Granite Construction posts record $7.5 billion backlog as revenue climbs 23%

Granite Construction grew third-quarter revenue 23% to $1.77 billion and booked a record $7.5 billion backlog, even as net income collapsed to $3.2 million from $102.9 million a year earlier. The earnings drop came from a one-time item, not operations: a $162 million charge to settle previously outstanding convertible notes.

Backlog rose $1.1 billion year over year. The Watsonville, California-based contractor credited core road and bridge projects, and it's now pushing into federal, rail and data center work it expects to grow faster than the rest of the business.

Where does the money come from?

CEO and President Kyle Larkin told analysts on a Thursday earnings call that federal transportation funding keeps flowing to active projects under the Infrastructure Investment and Jobs Act, even though Congress failed last month to pass a permanent renewal of the surface transportation bill.

"We are currently operating under a continuing resolution that provides a short-term extension of surface transportation programs, maintaining funding at IIJA levels, while work continues on fiscal year 2027 appropriations and a longer-term surface transportation reauthorization," Larkin said on the call.

A significant portion of the original IIJA funding hasn't been spent yet, he added, and he expects those approved dollars "to support state and local transportation programs over the next several years."

How big is the federal business?

Federal work — airfield and runway paving, roads, site infrastructure, civil work on military campuses, water infrastructure and other facilities — now makes up roughly $1.3 billion of Granite's backlog.

"We've performed federal work from Guam to Alaska and across the continental United States," Larkin said, adding that he expects "to bid on billions of dollars of opportunities over the next several years."

Part of that push rides on the 2026 National Defense Authorization Act, which designates new project delivery mechanisms for military construction: progressive design-build, construction manager at risk and other flexible procurement approaches. That fits Granite's strategy of recent years — moving away from locking down multibillion-dollar megaprojects toward smaller, lower-risk work packages under "best value" style contracts. Larkin said federal work should represent 15% of the firm's construction segment revenue this year.

What about rail and data centers?

Rail is currently less than 5% of Granite's business, but Larkin wants that higher in 2027. One candidate job: a proposed 4,500-acre integrated rail facility with a Class 1 railroad client in Southern California, designed to expand intermodal capacity along a major east-west freight corridor and improve freight movement from the ports of Los Angeles and Long Beach. The project is in permitting, with Granite handling preconstruction.

Mission critical work — data centers, battery storage and space sector clients — accounts for $331 million of backlog. As a heavy civil contractor, Granite can carry its core skills onto these sites, Larkin said.

"These projects typically include mass grading, utilities, paving, retaining walls, curb and gutter, and broader civil site development," said Larkin. "Our capabilities can also extend to early works, utility ready site development, water infrastructure, water well drilling, power infrastructure, campus scale civil development, and material supply."

The company is targeting mission critical work to reach 10% of construction revenue over the next few years.

Are more deals coming?

Granite intends to stay acquisitive. Since 2023 it has deployed more than $1.4 billion on M&A, much of it in its materials segment, and Larkin hopes to close three more deals by year-end worth a combined $750 million.

"They're not done until they're done," Larkin said. "We're still looking at things and hoping to get some exciting opportunities that we can announce over the next weeks or coming months."