By Teresa Rivas

There's nothing more essential than keeping the lights on. One way to profit from that is through Quanta Services stock.

Quanta isn't a household name, but it keeps many Americans' homes running. It's an industrial services provider whose clients include utilities, oil-and-gas companies, and communications providers. With electricity demand increasing by leaps and bounds thanks to artificial intelligence, the company is busier than ever, maintaining aging power plants and modernizing their transmission lines.

"Quanta builds everything that the nation needs, and they do it well," says T. Rowe Price's Dante Pearson, associate portfolio manager for the firm's U.S. Structured Active Mid-Cap Growth Strategy in the U.S. Equity Division. The urgent push to modernize infrastructure hardware across the country means there's no shortage of projects for the company. "What is limited, and what makes Quanta unique, is the craft labor -- the folks who can do these things," Pearson says. "Quanta has these people, and that makes it an irreplaceable company in terms of scale and quality of labor."

Keeping and retaining top workers is a key consideration for a company linked to the AI boom with plenty of work. Power plants that had been slated for closure have been pressed into longer service while new ones come online as tech giants gobble up gigawatts of capacity.

The upshot is a backlog of $36 billion and counting that "gives strong visibility into long-term growth," says Mike Smith, head of the Allspring Global Investments Growth Equity team.

"There's a real bottleneck in AI infrastructure -- data centers are power-hungry, and the grid isn't built for that kind of load," he says. "They've earned pricing power, and the flywheel is spinning -- predictable growth, expanding margins, and rising free cash flow."

That has led to strong bottom-line performance as well. The consensus calls for earnings per share to climb more than 17% this year and next, reaching a record $12.39 in 2026, on double-digit increases in revenue.

Of course, none of this has been lost on Wall Street, with the shares rising by a more than a third just this year. Quanta now changes hands for more than 35 times 2026 earnings, and, at a recent $437 has already topped the average analyst price target of $435.

"It screens expensive, but that's what happens when you have scarcity value," says Smith. "There aren't many firms with Quanta's capabilities, scale, and execution. In a world where infrastructure is the chokepoint to innovation, they're not just a contractor -- they're an enabler. The premium seems earned."

Quanta's valuation is hardly a new development, either. The stock's average price/earnings ratio has been just under 40 times over the past five years.

Part of that is certainly because of the AI effect, which could leave investors concerned about any pullback if it were to unwind.

However, Quanta has turned into a stronger, more disciplined company in recent years and is no longer plagued by project risk and cost overruns that may have kept investors up at night in the past, says Pearson.

"Even before AI, there was a reason to own Quanta," he says. "For example, there are massive projects in California to bury power lines because we've all seen the risk and disruption related to wildfires. That has nothing to do with AI."

The company's balance sheet is strong, with plenty of cash on hand to attract and retain top talent and buy equipment. While the stock's dividend yield of 0.1% is barely worth mentioning, Quanta has been busily buying back stock to the tune of nearly $135 million this year through the second quarter, with some $365 million remaining on its repurchase authorization through 2026.

One concern about the stock is its renewables business, which accounted for about a third of sales in 2024. With roughly 90% of its business in the U.S., where the Trump administration is hostile to green energy, some investors may worry that the revenue stream is in jeopardy.

Nonetheless, J.P. Morgan analyst Mark Strouse met with Chief Financial Officer Jayshree Desai last month and notes that she was "quite positive on the multiyear outlook for renewable energy development -- particularly in Quanta's core utility-scale solar and storage markets."

Even before the passage of the One Big Beautiful Bill, the company had strong visibility on projects through 2027. In August, the Treasury issued safe-harbor guidance that provides clarity on eligibility for clean energy tax credits. As a result, Desai expects "customers to safe harbor projects over the next nine months to lock in credits through 2030," Strouse writes. "Quanta is not seeing a 'pull-forward' of projects and expects developers to continue using traditional safe-harbor methods."

Putting it all together, Quanta is a company with stable growing earnings that is worth paying for.

"I see AI and data-center growth as another leg of the stool, on top of what's already a very strong foundation," says Pearson.

That means investors should be sitting pretty, too.

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Write to Teresa Rivas at teresa.rivas@barrons.com

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October 16, 2025 08:00 ET (12:00 GMT)

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