The AES Corporation (AES) | The Buildout — AI Infrastructure
The Verdict
AES is a global power company that sells electricity rather than hardware. Its growth engine is the Renewables unit, which signs long-term power purchase agreements with data-center operators and large corporations, backed by regulated utilities that build transmission and generation behind that load. Management frames the edge as 'time to power' — ready-to-build projects in the right locations, a domestic supply chain, and safe-harbored tax credits. It also sells gas generation and, more recently, developed land with an attached power contract.
| Market Cap | — |
| Revenue (TTM) | $13.1B |
| Revenue Growth | +8.5% |
| EBITDA Margin (TTM) | 34.2% |
| Net Debt | $30.3B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Renewables EBITDA grew 46% year-to-date through Q3 2025 (56% in Q2 2025), showing the data-center build-out landing in reported results.
- The data-center portfolio totals 8.2 GW — 4.2 GW operating and 4.0 GW in backlog — and Q2 2025's 1.6 GW of new PPAs were entirely with data-center customers, including 650 MW with Meta.
- Renewable backlog stands at 11.1 GW, 4.8 GW under construction and completing through 2027; the CFO calls it 'roughly 3 to 4 years of built-in growth.'
- About $400 million of incremental run-rate EBITDA is expected beyond 2027, from projects already under construction or in backlog, requiring no additional PPA signings.
- The 7.5 GW U.S. backlog is entirely safe-harbored, with line of sight to safe-harbor another 3–4 GW before July 4, 2026, enabling tax credits through 2030.
What We’re Watching
- PPA signings are lumpy and back-end loaded — 2.2 GW signed through Q3 2025 against a 4 GW full-year target, and the Q1 2026 10-Q carries no signing update, so the 2025 outcome is unconfirmed.
- The GIP/EQT-led take-private is stockholder-approved but not closed; law-firm investigations into the sale process (Kahn Swick & Foti; Schall) are unresolved.
- The Indiana partial settlement cut the requested rate increase by $105 million, or 53%, and commits to no rate-base increase until 2030; the expected 1.5–2.5 GW of Indiana data-center deals are still unsigned.
- The Q1 2026 10-Q discloses $4.5 billion of maximum undiscounted contingent exposure (guarantees, letters of credit, surety bonds) at subsidiary level, plus about $119 million of long-dated receivables including deferrals granted to Chilean mining customers.
The operating thesis is intact and, by management's numbers, strengthening: renewables EBITDA is inflecting, the backlog is converting into reported results, and $400 million of beyond-2027 EBITDA sits in construction without new signings. What complicates it is the corporate layer — the approved take-private means the standalone earnings story may stop mattering — and the two most recent disclosure points, the slow Q3 signing pace and the Indiana rate cut, both arrived without a live call to pressure-test them. The open question is whether the 4 GW 2025 PPA target was met and how much of the data-center backlog converts on schedule.
Earnings Beat
AES reported revenue of $3,422 million in the June 2026 quarter, up 19.9% from $2,855 million a year earlier, with a gross margin of 20.2%. There was no earnings call for the period; the last call and detailed results walk remain the Q3 2025 call.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.4B | $3.2B | $2.9B | +19.9% |
| Gross margin | 20.2% | 20.1% | 15.9% | +430bps |
| EBITDA | $1.6B | $1.0B | $759M | +113.0% |
| EPS | $0.65 | $0.68 | $-0.15 | −541.0% |
Looking beyond 2027, we expect to earn an incremental $400 million of run rate EBITDA. This is from projects that we expect to be either still under construction at the end of 2027 or that will come online during 2027 and will contribute a full year of EBITDA in 2028. This $400 million does not require any additional project development or PPA signings.— Steve Coughlin, CFO, 2025-11-05
Management tone: No earnings call is on record for the latest period; the most recent call is Q3 2025 (2025-11-05). There, management was confident and execution-framed, reaffirming all guidance and describing its construction and cost-savings programs as on track. The tone shifted toward quality over volume — the CEO said 'Not all gigawatts are made the same or equal,' and the CFO said 'It's not about gigawatt growth, but rather profitable growth with attractive returns.' Asked about acquisition speculation, management declined to comment and said only that the company had been 'consistently underappreciated.'
Management Guidance
No guidance was issued for the latest period. The last formal guide was reaffirmed on the Q3 2025 call (2025-11-05): FY2025 adjusted EBITDA of $2.65–2.85 billion, adjusted EPS of $2.10–$2.26, long-term adjusted EBITDA growth of 5%–7% through 2027, FY2026 EBITDA growth in the low teens, and parent free cash flow in the upper half of $1.15–$1.25 billion. The CFO's 2026 bridge cited about $250 million of new EBITDA from new projects, about $100 million from utilities, and cost savings rising from $150 million to a $300 million annual run rate. The Q1 2026 10-Q carries no guidance and states the company will no longer disclose Adjusted EPS beginning Q1 2026.
Trajectory
The revenue trend is accelerating: the June 2026 quarter brought $3,422 million, up 19.9% year over year, after +8.7% in the March 2026 quarter and +4.7% in the December 2025 quarter. The drivers are the shift toward contracted renewables and utility rate base — Q1 2026 Renewables revenue rose to $820 million from $666 million, Utilities added $127 million, and U.S. development services contributed $63 million — partly offset by Energy Infrastructure, where Q1 2026 revenue fell $64 million on lower contracted volumes and prices. Gross margin has expanded by about 420 basis points and EBITDA margin by about 540 basis points on the code-computed trend, as management says a larger operating portfolio and lower development spending lift operating margins.
The Model
The model projects FY+1 revenue of $13,800 million and EBITDA of $3,505 million, a 25.4% margin, rising to FY+2 revenue of $15,000 million and EBITDA of $3,855 million, a 25.7% margin. The near-term anchor is the contracted backlog — 4.8 GW under construction and $400 million of incremental run-rate EBITDA already embedded — while FY+2 depends on data-center PPAs converting on schedule and on the Indiana and Ohio utility load pipeline being signed and built.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $12.2B | $13.8B | $15.0B |
| YoY Growth | — | +12.8% | +8.7% |
| EBITDA | $3.3B | $3.5B | $3.9B |
| EBITDA Margin | 26.9% | 25.4% | 25.7% |
Projections are the median of 5 independent model runs. The model’s revenue sits 3.3% above analyst consensus.
No guidance was issued for the latest period. The last formal guide was reaffirmed on the Q3 2025 call (2025-11-05): FY2025 adjusted EBITDA of $2.65–2.85 billion, adjusted EPS of $2.10–$2.26, long-term adjusted EBITDA growth of 5%–7% through 2027, FY2026 EBITDA growth in the low teens, and parent free cash flow in the upper half of $1.15–$1.25 billion. The CFO's 2026 bridge cited about $250 million of new EBITDA from new projects, about $100 million from utilities, and cost savings rising from $150 million to a $300 million annual run rate. The Q1 2026 10-Q carries no guidance and states the company will no longer disclose Adjusted EPS beginning Q1 2026.
What Could Go Right — and Wrong
- Indiana data-center deals get signed in the 1.5–2.5 GW range management expects, adding utility load beyond the base rate-base growth plan.
- The full-year 2025 PPA target of 4 GW is confirmed, showing lumpiness is timing rather than weak demand.
- The additional 3–4 GW of safe-harbored projects are secured before the July 4, 2026 deadline, extending tax-credit-backed economics through 2030.
- Development services become recurring, converting the $322 million of remaining performance obligations ($190 million in the rest of 2026, $127 million in 2027).
- Cost savings reach the $300 million annual run rate in 2026 while the $400 million of beyond-2027 EBITDA arrives as scheduled for full-year 2028.
- PPA signings stay lumpy and the 4 GW 2025 target is missed, weakening the backlog-to-revenue conversion.
- The GIP/EQT-led take-private fails to close or is renegotiated, returning the standalone case to the fore with unresolved sale-process investigations.
- Indiana data-center deals slip or land at the low end, and the PJM regulatory pause noted by a peer delays Ohio and Indiana load.
- Supplier concentration bites — many storage projects rely on Fluence as BESS supplier or EPC contractor, and the 10-K flags single-supplier fuel and transportation reliance.
- Construction or interconnection delays slow the 4.8 GW under construction, while rising depreciation ($433 million in Q1 2026, up from $337 million) and interest expense weigh on reported earnings.
Looking Ahead
Over the next year, the story runs on two tracks: whether the GIP/EQT-led take-private closes, and whether the contracted pipeline converts. The backlog sits at 11.1 GW with 4.8 GW under construction through 2027, $400 million of beyond-2027 EBITDA is already in hand, and the Uplight stake sale is expected to close in the second half of 2026. The clearest tests are the unresolved 2025 PPA signing outcome, the Indiana data-center deals, and the development-services stream against $322 million of remaining performance obligations.
- 2H 2026Uplight stake sale closes — Up to $40M: $10M at closing, up to $30M contingent.
- 2026Petersburg repowering online — 1.2 GW coal-to-gas conversion at AES Indiana.
- 2026$300M cost-savings run rate — Rises from the $150M realized in 2025.
- Rest of 2026Development services revenue — $190M of the $322M RPO expected in the remainder of 2026.
- No date statedTake-private deal closes — GIP/EQT-led deal approved 2026-06-26; closing not confirmed.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $12.3B | $12.2B | $13.1B | -0.4% |
| Gross Margin | 18.8% | 17.9% | 20.3% | 85bps |
| EBITDA | $3.3B | $3.3B | $4.5B | -0.2% |
| EBITDA Margin | 26.9% | 26.9% | 34.2% | +6bps |
| Net Income | $1.8B | $897M | $1.9B | -49.7% |
| Free Cash Flow | −$4.6B | −$1.6B | −$1.7B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)20.3%
- EBITDA Margin (TTM)34.2%
- Net Margin (TTM)14.6%
- ROIC5.1%
- FCF Conversion-38.5%
- SBC / Revenue0.0%
The Company
AES is a global energy company that sells electricity, not equipment. Its most AI-relevant business is the Renewables unit — solar, wind, storage and hydro in ten countries — which signs long-term power purchase agreements with data-center operators and large corporations. The FY2025 10-K says the unit is 'well-positioned to take advantage of the growth in data centers driven by the increase in power demand for generative artificial intelligence,' and management says the business model supplies 'the electric energy and capacity in the shape, cost and reliability the market demands.'
AES runs four reporting units. Renewables sells contracted power to corporates, utilities and data-center customers; Utilities operates AES Indiana and AES Ohio plus four utilities in El Salvador, serving 2.7 million customers; Energy Infrastructure holds natural gas, LNG, coal and oil generation; and New Energy Technologies holds stakes in Fluence and Maximo. Management points to a ready-to-build development pipeline, a domestic supply chain with no tariff impact for near-term projects, and safe-harbored tax credits that keep project economics intact.
Business Segments
Competitive Landscape
Competition in AES's market is about who can deliver power fastest, not who holds the most megawatts. Management says data-center customers are 'overwhelmingly focused on time to power' and frames the company's advantage as a ready-to-build development pipeline, projects already in the right locations, a domestic supply chain, and safe-harbored tax credits. The supply-chain mapping names Constellation Energy, NextEra, Vistra, Talen, Clearway, NRG, Enlight and TotalEnergies as peers. One nuance the source carries: Constellation confirmed data-center demand remained strong but said some customers are pausing pending PJM regulatory clarity, and hyperscalers are exploring on-site gas and nuclear alternatives.
- Constellation EnergyNamed as a peer in the supply-chain mapping and also a disclosed AES customer (Skipjack solar). Source notes it has ~5,000 MW in the PJM interconnection queue for data-center load near AES Ohio.
- Named as a peer in the supply-chain mapping; not discussed in AES disclosures.
- VistraNamed as a peer in the supply-chain mapping; not discussed in AES disclosures.
- TalenNamed as a peer in the supply-chain mapping; not discussed in AES disclosures.
- ClearwayNamed as a peer in the supply-chain mapping; not discussed in AES disclosures.
Supply Chain
AES sits between equipment and fuel suppliers and the utilities and data-center operators that buy electricity. The 10-K names Fluence for storage, while the customer list spans hyperscalers and miners without disclosed revenue percentages.