Dnow Inc. (DNOW) | The Buildout — AI Infrastructure

——Mkt cap — · 52-wk —–— · YTD — · delayed

Updated Aug 12, 2026Q1 FY2026 reviewed

DNOW distributes pipe, valves, fittings, and pumps used in energy infrastructure supporting the AI data-center buildout.

FY26 rev $5.0–5.1B

FY guide raised; Q2 revenue $1,307M.

Q2 EBITDA +54% seq

Adjusted EBITDA $60M, 4.6% of revenue.

Data center rev $40–50M

Raised from ~$30M; under 1% of revenue.

Securities litigation

Class-action notices and litigation began accumulating.

The Buildout Takeaway

The recovery thesis moved from a Q1 trough call to sequential proof in Q2, with guidance raised and cash generation swinging positive. Direct data-center revenue remains under 1% of revenue, so the larger AI-adjacent effect is the unquantified pull through U.S. midstream natural-gas infrastructure.

Analyst coverage

16 analysts·8 Buy7 Hold1 Sell

Coverage is thin — only 1 price estimate, so no target is shown

Management guidance

FY26 revenue approaching $5.0B to $5.1B · FY26 EBITDA margin approaching 4.5% · Q3 revenue growth low- to mid-single-digit % · Q3 EBITDA margin 5.0%–5.5% of revenue.

Important: The Buildout is a data analytics platform. Content is generated by algorithms and AI agents using public filings, earnings transcripts, and market data. This is not personalized investment advice.

Our View

The Verdict

DNOW is a distributor and light fabricator, not a manufacturer of major equipment or an owner of power assets. It buys pipe, valves, fittings, pumps, automation and related products; warehouses them; and performs light fabrication, assembly, testing and modification for energy, industrial, and emerging data-center/power-infrastructure customers. The AI buildout link is mostly indirect: data-center electricity demand pulls natural-gas, power, and feed-gas infrastructure work, and DNOW supplies the PVF, valve actuation, fabricated solutions, and cooling-system products into that work.

Market Cap	—
Revenue (TTM)	$3.4B
Revenue Growth	+41.3%
EBITDA Margin (TTM)	-0.4%

Net Debt	$621M
Earnings Beats	5 of 7
P/E (TTM)	—
EV/EBITDA (TTM)	—

What We Like

Q2 adjusted EBITDA recovered to $60 million, up 54% sequentially, on 10% sequential revenue growth.
U.S. midstream annualized revenue crossed $1 billion for the first time.
Working capital improved ahead of plan: operating cash flow swung from -$95 million in Q1 to $133 million in Q2.
Synergy target raised twice to about $30 million year-one exit run-rate; three-year target remains $70 million.
Management's 2027 internal EBITDA target of $350 million moved from 'internal marching orders' to 'plausible.'

What We’re Watching

Remaining SAP conversions: exact count after the 17th MRC location was not reconciled.
Adjusted gross margin slipped to 20.8% in Q2 from 21.6% in Q1 while EBITDA margin improved.
Downstream prebuy activity expected near end of Q3 2026; execution strongest Q1 2027.
Securities class-action notices and litigation began accumulating.

Bottom Line

The recovery thesis strengthened in Q2: revenue and EBITDA beat the Q1-issued guide, cash flow swung positive, and the full-year revenue guide was raised. The open question is whether the revenue recapture rebuilds normal margins, or whether teaser-level win-back pricing and customer cost discipline keep profitability below the internal 2027 target.

Next upThe next test is Q3 2026 results in November 2026, which will show whether revenue grows low- to mid-single digits sequentially and EBITDA margin reaches 5.0%–5.5%. Late Q3 downstream prebuy commentary will signal the Q1 2027 turnaround season.

Last Quarter — Q1 FY2026

Earnings Beat

Q2 2026 revenue was $1,307 million, up about 10% sequentially. Reported gross profit was $243 million, or 18.6% of revenue; adjusted gross profit was $272 million, or 20.8%. Adjusted EBITDA rose 54% sequentially to $60 million, or 4.6% of revenue, while net loss attributable to DNOW was $21 million.

Metric	Q1 FY2026	Q4 FY2025	Q1 FY2025	YoY
Revenue	$1.2B	$959M	$599M	+97.5%
Gross margin	16.3%	7.1%	23.2%	-690bps
EBITDA	−$22M	−$87M	$44M	−150.0%
EPS	$-0.24	$-0.95	$0.21	−215.1%
Data center 2026 forecast	$40M–$50M	~$30M	n/a	Raised from ~$30M

I am thrilled with our significantly improved performance during the second quarter of 2026, highlighted by $133 million of cash flow from operating activities, a record second-quarter achievement.— Dave Cherechinsky, Chief Executive Officer, August 6, 2026

Management tone: Management's tone shifted from a Q1 bottom call and ERP stabilization focus to more confident language in Q2. The same 2027 $350 million EBITDA target moved from 'internal marching orders' in Q1 to 'plausible' in Q2, and Cherechinsky said confidence had increased over the prior 90 days.

Management Guidance

Management raised full-year 2026 revenue guidance to approaching $5.0 billion to $5.1 billion and held full-year EBITDA margin guidance at approaching 4.5%. Third-quarter sequential revenue growth is guided to low- to mid-single-digit percentage, with a Q3 EBITDA margin target of 5.0% to 5.5% of revenue. The full-year GAAP effective tax rate is expected in the mid- to high single digits.

Business Trajectory

Trajectory

The audited trailing series shows a steep acquisition-driven revenue step-up from $628 million in Q2 FY2025 to $1,183 million in Q1 FY2026, but reported gross margin compressed to 16.3% and reported EBITDA fell to -$22 million in the Q1 FY2026 quarter. Q2 call disclosures show a rebound to $1,307 million revenue and $60 million adjusted EBITDA, supported by U.S. midstream, gas utility, and upstream recapture. Adjusted gross margin slipped to 20.8% in Q2, meaning the profit improvement came mostly from SG&A reduction and higher revenue rather than gross margin expansion.

Revenue & Margin Trajectory

Gross margin as reported.

Share Price — 12 Months

52-week range $11–$17.

Share Price — 12 Months

52-week range $11–$17.

The Numbers

The Model

The model's locked projections put FY+1 revenue at $4,960 million with EBITDA of $223 million, a 4.5% EBITDA margin. FY+2 revenue is $5,320 million with EBITDA of $346 million, a 6.5% EBITDA margin. The near-term anchor is the guided ramp toward roughly $5.0–$5.1 billion of 2026 revenue and recovering EBITDA; FY+2 is driven by continued revenue recapture, synergy realization, and margin repair toward management's $350 million internal 2027 EBITDA target.

Revenue & EBITDA Projections

Solid bars are reported actuals; outlined bars are model projections — not company guidance.

Metric	FY2025	Next FY (E)	Following FY (E)
Revenue	$2.8B	$5.0B	$5.3B
YoY Growth	—	+75.9%	+7.3%
EBITDA	$54M	$223M	$346M
EBITDA Margin	1.9%	4.5%	6.5%

Projections are the median of 5 independent model runs. The model’s revenue sits 0.2% above analyst consensus.

What Could Go Right — and Wrong

What good looks like

All remaining MRC Global U.S. locations complete SAP conversion with measured customer-level revenue handoffs.
Revenue recapture among the roughly two dozen concentrated customer accounts proceeds without permanent 'teaser' margin dilution.
Downstream prebuy activity in late Q3 2026 converts into a strong Q1 2027 turnaround season.
Data-center revenue becomes a durable multiyear line beyond the $40–$50 million 2026 forecast.
Working-capital releases continue: management estimated $100 million from inventory reduction and $50 million from receivables.

What could go wrong

Remaining SAP conversion delays or failures stall revenue recapture.
Recaptured revenue remains permanently lower-margin under customer cost discipline and teaser pricing.
Downstream weakness deepens into 2027, removing the expected second-half catalyst.
International stays weak after the large 2024–2025 European project cycle ended and Middle East projects remain deferred.
Steel or tariff shocks that cannot be passed through compress distributor margins further.

What’s Next

Looking Ahead

The next twelve months hinge on execution: Q3 2026 should show sequential revenue growth of low- to mid-single digits and EBITDA margin of 5.0%–5.5%, with temporary ERP costs stepping down by about $1 million in Q3 and another $1 million in Q4. Downstream prebuy activity is expected near the end of Q3 2026, followed by turnaround execution strongest in Q1 2027. The open watch item is whether the 2027 internal frame—roughly 6.5%–7% revenue growth and about $350 million of EBITDA—becomes formal guidance.

Catalysts

Late Q3 2026Downstream prebuy activity begins — Leading indicator for Q1 2027 turnaround execution.
Securities litigation overhang — Class-action notices and litigation began accumulating.
November 2026Q3 2026 earnings call — Tests Q3 low/mid-single-digit revenue growth and 5.0%–5.5% EBITDA margin.
Q4 2026Temporary ERP cost step-down — Management expects temporary ERP-related costs to decline by about $1 million in Q4.
Q1 2027Downstream turnaround execution — Strongest quarter for downstream turnarounds; first major recapture test.
FY2026 year-end callPossible formal 2027 guidance — Watch whether $350 million EBITDA internal target becomes formal guidance.

Numbers

Financials

Annual Summary

Metric	FY2024	FY2025	TTM	YoY
Revenue	$2.4B	$2.8B	$3.4B	+18.8%
Gross Margin	22.7%	19.0%	16.2%	370bps
EBITDA	$147M	$54M	$141M	-63.3%
EBITDA Margin	6.2%	1.9%	-0.4%	428bps
Net Income	$81M	−$75M	−$141M	-192.6%
Free Cash Flow	$289M	$134M	$980M	—
Net Cash	—	—	—	—

Key Ratios (Trailing)

Valuation

P/E TTM—
EV/EBITDA TTM—
EV/Revenue TTM—
Price/FCF TTM—

Profitability

Gross Margin (TTM)16.2%
EBITDA Margin (TTM)-0.4%
Net Margin (TTM)-4.1%
ROIC-2.2%
SBC / Revenue0.9%

Reference

The Company

DNOW Inc. is a distributor and light fabricator of energy and industrial products. After the MRC Global merger, completed in the fourth quarter of 2025, it operates under both DNOW and MRC Global brands. The 10-K describes the company as a global leader in the distribution of pipe, valves and fittings, and pumps, as well as fabrication, assembly and testing of process and production equipment. Product lines include valves, automation, measurement and instrumentation; pipe; gas products; pumps; fittings, flanges and connectors; and general oilfield and industrial supplies.

The company reports through U.S., Canada, and International segments. It has approximately 300 global locations, including about 210 in the U.S., about 35 in Canada concentrated in Alberta, Saskatchewan, and Manitoba, and about 55 international. The La Porte, Texas facility modifies valves, welds pipe segments onto large pipeline valve openings, installs actuators, hydrotests, paints and coats, x-rays welds, and delivers complete valve and actuation assemblies. DNOW is primarily a buy-warehouse-light-fabricate-deliver model, not an owner of power or grid assets.

Business Segments

United States

Q2 2026 revenue approximately $1.1B, +13% sequential.

Largest segment; U.S. sector mix spans upstream, gas utility, midstream, and downstream/industrial.

Growth driver: Midstream, gas utility, and upstream recapture.

Canada

Q2 2026 revenue $47M, -8% sequential.

Concentrated in Alberta, Saskatchewan, and Manitoba; exposed to seasonal spring breakup.

Growth driver: Less seasonally sensitive midstream and LNG work.

International

Q2 2026 revenue $151M, +3% sequential.

U.K., Australia, and Middle East activity; large prior European project cycle ended.

Growth driver: U.K. brownfield and Australia MRO/project demand.

Competitive Landscape

The source does not describe a sole-source position. DNOW competes with large industrial distributors, and the 10-K warns that it has no contracts with most suppliers. Management's actual strategy leans on proximity, inventory depth, project support, and customer service rather than proprietary products. A computed criticality assessment in the supplied material says data center operators would easily source pumps and valves from other distributors with negligible delay.

Supply Chain

DNOW sits between manufacturers and end users: it buys PVF, pumps, automation and related products, warehouses them, provides light fabrication, and delivers to energy, industrial and data-center-facing customers. No supplier counterparties are named in the three source documents.