Reliance Steel & Aluminum Co. (RS) | The Buildout — AI Infrastructure
The Verdict
Reliance Steel & Aluminum is a metals service center, not a producer. It buys metal from domestic mills, performs cutting, processing, and logistics, and distributes those products to fabricators, contractors, and manufacturers. Its role in the AI infrastructure buildout is indirect: processed carbon steel, aluminum, and stainless go into data-center structures, the power and cooling systems that support them, and semiconductor fab construction. The company has not quantified its AI-linked revenue, and management says it cannot reliably separate data-center demand inside its broad nonresidential construction mix.
| 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
- Two government contracts announced in Q1 2026 through AMI Metals have combined potential revenue of up to approximately $3 billion; the DHS border wall Phase 1 alone is $1.4 billion through mid-2027.
- Q2 2026 border-wall contribution reached $0.41 per share, with a 30-basis-point pretax margin benefit despite a roughly 40-basis-point FIFO gross margin headwind.
- RS has outperformed broader service center industry shipments for 13 consecutive quarters as of Q1 2026, including nearly 8 percentage points of outperformance.
- Balance sheet at Q2 2026: net debt-to-EBITDA 0.9x, total debt $1.7 billion, and a roughly $700 million LIFO reserve available to cushion metal-price declines.
- Data center and energy infrastructure demand was described at record levels in Q1 and sustained strong activity in Q2; semiconductor language moved to clear improvement and accelerating momentum.
What We’re Watching
- Phase 2 of the border wall is a $800–900 million customer opt-in, not guaranteed, with no confirmed timing.
- Full-year 2026 LIFO expense guidance was raised twice, from $100 million to $150 million to $300 million, an increasing non-cash GAAP earnings drag.
- Data-center share of nonresidential tonnage cannot be quantified by management; AI exposure remains a qualitative read.
- Metal prices could roll over; falling prices would pressure selling prices and reverse the pricing tailwind, though the ~$700 million LIFO reserve is a cushion.
The thesis is strengthening, not weakening. Record tons, positive pricing, widening share outperformance, and the border-wall contribution show the operational core is being confirmed. The open question is durability: how much of 2026 profit is borrowed from future demand and whether border-wall Phase 2 becomes committed revenue.
Earnings
Q2 2026 net sales were $4.63 billion, up 15% sequentially and 27% y/y. Reported gross margin was 26.6%, while management's FIFO gross margin was 30.5%. Tons sold set a record, rising 7.0% sequentially and 10.8% y/y, and non-GAAP EPS was $6.27, above guidance.
| 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 | — |
Reliance delivered another excellent quarter building on the positive momentum of the first quarter and the continued strong execution by our teams.— Karla Lewis, CEO, July 23, 2026
Management tone: Management's commentary moved from positive demand in Q4 2025 to record volumes and 'access to metal becomes a strategic advantage' in Q1 2026, then to 'another excellent quarter' and a direct Q3 EPS growth guide of 76%–81% y/y in Q2 2026.
Management Guidance
For Q3 2026, management guided non-GAAP EPS of $6.40–$6.60, up 76%–81% y/y, including an estimated $75 million of LIFO expense, or about $1.10 per share. Full-year 2026 LIFO expense was raised to $300 million, and full-year capex was held at approximately $300 million, about half for growth.
Trajectory
Revenue is accelerating: $3,498.6 million in Q4 FY2025, $4,026.0 million in Q1 FY2026, and $4,630.0 million in Q2 FY2026, with Q2 up 27% y/y. Reported gross margin compressed to 26.6% in Q2 from 27.4% in Q1, but management's FIFO gross margin rose to 30.5%. The driver was countervailing forces: LIFO expense jumped from $37.5M to $112.5M, and the border wall added 5.1 percentage points of sequential tons-sold growth while creating a 40-basis-point FIFO gross margin headwind.
The Model
The model projects FY+1 revenue of $17,150 million and EBITDA of $1,818 million, a 10.6% margin, and FY+2 revenue of $18,000 million and EBITDA of $1,962 million, a 10.9% margin. The FY+1 estimate is anchored by the border-wall ramp and current volume and pricing strength; FY+2 assumes that demand and pricing support persist, with Phase 2 optionality unresolved.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $14.3B | $17.1B | $18.0B |
| YoY Growth | — | +20.0% | +5.0% |
| EBITDA | $1.3B | $1.8B | $2.0B |
| EBITDA Margin | 9.1% | 10.6% | 10.9% |
Projections are the median of 5 independent model runs. The model’s revenue sits 10.7% above analyst consensus.
For Q3 2026, management guided non-GAAP EPS of $6.40–$6.60, up 76%–81% y/y, including an estimated $75 million of LIFO expense, or about $1.10 per share. Full-year 2026 LIFO expense was raised to $300 million, and full-year capex was held at approximately $300 million, about half for growth.
What Could Go Right — and Wrong
- Phase 2 of the DHS border wall is exercised, adding roughly $800–900 million of customer-committed revenue beyond mid-2027.
- A second large government or infrastructure contract is announced; the border-wall project uses existing RS infrastructure, keeping variable cost low.
- Semiconductor and data center demand becomes more separable and accelerates, turning the qualitative AI read into disclosed, measurable wins.
- Commercial aerospace flips from early improvement to a sustained recovery, improving product mix and profit per ton.
- Flat-rolled lead times remain stretched (average orders about 2 weeks late, some mills 4–8 weeks late), supporting average selling prices.
- Phase 2 is not exercised, or border-wall pull slows into 2027, removing a large expected revenue layer.
- Metal prices decline while inventory costs are elevated, pressuring selling prices and reversing the 2026 pricing tailwind.
- Data-center and hyperscaler capex pauses or is pushed out, showing up first as broad nonresidential weakness because RS cannot quantify data-center share.
- Mills catch up and imports return faster than expected, shrinking lead times and removing the access-to-metal advantage.
- Customer concentration risk materializes from the new DHS dependence; contract delays or funding changes would land directly on quarterly results.
Looking Ahead
The next 12 months are anchored by the border-wall ramp: management expects higher Q3 shipments and believes Q3 is close to a full run rate, sustainable through mid-2027. Beyond the border wall, the Lockheed Martin/JSF renewal adds roughly 10% higher volumes from 2027, and management expects many meaningful opportunities to materialize through the second half of 2026 and into 2027.
- Q3 2026Q3 2026 results — Tests $6.40–$6.60 non-GAAP EPS guide and border-wall full run rate.
- Mid-2027DHS Phase 2 opt-in — Optional $800–900M extension beyond mid-2027; management believes likely.
- 2027Lockheed Martin / JSF start — Renewed program begins with roughly 10% higher volumes.
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 | $15.3B | -9.9% |
| EBITDA Margin | 10.4% | 9.1% | 9.6% | 134bps |
| Net Income | $875M | $739M | $895M | -15.5% |
| Free Cash Flow | $999M | $502M | $8.3B | — |
| 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 Steel & Aluminum is the largest metals service center company in North America by revenues, with FY2025 net sales of $14.29 billion. It distributes more than 100,000 metal products to over 125,000 customers. The product mix spans carbon steel, aluminum, stainless steel, alloy, copper and brass, and toll processing. The company is not a producer; it buys metal from domestic mills, performs value-added processing, and distributes it.
RS has one reportable segment: metals service centers. It operates through a network of subsidiaries, including AMI Metals, which executes the large government contracts. The FY2025 largest customer was 0.6% of net sales; in 2026, management announced DHS and Lockheed Martin contracts through AMI Metals. Management describes diversification by product, end market, and geography as its core volatility mitigant.
Business Segments
Competitive Landscape
The source material describes RS as the largest North American metals service center by revenues and reports 13 consecutive quarters of industry shipment outperformance. Management attributes share gains to domestic-mill relationships, robust inventory, and value-added processing. A computed criticality assessment in the source says that if RS disappeared, AI data center construction would not slow materially; customers would source from Ryerson or Worthington Steel with minimal delay.
- RyersonNamed as a competitor in the supply-chain wiring; not discussed in management transcripts.
- Worthington SteelNamed as a competitor in the supply-chain wiring; not discussed in management transcripts.
Supply Chain
RS sits between domestic mills and downstream fabricators, contractors, and manufacturers. It buys metal, performs processing and logistics, and distributes it. No neighbor transcript in the source mentions Reliance by name; all ecosystem links are inferred.
More on RS: Earnings recap