EMCOR Group delivered a record quarter in Q2 2026, with revenues of $5.15 billion up 19.8% year over year, operating income of $547.3 million up 31.8%, and diluted EPS of $9.06 up 34.8%. Growth was broad based, with all four reportable US segments posting revenue gains, and it was disproportionately driven by the network and communications market sector across both the electrical and mechanical construction segments, where data center projects are the dominant source of incremental volume. Backlog, measured as remaining performance obligations, expanded to a record $17.14 billion, up 29.3% from $13.25 billion at year end 2025 and up 43.9% from $11.91 billion at the midpoint of 2025, providing unusually high visibility into the second half of 2026 and into 2027.
The story is not unalloyed. The mechanical construction segment saw its operating margin compress by 110 basis points to 12.5% in the quarter as management deliberately accepted more construction manager and prime contractor work, including a higher mix of guaranteed maximum price and cost plus contracts on projects where design or scope is still being finalized. That mix choice is producing the top line acceleration the market is rewarding, but it is also a real signal that the easier low hanging fruit from Miller Electric and other acquisitions has been picked. The industrial services segment remains structurally lower margin, posting a 2.7% operating margin in the quarter, although that itself is a recovery from a small loss a year ago.
The valuation backdrop is the harder part of the call. EMCOR trades at a premium to most electrical and mechanical peer groups, and at a premium to its own historical averages, reflecting the combination of a record backlog, data center tailwinds, and a balance sheet with $924 million of cash and a fully undrawn $1.30 billion revolver. The bear case is that the mechanical margin compression is the start of a broader mix shift away from historical specialty contractor economics, and that the 110 basis points earned in the quarter does not normalize back toward 13% as new geographies and new contract types mature. The bull case is that the backlog growth of $3.9 billion in six months is the leading indicator for revenue growth in 2027 that the market is not yet capitalizing, and that the data center thesis is still early. The forward variable that matters most is whether the mechanical segment stabilizes back into the 12.5 to 13% range over the next two quarters, or whether it continues to slip as a higher share of CM at risk work enters the mix.