Kinder Morgan, Inc. (KMI) | The Buildout — AI Infrastructure
The Verdict
Kinder Morgan moves, stores, and processes natural gas, refined products, crude oil, CO2, and renewable fuels. Its AI infrastructure role is indirect: utilities building gas-fired generation for data-center load rely on KMI's pipelines and storage, making KMI a contracted midstream provider rather than a direct AI vendor.
| Market Cap | — |
| Revenue (TTM) | $18.0B |
| Revenue Growth | +12.7% |
| EBITDA Margin (TTM) | 42.9% |
| Net Debt | $32.2B |
| Earnings Beats | 3 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Q2 2026 expansion backlog of $9.6 billion, backed by a contract-led business model that prefers investment-grade utility and industrial customers.
- Five largest gas pipelines utilized above 90%; key hub tank utilization approximately 99% at Houston Ship Channel and Carteret.
- Approximately 706 Bcf of working natural-gas storage, which management calls a key differentiator for large demand centers.
- Balance sheet at 3.6x net debt/EBITDA with BBB+ equivalent ratings across all three agencies and ~$3.4 billion of incremental capacity to 4.0x.
- Natural Gas Pipelines momentum: Q2 transport volumes +7% YoY, gathering +26%, and KinderHawk gathering +54%.
What We’re Watching
- FERC certificates for MSX and SS4 were expected by end of July 2026; the source package does not confirm receipt.
- H2 2026 backlog-add target is at least ~$1 billion; ~$400 million of board-contingent projects still await contract signatures.
- Q2 refined product volumes fell 5% YoY, crude and condensate fell 16% (down 5% ex-Double H).
- Management sees compression-equipment timeline pressure; Permian Link in-service is targeted around 2030 partly because of long lead times.
The thesis is strengthening on execution: guidance was raised twice, leverage improved to 3.6x, and physical utilization remains tight. The key open question is whether MSX and SS4 permits and H2 backlog conversion materialize at the pace management described.
Earnings
Kinder Morgan reported Q2 2026 revenue of $4,477 million and gross margin of 68.6%. Adjusted EBITDA rose 12% year over year, adjusted EPS was $0.37 (up 32%), and net income attributable to KMI rose 21% to $867 million.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $4.5B | $4.8B | $4.0B | +10.8% |
| Gross margin | 68.6% | 49.0% | 35.7% | +3290bps |
| EBITDA | $2.0B | $2.1B | $1.8B | +11.8% |
| EPS | $0.39 | $0.44 | $0.32 | +21.1% |
| Expansion project backlog | $9.6B | $10.1B | n/a | — |
| Net debt / adjusted EBITDA | 3.6x | 3.6x | n/a | — |
In short, the natural gas story has legs and Kinder Morgan’s strong start to 2026 … supports that view.— Rich Kinder, Executive Chairman, July 22, 2026
Management tone: Management's tone was unusually bullish but disciplined across the Q1 and Q2 calls: guidance was raised twice, Q2 was described as 'another fantastic quarter,' and management stayed guarded on live project negotiations while acknowledging Western Gateway documentation delays.
Management Guidance
For 2026, management expects adjusted EBITDA at least 5% above budget and adjusted EPS at least 12% above the original budget, representing more than $430 million of additional EBITDA. Year-end net debt/EBITDA is guided to 3.6x, improved from the original 3.8x.
Trajectory
Trailing four-quarter revenue growth is 12.7%; Q1 FY2026 revenue was $4,828 million and Q2 FY2026 revenue eased to $4,477 million. Gross margin expanded from 49.0% in Q1 to 68.6% in Q2, while EBITDA margin was 43.9% in Q2, up from 43.0% in Q1. The driver is Natural Gas Pipelines—transport volumes rose 7% and gathering volumes rose 26% year over year—while refined product and crude volumes stayed soft.
The Model
The model projects FY+1 revenue of $18,200 million and EBITDA of $8,536 million (46.9% margin), rising to $19,600 million and $9,506 million (48.5% margin) in FY+2. Near-term revenue is anchored by the contracted natural-gas pipeline backlog; FY+2 assumes continued conversion of the greater-than-$10-billion opportunity set into fee-based projects and sustained gas-demand growth.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $16.9B | $18.2B | $19.6B |
| YoY Growth | — | +7.4% | +7.7% |
| EBITDA | $7.3B | $8.5B | $9.5B |
| EBITDA Margin | 42.9% | 46.9% | 48.5% |
Projections are the median of 5 independent model runs. The model’s revenue sits 5.5% above analyst consensus.
For 2026, management expects adjusted EBITDA at least 5% above budget and adjusted EPS at least 12% above the original budget, representing more than $430 million of additional EBITDA. Year-end net debt/EBITDA is guided to 3.6x, improved from the original 3.8x.
What Could Go Right — and Wrong
- H2 2026 backlog additions exceed the at least ~$1 billion floor, pushing backlog back above $10 billion.
- MSX and SS4 receive FERC certificates and construction stays on schedule and budget.
- Western Gateway post-FID terms show a disciplined project with manageable cost and capacity.
- KinderHawk adds ~1 Bcf/d of treating capacity through 2026 while volumes remain full.
- New named data-center or power-generation contracts make the AI demand story more concrete.
- MSX/SS4 permit timing slips, or early MSX completion fails to convert to early cash flow because customers are not obligated to take capacity early.
- H2 backlog additions miss the ~$1 billion target, leaving backlog around $9.6 billion or lower.
- Commodity and weather tailwinds normalize, and first-half outperformance proves less durable than management frames.
- Competing midstream operators could win gas-to-power projects in KMI's core corridors.
- Compression-equipment lead times delay Trident, MSX, SS4, or Permian Link and raise costs.
Looking Ahead
The next 12 months test conversion. H2 2026 carries management's at least ~$1 billion backlog-add target and ~$1 billion of project placements; Trident's first phase is expected in service Q1 2027, and KinderHawk treating capacity layers in through 2026. Western Gateway terms after FID may clarify cost, capacity, and partner roles.
- End of July 2026MSX and SS4 FERC certificates — Whether certificates landed as management expected; not confirmed in source set.
- Weeks to about a month from Q2 call~$400M contingent projects sign — Contract signatures would move board-contingent projects into backlog.
- H2 2026~$1B placements, ~$1B backlog adds — Tests whether backlog reaccelerates or holds near $9.6B.
- Through 2026KinderHawk treating capacity layered in — ~1 Bcf/d treating capacity on time and budget.
- Q1 2027Trident first phase in service — 216-mile, ~2.0 Bcf/d intrastate line; ~60% complete at Q2.
- ~2030Permian Link targeted in service — NGPL egress tied to power demand; long lead times.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $15.1B | $16.9B | $18.0B | +12.5% |
| Gross Margin | 36.6% | 43.1% | 54.9% | +648bps |
| EBITDA | $6.7B | $7.3B | $65.2B | +7.8% |
| EBITDA Margin | 44.7% | 42.9% | 42.9% | 183bps |
| Net Income | $2.6B | $3.1B | $3.5B | +17.0% |
| Free Cash Flow | $3.0B | $3.6B | $30.1B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)54.9%
- EBITDA Margin (TTM)42.9%
- Net Margin (TTM)19.3%
- ROIC6.5%
- FCF Conversion50.2%
- SBC / Revenue0.0%
The Company
Kinder Morgan owns or operates roughly 78,000 miles of pipelines, 136 terminals, 706 Bcf of working natural-gas storage, and 6.9 Bcf/year of gross RNG generation capacity. Its contracted midstream model moves natural gas, refined products, crude oil, CO2, and renewable fuels; the natural-gas system is the part tied to gas-fired power and LNG feedgas.
The company operates four reported segments—Natural Gas Pipelines, Products Pipelines, Terminals, and CO2—and emphasizes long-term, take-or-pay contracts with investment-grade utilities and industrial customers. Its footprint is weighted toward Texas, the Gulf Coast, and the Southeast, where management sees faster load growth and permitting than in the Northeast.
Business Segments
Competitive Landscape
Management says most data-center and power project situations are competitive, while citing KMI's storage footprint as a key differentiator. The supplied source material does not name individual competitors.
Supply Chain
Kinder Morgan sits between upstream natural-gas supply and downstream gas-fired power, LNG, and industrial demand, providing transportation, storage, gathering, processing, and terminal services.
More on KMI: Earnings recap