Contractor Backlogs Grow to 8.7 Months, But Profit Outlook Sours

Contractor backlogs grew for a second straight month in September to 8.7 months, yet more than a quarter of contractors expect their profit margins to shrink over the next six months — the highest share since November 2025, according to Associated Builders and Contractors.

The numbers capture a strange moment in construction. Work is piling up on contractors' books, but confidence is draining away. ABC reports that sales expectations also fell to an 11-month low in September.

The gloom has two roots, per the economic data. Construction costs keep climbing, and the momentum that does exist is heavily concentrated in the artificial intelligence buildout.

How bad is the cost pressure?

Construction input prices jumped 11.2% year over year in September, ABC found — the largest annual increase in nearly four years. Contractors have absorbed much of that escalation rather than passing it on, according to Associated General Contractors of America.

That squeeze explains the paradox at the heart of the reports: fuller schedules, thinner margins. Firms are booking work but keeping less of what it pays.

Is anything beyond data centers growing?

Yes, and it's one of the brighter signals in the data. Education and healthcare projects pushed nonresidential planning higher in September, according to Dodge Construction Network. Institutional groundbreakings improved over the month as well, Dodge reported.

Still, data centers dominate the spending picture. Construction spending on the data center boom surged 8.6% in September, according to ABC's analysis of Census Bureau data. Strip out data centers and the closely related power category, and nonresidential spending actually fell.

The divide shows up in backlogs too. ABC members with data center contractors on their books reported 11.3 months of backlog — three months more than firms without those projects. Only 15% of ABC members had such work under contract.

What does this change for contractors?

For most firms, the answer is: pricing discipline. With input costs rising at the fastest clip in nearly four years and margins already under pressure, the majority of contractors — the 85% without data center work — are competing for a shrinking pool of conventional nonresidential spending.

The next round of readings will test whether September's uptick in education, healthcare and institutional planning can broaden into a durable recovery, or whether the industry's fortunes stay tied to the AI buildout.