Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 4, 2026 · Beat 1 of last 3 quarters
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Fuel Tech's expanding APC backlog and data center pipeline underscore the critical role of emissions control in the AI infrastructure buildout, as power generation for data centers requires SCR technology. The company's positioning as a subcontractor to turbine OEMs and integrators, combined with the new NSPS rules favoring SCR for larger turbines, could drive meaningful revenue as data center projects move from development to construction.
Consolidated revenue rose 17% to $6.5M, driven by double-digit growth in both segments. APC backlog reached $14.3M at quarter end, the highest since 2018, and new contracts added $2.6M, bringing effective backlog to ~$17M. FUEL CHEM revenue grew 21% to $3.7M on increased dispatch at legacy accounts. Gross margin declined to 41% from 46% due to project mix and costs. The company ended the quarter with $29.6M in cash and investments and no debt. CEO Vince Arnone announced his retirement, effective August 10, 2026, with Ramesh Nuggihalli succeeding him.
Management expects 2026 revenues to exceed 2025, with FUEL CHEM approximating last year and APC exceeding prior-year performance, though the majority of the large APC contract revenue will be recognized in 2027. The data center opportunity remains a key upside driver, with a potential capacity reservation and long lead time procurement agreement under discussion that could convert to a commercial award before the end of Q3. FUEL CHEM is expected to benefit from high dispatch in Q3, and a restarted demonstration program could contribute $2.5M–$3M annually if converted to a commercial account in 2027. DGI is progressing toward its first commercial contract, with a full hatchery proposal in development and a wastewater rental generating ~$100K in 2026. Management reiterated SG&A guidance of $14.5M–$15M for 2026 and expressed optimism about the outlook across all segments.
“Our performance in the second quarter was improved versus the prior year period across both of our business segments.”
on Quarterly performance
“We believe that we are still very much in the running to capture a share of these opportunities, and we remain optimistic about our prospects for 2026.”
on Data center opportunities
“If there is 1 lesson I have learned throughout my career, that success in business and happiness in life are always driven by people.”
on Retirement reflection
In 2027, should we expect the data center opportunity to become a significant source of revenues or should we expect this to be like a '28 or '29 upside?
Vince Arnone said timing depends on contract award. He noted one opportunity is being followed closely with early-to-mid 2027 delivery timeframes, so there is potential for material revenues in 2027 pending award.
On the DGI front, do we know what the size of that award could look like and what would be the timeline of implementation and revenue recognition?
Vince Arnone said a full system for the hatchery could range from $500,000 to $1 million depending on configuration and redundancy. If awarded before year-end, revenue would be recognized in 2027 with a 5-6 month build-out.
Is there a mandate given to Ramesh, especially given your strong balance sheet and his experience with acquisitions?
Vince Arnone said there is no specific mandate, but Ramesh, with Board support, will evaluate opportunities to enhance top line, including M&A if it makes sense and is accretive.