AZZ Inc. (AZZ) | The Buildout — AI Infrastructure
The Verdict
AZZ takes fabricated steel and coats it. Its hot-dip galvanizing process reacts molten zinc with steel, which the 10-K says provides corrosion protection and extends the lifecycle of fabricated steel for several decades. Its other operating business, Precoat Metals, applies protective and decorative coatings to steel and aluminum coil. That coated metal ends up in transmission poles, towers, substations, structural steel, and the frames of power and data center projects. AZZ is not an AI compute supplier — it is an indirect participant, whose revenue depends on how much steel the grid and data center build-out actually commits. The 10-K describes AZZ as North America's leading independent post-fabrication hot-dip galvanizing and coil coating solutions company, operating through Metal Coatings, Precoat Metals, and a residual equity interest in a joint venture that is being wound down.
| Market Cap | — |
| Revenue (TTM) | $1.7B |
| Revenue Growth | +5.7% |
| EBITDA Margin (TTM) | 21.7% |
| Net Debt | $542M |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Guidance was raised after a single quarter across all three headline metrics (Q1 FY2027 call, 2026-07-09).
- Metal Coatings sales rose 12.3% to $210.3M in Q1 FY2027, running ahead of the mid-to-upper single digit segment guide management set in April 2026.
- Washington, Missouri is a discrete, quantified ramp: about $11M of FY2026 revenue moving toward a $50M-$60M sales range at 75% capacity, with the remaining quarter of capacity uncontracted.
- Balance sheet and returns: net leverage of 1.4x, a $130M-$170M FY2027 debt reduction target, and a dividend raised 20% to $0.24 per share.
What We’re Watching
- Precoat end markets are soft outside the container ramp: Transportation fell 1.2% and HVAC and appliances fell 2.4% in Q1 FY2027, and management expects nonresidential construction to remain subdued through FY2027.
- The AVAIL joint venture is winding down and losing money: Infrastructure Solutions segment adjusted EBITDA was a loss of $0.8M versus positive $7.6M a year earlier, and the JV partner is still pursuing a sale of the remaining operations.
- Input costs: zinc and natural gas in Metal Coatings, and paint and natural gas in Precoat, represent large portions of cost of sales, and the 10-K warns that unanticipated commodity increases could hurt profitability if they cannot be passed through.
- AI exposure is unquantified — there is no data center revenue line, and management says that revenue can land in either the construction or industrial bucket.
The thesis looks stronger on the operating numbers and unchanged on the AI question. Guidance was raised across all three headline metrics after one quarter, Metal Coatings is running ahead of its segment guide, and the two operating segments together grew segment adjusted EBITDA even as the consolidated line carried the wind-down. Against that, galvanizing is not a scarce step in the chain — customers can shift to alternative galvanizers — so AZZ's growth depends on capacity and location rather than on being an irreplaceable supplier to data center construction. The open question is how much of the growth is data center demand specifically, versus general grid, utility, and construction spending the company does not break out.
Earnings Beat
AZZ reported record first-quarter sales of $448.5 million, up 6.3% from $422.0 million a year earlier, with what the press release called record quarterly sales in both segments. Gross margin was 25.0% of sales, up 30 basis points on favorable mix, pricing discipline, and improved operational execution, and EBITDA was $100.6 million, or 22.4% of sales. Metal Coatings sales rose 12.3% to $210.3 million at a 30.3% segment adjusted EBITDA margin; Precoat Metals sales rose 1.5% to $238.2 million at a 21.7% segment adjusted EBITDA margin. Adjusted diluted EPS rose 3.9% to $1.85, while GAAP diluted EPS fell 69.6% to $1.72 against a prior-year quarter that included $173.5 million of AVAIL equity and earnings.
| Metric | Q1 FY2027 | Q4 FY2026 | Q1 FY2026 | YoY |
|---|---|---|---|---|
| Revenue | $448M | $385M | $422M | +6.3% |
| Gross margin | 25.0% | 22.7% | 24.7% | +30bps |
| EBITDA | $101M | $80M | $91M | +10.1% |
| EPS | $1.72 | $0.53 | $5.66 | −69.6% |
| Metal Coatings segment sales | $210.3M | n/a | $187.2M | +12.3% |
| Container end-market sales | $20.8M | n/a | $7.0M | +194% |
the highest growth area in our construction segment was data center. So certainly outpaced the rest of the group, but double digit growth there as well as in general construction— David Nark, Chief Marketing Communications and Investor Relations Officer, 2026-07-09
Management tone: Management's demand language hardened between the two calls, moving from describing data center demand as being in its early stages in April 2026 to describing momentum and structural, multiyear drivers in July 2026. The shift came with actions rather than words alone: a 20% dividend increase, a guidance raise after one quarter of data, and a price-conditioned buyback comment in closing remarks. Management was candid about its own execution, saying a pending M&A deal had dragged along for about six months against a normal 45-to-75-day window. It also said the tariff-driven tightening in substrate availability was starting to ease.
Management Guidance
On the July 2026 call, management raised FY2027 guidance to sales of $1.8B-$1.85B and adjusted EBITDA of $375M-$415M, from $1.725B-$1.775B and $360M-$400M initiated in April 2026. Adjusted diluted EPS guidance moved to $6.75-$7.15, and the $130M-$170M debt reduction target was unchanged. Management attributed the raise to the Washington, Missouri site hitting its dates sooner than budgeted, Precoat paint price increases, material burden, and zinc surcharges. Supporting assumptions in the release include capital expenditure of approximately $80M-$100M, interest expense of $35M-$45M, and an annualized effective tax rate of 25%. The guidance excludes all potential M&A and greenfield facilities.
Trajectory
Revenue has held in a narrow band for five quarters: $422.0M in Q1 FY2026, $417.3M in Q2, $425.7M in Q3, $385.1M in Q4, then $448.5M in Q1 FY2027 — the highest of the five and a record first quarter. Gross margin moved from 24.7% to 22.7% across that span before recovering to 25.0% in the latest quarter, and management tied the recovery to mix, pricing discipline, and operational execution. EBITDA was $100.6M, or 22.4% of sales, against $91.4M and 21.7% a year earlier. Management has said the severity of winter affects its fourth quarter, which is consistent with the sequential dip in the March-ending period. Trailing-twelve-month revenue is $1,676.6M with EBITDA of $363.9M, or 21.7%.
The Model
The model projects FY+1 revenue of $1,840M and EBITDA of $410M, a 22.3% margin, and FY+2 revenue of $2,000M and EBITDA of $454M, a 22.7% margin. The near term leans on two visible ramps: the Washington, Missouri coil coating line moving toward a $50M-$60M sales range at 75% capacity, and the Crowley, Texas kettle reaching full run rates in the second half of FY2027. FY+2 depends on drivers that sit outside company guidance, which excludes both M&A and greenfield capacity — so a committed greenfield site with an anchor customer, or bolt-on acquisitions, would sit on top of the current plan rather than inside it.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $1.7B | $1.8B | $2.0B |
| YoY Growth | — | +11.5% | +8.7% |
| EBITDA | $355M | $410M | $454M |
| EBITDA Margin | 21.5% | 22.3% | 22.7% |
Projections are the median of 5 independent model runs. The model’s revenue sits 4.8% above analyst consensus.
On the July 2026 call, management raised FY2027 guidance to sales of $1.8B-$1.85B and adjusted EBITDA of $375M-$415M, from $1.725B-$1.775B and $360M-$400M initiated in April 2026. Adjusted diluted EPS guidance moved to $6.75-$7.15, and the $130M-$170M debt reduction target was unchanged. Management attributed the raise to the Washington, Missouri site hitting its dates sooner than budgeted, Precoat paint price increases, material burden, and zinc surcharges. Supporting assumptions in the release include capital expenditure of approximately $80M-$100M, interest expense of $35M-$45M, and an annualized effective tax rate of 25%. The guidance excludes all potential M&A and greenfield facilities.
What Could Go Right — and Wrong
- The uncontracted roughly 25% of Washington, Missouri capacity gets signed, lifting Precoat above the $50M-$60M-at-75%-capacity benchmark.
- A second de-verticalization deal closes, turning a transaction management calls a scalable blueprint into a repeatable one.
- A greenfield site is committed with an anchor customer; management has identified about a dozen candidate sites where an anchor customer could take 10% to 25% of potential volume.
- Higher-voltage transmission work materializes; management says AZZ's kettles are positioned for it but has given no timing.
- Data center demand grows faster than the double-digit growth management described within the construction end market.
- Data center or utility capital spending slows, undercutting the structural framing that supported the raised guidance.
- Precoat softness spreads beyond residential, HVAC, and appliances into the container ramp or the general construction mix.
- AVAIL joint venture losses continue through the wind-down, adding further adjustments to reported results.
- A sharp move in zinc or paint inputs outruns AZZ's surcharges and price pass-through.
- Labor, permitting, or equipment constraints delay AZZ's own capacity ramps and any greenfield start.
Looking Ahead
Over the next twelve months the test is execution on ramps already announced rather than new demand. Washington, Missouri is expected to reach full run-rate metrics by the end of FY2027, and the Crowley, Texas kettle is expected at full run rates in the second half of the year. Seattle Galvanizing, announced 2026-07-30, adds a first Metal Coatings presence in the Pacific Northwest on undisclosed terms. A greenfield site remains uncommitted, and the AVAIL joint venture partner continues to pursue the sale of the remaining operations. Because management's guidance excludes both M&A and greenfield contributions, any closed deal or committed build would be incremental to the guided range.
- Q2 FY2027Q2 results — First full-quarter test of the raised FY2027 guidance.
- Second half FY2027Crowley at full rates — New kettle effectively doubles capacity at Crowley, Texas.
- FY2027Debt reduction target — Target maintained through the guidance raise.
- End of FY2027Washington full run-rate — Reaching targeted utilization with the strategic partner.
Financials
Annual Summary
| Metric | FY2025 | FY2026 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $1.6B | $1.7B | $1.7B | +4.6% |
| Gross Margin | 24.2% | 23.9% | 24.0% | 28bps |
| EBITDA | $319M | $355M | $364M | +11.3% |
| EBITDA Margin | 20.2% | 21.5% | 21.7% | +130bps |
| Net Income | $129M | $317M | $198M | +146.3% |
| Free Cash Flow | $134M | $445M | $169M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)24.0%
- EBITDA Margin (TTM)21.7%
- Net Margin (TTM)11.8%
- ROIC11.2%
- FCF Conversion46.5%
- SBC / Revenue2.4%
The Company
AZZ takes steel and aluminum that others have fabricated or rolled and coats it. Its hot-dip galvanizing process reacts molten zinc with steel, which the 10-K says provides corrosion protection and extends the lifecycle of fabricated steel for several decades; its Precoat Metals business applies protective and decorative coatings to steel and aluminum coil. The coated steel goes into transmission poles, towers, substations, structural steel, and the frames of power and data center projects, plus appliances, HVAC equipment, containers, and commercial trailers. The 10-K describes AZZ as North America's leading independent post-fabrication hot-dip galvanizing and coil coating solutions company.
AZZ operates its own coating plants. As of February 28, 2026, the 10-K lists 42 galvanizing plants and four surface technologies plants across the United States and Canada, plus 14 coil coating plants in the United States, the newest in Washington, Missouri, which became operational in fiscal 2026. It buys zinc, natural gas, and paint — the inputs the 10-K identifies as large portions of cost of sales — and manages zinc and natural gas exposure through agreements with suppliers that generally include fixed premiums. Capacity is being added in Metal Coatings, where the new Crowley, Texas kettle doubles capacity there, and in the Pacific Northwest through the Seattle Galvanizing acquisition announced 2026-07-30. The third segment, AZZ Infrastructure Solutions, is a 40% non-controlling interest in the AVAIL joint venture and is being wound down through the JV's divestitures.
Business Segments
Competitive Landscape
The 10-K describes AZZ as North America's leading independent post-fabrication hot-dip galvanizing and coil coating solutions company, and management says AZZ operates the largest kettles in the nation, which it ties to high-voltage transmission structures that need a kettle large enough to take multiple tower sections. On large projects specifically, management acknowledged the work is more competitive, and said surcharges and mix should keep Metal Coatings margins in the 30% range. The 10-K risks extract contains no sole-source disclosures. The named competitor relationships in the source are mostly documentary ties from the AVAIL divestitures, plus a set of web-sourced names in galvanizing and coatings that the company does not discuss.
- Purchased the AVAIL joint venture's electrical enclosures, switchgear, and bus systems businesses in May 2025. Also appears in supply-chain mapping as both a customer and a supplier of AZZ.
- Pelican Energy Partners LPPurchased the majority of AVAIL's Welding Services Business, completed 2025-12-31. Listed as a competitor, but the relationship documented in the source is a divestiture.
- Valmont IndustriesNamed in web-sourced relationship mapping as a galvanizing competitor including data center steel; not discussed by the company.
- Named in web-sourced mapping as legacy AIS/AVAIL switchgear competition; not discussed by the company.
- Named in web-sourced mapping as a coatings competitor; not discussed by the company.
Supply Chain
AZZ sits between raw-material suppliers it does not name and a broad end-market customer base it mostly does not name either. Zinc, natural gas, and paint are the large cost inputs, with steel and aluminum coil arriving as substrate. No company in the verified-neighbor set mentioned AZZ by name.
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