Argan stock falls after missing revenue estimates, investors eye backlog and project timing.

Argan's stock dropped after Q1 revenue missed estimates despite a profit beat. Investors are focused on the sustainability of its backlog, profit margins, and project pipeline timing.

Argan Inc. (NYSE: AGX), a construction and engineering firm specializing in power generation projects, reported its second-quarter results for fiscal 2026 on September 4, 2025. The company posted higher revenue and a large increase in profitability, but investors are focused on the sustainability of its backlog, profit margins, and project pipeline timing. The stock dropped after Q1 revenue missed estimates despite a profit beat.

Key Highlights:
- Revenue (GAAP) was $237.7 million, up 4.7% from the prior year [1].
- Diluted earnings per share (GAAP) jumped to $2.50, compared to $1.31 in Q2 FY2025, reflecting a sharply improved gross margin and a significant, nonrecurring tax benefit [1].
- The project backlog reached a record $2.0 billion, raising future revenue visibility [1].
- Gross margin improved to 18.6%, compared to 13.7% a year ago [1].
- Net income (GAAP) surged to $35.3 million, nearly doubling the previous year’s result [1].

Challenges and Uncertainties:
- The pace of backlog growth has slowed versus earlier in the year [1].
- Progress on certain jobs benefited from “cooperative weather,” an uncontrollable factor [1].
- The company did not provide specific revenue or earnings guidance for coming quarters or the full year [1].
- The expected timeline for the completion of the Trumbull project remains uncertain [2].
- The potential maximum backlog given capacity and project pipeline is a topic of debate among analysts [2].

Investor Focus:
Investors are closely monitoring Argan’s ability to maintain its impressive gross margin of 18.6%, the sustainability of its $2.0 billion backlog, and the timely completion of its projects. The company’s strong balance sheet, with no debt and substantial cash reserves, provides some reassurance.

Conclusion:
Argan’s Q2 results were largely positive, but investors remain cautious due to uncertainties surrounding the project backlog, profit margins, and project pipeline timing. The company’s ability to navigate these challenges will be key to maintaining investor confidence.

References:
[1] https://www.nasdaq.com/articles/argan-posts-91-profit-jump-fiscal-q2
[2] https://www.ainvest.com/news/argan-q2-2026-contradictions-emerge-trumbull-timeline-power-sector-backlog-gross-margins-2509/