Knife River Corporation (KNF) | The Buildout — AI Infrastructure
The Verdict
Knife River is an aggregates-led, vertically integrated construction materials and contracting services company. It supplies aggregates, ready-mix concrete, asphalt, and liquid asphalt, and performs contracting work such as paving, bridges, and site development. In the AI buildout, its role is indirect and physical: it provides site-clearing, foundation, structural, and access-road materials for data-center and semiconductor construction, but not electrical or mechanical systems.
| Market Cap | — |
| Revenue (TTM) | $3.2B |
| Revenue Growth | +9.6% |
| EBITDA Margin (TTM) | 15.3% |
| Net Debt | $1.4B |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Aggregates-based vertical integration: 1.3B tons of reserves, 208 active aggregate sites, and about 35% of aggregates used internally.
- Record Q1 backlog of about $1.2B, up 24.5% y/y, with about 75% expected completed in 2026.
- KNF-state DOT budgets up about 15% y/y versus flat in non-KNF states; about 46% of IIJA funding in its 14 states remains undisbursed.
- Q1 aggregates volume +26%, mix-adjusted ASP +4.1%, and per-unit production costs down more than 10%; aggregates gross margin +390 bps y/y.
- Repeat acquirer: nearly 100 acquisitions completed; three Q1 2026 deals closed, entering Utah as a new platform.
What We’re Watching
- Q2 2026 net income fell 13% y/y while revenue rose 13%; net margin down 140 bps with no adjusted EBITDA detail yet.
- Contracting services margins: Q1 gross margin fell from 7.7% to 5.3%; March 31, 2026 backlog margins expected lower than year-ago backlog.
- Oregon funding: May 19, 2026 ballot measure expected to fail; larger funding conversation pushed toward 2027.
- Data-center contribution remains 'virtually zero' in backlog and not baked into guidance midpoint.
The public-infrastructure thesis is intact and strengthened by record backlog, strong DOT budgets, and management's upper-half guidance bias. The key open question is whether Q2 net income margin compression is transitory, and whether the data-center pipeline converts to disclosed backlog in 2026.
Earnings Beat
Knife River reported Q1 2026 revenue of $410.1M, up 16% year over year, with a gross margin of -0.7% in the seasonally small quarter. Net loss widened to $79.2M from $68.7M. Aggregates volume rose 26%, and mix-adjusted aggregates pricing rose 4.1%.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $410M | $755M | $354M | +16.0% |
| Gross margin | -0.7% | 19.2% | -2.7% | +200bps |
| EBITDA | −$32M | $116M | −$44M | −26.9% |
| EPS | $-1.40 | $0.56 | $-1.21 | +15.1% |
| Aggregates volume (thousands of tons) | 4,878 | n/a | 3,867 | +26.1% |
| Backlog | $1,168.8M | $1,032.1M | $938.7M | +24.5% |
Frankly, we saw mid-single digits this quarter if you make those adjustments.— Brian Gray, 2026-05-05
Management tone: Management's tone became more specific and quantitative compared with the prior call: it disclosed mix-adjusted aggregates pricing of +4.1%, quantified diesel protection at about 80%, and added explicit upper-half guidance bias. It delivered the signaled Q1 acquisitions and answered pricing and diesel questions with figures rather than general assurances.
Management Guidance
Management reaffirmed FY2026 revenue of $3.3B–$3.5B and adjusted EBITDA of $520M–$560M on May 5, 2026, and said results are expected to trend toward the upper half of both ranges. Aggregate margin language was tightened from 'approximately 200 bps' to 'at least 200 basis points.' The company also reaffirmed mid-single-digit aggregate pricing, mid-teens ready-mix volume growth, mid-single-digit asphalt volume growth, and higher full-year contracting services gross margins; future acquisitions are not included.
Trajectory
Q1 2026 revenue was $410.1M, up 16% year over year, with volume growth across products: aggregates +26%, ready-mix +33%, and asphalt +42%. Aggregates gross margin expanded 390 bps on mix-adjusted pricing and lower unit costs, while contracting services gross margin fell to 5.3% from 7.7% in the small quarter. Record backlog and strong state DOT budgets support the full-year construction season.
The Model
The model projects FY+1 revenue of $3,475M and EBITDA of $553M, a 15.9% margin, and FY+2 revenue of $3,890M and EBITDA of $642M, a 16.5% margin. The FY+1 revenue projection sits inside management's $3.3B–$3.5B FY2026 range; FY+2 is anchored by record backlog conversion, public funding, M&A, and data-center pipeline.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $3.1B | $3.5B | $3.9B |
| YoY Growth | — | +10.5% | +11.9% |
| EBITDA | $480M | $553M | $642M |
| EBITDA Margin | 15.2% | 15.9% | 16.5% |
Projections are the median of 5 independent model runs. The model’s revenue sits 8.0% above analyst consensus.
Management reaffirmed FY2026 revenue of $3.3B–$3.5B and adjusted EBITDA of $520M–$560M on May 5, 2026, and said results are expected to trend toward the upper half of both ranges. Aggregate margin language was tightened from 'approximately 200 bps' to 'at least 200 basis points.' The company also reaffirmed mid-single-digit aggregate pricing, mid-teens ready-mix volume growth, mid-single-digit asphalt volume growth, and higher full-year contracting services gross margins; future acquisitions are not included.
What Could Go Right — and Wrong
- Data-center pipeline converts to disclosed backlog or revenue; management says pending bids are 'significantly more' than current supply contracts.
- Aggregate production cost reductions above 10% persist, driving aggregate margin expansion past the 'at least 200 bps' target.
- As-reported aggregates pricing accelerates to mid-single digits as geographic mix normalizes, following Q1 mix-adjusted +4.1%.
- M&A momentum continues in Utah and Mountain states, extending the platform and pulling through internal materials.
- Contracting services margins recover through self-performed asphalt paving plus late-Q3/Q4 quality and incentive payments.
- Q2 net income margin compression deepens; revenue +13% but net income -13% and net margin -140 bps with no adjusted EBITDA detail yet.
- Cementitious and liquid asphalt shortages raise input costs faster than downstream prices can recover.
- Oregon and other state DOT budgets stall; Oregon's May 19, 2026 measure fails and the 2027 legislative session disappoints.
- Integration strain from three Q1 2026 acquisitions, five 2025 deals, and Strata disrupts peak-season execution.
- Data-center pending bids remain pending, keeping current contribution 'virtually zero' in backlog and guidance.
Looking Ahead
The next 12 months center on converting the record $1.17B backlog during the 2026 construction season, with about 75% expected to complete in 2026. Management expects results to trend toward the upper half of FY2026 revenue and adjusted EBITDA ranges, with asphalt paving incentives typically landing late Q3 or Q4. Additional M&A and data-center bid conversion are un-dated upside.
- May 19, 2026Oregon ballot measure — Expected to fail; outcome already baked into guidance, tests West funding path.
- Aug 4, 2026Q2 2026 results — Tests adjusted EBITDA, segment margins, and whether upper-half guidance bias holds.
- 2026 construction seasonBacklog conversion — About 75% of about $1.2B backlog expected to complete in 2026.
- Late Q3/Q4 2026Asphalt paving incentives — Year-end quality and incentive payments may lift contracting services margins.
- 2026Additional M&A — Further Utah or Mountain platform deals; not included in guidance.
- No dateData-center bid conversion — Pending bids described as significantly larger; treated as upside to guidance.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $2.9B | $3.1B | $3.2B | +8.5% |
| Gross Margin | 16.5% | 14.8% | 18.3% | 168bps |
| EBITDA | $453M | $480M | $1.6B | +5.8% |
| EBITDA Margin | 15.6% | 15.2% | 15.3% | 39bps |
| Net Income | $202M | $157M | $147M | -22.1% |
| Free Cash Flow | $150M | −$70M | $185M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)18.3%
- EBITDA Margin (TTM)15.3%
- Net Margin (TTM)4.6%
- ROIC7.6%
- FCF Conversion-1.1%
- SBC / Revenue0.0%
The Company
Knife River is an aggregates-led, vertically integrated construction materials and contracting services company. It produces aggregates, ready-mix concrete, asphalt, and liquid asphalt, and performs contracting work including paving, concrete construction, site development, and bridges. The business matters to the AI buildout indirectly: its materials physically underpin data-center and semiconductor construction, but it does not supply the electrical or mechanical systems.
The company holds 1.3 billion tons of aggregate reserves and operates 208 active aggregate sites, 135 ready-mix plants, 55 asphalt plants, and 9 liquid asphalt terminals across its footprint. About 35% of aggregates are used internally, creating downstream pull-through into ready-mix, asphalt, and contracting services.
Business Segments
Competitive Landscape
The 10-K names nine competitors: Amrize, Cemex, CRH, Eagle Materials, Granite Construction, Heidelberg Materials, Martin Marietta, Construction Partners, and Vulcan Materials. KNF's competitive position rests on local reserves and vertical integration; management says nearly 90% of aggregates volume comes from markets where KNF has a leading position.
- Named in 10-K; not discussed.
- Named in 10-K; not discussed.
- Named in 10-K; not discussed.
- Eagle Materials, Inc.Named in 10-K; not discussed.
- Granite Construction, Inc.Named in 10-K; not discussed.
Supply Chain
KNF sits upstream-to-midstream in heavy construction materials: owned aggregate reserves feed internal ready-mix, asphalt, and liquid asphalt operations, which then supply state DOT, Navy, and private data-center customers. No external supplier names are confirmed in the filing.