Granite Construction (NYSE:GVA) executives used the company’s fourth-quarter conference call to highlight progress against strategic priorities and outline expectations for 2026, pointing to a record project portfolio, continued margin improvement, and a growing materials business supported by acquisitions and targeted capital investment.
Strategic focus: selectivity, materials investment, and M&A
President and CEO Kyle Larkin said Granite’s strategy is centered on “bidding and building the right projects,” investing in the materials segment, and expanding its footprint through targeted acquisitions. He described the company as “highly selective” in the work it pursues, with an emphasis on best-value and high-quality bid-build opportunities in Granite’s home markets.
On acquisitions, Larkin said Granite completed three transactions in 2025: Warren Paving (expanding the Southeast platform) and Papich Construction and Cinderlite (strengthening home markets in California and Nevada). He characterized the acquisitions as margin-accretive and said he expects acquisitions to remain a “major component” of growth in 2026.
Construction segment: record CAP and rising share of best-value work
Larkin said 2025 construction execution was strong, helping drive a “strong finish” to the year even with delays on certain projects and wet weather late in the fourth quarter. CAP increased sequentially by $632 million in the quarter to end at $7 billion, with California and Nevada “leading the way” in bidding and awards.
He also emphasized growth in best-value procurement. Best-value work ended the quarter at 48% of CAP, which Larkin said plays to Granite’s home market strengths and can reduce disputes and improve risk management through more collaborative project delivery. He added that Granite expects best-value contracting to remain a key driver of its sustainable margin expansion as more states adopt similar procurement methods.
In the Q&A session, Larkin said the company currently views a roughly 50/50 mix between best-value and bid-build as “healthy,” while noting that best-value projects can have longer burn profiles than traditional bid-build work. He said that mix supports confidence in organic growth in 2026 and into 2027.
Materials segment: acquisitions expand reserves and support margin goals
Larkin described 2025 as a “transformational year” for the materials business, citing organic growth and expanded addressable markets through acquisitions, especially Warren Paving. He said the fourth quarter was Granite’s first full quarter including Warren Paving, and management sees opportunities to grow the Southeast platform through distribution expansion, improved logistics, and leveraging Warren’s marine and river-based transportation capabilities.
With the addition of Warren Paving, Papich Construction, and Cinderlite, Granite’s aggregate reserves and resources increased 34% year-over-year to 2.1 billion tons, which Larkin said provides a foundation for sustained materials margin expansion.
During Q&A, management said 2026 strategic materials capital spending is expected to be weighted more toward the legacy business, including reserve expansion and automation projects, and also includes investments in prior acquisitions such as Lehman-Roberts and Stone and Gravel. Executives also said Warren Paving has performed well in the months since acquisition, and management reported that all three 2025 acquisitions were performing “very well” and “outperforming” internal expectations.
On pricing, management said it anticipates mid-single-digit price improvements in aggregates and low-single-digit improvements in asphalt for 2026, while continuing to look for additional opportunities by market. Larkin also said the legacy materials business has kept costs under control, with costs described as flat over the last two years, which he attributed to automation efforts and standardization.
Financial results: revenue up 10% in 2025; 2026 guidance calls for continued growth
Executive Vice President and CFO Staci Woolsey reported full-year 2025 results that included:
- Revenue up 10% to $4.4 billion
- Gross profit up 24% to $711 million
- Adjusted net income up 29% to $276 million
- Adjusted EBITDA up 31% to $527 million (adjusted EBITDA margin of 11.9% vs. 10% in 2024)
- Operating cash flow up 3% to $469 million
For the fourth quarter, Woolsey said construction segment revenue increased 14% year-over-year to $940 million, including $59 million from Warren Paving and Papich Construction. Construction segment gross profit increased $15 million to $143 million, with gross profit margin of 15%.
In materials, Woolsey said revenue rose $69 million year-over-year to $225 million, driven primarily by acquisitions. She reported quarterly cash gross profit of $47 million, or 21% of revenue, despite wet weather in certain geographies. For the full year, materials cash gross profit margin improved 490 basis points to 26%.
On cash flow, Woolsey said 2025 benefited from collecting a long-outstanding retention balance and payments for disputed claims in the first half of the year. Excluding those non-recurring collections, she said operating cash flow as a percent of revenue was in line with the company’s original 9% target. For 2026, Granite is targeting an operating cash flow margin of 10% of revenue.
Woolsey also outlined 2025 capital allocation, including $138 million of CapEx, $778 million of acquisitions, and $23 million in dividends, plus repurchases of 300,000 shares to offset dilution from stock-based compensation. Granite ended 2025 with $650 million in cash and marketable securities, $1.3 billion in debt, and $583 million in revolver availability.
For 2026, management guided to:
- Revenue of $4.9 billion to $5.1 billion, including a full year of 2025 acquisitions
- SG&A of 8.5% to 9% of revenue, including an estimated $48 million of stock-based compensation
- Adjusted EBITDA margin of 12% to 13%
- CapEx of $140 million to $160 million, including about $50 million in strategic materials investments
Policy backdrop, bidding environment, and M&A outlook
Asked about the federal Infrastructure Investment and Jobs Act (IIJA), Larkin noted it expires in September, but said only about 50% of spending had occurred as of November, leaving what he described as a “nice runway” of spending for several more years. He also said industry discussions suggest continued bipartisan support and that investment amounts being discussed are “significantly higher” than the IIJA, with potential updates possible around March or April if a draft bill emerges.
On direct federal opportunities, Larkin said Granite continues work with the federal government in Guam and expects to continue picking up work there. He also discussed a large border infrastructure program he described as just under $40 billion, noting Granite currently has one contract in southeastern Texas for just under $200 million that began last November. However, he said no additional border work was included in the guidance, citing changing risk profiles as contract sizes increase.
Regarding M&A, management said the pipeline remains robust and that Granite expects to complete several strategic acquisitions in 2026. Larkin said the company is targeting 2.5x net debt leverage, adding that Granite could temporarily move above that level for a larger opportunity with a plan to return to target.
In closing remarks, Larkin thanked employees and said 2025 was Granite’s “safest year yet,” adding that the company expects to improve further in 2026.
About Granite Construction (NYSE:GVA)
Granite Construction Inc is a publicly traded heavy civil contractor and construction materials producer based in Watsonville, California. The company specializes in delivering large-scale infrastructure projects for government and private clients, focusing on the development, rehabilitation and maintenance of transportation, water resource and industrial facilities. Its turnkey solutions span the full project lifecycle, from preconstruction and design-build to construction management and facilities maintenance.
In its construction segment, Granite undertakes highway and bridge building, airport runway and taxiway construction, marine terminal and port improvements, dam and reservoir projects, transit systems and underground utilities.
