Willdan Group, Inc. (WLDN) | The Buildout — AI Infrastructure
The Verdict
Willdan plans, designs, and delivers energy and infrastructure improvements for utilities, government agencies, and commercial customers. For the AI buildout, it provides the physical layer that energizes data centers: substations, interconnects, power blocks, grid studies, and battery storage. The business is not an AI software or model play; its exposure is indirect, through the engineering work required to get power to data centers.
| Market Cap | — |
| Revenue (TTM) | $684M |
| Revenue Growth | +14.9% |
| EBITDA Margin (TTM) | 9.4% |
| Net Debt | $36M |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Commercial revenue is expected to shift from 7% of the business in 2024 to about 25% in 2026 pro forma after Burton, with data-center electricity the largest and fastest-growing part.
- APG is projected to nearly triple in 2026 to roughly $75 million on data-center substation, interconnect, and power-block work.
- LADWP added a $110 million solar streetlight expansion and could become the largest customer in 2027, per management.
- Long-term adjusted EBITDA margin target was raised to high 20s; Q2 FY2026 printed 28.2%, the highest quarterly margin in company history.
- Customer concentration improved: top 10 customers fell from 53.8% to 49.1% of contract revenue in Q1 FY2026, with no single customer above 10%.
What We’re Watching
- LADWP ramp timing: only about half the $110 million expansion was authorized to proceed at the Q2 call, and Q3 contribution was not fully known.
- The 28.2% Q2 adjusted EBITDA margin is not expected to hold; management said part of the quarter reflected revenue acceleration out of the second half.
- APG growth depends on specialized electrical engineering labor that management calls hard to find and very expensive.
- H2 tax rate is expected to normalize to 15–20% after the 179D P&L benefit sunset at the end of June.
The thesis is strengthening, with the caveat that the most direct AI and data-center evidence is still partly undisclosed. Management has twice raised FY2026 guidance, demonstrated a record quarterly margin, and shifted the mix toward commercial work. The open question is whether the LADWP ramp and APG's confidential Southwestern data-center project convert into revenue at the pace management describes.
Earnings Beat
In Q2 FY2026, ended July 3, 2026, Willdan reported contract revenue of $231.0 million, up 33.2% year over year, and net revenue of $117.2 million, up 23.5%. Net income rose 57.7% to $24.3 million, while adjusted EBITDA rose 50.6% to $33.0 million, a 28.2% margin described as the highest quarterly margin in company history. Management said the quarter also reflected acceleration of revenue that will affect the second half.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $155M | $174M | $152M | +1.8% |
| Gross margin | 40.7% | 36.0% | 37.8% | +290bps |
| EBITDA | $13M | $15M | $12M | +10.4% |
| EPS | $0.55 | $1.22 | $0.32 | +71.5% |
| Net revenue | $117.2M | $92.4M | n/a | +23.5% |
adjusted EBITDA increased 51% to a record $33 million from the quarter, representing a record 28.2% adjusted EBITDA margin on net revenue. This 28.2% is the highest quarterly margin in the company’s history.— Kim Early, CFO, August 6, 2026
Management tone: Management shifted from describing the LADWP ramp as 'the first inning' in Q1 to saying it 'could be our largest customer in 2027' in Q2. It also cautioned that the record Q2 margin would not hold through the year and said LADWP's Q3 contribution was not fully known.
Management Guidance
Management's FY2026 guidance, raised on August 6, 2026, is net revenue of $415–430 million, adjusted EBITDA of $103–107 million, and adjusted diluted EPS of $5.00–5.15. Assumptions include about 15.9 million diluted shares at year-end, a 0% full-year effective tax rate, and a 15–20% tax rate in the second half. The long-term adjusted EBITDA margin target is high 20s, and free cash flow is expected to exceed 70% of adjusted EBITDA annually.
Trajectory
Reported contract revenue stepped down from $182.0M in Q3 FY2025 to $173.7M in Q4 FY2025 and $155.1M in Q1 FY2026, then jumped to $231.0M in Q2 FY2026 on data-center and commercial work. Gross margin expanded to 40.7% in Q1 FY2026 from 37.8% a year earlier, while adjusted EBITDA margin on net revenue moved from 19.6% in Q1 to a record 28.2% in Q2. Management attributed part of the Q2 margin jump to revenue acceleration out of the second half.
The Model
The model's locked projections are FY+1 revenue of $425M and EBITDA of $85M, a 20.0% margin, and FY+2 revenue of $510M and EBITDA of $112M, a 22.0% margin. Near-term revenue is anchored by management's FY2026 net revenue guide of $415–430M and APG's projected roughly $75M in 2026. The FY+2 step assumes continued commercial mix shift toward data-center electricity and expansion toward management's high-20s adjusted EBITDA margin target.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $682M | $425M | $510M |
| YoY Growth | — | −37.6% | +20.0% |
| EBITDA | $63M | $85M | $112M |
| EBITDA Margin | 9.2% | 20.0% | 22.0% |
Projections are the median of 5 independent model runs. The model’s revenue sits 23.5% above analyst consensus.
Management's FY2026 guidance, raised on August 6, 2026, is net revenue of $415–430 million, adjusted EBITDA of $103–107 million, and adjusted diluted EPS of $5.00–5.15. Assumptions include about 15.9 million diluted shares at year-end, a 0% full-year effective tax rate, and a 15–20% tax rate in the second half. The long-term adjusted EBITDA margin target is high 20s, and free cash flow is expected to exceed 70% of adjusted EBITDA annually.
What Could Go Right — and Wrong
- The remaining half of the $110 million LADWP expansion is authorized and ramps faster than management's conservative view, making LADWP the largest customer in 2027.
- APG converts its confidential Southwestern data-center project and adds disclosed data-center awards beyond the roughly $75 million 2026 target.
- Burton cross-sell extends beyond early Walgreens, Carter's, and Five Below wins into two utility-program placements at larger scale.
- Battery storage and microgrid work such as Ciro One, the Texas battery project, and the $31 million biogas microgrid convert as expected.
- Commercial revenue reaches about 25% of revenue in 2026 while adjusted EBITDA margin holds near the 25% full-year estimate or higher.
- LADWP authorization or revenue conversion slips past Q4 2026 and early 2027, delaying the largest-customer scenario.
- Data-center interconnection delays push APG project cadence to the right, leaving the $75 million 2026 target out of reach.
- Q2's 28.2% adjusted EBITDA margin proves one-time; commercial equipment and subcontractor pass-through compresses gross margin without enough overhead leverage.
- Specialized electrical engineering labor scarcity constrains APG's capacity and raises project costs.
- H2 tax normalization to 15–20% and the 179D P&L sunset pressure earnings, or competitive losses in utility programs disrupt the base.
Looking Ahead
The next twelve months turn on conversion: LADWP's $110 million expansion ramps through Q3, Q4, and early 2027; APG must deliver roughly $75 million in 2026; Burton integration continues; and management expects the revolver to be fully repaid by year-end absent further acquisitions. The company also faces second-half tax-rate normalization to 15–20% after the 179D P&L benefit sunset.
- Q3 2026LADWP ramp contribution — Tests how much of the $110M expansion converts and the authorization pace.
- H2 2026APG toward $75M — Tests data-center substation, interconnect, and power-block delivery.
- H2 2026Tax-rate normalization — Tests 15–20% H2 rate after the 179D P&L sunset.
- Year-end 2026Revolver repayment — Tests cash flow after Q1 timing pressure and acquisition decisions.
- Early 2027LADWP full run-rate — Tests whether LADWP becomes the largest customer in 2027.
- 2027SCE extension visibility — Tests the $100M two-year extension through year-end 2027.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $566M | $682M | $684M | +20.4% |
| Gross Margin | 34.6% | 37.5% | 38.2% | +290bps |
| EBITDA | $46M | $63M | $255M | +36.1% |
| EBITDA Margin | 8.2% | 9.2% | 9.4% | +106bps |
| Net Income | $22M | $52M | $56M | +133.3% |
| Free Cash Flow | $64M | $71M | $221M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)38.2%
- EBITDA Margin (TTM)9.4%
- Net Margin (TTM)8.2%
- ROIC10.1%
- FCF Conversion67.6%
- SBC / Revenue1.9%
The Company
Willdan provides professional, technical, and consulting services to utilities, private industry, and public agencies. Its two reportable segments are Energy and Engineering and Consulting. In the AI buildout, its clearest role is through APG, which supplies substations, interconnects, and power blocks for data centers; Willdan also performs grid load studies, battery storage, and microgrid work. Management describes data-center electricity as the largest part of commercial revenue and the fastest-growing part of Willdan.
The company operates from an Anaheim, California headquarters of about 18,000 square feet, with 48 other U.S. locations plus one office in Canada and one in Puerto Rico, as disclosed in the 10-K. After the May 4, 2026 Burton close, management said Willdan had active projects in all 50 states and permanent offices in 26 states, plus Puerto Rico and Canada; new hubs are in Florida, Georgia, North Carolina, Kentucky, and Texas.
Business Segments
Competitive Landscape
Willdan's recent wins include the $27 million New York Accelerator program, a competitive takeaway from a longstanding competitor, and the $110 million LADWP expansion. The supplied material does not identify a formal sole-source position.
Supply Chain
Willdan sits between utilities, grid operators, and data-center developers, providing the engineering and integration services that deliver power. The largest APG data-center project is confidential, and the supplied material does not record a neighbor naming Willdan directly.
More on WLDN: Earnings recap