Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 3, 2026 · Beat 2 of last 5 quarters
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CTOS's record results and raised guidance underscore accelerating demand for transmission and distribution infrastructure, a critical enabler of AI-driven data center growth. While management downplays direct AI linkage, the multi-year transmission super cycle they cite is consistent with the grid buildout required to power AI compute expansion. The company's young fleet and disciplined capacity additions position it to capture this demand without heavy capital intensity.
Custom Truck delivered record Q2 revenue of $563M and adjusted EBITDA of $117M, up 10% and 25% YoY respectively. SER third-party revenue grew 20% to $219M with segment adjusted EBITDA margin of 53%, up 700+ bps YoY, driven by 81.6% utilization and 13% growth in OEC on rent. STEM third-party revenue hit a quarterly record of $345M, up 5% YoY, though backlog fell to $322M on record deliveries; order flow remained strong with June quoting up 26% YoY. Net leverage improved to 3.85x, and the company raised full-year guidance.
Management raised full-year 2026 revenue guidance to $2.1B–$2.2B (8%–13% growth) and adjusted EBITDA to $437.5M–$455M (14%–19% growth), citing sustained strength in T&D end markets. They expect Q3 revenue and EBITDA to grow year-over-year but come in modestly below Q2 due to timing of deliveries and RPO buyouts pulled into Q2. Net rental fleet CapEx guidance was raised to $170M–$200M to support mid-single-digit net OEC growth, while still targeting >$50M levered free cash flow and net leverage meaningfully below 4x by year-end. Management reiterated confidence in a 'once-in-a-generation transmission demand super cycle' with projects extending into 2027–2028, and expects infrastructure end-market demand to pick up later this year or next as federal dollars are released.
“We believe that we are in the early stages of what could be a once-in-a-generation transmission demand super cycle.”
on Transmission demand outlook
“Given our strong year-to-date performance, robust conditions in the T&D end markets and our outlook for the rest of the year, we are increasing our previous full year 2026 consolidated revenue and adjusted EBITDA outlooks.”
on Guidance raise
“We've seen strong order growth so far in Q3, and our backlog currently stands at more than $340 million.”
on Backlog recovery
Can you help us quantify the revenue and adjusted EBITDA that is being pulled forward from the second half into Q2, and clarify how much came from 3Q versus 4Q?
Chris explained that quantifying the net pull forward is challenging due to historical timing shifts, but noted Q3 is expected to grow high single-digit percentage year-over-year, below Q2 levels. He indicated the first-half/second-half split is likely to be 48%/52% this year versus the historical 45–47%/55–57%.
How much were orders up year-over-year in the STEM segment, and how do you view the EPA '27 emission standard changes given your customers' usage patterns?
Ryan said converted orders were up low single digits, with quotes up double digits, a good leading indicator. On emissions, he noted non-conformance penalties are estimated at $4,500–$7,000 per unit, making prebuy economics favorable; Cummins' X10 engine is expected in full production later in Q3 next year.
Can you describe how federal funding packages are translating into order flow, and what percentage of backlog is tied to federal subsidies?
Ryan said T&D demand is less directly tied to federal dollars and more driven by regulatory improvements and customer planning. Infrastructure end-market demand, which is more directly tied to federal spending, has not yet picked up meaningfully but is expected to benefit later this year or next as dollars are released.