The Motley Fool on $STRS (Oct 29, 2026)
Sterling now gets 83% of revenue from AI data-center infrastructure, up from 60% a year ago, and its numbers look fantastic. But the buildout is expected to last only a few years and is one-and-done, making perpetual-earnings valuation hard. A 0.9x book-to-bill is a yellow flag—backlog worked down faster than added—though one quarter is not alarming; contractor acquisitions may reduce that risk.
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Sterling's up about 6% on their earnings and KLA Corporation is up 7%.
And that's where I want to finish here Matt because you brought to the world sterling infrastructure which I think if we're going to talk about that one and done sort of we're going to do one thing and then it's over.
Sterling might be the one of the three that we're talking about here.
Yeah. I mean, Sterling, if you looked at the company a few years ago, it was like, you know, it built highways and things like that. Now, it builds data centers for the most part, and the concentration is pretty huge.
They called this their e infrastructure segment. And even a year ago when the AI build buildout was already in full swing, this made up 60% of their revenue. Now, it's at 83%. So, they are an AI company now.
They're not, you know, this is not a highway contractor anymore.
Uh there are some yellow flags coming up to you mentioned that this could this is certainly a one and done. You only have to build your data center once. Um you know the book to burn ratio is one thing that really stood out to me this quarter.
It was.9x meaning that they worked through more of their backlog than they added to their backlog in this quarter. Now 0.9 is pretty close to 1 one and one quarter is not a cause for alarm which is why I call this a yellow flag and not a red flag.
And I mean the numbers from the business look fantastic, but even the most optimistic AI bulls, you know, believe that this buildout is not going to last forever. That's why they're calling it the buildout.
It's going to last for a few years. Uh and then we're going to have the data center infrastructure that that we need to to develop AI.
Uh so Sterling, it's just a matter of, you know, how much is how long is it going to last and how much is that future revenue worth? because most stocks we value based on how much they're going to earn in perpetuity.
That's really tough to do with the some of the the one and done uh AI plays.
Yeah. And one of the ways, if I remember correctly, Sterling Infrastructure is trying to address this is they are starting to acquire other contractors that aren't just pouring concrete doing uh doing sort of the the site preparation work.
I think they recently bought an electrical contractor and maybe bringing that in-house as well. Maybe solidifying their business to move just not having that one and done sort of aspect of their business.