Dive Brief:
- Fluor CEO David Constable identified the data center market as a major sector of opportunity for construction activity during Fluor’s first quarter earnings call on Friday.
- Constable discussed the increasing demand for clean power at the facilities, stating that in the U.S. alone, the power consumption required to support data centers is expected to nearly double by 2030. He pinned the rise to the need for more servers and the integration of artificial intelligence.
- “We’re looking to support build out of data centers in the US and globally,” said Constable during the call. “For example, our build out of data centers from Microsoft in India is one example internationally, but we expect to also bring that experience to bear in the U.S. as these data centers start to come out to bid. I would say they’ll be increasing the backlog going forward.”
Dive Insight:
The demand for processing power, storage and cloud services will continue to provide strong momentum for sustained data center construction, according to a March 2024 CBRE report on data centers.
Constable drew parallels between the surge in data center construction and the ongoing trend of onshoring manufacturing. He noted the data center boom follows a similar trajectory to the manufacturing construction trend, driven by abundant opportunities and accelerated demand both domestically and internationally.
“Clients are orienting their capex plans toward data centers to support AI,” said Constable during the call. “While it is still early days, we are well positioned to support clients in this space. Looking ahead, we see data center investments gaining momentum in the U.S. Midwest, the European Union and Asia.”
He identified Fluor’s pipeline as being predominantly led by work in life sciences, semiconductors, data centers, energy transition and key prospects in mining and metals projects.
Return to profitability
Fluor reported it earned $59 million in the first quarter of 2024, compared to a loss of $107 million a year ago. Its revenue for the quarter hit $3.73 billion, a minor dip from the $3.75 billion in last year’s first quarter.
The Irving, Texas-based company’s backlog reached $32.7 billion, about a 28% increase from last year’s first quarter. New awards in the first quarter totaled $7 billion, more than double the $3.2 billion amount a year ago, according to the earnings report. That includes a $409 million contract with the Air Force, said Constable during the call.
Fluor’s backlog strength is “likely seen as the biggest positive surprise and certainly is the most forward-looking indicator,” said Andrew Wittmann, senior research analyst at Baird, a Milwaukee-based financial services company.
While investors shunned the stock after the call — both earnings and revenue for the quarter were below analysts’ expectations — Constable emphasized the results as a positive beginning to the year that are likely to fuel more gains in the future.
“2024 is off to a good start with substantial new awards from clients in our Urban Solutions segment,” said Constable. “This demand, which we believe is just beginning, drove our backlog to a level not achieved since 2019.”