The AES Corporation (AES) | The Buildout — AI Infrastructure
The Verdict
AES develops, owns, and operates power generation and utility infrastructure that delivers electricity to large corporate customers, including data center operators. Its role in the AI buildout is upstream of compute: it supplies grid-connected power, mainly renewables and batteries in the near term, plus storage, transmission, and gas-fired capacity.
| Market Cap | — |
| Revenue (TTM) | $12.5B |
| Revenue Growth | +3.0% |
| EBITDA Margin (TTM) | 28.9% |
| Net Debt | $29.3B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data-center portfolio reached 8.2 GW as of Q3 2025: 4.2 GW operating and 4.0 GW in backlog, with nearly half of the backlog under construction and expected online within 18 months.
- Renewables segment adjusted EBITDA grew 56% in Q2 2025 and 46% year-to-date through Q3 2025; Q1 2026 segment EBITDA rose to $269M from $161M.
- Management disclosed $400M of incremental run-rate EBITDA beyond 2027 from projects already in backlog or construction, requiring no additional PPA signings.
- The 7.5 GW U.S. backlog is entirely safe-harbored, with an additional 4 GW of pipeline protected and 3-4 GW more targeted before July 4, 2026.
- Utilities add a second engine: AES Ohio has 2.1 GW of signed data-center agreements, and AES Indiana points to a 1.5-2.5 GW data-center load opportunity.
What We’re Watching
- 2025 PPA target hinges on Q4: only 2.2 GW signed through Q3 against a 4 GW full-year target.
- Indiana data-center deals were still under negotiation as of the Q3 2025 call, with announcements expected in the following couple of months.
- AES Indiana final rate order is expected in Q2 2026; the partial settlement cut the requested increase by $105M, or 53%, and bars rate-base increases until 2030.
- Safe-harbor deadline is July 4, 2026: management sees line of sight to protect an additional 3-4 GW.
The operating thesis is strengthening: data-center demand has moved from backlog into reported renewables and utility results, and management added post-2027 visibility. The open question is whether the back-end-loaded PPA target and Indiana data-center deals convert before the pending GIP/EQT acquisition changes the standalone picture.
Earnings Beat
In Q1 2026, AES reported revenue of $3,180 million, up from $2,926 million a year earlier, with gross margin of 20.1% versus 15.0% a year ago. EBITDA reached $1,018 million, a 32.0% margin, compared with $700 million and a 23.9% margin in Q1 2025. Net income was $487 million, and free cash flow was negative $565 million.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.2B | $3.1B | $2.9B | +8.7% |
| Gross margin | 20.1% | 18.8% | 15.0% | +510bps |
| EBITDA | $1.0B | $914M | $700M | +45.4% |
| EPS | $0.68 | $0.45 | $0.06 | +955.7% |
It is important to highlight that our long-term guidance through 2027 understates the actual run rate earnings power of our portfolio.— Steve Coughlin, Chief Financial Officer, 2025-11-05
Management tone: On the Q3 2025 call, management was confident and execution-focused, repeatedly using phrases like 'highly confident,' 'solid,' and 'on track.' Management reframed slow quarterly PPA bookings around project profitability rather than directly answering demand acceleration questions.
Management Guidance
Management reaffirmed 2025 adjusted EBITDA of $2.65B-$2.85B, adjusted EPS of $2.10-$2.26, long-term adjusted EBITDA growth of 5%-7% through 2027, 2026 adjusted EBITDA growth in the low teens, and parent free cash flow in the upper half of $1.15B-$1.25B for 2025. The Q1 2026 10-Q contains no updated guidance and states that the company no longer discloses adjusted EPS beginning in the first quarter of 2026.
Trajectory
Revenue has turned higher in recent quarters: $2,855M in Q2 FY2025, $3,351M in Q3, $3,101M in Q4, and $3,180M in Q1 FY2026. Gross margin expanded from 15.9% in Q2 FY2025 to 20.1% in the latest quarter, and EBITDA margin reached 32.0%. The improvement is driven by new renewables projects entering service, Ohio rate-case benefits, and development-services revenue, partly offset by Energy Infrastructure declines.
The Model
The model projects FY+1 revenue of $12,900 million with EBITDA of $3,831 million, a 29.7% margin, followed by FY+2 revenue of $13,950 million and EBITDA of $4,380 million, a 31.4% margin. Near-term revenue is anchored by contracted renewables and utilities growth; FY+2 adds the next tranche of backlog conversion and data-center load.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $12.2B | $12.9B | $13.9B |
| YoY Growth | — | +5.5% | +8.1% |
| EBITDA | $3.3B | $3.8B | $4.4B |
| EBITDA Margin | 26.9% | 29.7% | 31.4% |
Projections are the median of 5 independent model runs. The model’s revenue sits 3.3% above analyst consensus.
Management reaffirmed 2025 adjusted EBITDA of $2.65B-$2.85B, adjusted EPS of $2.10-$2.26, long-term adjusted EBITDA growth of 5%-7% through 2027, 2026 adjusted EBITDA growth in the low teens, and parent free cash flow in the upper half of $1.15B-$1.25B for 2025. The Q1 2026 10-Q contains no updated guidance and states that the company no longer discloses adjusted EPS beginning in the first quarter of 2026.
What Could Go Right — and Wrong
- Indiana data-center deals sign at the upper end of the 1.5-2.5 GW range management expects.
- Q4 2025 PPA signings reach at least 1.8 GW, meeting the 4 GW full-year target.
- Safe harbor of an additional 3-4 GW is completed before July 4, 2026, extending tax credits through 2030.
- Development-services revenue continues after the first DTA: $322M remaining performance obligations, with $190M expected in the rest of 2026 and $127M in 2027.
- Petersburg 1.2 GW gas repowering reaches commercial operation in 2026.
- Q4 2025 PPA signings miss the 4 GW target and backlog drawdown outpaces replenishment.
- Indiana data-center deals slip or shrink below the expected 1.5-2.5 GW range.
- Maritza PPA expiry in 2026 and continued Energy Infrastructure revenue declines offset renewables and utilities growth.
- Supply-chain concentration: AES relies on a small number of suppliers and on Fluence for many storage projects; a disruption would slow construction.
- The pending acquisition fails to close, leaving unresolved sale-process litigation and capital-structure changes to work through.
Looking Ahead
Over the next twelve months, the signposts are the AES Indiana final rate order in Q2 2026, the safe-harbor window before July 4, 2026, the Petersburg gas repowering in 2026, and the expected Uplight sale close in the second half of 2026. The pending GIP/EQT acquisition close and the undisclosed August 5, 2026 material agreement are the key corporate-path items.
- 2026Petersburg gas repowering operational — 1.2 GW coal-to-gas conversion expected in service during 2026.
- Second half 2026Uplight sale expected to close — Tests exit of 25% stake; up to $40M total consideration.
- End of 2026Moody's FFO/net-debt target — 12% target by end of 2026; tests balance-sheet path.
- No date providedGIP/EQT acquisition close — Stockholder approved June 26, 2026; closing not confirmed.
- 2028$400M beyond-2027 EBITDA — Full-year impact of projects online during 2027.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $12.3B | $12.2B | $12.5B | -0.4% |
| Gross Margin | 18.8% | 17.9% | 19.3% | 85bps |
| EBITDA | $3.3B | $3.3B | $34.4B | -0.2% |
| EBITDA Margin | 26.9% | 26.9% | 28.9% | +6bps |
| Net Income | $1.8B | $897M | $1.3B | -49.7% |
| Free Cash Flow | −$4.6B | −$1.6B | −$11.6B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)19.3%
- EBITDA Margin (TTM)28.9%
- Net Margin (TTM)10.7%
- ROIC4.8%
- FCF Conversion-41.0%
- SBC / Revenue0.0%
The Company
AES operates as a global power company across four segments: Renewables, Utilities, Energy Infrastructure, and New Energy Technologies. Its direct link to AI infrastructure is electricity, delivered through long-term renewable power purchase agreements to data-center customers and through regulated utilities in Indiana and Ohio. The 10-K describes AES as a leading provider of renewable energy to data center companies and large mining companies.
The company develops, constructs, owns, and operates generation and regulated utility assets across ten countries and operates six utilities serving 2.7 million customers. It relies on suppliers such as Fluence for battery storage and on a small number of fuel and transportation suppliers.
Business Segments
Competitive Landscape
AES competes for renewable and data-center power contracts; the source set's neighbor evidence highlights Constellation Energy. Management's argument rests on time to power: a ready-to-build development pipeline, a domestic supply chain, safe-harbored tax credits, and the ability to bundle renewables, storage, transmission, and gas.
- Constellation EnergyThe supply-chain intelligence note reports Constellation Energy confirmed data-center demand remained strong but noted some customers pausing pending PJM regulatory clarity.
Supply Chain
AES sits between equipment suppliers and large corporate power buyers, converting equipment and fuel into operating generation and utility capacity for data-center and industrial customers.