Why Comfort Systems USA (FIX) Is a High-Conviction Buy in the Modular and Data Center Construction Boom

The construction industry is undergoing a seismic shift, driven by the explosive growth of artificial intelligence (AI) and the urgent need for energy-efficient infrastructure. At the forefront of this transformation is Comfort Systems USA (FIX), a leader in commercial, industrial, and institutional HVAC and electrical contracting. With a record backlog of $8.12 billion as of June 30, 2025—a 39% surge from $5.77 billion in June 2024—Comfort Systems is uniquely positioned to capitalize on the modular construction and data center infrastructure boom. This article argues that the company's combination of robust backlog visibility, margin expansion, and strategic acquisitions makes it a high-conviction buy for investors seeking exposure to long-term secular trends.

A Backlog to Fuel Decades of Growth

Comfort Systems' backlog is not just a number—it's a pipeline of future cash flow. The company's same-store backlog increased from $5.77 billion in June 2024 to $7.93 billion in June 2025, driven by surging demand in the technology and industrial sectors. This backlog represents a $2.4 billion year-over-year increase, with 62% of the total tied to high-margin industrial and data center projects. These projects, which require advanced mechanical and electrical systems, align perfectly with Comfort Systems' core competencies.

The backlog's durability is further underscored by the Stargate Project, a $500 billion U.S. initiative to accelerate AI infrastructure development through 2028. This federal push is expected to drive a multi-year surge in data center construction, with hyperscalers like Amazon, Google, and Microsoft aggressively expanding their footprints. For Comfort Systems, the result is a 16.5% year-over-year backlog growth in Q1 2025, with 37% of revenue now coming from technology projects—a jump from 30% in 2024.

Margin Expansion Through Strategic Acquisitions

Comfort Systems has long leveraged its acquisition-driven growth model to expand capabilities and reduce risk. In 2024, the company closed the acquisition of Summit Industrial Construction, LLC, a Houston-based modular construction specialist. Summit's expertise in engineering, design-assist, and turnkey modular systems—including process piping, large pipe rack trestles, and steel erection—has directly enhanced Comfort Systems' ability to execute high-margin data center projects.

The acquisition is expected to contribute $375 million to $400 million in annualized revenue and $35 million to $40 million in EBITDA, despite amortization-related headwinds. Beyond Summit, the company acquired Century Contractors in 2024, which drove a 230-basis-point improvement in EBITDA margins to 13.3% in Q1 2025. These moves reflect Comfort Systems' disciplined approach to M&A, which prioritizes integration efficiency and operational synergies.

The company's decentralized model—where local teams retain autonomy but benefit from centralized HR, procurement, and training—ensures that acquisitions like Summit are rapidly scaled. For example, Summit's modular construction capabilities have already been integrated into Comfort Systems' national network of 172 locations, enabling the company to bid on large-scale projects with standardized, off-site solutions.

Leveraging Tailwinds in AI and Industrial Reshoring

The AI infrastructure boom is not a passing trend—it's a structural shift. The Stargate Project's $500 billion investment is expected to create $200 billion in annualized demand for data center construction alone by 2027. Comfort Systems is uniquely positioned to benefit, given its expertise in high-power, energy-efficient systems. The company's modular construction approach, which reduces on-site labor costs and accelerates project timelines, is a perfect fit for this environment.

Industrial reshoring is another tailwind. As U.S. manufacturers seek to reduce reliance on foreign supply chains, demand for advanced manufacturing facilities—many of which require modular infrastructure—is surging. Comfort Systems' recent acquisition of Walker Engineering has further bolstered its electrical infrastructure capabilities, enabling cross-selling of MEP (mechanical, electrical, and plumbing) services to industrial clients.

A Strong Balance Sheet and Shareholder-Friendly Policies

Comfort Systems' financial discipline is a critical component of its long-term appeal. The company's $549.94 million cash position (as of 2024) and $308.6 million in debt reflect a conservative leverage profile, with a debt-to-equity ratio of just 0.16x. This liquidity allows for continued M&A activity while supporting a robust shareholder return program. In Q1 2025, the company spent $92 million on share repurchases and increased its quarterly dividend to $0.45 per share, a 13% increase from the prior year.

The company's 26-year streak of positive free cash flow is a testament to its operational efficiency. Despite challenges like advanced customer payments and macroeconomic uncertainty, Comfort Systems has maintained positive operating cash flow and a current ratio of 1.08x, ensuring short-term liquidity.

Investment Thesis: A High-Conviction Buy

Comfort Systems USA is more than a beneficiary of the data center and modular construction boom—it is a cornerstone of the infrastructure revolution. The company's:
- $8.12 billion backlog provides multi-year revenue visibility,
- Strategic acquisitions (Summit, Century Contractors, Walker Engineering) enhance margin resilience,
- Alignment with AI and industrial reshoring trends ensures long-term relevance,
- Conservative balance sheet and aggressive shareholder returns make it a compelling value proposition.

For investors, the case is clear: Comfort Systems is a high-conviction buy at current valuations. With the Stargate Project accelerating demand and the company's backlog poised to drive revenue growth for years, the stock offers a rare combination of durable cash flow, margin upside, and strategic positioning in high-growth sectors.

In conclusion, Comfort Systems USA (FIX) is a rare gem in the construction sector—a company that is not only riding macroeconomic tailwinds but actively shaping them. For those seeking a long-term, high-conviction investment in the AI and infrastructure revolution, the time to act is now.