Kodiak Gas Services, Inc. (KGS) | The Buildout — AI Infrastructure
The Verdict
Kodiak Gas Services operates large-horsepower natural-gas compression infrastructure that keeps natural gas and oil moving, processed, and transported across key U.S. production basins. Through Kodiak Power Solutions, formed after the April 2026 DPS acquisition, it also supplies natural-gas-fired behind-the-meter and islanded primary power for data centers, plus commissioning power and operations and maintenance.
| Market Cap | — |
| Revenue (TTM) | $1.3B |
| Revenue Growth | +4.0% |
| EBITDA Margin (TTM) | 53.2% |
| Net Cash | $48M |
| Earnings Beats | 3 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- 2026 compression new-unit deliveries are fully contracted; 2027 deliveries are about 50% contracted, and 2028 contracting has begun.
- Compression utilization is 98.2% with revenue per ending horsepower of $23.80, up 4.5% year over year. Average horsepower per revenue-generating unit reached 991 hp, which management says is highest among disclosed peers.
- Compression Infrastructure adjusted gross margin was 70.0% in Q2 2026 despite roughly $1.5 million per month of lube-oil cost pressure.
- Power equipment secured is roughly 1.8 GW toward a 2 GW goal, including a Baker Hughes agreement for 1 GW by 2030 with an option to 1.8 GW.
- The May 2026 equity raise brought leverage to 3.1x at Q2 end, described as the lowest in company history.
What We’re Watching
- West Texas data center limited notice to proceed must convert into a definitive long-term contract; management expects firmer details before year-end 2026.
- The 2026 power delivery figure shifted from about 61 MW on the Q1 call to about 50 MW of new gensets in H2 2026 on the Q2 call, and the materials do not reconcile the difference.
- Lube-oil and fuel costs are expected to remain a margin headwind in H2 2026.
- Power deliveries are back-end loaded: about 50 MW of new gensets in H2 2026, with 2027 deliveries back-end loaded and first large Baker Hughes turbines around early Q4 2027.
Thesis is strengthening: the compression core remains high-margin and contracted, the balance sheet is de-risked, and the company executed its first data-center limited notice to proceed. The open question is whether the power pipeline converts into definitive contracts and delivered megawatts fast enough to justify the secured equipment.
Earnings
Q2 2026 revenue was $391 million, up 21% year over year, and adjusted EBITDA was $217 million, up 22%. Compression Infrastructure adjusted gross margin was 70.0%, while Power Infrastructure generated $33 million.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $346M | $333M | $330M | +4.9% |
| Gross margin | 44.6% | 42.0% | 39.6% | +500bps |
| EBITDA | $185M | $177M | $171M | +8.2% |
| EPS | $0.20 | $0.28 | $0.34 | −39.4% |
| Compression revenue per ending hp | $23.80 | $23.31 | n/a | Up 4.5% y/y |
The biggest driver that allows us to overcome high lube oil prices, which are real is it's the continued incremental gains from pouring this next level training in operational artificial intelligence and machine learning across the fleet. And as we scale that out and roll it up -- roll it out, we're seeing true results. And I say it all the time, like what we see is we truthfully break things less. We fix things when they need to be fixed, not just based on hours and time, and we have higher labor productivity.— John Griggs, 2026-08-07
Management tone: Management tone became more execution-stage on the Q2 call, moving from strategic framing to concrete commercial and operating detail. Management quantified lube-oil pressure at about $1.5 million per month and reaffirmed greater than 15% unlevered power returns with roughly five-year paybacks.
Management Guidance
For FY2026, management raised adjusted EBITDA guidance to $830–860 million, discretionary cash flow to $570–600 million, and Compression Infrastructure adjusted gross margin to 69.0%–70.5%. Compression growth capex was raised to $280–300 million while power growth capex was reduced to $400–450 million on better cost visibility. Power Infrastructure revenue guidance was held at $95–125 million, with power adjusted gross margin held at 60%–70%.
Trajectory
Trailing revenue has turned higher: $322.7 million in Q3 2025, $332.9 million in Q4 2025, and $345.8 million in Q1 2026 before Q2 2026 reported $391 million, up 21% year over year. The Q2 step includes the first full quarter of the DPS power acquisition, so sequential comparison is distorted by deal timing. Compression pricing and utilization are rising, and Compression Infrastructure adjusted gross margin was 70.0% in Q2, down 60 basis points sequentially from 70.6% but inside the top half of the guided range.
The Model
The model projects FY+1 revenue of $1,545 million and EBITDA of $839 million, a 54.3% EBITDA margin. FY+2 revenue is $1,750 million and EBITDA is $950 million, also a 54.3% margin.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $1.3B | $1.5B | $1.8B |
| YoY Growth | — | +18.1% | +13.3% |
| EBITDA | $691M | $839M | $950M |
| EBITDA Margin | 52.8% | 54.3% | 54.3% |
Projections are the median of 5 independent model runs. The model’s revenue sits 1.4% below analyst consensus.
For FY2026, management raised adjusted EBITDA guidance to $830–860 million, discretionary cash flow to $570–600 million, and Compression Infrastructure adjusted gross margin to 69.0%–70.5%. Compression growth capex was raised to $280–300 million while power growth capex was reduced to $400–450 million on better cost visibility. Power Infrastructure revenue guidance was held at $95–125 million, with power adjusted gross margin held at 60%–70%.
What Could Go Right — and Wrong
- West Texas limited notice to proceed converts into a definitive long-term power contract before year-end 2026.
- Additional signed hyperscaler or data-center contracts convert more of the 1.8 GW of secured equipment into revenue.
- Power adjusted gross margin expands above the initial 60%–70% range as the segment scales.
- Power installation accelerates, pulling 2027 back-end-loaded deliveries forward.
- Compression continues recontracting at higher revenue per horsepower and adds purchase-leaseback horsepower.
- West Texas limited notice to proceed fails to convert, or terms disappoint on size, duration, or returns.
- Power pipeline conversion slows, leaving 1.8 GW of equipment secured but underutilized.
- Equipment deliveries slip, especially Baker Hughes turbine deliveries or balance-of-plant components.
- Compression margins fall below the 69%–70.5% guide if lube-oil or fuel costs are not offset.
- A major compression customer is lost or reduces activity.
Looking Ahead
The next 12 months hinge on power contract conversion and equipment delivery. Management expects firmer West Texas data center details before year-end 2026, initial power supply to that project in early 2027, and first large Baker Hughes turbines around early Q4 2027. Compression provides near-term visibility with 2026 new-unit deliveries fully contracted and 2027 about 50% contracted.
- H2 2026~50 MW new gensets — Gensets received and commissioned; tests H2 power delivery.
- Fall 2026Waukesha certification at BEARS Academy — One of two U.S. facilities certified on compressors and gensets.
- Before year-end 2026West Texas data center update — Management expects firmer details; tests contract conversion.
- Early 2027West Texas power supply starts — Initial supply active; tests behind-the-meter and islanded execution.
- Early Q4 2027First Baker Hughes turbines arrive — Large turbine deliveries begin; tests 2027 back-end-loaded ramp.
- By year-end 20302 GW power fleet target — Target for revenue-generating power assets; also 5.2 million hp compression.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $1.2B | $1.3B | $1.3B | +12.8% |
| Gross Margin | 38.1% | 42.2% | 43.5% | +410bps |
| EBITDA | $510M | $691M | $2.2B | +35.5% |
| EBITDA Margin | 44.0% | 52.8% | 53.2% | +885bps |
| Net Income | $50M | $80M | $68M | +61.3% |
| Free Cash Flow | −$9M | $284M | $235M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)43.5%
- EBITDA Margin (TTM)53.2%
- Net Margin (TTM)5.1%
- ROIC30.2%
- FCF Conversion28.4%
- SBC / Revenue1.8%
The Company
Kodiak Gas Services operates large-horsepower natural-gas compression infrastructure that keeps natural gas and oil moving, processed, and transported across key U.S. production basins. After closing the Distributed Power Solutions acquisition on April 1, 2026, it also operates Kodiak Power Solutions, which provides natural-gas-fired behind-the-meter and islanded primary power for data centers, plus commissioning power and operations and maintenance.
The company owns three service facilities in North Dakota and Texas and leases service facilities in twelve states, with headquarters in The Woodlands, Texas. It operates both company-owned and customer-owned equipment, supporting compression, gas treating, and cooling, while Other Services handles station construction, maintenance, overhaul, freight, and parts sales.
Business Segments
Competitive Landscape
The supplied material does not include a detailed competitive discussion by Kodiak, beyond management describing its average horsepower per revenue-generating unit and utilization as highest among disclosed peers. The supplied materials do not name specific competitors.
Supply Chain
Kodiak sits between equipment vendors and natural-gas producers, midstream operators, and data-center power customers. It procures large engines, compressors, turbines, and gensets, then packages and operates them under long-term service contracts.
More on KGS: Earnings recap