Revenue has accelerated to 110.7% year-over-year growth in Q2 2026, but this has been accompanied by a severe erosion in gross margins, which have compressed by 770 basis points to 14.4% over the past five quarters.
Legence Corp. Class A Common stock (LGN) annual income statement — 3-year revenue, gross profit & net income history
| Metric | TTM | Dec'25 | Dec'24 | Dec'23 |
|---|
| Sales/Revenue | 3.75B | 2.55B | 2.1B | 1.62B |
| Revenue Growth % | - | 21.53% | 29.94% | - |
| Cost of Goods Sold | 3.12B | 2.01B | 1.67B | 1.3B |
| COGS % of Revenue | - | 78.99% | 79.57% | 80.49% |
| Gross Profit | 627.13M | 535.92M | 428.64M | 315.15M |
| Gross Margin % | 16.74% | 21.01% | 20.43% | 19.51% |
| Gross Profit Growth % | - | 25.03% | 36.01% | - |
| Operating Expenses | 513.32M | 442.99M | 370.2M | 304.89M |
| OpEx % of Revenue | - | 17.37% | 17.64% | 18.88% |
| Selling, General & Admin | 464.39M | 342.63M | 252.67M | 186.06M |
| SG&A % of Revenue | - | 13.43% | 12.04% | 11.52% |
| Research & Development | 0 | 0 | 0 | 0 |
| R&D % of Revenue | - | - | - | - |
| Other Operating Expenses | 2M | 100.36M | 117.53M | 118.83M |
| Operating Income | 113.82M | 92.93M | 58.44M | 10.26M |
| Operating Margin % | 3.04% | 3.64% | 2.78% | 0.64% |
| Operating Income Growth % | - | 59.02% | 469.6% | - |
| EBITDA | 251M | 207.22M | 169.29M | 103.06M |
| EBITDA Margin % | 6.7% | 8.12% | 8.07% | 6.38% |
| EBITDA Growth % | - | 22.41% | 64.26% | - |
| D&A (Non-Cash Add-back) | 137.19M | 114.29M | 110.85M | 92.8M |
| EBIT | 55.7M | 46.64M | 45.77M | 14.25M |
| Net Interest Income | -69.74M | -97.29M | -20.07M | -63.95M |
| Interest Income | 6.2M | 4.49M | 5.46M | 4.25M |
| Interest Expense | 75.94M | 101.78M | 25.54M | 68.2M |
| Other Income/Expense | -175M | -148.07M | -38.21M | -64.2M |
| Pretax Income | -61.18M | -55.14M | 20.23M | -53.94M |
| Pretax Margin % | -1.63% | -2.16% | 0.96% | -3.34% |
| Income Tax | 10.29M | 22.16M | 2.81M | -7.92M |
| Effective Tax Rate % | -16.81% | -40.19% | 13.89% | 14.68% |
| Net Income | -45.04M | -59.78M | 9.72M | -46.03M |
| Net Margin % | -1.2% | -2.34% | 0.46% | -2.85% |
| Net Income Growth % | - | -715.15% | 121.11% | - |
| Net Income (Continuing) | -71.47M | -77.3M | 17.42M | -46.03M |
| Discontinued Operations | 0 | 0 | 0 | 0 |
| Minority Interest | 377.08M | 396.6M | 912K | 0 |
| EPS (Diluted) | -0.76 | -1.01 | 0.10 | -0.45 |
| EPS Growth % | - | -1157.59% | 121.22% | - |
| EPS (Basic) | - | -1.01 | 0.10 | -0.45 |
| Diluted Shares Outstanding | 59.56M | 59.38M | 58.51M | 58.51M |
| Basic Shares Outstanding | 71.62M | 59.38M | 58.51M | 58.51M |
| Dividend Payout Ratio | - | - | 3103.66% | - |
Quick answers to the most common questions about buying LGN stock.
For fiscal year 2025, Legence Corp. Class A Common stock (LGN) reported total revenue of $2.55B. This represents a 57.9% increase compared to $1.62B in 2023.
Legence Corp. Class A Common stock (LGN) reported a net loss of $59.8M for the fiscal year ending 2025.
Legence Corp. Class A Common stock (LGN) reported an operating income of $92.9M, resulting in an operating profit margin of 3.6%. This margin reflects the operational efficiency of the business before interest and taxes.
Legence Corp. Class A Common stock (LGN) generated $535.9M in gross profit for the year, representing a gross profit margin of 21.0%. This demonstrates the company's core pricing power and production efficiency.
Key Metrics
Top Statement Risk
Profitability lagging rapid revenue growth
Metrics are mathematically derived from official filings.
Hyper-Growth Driven by Project Execution
Legence's revenue growth has accelerated dramatically, with a 110.7% year-over-year increase in Q2 2026, suggesting a massive ramp in project execution, likely tied to data center and semiconductor facility construction.
The sequential acceleration from 105.1% growth in Q1 2026 to 110.7% in Q2 indicates the company is successfully converting its backlog into recognized revenue at an increasing pace. This hyper-growth trajectory, while impressive, raises questions about the sustainability of such a pace and the operational strain it places on the organization, as evidenced by the concurrent margin compression.
Gross Margin Erosion Amidst Scaling
Gross margins have compressed significantly from 22.1% in Q1 2025 to 14.4% in Q2 2026, a trend that appears to indicate the revenue mix is shifting toward lower-margin installation projects or that input cost pressures are intensifying.
The 770 basis point decline in gross margin over five quarters is a critical concern, as it suggests the company's rapid top-line expansion is not translating into proportional profit growth. This compression may reflect a higher proportion of large-scale, competitively bid installation contracts versus higher-margin consulting work, or it could signal an inability to pass through rising labor and material costs to clients.
Operating Leverage Fails to Materialize
Despite revenue more than doubling, operating income has grown modestly from $16.2M in Q1 2025 to $34.7M in Q2 2026, indicating a lack of operating leverage as SG&A expenses scale nearly in line with the top line.
The operating margin has declined from 3.2% to 2.7% over the same period, demonstrating that overhead costs are not being absorbed by the massive revenue increase. This suggests the company is in a phase of heavy investment in corporate infrastructure, sales, and project management to support its growth, which is currently offsetting any potential efficiency gains from scale.
Net Loss Driven by Non-Operating Burdens
The company reported a net loss of $27.8 million in Q2 2026 despite positive operating income, a disconnect that appears to be driven by significant non-operating expenses, likely related to debt servicing or acquisition-related amortization.
The swing from a $16.1 million net profit in Q1 2026 to a $27.8 million loss in Q2, on only a modestly higher operating profit, points to volatile non-operating items. This pattern suggests the reported net income is of low quality for fundamental valuation, as it is heavily influenced by financing structures and accounting treatments rather than core operational performance.
SG&A Scaling with Revenue Growth
SG&A expenses have surged from $69.5 million in Q1 2025 to $147.6 million in Q2 2026, a 112% increase that closely mirrors the revenue growth rate, indicating limited cost discipline in the corporate overhead structure.
The fact that SG&A as a percentage of revenue has remained relatively stable (around 13-14%) during this hyper-growth phase suggests management is prioritizing market capture over near-term profitability. This cost structure is typical of a roll-up strategy but warrants monitoring to see if these expenses can eventually be leveraged as the growth rate normalizes.
Growth at the Expense of Profitability
The most significant risk to the investment thesis is that Legence's hyper-growth is being achieved through a deteriorating margin profile, with gross margins falling 770 bps in five quarters while the company remains net unprofitable.
A short-seller would focus on the widening gap between revenue growth and profitability, arguing that the company is buying growth with lower-margin contracts and high integration costs. The persistent net losses, even as revenue scales past $1 billion per quarter, challenge the narrative that this is a high-quality, scalable business model and instead paint a picture of a company that may be overextended.