Stantec lifts 2026 margin outlook as adjusted EBITDA jumps 17% to C$333m

Stantec Inc. delivered another quarter of expanding revenue, earnings and backlog as infrastructure demand and the integration of Page helped push second-quarter net revenue up 11.5% to C$1.78 billion. Adjusted EBITDA increased 17.1% to C$332.9 million and adjusted earnings per share climbed 18.4% to C$1.61, while net income rose 11% to C$150.3 million. Contract backlog reached a record C$9.24 billion, representing 17.5% year-over-year growth and approximately 13 months of work. Management responded to the stronger profitability by raising both ends of its 2026 adjusted EBITDA margin target while maintaining expectations for 8.5% to 11.5% net revenue growth and 15% to 18% adjusted earnings-per-share growth.

The composition of that growth is particularly important because acquisitions are doing substantial work. Acquisition growth contributed 7.1 percentage points to second-quarter net revenue expansion, compared with 3.7% organic growth, with the Page acquisition accounting for much of the increase in the United States. The results therefore show a company successfully integrating a large acquisition while improving margins, but they also establish a higher hurdle for Stantec Inc. once Page begins moving out of the acquisition-growth comparison base.

The initial stock-market response was comparatively subdued. Stantec Inc. shares were trading around US$74.25 after the results on August 12, about 0.4% below the previous close, suggesting investors were not immediately treating the higher margin outlook as a major valuation reset. The muted reaction contrasts with the strength of the operating figures and may reflect expectations that were already elevated following several quarters of strong backlog, acquisition-driven expansion and infrastructure demand.

Stantec’s C$9.2 billion backlog gives the engineering group unusually strong revenue visibility

Contract backlog increased to C$9.24 billion at June 30 from C$7.86 billion a year earlier, representing growth of C$1.37 billion. Acquisition activity contributed 7.8 percentage points of backlog growth, foreign exchange added another 2.7 points and organic backlog increased 7%, leaving the company with approximately 13 months of contracted work based on its current revenue profile.

The backlog mix also shows where some of the strongest opportunities are emerging. Stantec Inc.’s Global backlog increased nearly 25% organically to C$1.91 billion, while the United States backlog reached C$5.47 billion and Canadian backlog increased to C$1.86 billion. Water achieved more than 10% organic backlog growth, reinforcing the importance of aging water infrastructure and long-term public investment as demand drivers for the engineering business.

The Page acquisition has had an especially large impact on Buildings. Stantec Inc. said Page contributed to more than 40% backlog growth in that business, demonstrating why the acquisition is already materially changing the scale of the company’s U.S. architecture and engineering operations. Page brought approximately 1,400 employees when Stantec completed the acquisition in July 2025, giving the company additional exposure to sophisticated building markets and design capabilities.

Revenue growth reflects the same dynamic. U.S. second-quarter net revenue increased to C$924.5 million from C$819.6 million, with approximately C$105.1 million of acquisition growth offsetting essentially flat organic performance. Global operations delivered a different profile, with revenue increasing to C$452.9 million as organic growth reached 12.8%, while Canada generated C$403.2 million and 2.4% organic growth.

That distinction matters because acquisition-driven revenue cannot indefinitely substitute for underlying expansion. Stantec Inc. will eventually need Page and other acquired businesses to become part of its organic comparison base, making continued demand across Water, Buildings, Infrastructure and Energy & Resources increasingly important to maintaining the growth rate investors currently expect.

Margin expansion is becoming as important as revenue growth in Stantec’s 2026 earnings story

Stantec Inc.’s adjusted EBITDA margin reached 18.7% during the second quarter, up 90 basis points from 17.8% a year earlier. Adjusted EBITDA increased faster than revenue to C$332.9 million, while adjusted net income rose 18% to C$182.5 million and represented 10.2% of net revenue compared with 9.7% in the prior-year quarter.

Project economics also strengthened. Project margin increased 12.3% to C$970.7 million and expanded 30 basis points to 54.5% of net revenue, while administrative and marketing expenses declined to 36.4% of net revenue from 37.5%. That combination allowed Stantec Inc. to translate an 11.5% revenue increase into 17.1% adjusted EBITDA growth and 18.4% adjusted earnings-per-share growth.

Management now expects full-year adjusted EBITDA margin between 17.8% and 18.3%, compared with the previous target of 17.6% to 18.2%. Increasing both ends of the range after the first six months signals greater confidence that project execution and spending discipline can sustain margin improvement through the remainder of 2026.

The broader outlook remains largely unchanged. Stantec Inc. continues to expect net revenue growth of 8.5% to 11.5%, adjusted net income margin of at least 9.5%, adjusted return on invested capital above 13% and adjusted earnings-per-share growth of 15% to 18%. Management also refined its organic net revenue expectation toward the mid-single-digit range, providing an important benchmark as acquisition contributions become less dominant.

First-half results indicate that the company is currently tracking comfortably within those profitability objectives. Net revenue increased 10.3% to C$3.5 billion, adjusted EBITDA rose 15.5% to C$619.9 million and adjusted earnings per share increased 16.7% to C$2.94. Water was the strongest organic growth contributor during the first six months, with net revenue increasing 13% organically.

Water demand and international infrastructure are becoming key organic growth engines for Stantec

Stantec Inc.’s Water business is playing a particularly important role because its growth is less dependent on acquisitions than the U.S. Buildings operation. Management said strong water activity under long-term frameworks and asset-management programs is helping support high-single-digit expected organic growth across Global operations, while Canadian demand is also benefiting from Water and Buildings projects.

The geographic diversification provides an additional layer of resilience. Global operations generated 12.8% organic growth during the second quarter and 10.4% during the first half, while Global backlog increased almost 25% organically. Those figures indicate that international operations are currently expanding much faster than the company’s North American organic revenue base.

Management expects U.S. performance to improve during the remainder of 2026 as organic backlog converts into revenue. Stantec Inc. continues to target mid-single-digit U.S. organic net revenue growth for the full year, suggesting the essentially flat second-quarter U.S. organic comparison is not considered representative of the expected second-half trajectory.

Canada is expected to improve as well, supported by public-sector spending and demand across Water and Buildings. The combination of public infrastructure programs, water-system investment, energy-related development and increasingly complex building projects gives Stantec Inc. several independent demand drivers, reducing dependence on a single construction cycle.

Acquisitions remain part of the strategy despite the stronger organic pipeline. Stantec Inc. acquired Niche, a roughly 200-person Australian engineering and environmental consultancy, on July 31, strengthening its Environmental Services capabilities while extending the company’s acquisition program beyond the much larger Page transaction.

Cash flow weakness is the main counterpoint to Stantec’s stronger earnings and record backlog

Not every financial measure improved at the same pace as earnings. Second-quarter operating cash flow declined to C$118.6 million from approximately C$134 million a year earlier, while first-half operating cash flow fell to C$116.3 million from approximately C$234.7 million. Stantec Inc. attributed the decline primarily to working-capital investment associated with revenue growth and, during the first quarter, effects connected with integrating Page.

Days sales outstanding reached 75 days, two days higher than a year earlier but still within the company’s target. Net debt to trailing adjusted EBITDA remained at 1.3 times, comfortably inside Stantec Inc.’s internal target range of 1.0 to 2.0 times, leaving leverage manageable despite the recent acquisition activity.

Capital returns have continued alongside that investment. Stantec Inc. repurchased approximately 1.67 million common shares for C$175.9 million during the first half and declared a quarterly dividend of C$0.245 per share payable October 15. Those actions suggest the balance sheet remains sufficiently flexible to support acquisitions, shareholder returns and working-capital requirements simultaneously.

The cash-flow trajectory nevertheless deserves attention during the second half because rapidly expanding backlog eventually requires staffing and working capital before projects generate cash. Strong accounting earnings combined with consistently weaker cash conversion would become a concern, while normalization of working capital as Page integration matures would strengthen the quality of the current earnings expansion.

Investor sentiment following the release appears neutral rather than skeptical. Stantec Inc. shares were around US$74.25 in late trading on August 12, down roughly 0.4%, despite the record backlog and higher adjusted EBITDA margin forecast. The restrained reaction suggests the market may now require continued organic acceleration and stronger cash conversion rather than another quarter driven substantially by acquisition growth.

Stantec Inc. nevertheless enters the second half with unusually strong visibility. A C$9.2 billion backlog, expanding Water demand, improving margins and Page-driven scale provide several routes to earnings growth, while the key question for the remainder of 2026 will be whether organic revenue can accelerate enough to take over as acquisition comparisons gradually become more demanding.

Key takeaways from Stantec’s record backlog and higher 2026 margin outlook

• Stantec Inc. Q2 net revenue increased 11.5% to C$1.78 billion, supported by 7.1% acquisition growth and 3.7% organic growth.
• Adjusted EBITDA climbed 17.1% to C$332.9 million as adjusted EBITDA margin expanded 90 basis points to 18.7%.
• Adjusted earnings per share rose 18.4% to C$1.61, while net income increased 11% to C$150.3 million.
• Contract backlog reached a record C$9.24 billion, up 17.5% year over year and representing approximately 13 months of work.
• Page contributed substantially to U.S. growth and helped drive more than 40% backlog expansion in Stantec’s Buildings business.
• Water remained a major organic growth engine, delivering 13% year-to-date net revenue growth and double-digit backlog expansion.
• Stantec raised its 2026 adjusted EBITDA margin target to 17.8%–18.3% while maintaining 8.5%–11.5% net revenue growth guidance.
• First-half operating cash flow fell to C$116.3 million as revenue growth and Page integration increased working-capital requirements.
• Net debt remained manageable at 1.3 times trailing adjusted EBITDA, within Stantec’s internal target range.
• Stantec shares were around US$74.25 after the results, with the muted reaction suggesting investors want stronger organic growth and cash conversion.