Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 23, 2026 · Beat 7 of last 7 quarters
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Comfort Systems' record backlog and 58% technology revenue share underscore the sustained, accelerating pace of data center construction. The company's modular capacity expansion and strong cash generation signal continued investment in AI infrastructure, with hyperscaler demand showing no signs of slowing. Management's confidence in multiyear commitments from customers reinforces the durability of the AI buildout cycle.
Comfort Systems reported record Q2 revenue of $3.3 billion, up 44% same-store, with EPS of $12.53, up 92% YoY. Backlog reached a record $14.1 billion, up 73% YoY, driven by strong technology sector bookings. Gross margin expanded to 25.9%, and free cash flow was $999 million. The company closed the acquisition of Hunt Electric on May 1, expected to contribute about $250 million in annualized revenue. Technology (data centers) accounted for 58% of revenue, up from 40% a year ago.
Management raised full-year same-store revenue growth guidance to mid- to high 30% (from mid- to high 20% previously), citing strong demand and backlog. They expect gross margins to remain in the strong recent ranges, with full-year effective tax rate around 23%. CapEx is expected to be approximately 5% of revenue, driven by modular capacity expansion. Modular capacity is on track to reach 4 million square feet by year-end and about 5 million square feet by late summer 2027, with expansion tied to existing customer volume commitments. Management expressed optimism for the rest of 2026 and into 2027, noting no signs of demand slowdown from hyperscalers.
“We had a fantastic quarter with amazing execution by our teams. This is the first time that our quarterly revenue has exceeded $3 billion.”
on Record revenue
“There is a very deep and calm certainty among these people that they're going to continue to build, that they absolutely need and have to do this building. And our goal -- so we see no let down whatsoever.”
on Data center demand
“We're not going to invest in buildings just on speculation. We expand when customers provide us meaningful multiyear commitments.”
on Modular capacity expansion
Can you help us understand the puts and takes to cash flow, how we should be looking at $1 billion of free cash flow in a single quarter and what that tells us about your cash flow prospects?
Bill George explained that the $1 billion free cash flow was about 2.5x earnings, driven by advanced cash from customers, excellent payment terms due to strong negotiating power, and overall healthy business. He noted there was no unique item, but it reflects customer satisfaction and strong performance.
How should we think about incremental CapEx associated with 1 million incremental square foot of modular capacity? And is that tied to an existing customer or new customers?
Bill George said CapEx guidance of 5% of revenue remains appropriate, with some flexibility on leasing vs. ownership. Trent McKenna added that expansion is only done with meaningful multiyear commitments from existing customers, and Brian Lane noted they are bullish on the industry long-term.
How much of the backlog increase was Modular this quarter? And is it unusual to have a larger Modular order in Q2?
Bill George stated Modular bookings were $510 million, covering their burn rate and adding $500 million net. He said nothing was unusual, just consistent demand, which is why they are adding capacity. Trent McKenna added they only take work they can perform, with disciplined labor planning.