Babcock & Wilcox Enterprises, Inc. (BW) | The Buildout — AI Infrastructure
The Verdict
Babcock & Wilcox makes the equipment that turns fuel into electricity: steam boilers, steam turbines, heat recovery steam generators and the emissions-control systems that go with them. It also builds the plants. For AI infrastructure, the company sells power generation sited next to or near data centers, to developers, hyperscalers and utilities that need electricity faster than the grid can deliver it. Its pitch is speed rather than efficiency leadership: install the boiler and steam turbine first, add a combustion turbine later, and double the output on the same land. It also supports the existing coal and gas plants that are being run harder as data center load grows.
| Market Cap | — |
| Revenue (TTM) | $844M |
| Revenue Growth | +48.4% |
| EBITDA Margin (TTM) | 4.9% |
| Net Cash | $4M |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Base Electron, the flagship data center power project, is described as progressing ahead of expectations and on budget, with $131.7M of H1 2026 revenue already recognized and the construction phase — the larger revenue phase — still ahead.
- The pipeline added more than $2B of additional AI data center opportunities in Q1 2026 alone, from hyperscalers and utility customers.
- The balance sheet was repaired: net debt was $42.4M in Q1 2026, below 1x trailing-twelve-month adjusted EBITDA, and the $61.4M of 6.50% Senior Notes due 2026 were fully redeemed in August 2026.
- Parts and Services is described as a growing annuity — management calls these businesses 'strong cash generators' that grow each quarter on coal and natural gas utilization, with existing U.S. coal plants running at capacity factors of around 50% and a seasonally stronger Q3/Q4 outage window.
- Capacity was committed ahead of contracts: a 1 GW reservation for 20 Siemens Energy steam turbine generator sets, with the first sets delivered within 12 to 14 months and the agreement formalized on 2026-08-11.
What We’re Watching
- Derived Q2 2026 standalone bookings of roughly $0.2B against $2.5B in Q1 2026, with backlog down sequentially. Booking timing for gigawatt-scale projects is lumpy, but a second quarter at that level would change the read.
- Whether a second data center project reaches full notice to proceed in 2026 as management expects. It is not signed, and the Siemens 1 GW reservation was placed in anticipation of it.
- Whether the Q2 labor cost overrun was a one-quarter event. Management disclosed that skilled-labor shortages 'negatively impacted efficiencies and resulted in higher direct costs on a specific construction project.'
- The securities class action covering November 5, 2025 – March 11, 2026, which alleges overstated pipeline metrics and a concealed deal timeline — the same disclosures the bull case leans on. The 10-Q filed 2026-05-11 stated no material changes to risk factors.
The operating direction is up: revenue accelerated through the last four quarters, the full-year adjusted EBITDA target was raised, the balance sheet was fixed, and the flagship data center contract is performing ahead of plan. Two things sit on the other side. The incremental demand signal weakened — derived Q2 standalone bookings of roughly $0.2B against $2.5B in Q1, and a sequential backlog decline — and the company reported bookings on a half-year basis in Q2 where Q1 used a quarterly basis, which makes the sequential read harder. Margin evidence is also mixed: adjusted EBITDA is growing in absolute dollars, but margins are not expanding on the incremental project revenue, and the 10-Q attributes rising costs to a mix of higher large-project volume. The open question is whether the derived Q2 bookings figure was timing around one very large award or the start of a trend, and whether margins hold as construction scales.
Earnings
Q2 2026 revenue was $319.7 million, up from $144.1 million a year earlier, driven by higher large-project volume. Gross margin was 14.6%, down from 30.0% in the year-ago quarter. Net income was $14.3 million, a $72.8 million year-over-year improvement. H1 2026 revenue of $534.1 million included $131.7 million from the Base Electron data center project.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $320M | $214M | $144M | +121.9% |
| Gross margin | 14.6% | 20.3% | 30.0% | -1540bps |
| EBITDA | $14M | $1M | $11M | +28.8% |
| EPS | $0.09 | $-0.57 | $-0.22 | −142.3% |
| Backlog | $2.6B | $2.7B | n/a | +533% y/y |
| Bookings | $2.7B (H1 2026) | $2.5B (Q1 2026) | n/a | +more than 1,058% y/y (H1) |
We don't see an end to the power generation demands coming from AI and data centers despite what the public markets have been stating.— Kenneth Young, Chairman and CEO, 2026-08-10
Management tone: Tone firmed between the two calls. In May, management held guidance with upside flagged, said it was 'hopeful' on a second data center project, and said it felt good about the current supply chain. In August it raised the full-year adjusted EBITDA target and gave a dated expectation that a second data center project would reach full notice to proceed this year, while disclosing a labor-driven cost overrun on a specific construction project. The CEO constrained the Q2 call format to 'just 1 or 2 questions' and the operator took two questioners. On coal, the language moved from conversions and upgrades toward new-build, and the BrightLoop timeline firmed but was pushed out to late 2027 operation and 2028-2030 bookings.
Management Guidance
On the Q2 2026 call management said it would 'raise our full year 2026 adjusted EBITDA target range from $80 million to $105 million.' The wording does not settle whether this is a new range of $80M-$105M or a raise to $105 million, and the source records the ambiguity rather than resolving it. H1 2026 adjusted EBITDA was $37.8M, so reaching $80M-$105M for the year requires $42.2M-$67.2M in the second half (derived). Management tied the raise partly to potential pull-forward of Base Electron revenue and EBIT, and said it would keep an eye on revenue and revisit 'in the coming quarters.'
Trajectory
Revenue is accelerating. Quarterly revenue ran $149M, $161M, $214.4M and $319.7M across the last four reported quarters, with the step-up driven by large-project volume, including Base Electron. Margins are moving the other way. Gross margin was 20.3% in Q1 2026 and 14.6% in Q2 2026, and on the reported basis EBITDA margin compressed as well. The 10-Q attributes higher costs to 'the product mix of higher large-project volume which carries higher costs needed to complete certain projects,' and Q2 absorbed the disclosed labor cost overrun. Adjusted EBITDA as the company reports it is still growing in absolute dollars — $16.1M in Q1 2026 and $21.8M in Q2 2026 — but H1's $37.8M against a full-year target of $80M-$105M puts a lot of weight on the second half.
The Model
The model projects FY+1 revenue of $1,026.0 million and EBITDA of $76 million, a 7.45% margin, and FY+2 revenue of $1,192.0 million and EBITDA of $118 million, a 9.9% margin. The near term depends on Base Electron manufacturing milestones and the start of construction revenue, plus continued Parts and Services growth; FY+2 depends on the construction phase scaling and on project margins holding as the mix shifts toward larger work. Projection dispersion across model runs is 11% on FY+1 revenue (min $968M, median $1,026M, max $1,080M) and 21% on FY+2 revenue (min $1,100M, median $1,192M, max $1,350M).
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $603M | $1.0B | $1.2B |
| YoY Growth | — | +70.2% | +16.2% |
| EBITDA | $39M | $76M | $118M |
| EBITDA Margin | 6.5% | 7.5% | 9.9% |
Projections are the median of 4 independent model runs. The model’s revenue sits 15.3% above analyst consensus.
On the Q2 2026 call management said it would 'raise our full year 2026 adjusted EBITDA target range from $80 million to $105 million.' The wording does not settle whether this is a new range of $80M-$105M or a raise to $105 million, and the source records the ambiguity rather than resolving it. H1 2026 adjusted EBITDA was $37.8M, so reaching $80M-$105M for the year requires $42.2M-$67.2M in the second half (derived). Management tied the raise partly to potential pull-forward of Base Electron revenue and EBIT, and said it would keep an eye on revenue and revisit 'in the coming quarters.'
What Could Go Right — and Wrong
- A second data center project reaching full notice to proceed in 2026, converting the reserved Siemens 1 GW of turbine capacity into booked work.
- Base Electron on-site construction starting in the first part of 2027 as scheduled, unlocking the phase management calls the real bulk of the revenues.
- Parts and Services revenue growth re-accelerating through the Q3/Q4 outage season, evidence that the AI power demand tailwind is broadening beyond one megaproject into the recurring base.
- The labor cost overrun proving contained, with a margin re-expansion on project revenue as volume scales rather than further compression.
- The coal lane converting — TerraSpark moving from FEED study to a booking, the approximately $130M air quality control LNTP converting to full notice to proceed, or another coal-related data center project signing.
- A second consecutive quarter of negligible bookings would shift the derived Q2 2026 figure from lumpiness to trend and weaken the credibility of the >$14B pipeline.
- Another labor-driven cost overrun on a different project as Base Electron moves toward a four-unit construction build, suggesting a structural margin problem at scale.
- Base Electron construction slipping past the stated first part of 2027 window, or the conditional use permit not being approved, which would remove the near-term revenue inflection.
- A customer or project loss. With roughly a quarter of H1 2026 revenue from one project and the second data center project not signed, one dispute or renegotiation has an outsized effect on reported revenue.
- A capital-structure reversal. The company issued roughly 12.4M shares for about $230M in May 2026 and then authorized up to $50M of share repurchases in July 2026, with a multi-year construction build ahead; a return to meaningful borrowing would undo the deleveraging.
Looking Ahead
Over the next twelve months the story is conversion. Management expects a second data center project to reach full notice to proceed in 2026, has scheduled Base Electron civil and mechanical construction for the first part of 2027, says significantly more Base Electron revenue arrives in the early part of next year, will begin Massillon construction later this fall, and expects the first Siemens turbine generator sets within 12 to 14 months of the August 2026 agreement. BrightLoop and ClimateBright commercial bookings are targeted for 2028-2030, so they play no part in the near term. TerraSpark's 1.6 GW West Virginia coal project remains a FEED study with no revenue timing given.
- Fall 2026Massillon construction start — BrightLoop demonstration build begins; operation targeted late 2027.
- 2026Second data center NTP — Expected full notice to proceed; converts reserved Siemens capacity.
- First part of 2027Base Electron construction start — On-site civil and mechanical work; gates the larger revenue phase.
- Within 12-14 monthsSiemens turbine deliveries — First of 20 generator sets under the FastPower agreement.
- Late 2027Massillon reactors operational — Fuel and hydrogen reactors initial phase; positions BrightLoop as available.
- 2028-2030BrightLoop bookings targeted — Commercial bookings for chemical looping and other capture technologies.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $674M | $603M | $844M | -10.6% |
| Gross Margin | 26.8% | 24.8% | 20.0% | 198bps |
| EBITDA | $43M | $39M | $42M | -10.0% |
| EBITDA Margin | 6.4% | 6.5% | 4.9% | +5bps |
| Net Income | −$60M | −$75M | −$93M | -25.0% |
| Free Cash Flow | −$130M | −$86M | −$58M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)20.0%
- EBITDA Margin (TTM)4.9%
- Net Margin (TTM)-11.0%
- ROIC46.2%
- FCF Conversion-139.7%
- SBC / Revenue1.6%
The Company
Babcock & Wilcox is a globally focused energy technologies provider with nearly 160 years of experience, per its 10-K business summary. It makes steam generation equipment and aftermarket parts, performs construction, and provides maintenance and field services. Its product set includes package boilers, watertube and firetube waste heat boilers, specialized technologies for hydrogen and syngas production, and environmental solutions and carbon capture systems. The 10-K names utilities, data centers and oil and gas as customer sets. Management describes three businesses: Parts and Services, large projects and new-build construction, and the pre-commercial BrightLoop and ClimateBright capture technologies.
The company reports as one segment, labeled B&W, after reassessing its segment structure in the fourth quarter of 2025 — which reduces disclosure granularity just as the mix shifts toward large projects. It lists four leased facilities in the 10-K: manufacturing in Chanute, Kansas and Dartmouth, Nova Scotia; an administrative office and manufacturing facility in Guadalupe, Mexico; and a production facility under construction in Massillon, Ohio, the BrightLoop demonstration site. BW does not make its own steam turbines. It secures them from Siemens Energy, and it uses a mix of internal and third-party boiler manufacturers that it can shift work among depending on boiler size.
Business Segments
Competitive Landscape
BW's 10-K names four competitors: Aker Carbon Capture ASA, Southern Environmental, Inc., Elessent Clean Technologies Inc. and Steinmüller Engineering GmbH. Supply-chain intelligence adds GE Vernova, Caterpillar, Mitsubishi, Doosan, BWX Technologies, Fuel Tech and CECO Environmental as inferred competitors, and Fuel Tech's own filings name B&W among 'active SCR system and reagent feed providers.' The 10-K extraction contains no sole-source disclosures. On coal-related data center projects, management describes BW as 'probably one of the only few companies that actually support those projects today.' On boilers, management itself describes multiple internal and third-party manufacturers it can shift work among — flexibility rather than exclusivity.
- Aker Carbon Capture ASANamed in filings; not discussed.
- Southern Environmental, Inc.Named in filings; not discussed.
- Elessent Clean Technologies Inc.Named in filings; not discussed.
- Steinmüller Engineering GmbHNamed in filings; not discussed.
- Fuel TechFuel Tech's own filing states: 'Companies including Babcock Power, Babcock & Wilcox (B&W) Company, CECO Environmental and Mitsubishi are active SCR system and reagent feed providers.'
Supply Chain
BW sits between specialty alloy, steel and turbine suppliers and a customer base of utilities, data center developers and industrial plants. It buys steam turbines from Siemens Energy and builds boilers in its own and third-party facilities.
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More on BW: Earnings recap