Granite Q3 2026 Earnings: Construction Growth Lifts Adjusted Profit

Granite (NYSE: GVA) reported Q3 2026 revenue of $1.77 billion, up 23% year over year, while diluted EPS fell to $0.07 from $1.98; adjusted diluted EPS increased to $3.81 from $2.70. Operating performance was led by Construction, but $162 million of net non-operating charges related to convertible-note conversions reduced GAAP net income to $3.2 million. Committed and Awarded Projects reached a record $7.5 billion, while Materials faced continued margin pressure.

Core Financial Results

Revenue increased by $332.8 million, with Construction accounting for most of the growth. Gross profit rose faster than revenue, and SG&A increased only slightly to $104.1 million from $101.6 million, lowering SG&A as a percentage of revenue to 5.9% from 7.1%.

The sharp decline in GAAP earnings contrasted with higher adjusted profit because Granite excluded the effects of its convertible-note conversions from adjusted net income and adjusted EBITDA.

Adjusted net income, adjusted EPS and adjusted EBITDA are non-GAAP measures. The calculated consolidated gross, operating and adjusted EBITDA margins are approximate.

Business and Segment Performance

Construction delivered faster revenue growth and wider margins, supported by higher project volume and acquisitions. Materials revenue also increased, but higher sales did not translate into higher gross profit.

Construction revenue increased because Granite entered the quarter with higher Committed and Awarded Projects, or CAP, and added revenue from acquisitions. Excluding acquisitions, Construction revenue grew approximately 20%. Strong project execution helped gross profit grow faster than revenue, expanding the segment’s gross margin by 2.1 percentage points.

CAP increased $37 million sequentially and $1.1 billion year over year to a record $7.5 billion. Federal CAP was $1.3 billion, including $569 million of U.S. Customs and Border Protection tactical infrastructure projects expected to be substantially recognized through Q2 2028.

Materials growth came from recently acquired businesses. However, energy surcharges offsetting elevated diesel costs reduced profitability: gross margin fell 4.2 percentage points, while non-GAAP cash gross margin declined to 30.7% from 31.7%. Materials cash gross profit still increased 4.5% to $89.8 million.

Convertible-Note Charges Obscured Stronger Operating Profit

Granite’s operating income rose approximately 56%, but net income attributable to the company fell to $3.2 million. The main reason was $162 million of net non-operating charges associated with settling conversions of Granite’s 3.75% convertible notes.

Q3 interest expense included $270.2 million of convertible-debt discount amortization, partly offset by a $108.6 million net gain on convertible-debt transactions. Granite elected to settle the conversions primarily in cash to limit shareholder dilution. Because these effects were excluded from adjusted results, adjusted net income rose approximately 40% even as GAAP net income declined approximately 97%.

Profitability, Cash Flow and Balance Sheet

Granite disclosed cash flow on a nine-month rather than quarterly basis. Operating cash flow for the nine months ended September 30 increased to $404.3 million from $289.6 million, an improvement of approximately $114.7 million. Capital expenditures were $89.9 million, compared with $87.7 million in the prior-year period.

The company generated positive operating cash flow despite a nine-month GAAP net loss of $297.6 million. Major noncash reconciling items included $273.7 million of convertible-debt discount amortization, $255.0 million of derivative remeasurement losses related to the notes, $139.8 million of depreciation and amortization, and $46.6 million of stock-based compensation.

Cash and equivalents were $480.3 million at September 30, down $48.9 million from year-end 2025. Combined current maturities and long-term debt were approximately $1.56 billion, compared with approximately $1.34 billion at year-end. During the first nine months, Granite also spent $184.3 million on acquisitions and $55.8 million on share repurchases.

Earnings Guidance

Granite raised the lower end of its 2026 revenue range while keeping its other full-year guidance unchanged. At the midpoint of the revised revenue range, management expects approximately 15% organic growth and an additional 9% contribution from acquired companies.

The SG&A outlook includes an estimated $48 million of stock-based compensation, while capital expenditure guidance includes approximately $50 million of planned strategic Materials investments.

Granite also introduced longer-term financial targets through 2029. These targets call for faster organic growth, higher margins and continued acquisition activity.

Management identified core transportation, federal infrastructure, mission-critical infrastructure and rail as areas of opportunity. Delivering the 2029 margin targets will require Granite to convert its project pipeline while maintaining execution discipline and improving Materials profitability.

Recent Insider Transactions

Available six-month insider data show 10,896 shares across 11 purchase or award transactions and 14,234 shares across two sales, resulting in a net sale of 3,338 shares, or 0.80% of reported insider holdings. The latest 10 reported transactions consisted of eight zero-price stock awards and two director purchases; the cash purchases are shown below.

Total reported insider holdings were approximately 406,130 shares. The transaction data alone do not establish insiders’ views on Granite’s outlook.

Risks Investors Need to Watch

• Materials margin pressure: Materials gross margin fell to 21.0% from 25.2% because energy surcharges offset elevated diesel costs. Continued pressure could limit the benefit of higher segment revenue.
• Project conversion and execution: CAP reached a record $7.5 billion, but future revenue depends on contract execution, funding and project timing. The $569 million tactical infrastructure portfolio is expected to be recognized over a period extending through Q2 2028.
• Acquisition dependence: Acquisitions contributed to Construction growth and drove the Materials revenue increase. Management also expects acquired companies to contribute approximately 9% to 2026 revenue growth and plans continued M&A through 2029.
• Leverage and capital allocation: Cash declined while combined current and long-term debt increased from year-end. Granite is balancing acquisitions, strategic capital spending, debt transactions and share repurchases while targeting net leverage of 2.5x.
• GAAP earnings comparability: Convertible-note transactions materially reduced reported earnings despite stronger operating income. These financing effects make comparisons based only on GAAP net income or EPS less representative of underlying project performance for this quarter.

Summary

Granite’s Q3 2026 operating results improved as Construction delivered organic growth, margin expansion and a record project pipeline. Convertible-note conversion charges sharply reduced GAAP earnings, but adjusted profit and nine-month operating cash flow increased. The main issues to monitor are the conversion of CAP into profitable revenue, recovery in Materials margins, execution of acquisition-led growth and progress toward the company’s newly introduced 2029 margin and cash-flow targets.