Reliance Steel & Aluminum Co. (RS) | The Buildout — AI Infrastructure
The Verdict
Reliance is a metals service center. It does not make metal; it buys carbon steel, aluminum and stainless, then stores, cuts, heat-treats and delivers it to fabricators, contractors and OEMs. The AI buildout reaches the company indirectly. Data-center construction needs carbon steel tubing, plate and structural products, and data-center equipment needs industrial machinery parts, but Reliance sells to the fabricators and contractors who serve many projects at once, not to the projects themselves. Management talks about data centers, semiconductors and energy infrastructure, and never uses the term AI. The business is scale, logistics and mill relationships rather than technology.
| Market Cap | — |
| Revenue (TTM) | $15.8B |
| Revenue Growth | +15.4% |
| EBITDA Margin (TTM) | 9.6% |
| Net Debt | $1.8B |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- The government awards give Reliance its first large named revenue stream: a DHS border wall contract of up to $2.24 billion and a Joint Strike Fighter IDIQ of up to $654 million, collectively described by management as up to approximately $3 billion.
- Two consecutive quarters of above-guidance delivery: Q1 2026 tons +9.4% versus +5-7% guided; Q2 2026 tons +7.0% versus +1-3% guided, with average selling price and EPS also beating.
- The company's non-GAAP FIFO gross margin expanded for three straight quarters: 28.5% in Q4 2025, 30.1% in Q1 2026 and 30.5% in Q2 2026.
- Customer concentration is very low: the largest customer was 0.6% of FY2025 net sales, across more than 125,000 customers and over 100,000 metal products.
- Net debt/EBITDA of 0.9 against total debt of $1,995.2 million, with $529 million of repurchase authorization remaining.
What We’re Watching
- Underlying demand: Q3 2026 shipments excluding the border wall are guided down 2% to 4% quarter over quarter, on typical seasonality plus limited supply availability.
- LIFO: the FY2026 expense outlook was raised twice, from $100M to $150M to $300M, and Q2's $112.5M came in about three times the guided $37.5M.
- Supply: flat-rolled orders run about two weeks late on average and four to eight weeks at some mills, with no signs suppliers are catching up; beams, carbon plate and heat-treated aluminum plate are tight.
- Border wall Phase 2, roughly $800-900 million, is a customer opt-in that management says is not guaranteed; Phase 1 ends mid-2027.
The operating evidence is strengthening: two straight quarters of above-guidance delivery, three quarters of FIFO gross-margin expansion, and a newly contracted revenue stream. The reported numbers understate that because a non-cash LIFO charge is running far above plan. The open question is how much of the recent momentum belongs to the border-wall contract rather than the broader market — management's own ex-contract shipment guide is the place that resolves.
Earnings
Reliance reported Q2 2026 net sales of $4.63 billion, up 27% year over year and 15% sequentially — management called it the second-highest quarterly revenue in company history. Tons sold set a record, up 7.0% quarter over quarter and 10.8% year over year, beating guidance on both measures. The company's non-GAAP FIFO gross margin was 30.5%, up from 30.1% in Q1 2026, while a $112.5 million LIFO charge, about three times the guided figure, weighed on reported results.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $4.6B | $4.0B | $3.7B | +26.5% |
| Gross margin | 26.6% | 27.4% | 27.8% | -120bps |
| EBITDA | $511M | $437M | $382M | +33.8% |
| EPS | $6.25 | $5.12 | $4.39 | +42.2% |
| LIFO expense | $112.5M | $37.5M | n/a | — |
| Border wall contribution to sequential tons | 5.1 pp | None (shipping began April 2026) | n/a | — |
Higher than anticipated carbon and aluminum product costs caused us to increase our full year LIFO expense outlook to $300 million from our prior estimate of $150 million. As a result, we recorded second quarter LIFO expense of $112.5 million, significantly above our estimate of $37.5 million.— Arthur Ajemyan, CFO, 2026-07-23
Management tone: Management's tone on the Q2 2026 call was confident and detail-forward, with no hedging in prepared remarks or defensiveness in Q&A. Versus the prior quarter, the intel file documents eight shifts, including the border wall moving from "commencing in April" to "contributing meaningfully," the LIFO outlook raised again, three end markets improving at once, and supply lead times getting worse rather than better. The CFO disclosed the LIFO miss in his own prepared remarks before anyone asked, and volunteered the aluminum-versus-carbon LIFO split unasked.
Management Guidance
Management guided Q3 2026 non-GAAP EPS to $6.40-$6.60, up 76% to 81% year over year, including an estimated $75 million of LIFO expense, or about $1.10 per diluted share. It flagged trade policy, the U.S.-Iran conflict and normal seasonality as considerations. Excluding the DHS contract, shipments were guided down 2% to 4% sequentially. For the full year, LIFO expense is guided to $300 million and capital expenditure to approximately $300 million, with about half allocated to strategic growth.
Trajectory
Revenue has accelerated for two consecutive quarters: $3,499 million in Q4 FY2025, $4,026 million in Q1 FY2026 and $4,630 million in Q2 FY2026, the last two each up about 15% sequentially. EBITDA followed the same path — $245.5 million (7.0% of revenue) in Q4 FY2025, $437.1 million (10.9%) in Q1 and $511.1 million (11.0%) in Q2. Record tons and rising average selling prices drive it, with the border-wall contract layered on top. On the reported basis, gross margin carries a large non-cash LIFO charge; the FIFO measure management uses, 30.5% in Q2 2026, expanded for a third straight quarter.
The Model
The model projects FY+1 revenue of $17,686 million and EBITDA of $1,945 million, an 11.0% EBITDA margin, and FY+2 revenue of $19,080 million and EBITDA of $2,271 million, an 11.9% margin. FY+1 sits about 12% above the trailing twelve-month revenue of $15,805.8 million, so it assumes the recent record volume and pricing largely persist. FY+2 adds roughly 8% more revenue and expands EBITDA margin by about 90 basis points.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $14.3B | $17.7B | $19.1B |
| YoY Growth | — | +23.7% | +7.9% |
| EBITDA | $1.3B | $1.9B | $2.3B |
| EBITDA Margin | 9.1% | 11.0% | 11.9% |
Projections are the median of 5 independent model runs. The model’s revenue sits 19.3% above analyst consensus.
Management guided Q3 2026 non-GAAP EPS to $6.40-$6.60, up 76% to 81% year over year, including an estimated $75 million of LIFO expense, or about $1.10 per diluted share. It flagged trade policy, the U.S.-Iran conflict and normal seasonality as considerations. Excluding the DHS contract, shipments were guided down 2% to 4% sequentially. For the full year, LIFO expense is guided to $300 million and capital expenditure to approximately $300 million, with about half allocated to strategic growth.
What Could Go Right — and Wrong
- Border wall Phase 2, sized at roughly $800-900 million, is exercised, extending the contract beyond mid-2027.
- Supply stays tight enough to support pricing without capping volume, keeping mill lead times and preferential access in place.
- The three improving end markets — general manufacturing, aerospace and semiconductor — deliver as management describes.
- A third consecutive quarter of above-guidance delivery on tons, average selling price and earnings.
- The data-center portion of nonresidential demand gets quantified, or a named data-center relationship is disclosed.
- Core demand rolls over: ex-border-wall shipments fall beyond the guided 2% to 4% sequential decline.
- LIFO expense escalates past the guided $300 million, or metal prices break abruptly and mark down inventory values.
- Supply constraints cap volume — flat-rolled orders already run about two weeks late, four to eight weeks at some mills.
- Phase 2 is not exercised, ending the border-wall revenue stream after Phase 1 completes in mid-2027.
- Commercial aerospace recovery stalls, with inventories still described as elevated and only early signs of improvement.
Looking Ahead
The next twelve months turn on two things: whether the border-wall shipment run rate holds near Q3 levels through mid-2027, and whether the commercial book recovers from the guided sequential decline. LIFO is guided lower in Q3 than Q2, which would ease the reported-margin drag if it holds. Semiconductor is the clearest improvement in the record; the aerospace recovery is still described as early signs against elevated inventories.
- Q3 2026Q3 earnings report — Tests guided $6.40-$6.60 EPS and the ex-border-wall shipment line
- Beginning 2027JSF volume step-up — About 10% higher volumes on the Joint Strike Fighter contract
- Mid-2027Border wall Phase 1 end — Phase 1 runs through mid-2027; Phase 2 is a customer opt-in
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $13.8B | $14.3B | $15.8B | +3.3% |
| Gross Margin | 27.7% | 27.3% | 26.9% | 40bps |
| EBITDA | $1.4B | $1.3B | $1.5B | -9.9% |
| EBITDA Margin | 10.4% | 9.1% | 9.6% | 134bps |
| Net Income | $875M | $739M | $895M | -15.5% |
| Free Cash Flow | $999M | $502M | $540M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)26.9%
- EBITDA Margin (TTM)9.6%
- Net Margin (TTM)5.7%
- ROIC10.7%
- FCF Conversion35.4%
- SBC / Revenue0.0%
The Company
Reliance is the largest metals service center company in North America based on revenues, per its 10-K. It does not make metal. It buys carbon steel, aluminum and stainless, overwhelmingly from domestic mills, then stores, cuts, heat-treats, fabricates and delivers it to more than 125,000 customers, with over 100,000 metal products and FY2025 net sales of $14.29 billion. Its customers are fabricators, contractors and OEMs, not hyperscalers.
The company reports one segment, metals service centers, and operates as a scale, logistics and supply-relationship business. It buys from long-standing domestic mill partners and runs value-added processing and toll processing alongside distribution. Diversification across product, end market and geography is its stated mitigant to metals-price volatility. Its semiconductor business has a footprint in the U.S., Singapore, South Korea and China, and border-wall shipments run out of Texas and California.
Business Segments
Competitive Landscape
The disclosed record names only two competitors, Ryerson and Worthington Steel, and both come from a generated relationship map rather than from filings or calls. Management frames the competitive dynamic around industry consolidation and supply access: it says it hopes consolidation brings "a more disciplined environment … with fewer competitors," and that in tight markets long-tenured domestic mill relationships earn preferential treatment. Reliance also claims share gains because competitors carry "holes in inventories"; the supplied evidence contains no competitor transcript to confirm or refute that.
- Ryerson (RYI)Listed as a metals service center competitor in the generated relationship map; not discussed in filings or on the calls.
- Worthington Steel (WS)Listed as a metals service center competitor in the generated relationship map; not discussed in filings or on the calls.
Supply Chain
Reliance sits between domestic mills upstream and fabricators, contractors and OEMs downstream, processing purchased metal into just-in-time deliveries. No neighbor in the supplied set mentions Reliance by name; the twelve inferred ecosystem neighbors are demand-environment reads, not confirmed counterparties.
More on RS: Earnings recap