Granite Construction beats Q3 estimates on $1.77B revenue

Granite Construction reported record third-quarter revenue of $1.77 billion and adjusted earnings of $3.81 a share, beating Wall Street forecasts as construction growth and stronger margins helped lift results. The company also raised the low end of its 2026 revenue outlook, backed by a record $7.5 billion in committed and awarded projects.

Revenue increased 23% from a year earlier, exceeding the $1.70 billion forecast by $70 million. Adjusted earnings topped the $3.40 consensus estimate by $0.41.

The earnings beat came alongside record adjusted EBITDA of $283 million and a 29% increase in gross profit to $336 million. Adjusted net income reached $173 million, up $49 million from a year earlier.

"We delivered record revenue and adjusted EBITDA, reflecting the strength of our CAP portfolio, disciplined execution across the enterprise, and contributions from recent acquisitions", Chief Financial Officer Staci Woolsey said.

Construction leads growth

Construction revenue rose $312 million, or 27%, to $1.5 billion. Organic growth contributed $248 million of that increase, while acquired businesses added $64 million. The segment’s gross profit margin expanded 210 basis points during the quarter.

Granite’s committed and awarded projects, known as CAP, increased $37 million sequentially to $7.5 billion. Project wins exceeded revenue recognized during the company’s busiest construction quarter, management said.

Materials revenue increased $21 million to $292 million, with the growth coming from acquired businesses. Higher energy costs weighed on the segment’s gross profit margin, which declined 420 basis points. Management said surcharges largely recovered those costs in absolute dollars, while pricing actions and hedging provided additional protection.

Year-to-date operating cash flow reached $404 million, compared with $290 million a year earlier.

Higher revenue floor, broader growth ambitions

Granite now expects 2026 revenue of $5.4 billion to $5.5 billion, raising the lower end from $5.3 billion. At the midpoint, the revised outlook reflects approximately 15% organic growth and approximately 9% growth from acquired businesses.

The company also refined its 2027 organic revenue growth expectation to 10% to 12%, replacing its previous outlook for growth above 10%.

Chief Executive Kyle Larkin said Granite is "targeting an organic revenue CAGR of 10%-12% through 2029", with future acquisitions additive to that goal.

"Our home market model remains at the center of this strategy. Local relationships, market knowledge, materials resources, and our people provide the foundation from which we compete and grow", Chief Executive Kyle Larkin said.

Management expects core public transportation work to grow in the mid-single digits, supplemented by faster growth in federal, rail and mission-critical infrastructure.

Federal CAP totaled $1.3 billion at the quarter’s end, while mission-critical infrastructure CAP stood at approximately $331 million. Granite’s mission-critical work includes data centers, battery storage and space-sector projects.

In discussing the mix of those growth markets, Larkin cautioned against treating individual revenue shares as fixed targets: "Here's the exact targets by each of these end markets."

The company is targeting an adjusted EBITDA margin of 14% to 16% in 2029 through improvements in both operating segments and greater leverage over selling, general and administrative expenses. It also hopes to complete two or three more acquisitions by the end of 2026 or early in the first quarter of 2027.

Project timing and debt charges remain factors

Despite the stronger results, Granite faces delays on tactical infrastructure projects. Right-of-way availability has pushed expected completion from the second quarter of 2027 to the third quarter of 2028. Management said its expectations for the projects’ overall success and profitability remain unchanged.

The company also recorded $162 million in net non-operating charges associated with redeeming its remaining 3.75% convertible notes. Those charges were excluded from adjusted net income and adjusted EBITDA.

Looking ahead, management said healthy public infrastructure markets and opportunities in federal, rail and mission-critical work support its growth targets. A proposed 4,500-acre intermodal rail facility in Southern California could provide another opportunity beginning in 2027 and ramping up in 2028, but the project remains subject to permitting.

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