Top AI Stock Comfort Systems Is Powered By An Army Of Welders

2026-02-14 13:31:51

Comfort Systems USA (FIX) supplies the army of pipe fitters, welders, technicians and project managers needed to get AI data centers up and running.

An explosion of demand means there’s more work than manpower, so a key part of the investment case for the Houston-based HVAC (heating, ventilation and air conditioning) and electrical contractor is its ability to keep flexing its capacity — along with its profit margins — to capitalize on surging demand from Google parent Alphabet (GOOGL), Meta Platforms (META) and others.

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“The holy grail for any contractor is you want demand to exceed supply,” Thompson Davis & Co. Research Director Adam Thalhimer told Investor’s Business Daily. Thompson Davis is an independent asset management firm. “Contractors don’t usually get pricing power. But if demand exceeds supply enough, then eventually it will drop through to pricing.”

He added: “That’s clearly what’s been going on for call it two or three years now, not just for Comfort,” but for the broader group of so-called pick-and-shovel suppliers to the artificial intelligence data-center buildout.

Google, Meta Capital Expenditures

Comfort Systems stock has surged to start the year “because you’ve had Meta, Google and Amazon (AMZN) give such unbelievably high capex (guidance), so they’re clearly committed to these megaprojects,” Thalhimer said.

Those three companies — plus Microsoft (MSFT), Oracle (ORCL) and CoreWeave (CRWV) — indicated a plan to boost capital spending to a combined $656 billion in 2026 from $393 billion in 2025, according to a Feb. 6 note from William Blair analyst Tim Mulrooney. The group’s planned capex spending points to further increases of 11% and 5.5% in 2027 and 2028, respectively.

All of Comfort Systems’ end markets are showing growth, including health care facilities and manufacturing plants for semiconductors and pharmaceuticals. However, data centers are “the key growth driver,” which makes hyperscaler capex “critical to the investment thesis” of Comfort Systems, as well as Emcor Group (EME), the other big mechanical, electrical and plumbing (MEP) construction firm, Mulrooney told IBD.

Electrician Shortage

“There’s a huge shortage of electricians, plumbers, welders, millwrights and pipe fitters in this country,” Mulrooney said. “There’s a limited supply and a growing demand — and you can see it in that capex chart, which got revised up a lot. In that situation, what is the outlet? It’s price.”

The impact on Comfort Systems’ operating profit margin has been dramatic, rising from its 6%-7% historical range to 8% in 2023, 10.7% in 2024 and an expected 13.5% in 2025, according to Thalhimer.

Newer data centers have a greater density than older ones, Comfort’s chief operating officer, Trent McKenna, said at the Sidoti conference in December. He estimates they require three or four times the piping and electrical equipment per square foot.

Comfort Systems is set to report fourth-quarter results on Feb. 19, according to FactSet. In the third quarter, technology-sector revenue, which is primarily data-center related, soared 82% from a year ago, accounting for 46% of total sales. The order backlog rose to $9.377 billion, up 15% from the second quarter and 65% from a year ago.

Expectations will be high. Data-center infrastructure stocks got a lift on Wednesday after Vertiv (VRT), which provides power and cooling systems for data centers, said its backlog shot up 109% from a year ago to $15 billion.

Comfort Systems’ Growth Plan

Comfort Systems has long had a multipart growth strategy to take advantage of the rising demand. The company’s huge growth “didn’t happen by accident,” Thompson Davis’ Thalhimer said. Between increased trade frictions and the pandemic roiling supply chains, they anticipated “a U.S. heavy construction supercycle” and planned accordingly, he said.

Through both acquisitions and organic growth, Comfort Systems has expanded its workforce to 21,000 from 15,800 at the end of 2023. About 85% of its workers “have tools in their hands,” doing mechanical and electrical installations, Julie Shaeff, senior vice president and chief accounting officer, said at the Sidoti conference.

Shaeff explained that Comfort Systems is “relatively capital-light,” spending 2% of revenue on capex. That leaves a healthy amount of cash flow, of which 75% goes to acquisitions, with the rest going to shareholders.

One key acquisition, which was announced in January 2022, was for the Kodiak Labor Solutions staffing firm, which has grown into a database of around 35,000 contract laborers to handle jobs more than 100 miles from Comfort Systems’ local offices.

Modular Construction

Comfort Systems also is known for its ability to do modular construction, which involves fabricating systems in its own specially designed facilities away from construction sites, then transporting them for installation.

“It reduces the need for labor,” D.A. Davidson analyst Brent Thielman told IBD. “It’s a very attractive solution to some of these data-center customers, because it means you can move things along faster.”

Thielman wrote in a Dec. 19 note that Comfort Systems is installing or ramping up use of specialty welding and other sophisticated automation tools, which should speed up the work and reduce labor, freeing up its welders to work off-site. That’s in addition to expanding its modular facility square footage.

Modular revenue accounted for 17% of the total in the first nine months of 2025, rising more than 30% from a year ago in the third quarter, Thielman said.

Comfort Systems Stock

Comfort Systems boasts a perfect 99 IBD Composite Rating. The single rating combines both fundamental and technical factors. Shares lead the Building-A/C & Heating Products industry group, according to IBD Stock Checkup.

Both Comfort Systems and Vertiv stocks are part of the flagship IBD 50 list of leading growth stocks.

On Jan. 2, Comfort Systems stock began a move above support at its 50-day moving average and traded 25% above that key technical level on Thursday.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

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