EMCOR Group delivered the kind of quarter that leaves little room to argue with the numbers. Adjusted earnings of $9.60 per share beat the $8.33 consensus by 15.2% and grew 46.1% year over year. Revenue of $5.542 billion, a quarterly record, topped expectations by 6.6% and rose 28.8%. Management then raised full-year 2026 guidance for the third consecutive quarter. Revenue guidance is now $20.6 billion to $21.0 billion, up from $20.0 billion to $20.5 billion. Adjusted EPS guidance is now $34.50 to $35.50, up from $32.00 to $33.25. The more important point is that growth is accelerating, not plateauing. Organic revenue growth has stepped up from 16.8% in the first quarter to 19.6% in the second and 25.5% in the third. That is the fundamental story. The central tension is that the stock fell sharply into the report anyway.
The quality of the beat holds up well. GAAP EPS was $9.04. The gap to the adjusted figure comes from a $34 million non-cash impairment in the building services energy-efficiency and performance contracting business, which is a blemish but not a core earnings problem. Excluding that charge, operating margin expanded to 10.5% from 9.4%. Gross margin rose 60 basis points to 20.0%, and SG&A fell to 9.5% of revenue from 10.0%. The beat therefore came from both field execution and overhead leverage, not tax or below-the-line items. Cash generation also caught up after a weak first half: third-quarter operating cash flow was $797 million, against $289 million in the second quarter and roughly breakeven in the first. Management framed full-year operating cash flow at $1.5 billion to $1.7 billion. Acquisitions contributed 7.3 points of reported growth, but the organic acceleration stands on its own.
Backlog is where the investment case gets stronger and more concentrated at the same time. Remaining performance obligations reached a record $18.57 billion, up 47% year over year and 8.3% sequentially. Data center RPOs more than doubled to $8.74 billion and now account for nearly half of the total. Electrical construction revenue grew 44%, with segment margin up 200 basis points to 13.3%, and mechanical data center revenue rose about 130%. Demand outside data centers is real but uneven. Healthcare RPOs rose 31%, water and wastewater rose 38%, and institutional rose 25%. Manufacturing and industrial gained 27% sequentially, and semiconductor revenue increased for the first time in a while. Commercial RPOs, however, slipped 1% to 2%.
The softer spots deserve attention. Mechanical construction margin fell to 12.1%, down 80 basis points year over year and below the second quarter's 12.5%. Management attributed the decline to guaranteed-maximum-price and prime-contractor mix and expects a 12% to 12.5% band for roughly another 12 months. Industrial services revenue was flat after rising 26% in the second quarter, and its operating income slipped to $5.1 million. Fuel cost inflation is only being passed through at 50% to 75%. Acquisition amortization of about $35 million in the fourth quarter and roughly $128 million in 2027 will damp reported accretion from the Schmidt Electric and Conley Electric deals. The bigger risk is concentration. Data centers are now about a third of revenue and approaching half of construction revenue, while moratorium rhetoric, a pause in Loudoun County, and a New York moratorium were discussed at length. Management said it sees no abatement in data center demand. Investors are being asked to take that at face value.
That risk explains the market setup better than the earnings surprise does. Shares closed at $678.55 the day before the report. That was 12.1% below the open following the July report and 13.1% beneath the $781.19 200-day moving average. The stock sat 21.5% below its mid-August inter-earnings high of $864.83 and only 7.4% above the $631.70 low set on October 23, less than a week before results. Investor sentiment moved from slightly negative (-0.07) to modestly positive (0.19), a meaningful improvement but hardly euphoric. The Earnings Whispers trend readings are split: sequential growth and momentum are positive, while price and AVWAP trends remain negative, which is consistent with fundamentals improving while the stock lagged.
Management is leaning into that disconnect. The board added $500 million to the buyback authorization after $456.5 million of repurchases year to date. EMCOR also plans additional fabrication-only prefabrication shops to serve hyperscaler module demand.
The bottom line is that EMCOR's operating momentum is accelerating on nearly every headline measure: organic growth, margins, backlog, cash flow and guidance. The stock's slide reflects a debate about how durable and concentrated the data center cycle is, not about current execution. Bears have legitimate ammunition in mechanical margin pressure, flat industrial services, rising amortization and political risk around data centers. Even so, a doubled data center backlog and a third straight guidance raise make it difficult to argue that the business itself is losing steam.