Solar overruns hit margins while backlog waits
- Primoris has a massive $13.8 billion backlog, but the profit inside that backlog is now in question.
- The Energy segment fell into a 0.3 percent gross loss in Q2 2026 due to six troubled renewable projects.
- Management expects all six of the problem projects to be completed by the end of 2026.
- Utilities segment gross margins stepped down to 11.9 percent in Q2 2026, offering less buffer for the core business.
- The PayneCrest deal adds data center exposure, but investors first need proof that solar project losses are contained.
Backlog helps, trust hurts
Primoris has the kind of demand story contractors want. Utilities need grid work. Energy customers need solar, storage, gas generation, industrial work, and data center power systems. The massive $13.8 billion backlog gives the company a long list of future work.
The problem is that backlog only matters if the work is priced well and run well. In Q2 2026, Energy segment gross margin fell to a 0.3 percent loss due to cost overruns on six renewable projects. Management expects to complete the remaining troubled projects by the end of the year, setting up a potential recovery in 2027.
That timeline changes the story. The bull case still has pieces: PayneCrest gives Primoris more exposure to data centers, and the project timeline offers a clear end to the pain. But the bear case is loud. Investors have to ask whether the renewables issue is truly contained to six sites, or whether more projects in backlog will disappoint.
For Finn, this is a show-me situation. The next good sign would be completing the final four problem projects in Q3 and Q4 without further massive write-downs. The next bad sign would be another estimate change or falling margins in the Utilities segment.
Paid to build hard assets
Primoris makes money by building, repairing, and maintaining infrastructure in the United States and Canada. Its jobs range from daily utility work orders to large projects that can run for 36 months or longer.
The contract mix matters. Some contracts are time and material or cost-reimbursable, where the customer carries more cost risk. Others are fixed-price or unit-price, where Primoris can lose profit fast if labor, weather, design changes, or sequencing problems push costs above the bid.
That is what makes the current solar issue so important. A construction company can report strong revenue and still disappoint if project estimates are wrong. In Q2 2026, the Energy segment fell to a 0.3 percent gross loss because of severe cost overruns.
The May 2026 PayneCrest acquisition adds electrical construction skill for industrial and data center projects. It may be a useful growth path, but it also raises the need for clean execution and good capital discipline after an all-cash deal.
Where the work comes from
Utility power and gas work
This includes installation and maintenance for electric and natural gas distribution and transmission systems. It is the steadier side of the company right now.
Renewables and storage projects
Primoris builds large solar and energy storage projects. Demand can be strong, but this is also where the current cost overruns are concentrated.
Industrial and energy facilities
The Energy segment serves LNG, petrochemical, renewable fuels, and other industrial customers. These jobs can be large and complex, so bidding and project controls matter.
Data center electrical services
PayneCrest expands Primoris into electrical work for data centers, manufacturing, and advanced facilities. This could become a bigger growth lane if the integration works.
Pipeline services
Primoris provides pipeline construction, maintenance, and integrity services. Demand can move with energy markets and customer capital budgets.
Civil infrastructure
The company also works on civil projects such as highways and bridges. These projects add diversity, but they still carry normal construction cost and timing risk.
Two segments, one weak spot
Mix reflects the historical balance between the Utilities and Energy segments. Both divisions represent significant portions of revenue, though Energy has seen recent declines.
What could break the thesis
Solar overruns continue
High impact · Medium oddsThe company named six specific renewable projects that caused massive overruns. Management expects to complete all six by the end of 2026. If these projects require more cost adjustments in the second half of the year, earnings will suffer further.
Management credibility gap
High impact · Medium oddsIn early 2026, management framed the issue as a small number of solar projects before cutting guidance dramatically. That gap makes future projections harder to trust.
Backlog converts at poor margins
High impact · Medium oddsBacklog reached a massive $13.8 billion, but backlog is not profit. Customers can delay work, and project estimates can change. A large backlog with weak margins can still hurt earnings.
Utilities segment cooling
Medium impact · High oddsThe Utilities segment saw gross margins step down to 11.9 percent in Q2 2026 from 14.1 percent a year earlier. With less high-margin storm work, the core business provides less offset to the struggling Energy division.
PayneCrest does not offset the damage
Medium impact · Medium oddsThe PayneCrest acquisition gives Primoris more data center and advanced facility exposure. If integration is messy or data center work is not profitable, the deal will not fix the renewables issue.
In one breath
What does Primoris Services do?
Primoris builds and maintains infrastructure for utilities, energy, renewables, industrial customers, data centers, pipelines, and civil projects. It earns revenue through construction, engineering, maintenance, and related services.
Why are Primoris margins falling?
In mid-2026, Primoris revealed severe cost overruns on six renewable energy projects. These projects pushed the Energy segment into a gross loss in the second quarter.
Is Primoris a data center stock?
Partly. The PayneCrest acquisition increases exposure to data center electrical work, and power demand from AI data centers is a real tailwind. The current investment debate is still dominated by renewables execution and Energy segment margins.
What should investors watch next?
Watch whether the remaining problem renewable projects finish by the end of 2026 without more charges. Also watch Energy gross margin, backlog quality, and whether PayneCrest helps Primoris win profitable data center work.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- August 16, 2026
- Score data
- September 6, 2026
- Reviewed by
- Shivam Bharuka
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