Comfort Systems USA Q3 2026: Revenue +54% to $3.77B, Backlog Hits $17.8B on Data Centers

Comfort Systems USA (NYSE: FIX), the Houston-based commercial HVAC, mechanical and electrical contractor, reported third-quarter 2026 revenue of $3.77 billion, up 53.7% year over year, with net income up 67.7% to $489.0 million ($13.91 diluted). Operating cash flow exceeded $1 billion in a single quarter for the first time, and backlog closed at a record $17.81 billion — up 90% from a year ago and equal to roughly 4.7 quarters of Q3 revenue.

The striking part is how little of this came from deals. Same-store revenue grew 46.3%; acquisitions added just 7.4 points. Management names the driver plainly: the technology sector, particularly data centers, at its Texas operations. This is an organic boom in work already contracted — the question, as always with a backlog this large, is execution.

The Headline Numbers​

Gross margin held flat at 24.8% — this quarter's growth is volume, not pricing. The leverage came below gross profit: SG&A grew 36.9% against 53.7% revenue growth, falling to 8.3% of revenue from 9.4%, which pushed operating margin up more than a point to 16.6%. The tax rate rose to 23.0% from 21.3%, a modest headwind against the 68.6% EPS gain. CEO Brian Lane: the quarter delivered "extraordinary results across every metric," with "remarkable cash flow exceeding $1 billion in a single quarter."

Where the Growth Came From: Texas, Technology, and Both Segments​

Mechanical added $772.4 million, of which only $7.5 million came from the August acquisition of a Texas modular company — the rest was same-store, led by $312.0 million of technology-sector work at one Texas operation, $177.8 million at its large Texas modular operation, and $96.2 million at a North Carolina operation. Electrical nearly doubled, up $542.9 million, with $174.1 million from acquired operations (Boys Electrical, Hunt, Feyen Zylstra, Meisner) and $368.8 million same-store — mostly $300.2 million of technology-sector work at its Texas electrical operation.

The backlog table tells the same story in forward form: $17.81 billion total ($12.20 billion mechanical, $5.61 billion electrical), up $3.8 billion sequentially, with same-store backlog up 85.4% year over year to $17.39 billion. Sequential growth came "primarily as a result of increases in the technology sector," per the 10-Q — data-center demand converting into contracted work faster than crews can burn it down.

Nine Months That Already Beat Last Year​

Nine-month revenue of $9.90 billion already exceeds full-year 2025's $9.10 billion, and net income of $1.30 billion is 27% above last year's full-year total with a quarter to go. Cash conversion is the standout: nine-month operating cash flow of $2.54 billion is 195% of net income, driven by a $1.69 billion increase in billings in excess — customers paying ahead of costs on the swelling backlog. The board raised the quarterly dividend to $1.00 per share (up $0.10, payable November 23), and the company repurchased $346.1 million of stock in the nine months.

The Multi-Year Arc: Revenue Triples, Profits Grow 7x​

Revenue has roughly tripled since FY2021 (+196% by FY2025) while net income grew more than sevenfold — operating leverage compounding through SG&A discipline and a mix shift toward higher-margin modular and electrical work. FY2025 alone grew revenue 29.5% and net income 95.7%.

The balance sheet shows how the boom is financed: by customers, not lenders. Cash more than doubled year to date to $2,158.0 million while total debt sits at just $49.6 million — net cash of roughly $2.11 billion. Billings in excess of costs (customer advance billings) surged 82.6% to $3,872.0 million, funding working capital as billed receivables grew 48.9% to $3,837.2 million. Total assets reached $9,805.3 million (+52.2% year to date) against equity of $3,335.2 million. The one balance-sheet number that tells the narrative: $3.87 billion of advance billings against $3.84 billion of billed receivables — customers are prepaying roughly as fast as the company can bill them.

The One Big Question: Does a $17.8B Data-Center Backlog Convert at 24.8% Margins?​

The bull case is the organic math. Same-store revenue up 46.3% and same-store backlog up 85.4% — this is demand pulling, not deals pushing. The backlog covers nearly five quarters of revenue at 24.8% gross margins with SG&A leverage still compounding, and 195% cash conversion means growth funds itself: $2.05 billion of nine-month free cash flow against $262.9 million of acquisition spending. Net cash of $2.11 billion plus a raised dividend says management believes the cycle has room — Lane guided to growth "through year end and for 2027."

The bear case is concentration wearing a diversification costume. The growth is the technology sector at Texas operations — data-center construction, one end market in one state, however large. Gross margin is flat, so none of this is pricing power; it is volume at constant take rates, and volume from one sector can reverse. The $3.87 billion of advance billings is owed work, and fixed-price contracting means labor overruns or schedule slips convert backlog into margin compression. Capex quintupled to $499.4 million in nine months (modular capacity) and goodwill sits at $1.15 billion — the company is investing as if the cycle extends, which is exactly when contractors overextend.

The tell is backlog conversion and margin in Q4 and early 2027: whether the $17.8 billion burns at 24.8%+ gross margins with SG&A leverage intact, or whether hiring and execution strain show up first in cost of services. Watch the billings-in-excess line too — if it stalls while revenue grows, the customer-financing engine is sputtering. Watch those before anything else.

Tracking a $9.8 Billion Balance Sheet in Plain Text​

A contractor's balance sheet is where double-entry earns its keep: $3.87 billion of advance billings on one side and $3.84 billion of billed receivables on the other, and every dollar still has to reconcile to $9,805.3 million of assets. This is how we model every company. The Q3 income statement, exactly as filed (income negative, expenses positive, net income absorbed by Equity:Adjustments):

; Check: −3766.302 + 2831.820 + 314.165 − 4.253 − 15.979 + 1.482 + 4.295 − 0.284 + 146.012 + 489.044 = 0 ✓
2026-09-30 * "Comfort Systems USA, Inc." "FY2026Q3 Income Statement"
  Income:Revenue                                -3766.302 MUSD  ; revenue
  Expenses:CostOfServices                         2831.820 MUSD  ; cost of services
  Expenses:SGA                                     314.165 MUSD  ; selling, general and administrative expenses
  Expenses:GainOnSale                               -4.253 MUSD  ; gain on sale of assets (deduction)
  Income:Interest                                  -15.979 MUSD  ; interest income
  Expenses:Interest                                  1.482 MUSD  ; interest expense
  Expenses:Earnout                                   4.295 MUSD  ; changes in the fair value of contingent earn-out obligations
  Expenses:OtherNet                                 -0.284 MUSD  ; other (income)
  Expenses:Tax                                     146.012 MUSD  ; provision for income taxes
  Equity:Adjustments                               489.044 MUSD  ; consolidated net income offset (no NCI; wholly attributable to the Company)

The Verdict: Bull vs. Bear​

Bull Case

• Same-store revenue +46.3% and same-store backlog +85.4% — an organic demand boom, not a roll-up story.
• $17.81 billion backlog covers ~4.7 quarters of revenue at steady 24.8% gross margins.
• 195% nine-month cash conversion ($2.54B OCF on $1.30B earnings) — growth funds itself through advance billings.
• Net cash of ~$2.11 billion against $49.6M of debt, a raised $1.00 dividend, and $346M of buybacks.
• SG&A leverage compounding: 8.3% of revenue vs. 9.4% a year ago, lifting operating margin to 16.6%.

Bear Case

• One end market (data centers / technology) in one state (Texas) drives the growth — concentration risk.
• Gross margin flat at 24.8%: volume growth with no pricing power to cushion a downturn.
• $3.87B of advance billings is owed fixed-price work — execution slips convert backlog into margin compression.
• Capex quintupled to $499.4M and goodwill is $1.15B — investing hard late in a construction boom.
• Tax rate rose to 23.0% from 21.3%, trimming the EPS gain the P&L earned.

Our Take: Believe the backlog, price the concentration. Comfort Systems USA's demand is demonstrably real — 46% same-store growth and 195% cash conversion don't happen by accounting — but it is data-center work in Texas, and flat gross margins mean the company is a price-taker riding volume. The quarter to watch is Q4: whether the $17.8 billion converts at 24.8%+ margins with the advance-billing engine still running. Watch those before anything else.