Contractor Backlog and Confidence Rise Again in April, Buoyed by Data Centers

Why It Matters

The surge in backlog, driven by data‑center construction, signals robust demand for large‑scale, high‑tech projects, bolstering revenue outlook for the sector’s biggest players. Elevated confidence despite cost pressures suggests a resilient construction market that could attract investment and sustain employment growth.

Key Takeaways

• Backlog Indicator rose to 8.8 months in April, up 0.2.
• Large contractors (> $100M revenue) backlog up 2.2 months YoY.
• Data center projects account for 42% of large contractors' backlog.
• Confidence index shows higher sales, margins, staffing expectations.
• Only 20% anticipate margin shrinkage, lowest since Jan 2025.

Pulse Analysis

The latest ABC Construction Backlog Indicator, now at 8.8 months, underscores a gradual but meaningful recovery in the U.S. building sector. While the overall increase is modest, the metric reveals a pronounced divergence between large firms—those generating over $100 million annually—and their smaller peers. The biggest contractors are benefitting from a data‑center construction boom, with 42% of them tied to such projects and an average backlog extending to 12.2 months. This concentration of work reflects the broader shift toward digital infrastructure, as hyperscale cloud providers continue to expand capacity to meet rising demand for computing power.

Confidence among contractors has risen in tandem, as shown by the Construction Confidence Index, which now registers above the 50‑point threshold for sales, profit margins and staffing levels. Even with lingering concerns about weak general construction spending, higher oil prices and material cost inflation, only one‑in‑five firms expect profit‑margin compression over the next six months—the lowest proportion since early 2025. This optimism is anchored in the expectation that high‑margin, technology‑driven projects will offset broader market softness, allowing firms to maintain hiring plans and invest in equipment without sacrificing profitability.

Looking ahead, the data‑center‑driven backlog surge could reshape the competitive landscape. Large contractors with the capacity to secure and execute complex, capital‑intensive projects are likely to capture a disproportionate share of future revenue, potentially widening the gap with smaller firms. Investors and lenders should monitor the sustainability of this trend, especially as material price volatility and potential policy shifts around energy consumption could affect project economics. Nonetheless, the current confidence levels suggest the construction sector is poised to leverage its tech‑focused momentum into steady growth throughout the remainder of the year.