Argan's Data Center Business Expands: Can It Become a Growth Pillar?
Argan, Inc.AGX has long been recognized as an engineering, procurement and construction (EPC) contractor serving power-generation projects. However, the company is finding another avenue of growth through data center infrastructure. While the opportunity remains relatively small compared with its core power business today, recent contract wins, manufacturing expansion and favorable industry trends indicate that data center-related work could become an increasingly meaningful contributor to long-term growth.
The rapid expansion of artificial intelligence (AI), cloud computing and digital infrastructure is fueling unprecedented investment in data centers. Beyond the construction of server facilities, this buildout requires specialized industrial equipment, cooling systems, energy storage solutions and reliable power infrastructure. Argan has begun capitalizing on these opportunities through its Industrial segment, which secured a $125 million contract in November 2025 to fabricate thermal expansion and energy storage tanks for a U.S. data center project. The contract is expected to run through 2028, providing multi-year revenue visibility while allowing the company to leverage its existing fabrication expertise.
Argan appears to view this opportunity as more than a one-time project. To support growing demand, the company has started construction of a new fabrication facility in North Carolina, which is expected to become operational during the third quarter of fiscal 2027. The expansion will increase manufacturing capacity for the current data center project while positioning Argan to pursue additional industrial opportunities as customer demand grows. Management also expressed confidence that the market extends well beyond the current contract. During the first quarter of fiscal 2026, the company noted that it sees a multi-year runway for thermal expansion tanks and related fabrication work tied to data center development, supporting its decision to expand production capacity.
Although data centers remain a relatively small business, their strategic importance is increasing. At the end of first-quarter fiscal 2027, the Industrial segment accounted for 20% of revenues and had a backlog of approximately $225 million, compared with the Power segment's $2.5 billion. While power generation remains Argan's primary earnings driver, expanding fabrication capacity, growing industrial opportunities and AI-driven power demand position the data center business as an increasingly important long-term growth pillar.
How AGX Compares in the Expanding Data Center Infrastructure Market
As Argan expands its presence in data center infrastructure, it is competing in a market benefiting from accelerating AI adoption, cloud computing and rising electricity demand. Unlike larger diversified engineering and specialty contracting firms such as Jacobs Solutions Inc.J and EMCOR Group, Inc.EME, Argan's exposure remains focused on niche industrial fabrication and power infrastructure rather than full-scale data center design or construction.
Jacobs is capitalizing on the AI infrastructure boom through its broad engineering, consulting and project management capabilities. During the second quarter of fiscal 2026, the company more than doubled its data center business year over year, supported by hyperscaler projects spanning advisory, design, program management, digital solutions and EPCM services. Jacobs also highlighted growing demand across semiconductors, energy and power, with management stating that AI infrastructure is accelerating growth across multiple end markets while providing visibility into 2027 and beyond.
EMCOR is benefiting from strong demand for mission-critical electrical and mechanical construction tied to AI data centers. The company reported that networking and communications remained its fastest-growing market, driving significant increases in both electrical and mechanical construction revenues, while remaining performance obligations climbed 32.9% year over year to $15.62 billion. Management also noted that investments in AI infrastructure, cloud computing and digital transformation continue to support unprecedented levels of data center activity, with no signs of slowing demand.
AGX Stock’s Price Performance & Valuation Trend
Shares of this global provider of consulting services of engineering, procurement and construction have surged 144% year to date, outperforming the Zacks Building Products - Miscellaneous industry, the broader Construction sector and the S&P 500 Index.
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AGX stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 53.52, as evidenced by the chart below.
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Earnings Estimate Revision of AGX
AGX’s earnings estimates for fiscal 2027 and 2028 have trended upward in the past 30 days. The revised estimates for fiscal 2027 and 2028 imply year-over-year growth of 29.4% and 32.2%, respectively.
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Argan currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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