MYRG Stock:
Will Data Centers Drive the Next Growth Phase?

The Electrical Contractor Behind the Electrification Supercycle

MYR Group Inc. (NASDAQ: MYRG) is a pure-play specialty electrical contractor operating through a holding company structure of thirteen regional subsidiaries across the United States and Canada. It does not generate electricity, own power plants, or manufacture equipment. It builds and maintains the physical paths that electricity travels, from bulk generation sources through high-voltage transmission lines and substations to the electrical systems inside data centers, semiconductor fabs, and commercial facilities.

The business operates through two reporting segments. The Transmission and Distribution segment (approximately 54% to 58% of revenue) covers everything from the power generation source to the utility. The Commercial and Industrial segment (approximately 42% to 46% of revenue) covers everything inside the facility footprint. Understanding this boundary is the foundation for evaluating the data center power demand thesis as it applies specifically to MYRG.

The holding company structure provides three structural advantages that smaller regional competitors cannot replicate. The centralized fleet of specialized equipment (heavy-duty bucket trucks, cranes, wire-pulling tensioners ) can be dynamically reallocated across regions as project demand shifts. The corporate bonding capacity allows subsidiaries to bid on projects requiring hundreds of millions in performance bonds. And the centralized safety program maintains an elite Total Case Incident Rate of 0.92 ( well below the industry average of 1.50 to 2.00) which is a hard prequalification requirement for utility and hyperscaler contracts.

How Much of MYRG’s Revenue Is Actually Data Center Driven?

This is the most important question to answer before evaluating the growth thesis and the honest answer requires acknowledging a disclosure gap. MYR Group does not break out data center revenue as a separate line item in its financial filings. The company reports the C&I segment in aggregate, which includes data centers alongside semiconductor fabs, healthcare facilities, transit systems, aviation infrastructure, and commercial buildings. There is no precise publicly available figure for MYRG’s data center revenue as a percentage of total consolidated revenue.

However, four available proxies allow a reasonable estimate of the data center exposure weight within the C&I segment. First, management commentary on earnings calls explicitly identifies AI data centers as the primary driver of C&I segment growth in 2025 and 2026. Second, the C&I segment recorded 24% year-over-year revenue growth in Q1 2026 to a record $459.4 million driven explicitly by high-density wiring contracts for data centers and reshored manufacturing plants. Third, the most direct proxy is the Valley Electric and Comet Electric acquisition rationale. MYR Group is paying $328 million for two contractors whose primary strategic value is described as expanding into data center markets in the Western United States. A $328 million acquisition justified primarily by data center exposure signals that management views this as the highest-value growth vector in the business. Fourth, Valley and Comet Electric generated combined average annual revenues in excess of $400 million — adding approximately 10% to MYR Group’s consolidated revenue base with data center work as the stated primary rationale.

The honest analytical conclusion is that data center exposure is concentrated in the C&I segment which represents 42% to 46% of total revenue and is growing rapidly within that segment. It is not yet the majority of MYRG’s business. The T&D segment, which is driven primarily by regulated utility grid modernization spending, remains the larger revenue contributor and provides the stable recurring base that makes the data center growth optionality genuinely valuable rather than a speculative bet on a single demand driver.

Record Revenue, a 2024 Margin Compression, and the Recovery Mechanics

MYR Group has delivered a long-term revenue compound annual growth rate of 10.2% over five years, reaching a record $3.82 billion in last-twelve-month revenue as of Q1 2026. But the path was not linear. Understanding the 2024 margin compression and the subsequent recovery is essential for evaluating whether the current growth trajectory is durable or a temporary rebound.

The 2024 Compression — What Went Wrong

In fiscal year 2024, consolidated gross margins fell to 8.63% from a historical average closer to 10% to 11%. Operating margins fell to a cyclical trough of 3.9% in late 2024. The compression was concentrated in two specific areas. Fixed-price utility-scale solar EPC projects in the T&D segment and an underperforming industrial contract in the C&I segment. These projects suffered from high labor turnover under union-negotiated wage escalations, material shortages, and schedule compression penalties. In Q2 2024, MYR Group reported a net loss of $15.3 million and it was the most severe quarterly loss in the company’s recent history.

The Recovery — Structural Not Cyclical

The subsequent recovery demonstrates disciplined risk management rather than simply better market conditions. By late 2025, the problematic solar projects reached mechanical completion, eliminating further margin degradation. More importantly, management implemented three structural changes. First, a deliberate exit from high-risk, fixed-price solar EPC work. Solar-related T&D revenue fell from 10% of segment revenue in 2024 to just 4% in 2025. Second, a shift toward unit-price and time-and-materials contracts in the T&D segment that pass inflationary cost risk back to the project developer. Third, expanded offsite prefabrication in the C&I segment to reduce exposure to field labor cost inflation.

Q1 2026 gross margins of 13.4%, up from 11.6% in Q1 2025 are the highest in recent history and reflect the combination of improved project mix, positive estimate-at-completion adjustments, and the structural shift away from high-risk solar work. Management has raised long-term operating margin targets: T&D segment from 7.0% to 10.5% up to 8.0% to 11.0%, and C&I segment from 5.0% to 7.5% up to 6.0% to 9.0%.

Why the $2.84 Billion Reported Backlog Understates True Revenue Visibility

The most analytically important and least discussed characteristic of MYR Group’s business is the gap between its reported backlog and its true revenue visibility. Understanding this gap changes the investment quality assessment significantly.

MYR Group reports a consolidated backlog of $2.84 billion as of March 31, 2026. But Master Service Agreements which represent approximately T&D revenue base are booked into the reported backlog on a conservative 90-day rolling basis only. MSAs typically run for three to seven years. A five-year, $500 million MSA with Xcel Energy that commenced in early 2026 does not appear as $500 million in the backlog. It appears as approximately $34 million of the next 90 days of work.

This conservative booking convention creates a substantial shadow backlog of long-term recurring revenue that is structurally excluded from the official $2.84 billion figure. The true multi-year revenue visibility, which is the reported backlog plus the unbooked tail of active MSAs, is considerably higher than the headline number suggests. Investors who compare MYRG’s $2.84 billion backlog directly against peers that book full MSA values are making an asymmetric comparison that understates MYRG’s actual revenue durability. The competitive implications of this accounting distinction are examined in the companion analysis.

The Physical Constraint That Determines Whether Data Centers Drive the Next Growth Phase

The data center demand thesis for MYRG is real. Whether it translates into revenue on the timeline the market expects depends on a physical supply chain constraint that has nothing to do with MYR Group’s execution quality (the global shortage of power transformers).

Custom-engineered Large Power Transformers, required to connect high-voltage transmission grids to utility substations and data center campuses, now carry lead times of 36 to 48 months. Up from pre-2020 averages of 12 to 18 months. Liquid-filled distribution transformers carry lead times of 12 to 24 months. This supply crisis is driven by a structural shortage of grain-oriented electrical steel, with global capacity restricted to approximately 2.5 to 3.0 million metric tons per year controlled by a small number of producers operating at full capacity. In the United States, Cleveland-Cliffs and AK Steel supply roughly 80% of domestic demand and maintain 52-week backlogs.

The direct consequence for data center project timelines is severe. Goldman Sachs Commodities Research projects that only 60% completion rate scheduled for the next year will materialize on time, dropping to just 50% for projects scheduled over a two-year horizon. For MYR Group’s C&I segment, this introduces significant lumpiness in backlog burn. If a developer’s high-voltage transformer delivery slips by 12 months, the corresponding commercial electrical work inside the facility boundary must be re-sequenced resulting in temporary crew inefficiencies and volatile quarterly revenue recognition.

This is not a reason to dismiss the data center thesis. It is a reason to understand that the growth phase will be uneven rather than linear. MYR Group does not manufacture or procure transformers directly. Its installation revenues are dependent on client-furnished equipment schedules. Meaningful relief in transformer lead times is unlikely before 2027 to 2028 when new domestic production lines are fully commissioned. The data center growth phase for MYRG is real but its revenue conversion timeline is constrained by equipment availability, not by demand or execution capability.

0.04x Leverage, $623M Liquidity, and a Non-Dilutive $328M Deal

MYR Group enters this expansion phase with one of the most conservative balance sheets in the engineering and construction sector. As of March 31, 2026, the company reported $163.2 million in cash alongside $460.5 million of available borrowing capacity under its $490 million revolving credit facility. Total liquidity is around $623.7 million. Funded debt stands at just $9.4 million against LTM EBITDA of $264.1 million — a leverage ratio of 0.04x. This is not a rounding error but a structural characteristic of a business funded entirely by customer advance payments and operating cash flow rather than debt capital markets.

The $328 million Valley Holdings acquisition is being funded entirely through cash on hand and revolving credit drawdowns, with no equity dilution. Post-closing leverage is projected to remain below 0.8x which is well within conservative covenant thresholds. The acquisition immediately adds over $400 million in annual revenues, expands C&I capabilities in Washington and Southern California, and integrates Valley Electric’s advanced Building Information Modeling and offsite prefabrication platform. The same power infrastructure cycle driving Argan’s EPC backlog is simultaneously pulling MYR Group’s electrical contracting pipeline and both companies are funding their expansion from operating cash flows rather than debt.

Three Variables That Determine Whether Data Centers Drive the Next Growth Phase

The question the title poses — will data centers drive MYRG’s next growth phase — resolves over the next 12 to 18 months as three specific quarterly data points become observable. Each has a clear threshold that signals the thesis is progressing or stalling.

• C&I Segment Revenue Growth Rate

  The clearest proxy for data center demand converting into MYRG revenue. C&I grew 24% year-over-year in Q1 2026 — the baseline to beat. Sustained C&I growth above 20% year-over-year signals data center contracts are converting from backlog to recognized revenue at a healthy pace. C&I growth decelerating below 10% signals transformer bottlenecks or project re-sequencing is delaying revenue recognition. Watch the Q2 2026 C&I segment result as the first post-Valley acquisition data point.

• Backlog Composition and Growth

  The reported $2.84 billion backlog should be monitored for both size and composition. Backlog climbing above $3.2 billion following the Valley acquisition close confirms strong new contract award momentum. More important than the total is the C&I percentage — if C&I’s share of total backlog rises above 70% from the current 65.5%, it signals data center and industrial contracts are dominating new awards. Management commentary on the proportion of data center work within C&I backlog is the most valuable signal in each earnings call.

• Valley Acquisition Integration Progress

  Valley Electric and Comet Electric are the primary vehicles for MYR Group’s Pacific Northwest and Southern California data center expansion. The first two quarters post-close will reveal whether the revenue and margin projections underpinning the $328 million acquisition price are tracking to plan. Valley’s prefabrication capabilities improving C&I gross margins above 9% would confirm the acquisition thesis. Any disclosed integration charges or revenue shortfalls against the $400 million annual revenue estimate would be a negative signal requiring reassessment of the data center growth timeline.