 68% to $489 million, while revenue increased 54% to $3.8 billion. Growth was driven by strong construction demand from technology and industrial customers, plus expanding electrical and modular operations.
• Backlog reached a record $17.8 billion, up 90% year over year and marking the eighth consecutive quarter of sequential growth. Management said the backlog now generally spans 18 to 24 months, though labor availability remains a key capacity constraint.
• Management maintained an optimistic outlook, projecting mid-40% same-store revenue growth in 2026 and mid-20% growth in 2027. The company also expects elevated capital spending through the first half of 2027 to expand modular and prefabrication capacity.

Comfort Systems USA NYSE: FIX reported sharply higher third-quarter results, supported by strong demand in construction activity, particularly from technology and industrial customers, and continued growth in its electrical and modular operations.

The company earned net income of $489 million, or $13.91 per share, for the third quarter of 2026, compared with $292 million, or $8.25 per share, a year earlier. Revenue increased 54% to $3.8 billion. Chief Executive Officer Brian Lane said the company’s mechanical business saw an “extraordinary increase” in activity and profitability, while the electrical segment delivered substantial organic growth.

“Construction is driving most of our results, but service revenue and profit also grew by double-digit percentages,” Lane said. Service revenue increased 13% from the prior year and represented 10% of total revenue, while construction accounted for 90%.

Backlog Reaches Record $17.8 Billion

Comfort Systems ended the quarter with backlog of $17.8 billion, a record level and an increase of $8.4 billion, or 90%, from a year earlier. Backlog rose $3.8 billion sequentially, marking the company’s eighth consecutive quarter of sequential backlog growth.

President Trent McKenna said bookings were especially strong in the technology sector across both traditional construction and modular operations. Industrial customers accounted for 76% of revenue during the first nine months of 2026, while technology-related work represented 59% of revenue, up from 42% in the prior-year period.

Management said the duration of backlog has increased as the company takes on larger projects. Lane estimated that the current backlog generally extends about 18 to 24 months, compared with roughly nine months a decade ago.

Company executives said labor availability remains a key constraint on industry capacity, but said Comfort Systems evaluates staffing needs before accepting work. Lane said the company remains disciplined in selecting projects and will not take on work it cannot execute at a high level.

Margins Remain Strong Amid Project Mix Effects

Gross profit rose to $934 million from $607 million a year earlier, while the gross margin remained at 24.8%. Mechanical segment gross margin improved to 25.1% from 24.3%. Electrical segment gross margin was 24.3%, down from 26.2% a year earlier, though management noted that the prior-year electrical margin benefited from discrete gains, including a customer bankruptcy emergence, that added approximately 1.8 percentage points.

Chief Financial Officer Bill George said margins were affected by a higher proportion of equipment and materials in the cost mix, which increased revenue but carried lower margins than labor-intensive work. The company also cited higher acquisition-related purchase accounting adjustments and the early stage of several large projects.

“Our gross profit per hour worked continues to get better,” George said, adding that the company does not recognize all potential gains early in a project because it retains contingencies until work progresses further.

Operating income increased 65% to $625 million, and the operating margin improved to 16.6% from 15.5%. EBITDA rose 61% to $668 million, with trailing 12-month EBITDA reaching about $2.3 billion. The company said it expects 2027 gross margins to remain within the strong ranges achieved in recent quarters.

Modular Capacity and Customer Focus

Modular operations represented 17% of year-to-date revenue. Comfort Systems expects to have more than 4 million square feet of modular production space by the end of 2026 and about 6 million square feet of capacity by the end of 2027.

McKenna said the planned expansion is based on existing programmatic customer relationships rather than new arrangements with Frontier Lab or colocation providers. The company is building products for those newer customers but has not yet reached agreements it considers programmatic.

George said that when evaluating new modular relationships, the company considers the customer’s commitment level, payment terms, financial strength, and whether the products and dedicated capacity could be used for other customers. He said Comfort Systems has remained focused on its two large existing programmatic customers, which have made multiyear volume commitments.

Cash Flow, Capital Spending and Leadership Transition

Third-quarter free cash flow totaled $806 million, bringing year-to-date cash flow to roughly $2 billion. The company said cash flow benefited from favorable payment terms and collections from large technology customers, as well as $166 million of income tax payments deferred into the fourth quarter.

Comfort Systems invested more than $100 million in capital expenditures during the quarter to expand prefabrication facilities for its traditional construction business, in addition to ongoing modular investments. It expects full-year capital expenditures to equal 4% to 5% of revenue and anticipates elevated spending through the first half of 2027.

The company repurchased shares during the quarter and has returned $349 million to shareholders year to date, retiring approximately 212,000 shares. It also raised its quarterly dividend by $0.10 to $1 per share.

Comfort Systems announced that George will retire following the company’s 2026 results, ending a 30-year tenure with the company. Julie Shaeff, currently chief accounting officer, will succeed him as CFO shortly after the results are reported. Lane said the company also acquired Boys Electrical of Melbourne, Florida, and NeoPod, a healthcare-focused modular company based in New Braunfels, Texas, on Aug. 1. The acquisitions are expected to contribute more than $100 million in annual revenue at favorable margins.

Management said it expects full-year same-store revenue growth in the mid-40% range for 2026 and same-store revenue growth in the mid-20% range for 2027, citing continued demand and a growing project pipeline.

About Comfort Systems USA (NYSE:FIX)

Comfort Systems USA, Inc NYSE: FIX is a provider of mechanical and electrical contracting services for commercial, industrial, and institutional customers. The company designs, installs, maintains, repairs, and replaces heating, ventilation, air conditioning, and temperature-control systems, as well as plumbing, piping, electrical, and related building systems.

Its services support new construction, building renovations, facility upgrades, and ongoing maintenance. Comfort Systems USA also provides specialized services for data centers, manufacturing facilities, healthcare buildings, educational institutions, and other complex commercial and industrial projects.

Founded in 1997 and headquartered in Houston, Texas, the company operates through a network of regional contracting businesses serving customers across the United States.

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