Kinder Morgan, Inc. (KMI) | The Buildout — AI Infrastructure
The Verdict
Kinder Morgan is a midstream energy company. It owns and operates the pipelines, compression, storage caverns, terminals and tankers that sit between gas producers and the end users who burn or export the fuel. For the AI buildout, the exposure is indirect: AI and data centers raise electricity demand, utilities add gas-fired generation, and that generation needs firm gas transportation and storage. KMI does not own data centers or power plants and sells no AI hardware. Its role is moving and holding the molecules, and that work sits inside its Natural Gas Pipelines segment.
| 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
- Two consecutive quarters of broad-based outperformance. Q1 2026: every segment grew and beat budget. Q2 2026: each business unit contributed to year-over-year growth.
- Guidance raised twice in six months. The incremental-over-budget EBITDA figure moved from more than $250M in Q1 2026 to more than $430M in Q2 2026.
- Leverage fell to 3.6x at Q2 2026 from 3.8x at the start of the year, while the company closed the $500M Monument acquisition and spent $1.92B of capital in H1 2026. Management says 3.6x is the lowest for a Kinder Morgan entity since well before its 2014 consolidation.
- Contracted revenue visibility: $35B of remaining performance obligations from contracts with customers — $4B remaining in 2026, $5B in 2027 and $26B for 2028 and beyond.
- A developed opportunity set: more than 10 Bcf/d of power-sector gas demand and approximately 3 Bcf/d of LNG in various stages of development.
What We’re Watching
- The sanctioned backlog fell to $9.6B in Q2 2026 from about $10.1B, on more than $650M placed into service against roughly $200M of additions. Management committed to at least $1B of H2 2026 additions; that is unproven.
- Products Pipelines volumes keep shrinking: refined products -5% and crude and condensate -16% (-5% excluding Double H) in Q2 2026. The crude trend ex-Double H flipped from +2% in Q1 to -5% in Q2.
- Part of the beat is not repeatable. Management says non-recurring items are less than half of full-year outperformance, and that commodity prices are 'out of our hands.' It has not disaggregated the two.
- Execution gates: Mississippi Crossing and South System Expansion 4 were awaiting FERC certificates expected by end-July 2026, compression and turbine lead times are lengthening, and the Northeast expansion remains stalled by permit and commercial hurdles.
The thesis is strengthening on demand and execution but mixed on conversion. Two quarters of broad budget beats, two guidance raises and a leverage ratio at 3.6x show a base business running well and a balance sheet with room. Against that: the sanctioned backlog fell sequentially, management itself flags a non-recurring share of the outperformance, and the largest growth claims sit in a development-stage opportunity set rather than signed contracts. The open question is whether H2 2026 project additions meet the at-least-$1B floor and lift the backlog back above $10B.
Earnings
Kinder Morgan reported Q2 2026 revenue of $4,477M at a 68.6% gross margin. Management said adjusted EBITDA rose 12% year over year and adjusted EPS rose 32% to $0.37, with net income attributable to KMI of $867M and GAAP EPS of $0.39, up 22%. The company described it as a record second quarter for both net income and adjusted EBITDA, with each business unit contributing to the year-over-year growth.
| 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% |
| Project backlog | $9.6B | ~$10.1B | n/a | — |
I wouldn't take that as that's all we're going to do in the last half of this year.— Richard Kinder, Executive Chairman, 2026-07-22
Management tone: Tone escalated across the two 2026 calls. Q1 2026 opened on 'the best I can remember'; Q2 2026 on 'another strong quarter' and a reputational anchor — the Executive Chairman cited a 29-year record, approximately 22% enterprise-value CAGR and over $40B of dividends paid. Language on the project pipeline strengthened too: from expecting 'a meaningful amount' of conversions in Q1 to expecting to FID 'very substantial additional CapEx projects' in Q2. Management also restated its own conservatism, saying it tries to be 'somewhat conservative' on the balance of the year.
Management Guidance
No guidance was withdrawn or cut in the record; both 2026 adjustments were raises. Management guides FY2026 adjusted EBITDA to at least 5% above budget — more than $430M of additional EBITDA — and adjusted EPS at least 12% above its original budget. The budget itself was $8.6B of adjusted EBITDA and $1.36 of adjusted EPS. Year-end 2026 net debt to adjusted EBITDA is guided to 3.6x, down from a 3.8x budget. Growth capital is guided at over $3B per year based on the current backlog, and management expects at least $1B of H2 2026 project additions, likely more than offsetting the approximately $1B it expects to place into service. Management states the guide is set conservatively because commodity prices are not in its control.
Trajectory
Revenue is a rough read on KMI, because roughly half of it is commodity sales with matching costs. Reported revenue has been roughly flat across the trailing four quarters — $4,146M in Q3 2025, $4,508M in Q4 2025, $4,828M in Q1 2026 and $4,477M in Q2 2026 — and EBITDA margin has held between 40% and 44%. The durable layer is contracted: services plus leasing were $2,531M of Q1 2026 revenue, up 6.4% year over year. The volume picture splits. Natural gas transport rose 7% and gathering 26% in Q2 2026, with KinderHawk up 54%. Liquids went the other way: refined products -5% and crude and condensate -16% (-5% excluding Double H).
The Model
The model projects FY+1 revenue of $18,600M and EBITDA of $8,091M, a 43.5% margin. For FY+2 it projects revenue of $19,760M and EBITDA of $8,694M, a 44.0% margin. The near-term case rests on the contracted services base and the $9.6B sanctioned backlog. The FY+2 step-up depends on the development-stage opportunity set — more than 10 Bcf/d of power-sector demand and approximately 3 Bcf/d of LNG — converting into signed projects, which management says it cannot time.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $16.9B | $18.6B | $19.8B |
| YoY Growth | — | +9.7% | +6.2% |
| EBITDA | $7.3B | $8.1B | $8.7B |
| EBITDA Margin | 42.9% | 43.5% | 44.0% |
Projections are the median of 5 independent model runs. The model’s revenue sits 5.4% above analyst consensus.
No guidance was withdrawn or cut in the record; both 2026 adjustments were raises. Management guides FY2026 adjusted EBITDA to at least 5% above budget — more than $430M of additional EBITDA — and adjusted EPS at least 12% above its original budget. The budget itself was $8.6B of adjusted EBITDA and $1.36 of adjusted EPS. Year-end 2026 net debt to adjusted EBITDA is guided to 3.6x, down from a 3.8x budget. Growth capital is guided at over $3B per year based on the current backlog, and management expects at least $1B of H2 2026 project additions, likely more than offsetting the approximately $1B it expects to place into service. Management states the guide is set conservatively because commodity prices are not in its control.
What Could Go Right — and Wrong
- H2 2026 project additions exceed the at-least-$1B floor, lifting the sanctioned backlog back above $10B and confirming the opportunity set is converting.
- The three data-center deals become named, sized, long-dated contracts, making the AI-linked share of the pipeline book countable.
- Permian Link and Project 219 South reach contracts and FID, adding $1B-plus class projects to the backlog.
- Leverage holds at or below 3.6x while growth capital rises, keeping new projects funded from internally generated cash flow.
- Products Pipelines volumes stabilize, removing the one visibly shrinking part of the portfolio.
- H2 2026 additions miss the at-least-$1B floor, leaving the backlog below $9.6B entering 2027 and undercutting the opportunity-set claim.
- The base business turns out to be weather- and commodity-driven rather than tightness-driven, and management's 'less than half' non-recurring assertion turns out to be optimistic.
- Products Pipelines volumes keep falling and the crude trend excluding Double H stays negative.
- Compression and turbine lead times lengthen enough to push project in-service dates and project economics.
- Haynesville volume growth keeps arriving at a lower margin while the $500M treating and transport capacity completes.
Looking Ahead
The next 12 months turn on conversion. Management has pointed to contract signatures on almost $400M of contingently-approved projects within 'weeks to a month,' at least $1B of backlog additions in the back half of 2026, and 'very substantial additional CapEx projects' before year-end. Two large gas projects, Mississippi Crossing and South System Expansion 4, were awaiting FERC certificates expected by end-July 2026. Trident is around 60% complete with a first phase targeted for Q1 2027. Permian Link is targeted for 2030 in-service and gated on contracts with acceptable returns. The tests are whether the backlog rises above $9.6B and whether year-end leverage lands at the guided 3.6x.
- End of July 2026MSX, SS4 certificates — FERC certificates for two of the largest backlog gas projects.
- Weeks to a monthContingent projects signed — Almost $400M of Board-approved projects in advanced contract talks.
- Back half of 2026Backlog additions — At least $1B of new sanctions, likely offsetting ~$1B placed in service.
- Later this yearMonument expansion capital — Post-close expansion spending on the $500M Texas system gets underway.
- Q1 2027Trident first phase — First phase of the ~2.0 Bcf/d Katy-to-Port Arthur pipeline in service.
- 2030Permian Link in service — Target in-service date; FID gated on contracts at acceptable returns.
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 | $7.7B | +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 | $3.9B | — |
| 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 describes itself as one of the largest energy infrastructure companies in North America. It owns and operates pipelines, storage, terminals and tankers that move and hold natural gas, refined petroleum products, crude oil, condensate, CO2 and renewable fuels. As of December 31, 2025, it reported owning an interest in or operating approximately 78,000 miles of pipelines, 136 terminals, about 706 Bcf of working natural gas storage capacity and RNG generation capacity of about 6.9 Bcf per year of gross production. It sits in the midstream — it neither produces most of the gas nor burns it.
The company runs four reporting segments. Natural Gas Pipelines is the largest, and includes interstate and intrastate pipelines, underground storage, LNG liquefaction and terminal facilities and NGL fractionation, covering transportation, storage, sales, gathering, processing and treating. Products Pipelines covers refined products, crude oil and condensate pipelines plus associated terminals, condensate processing and transmix processing. Terminals covers liquids and bulk terminal facilities plus Jones Act-qualified product tankers moving crude, condensate, refined products and renewable fuel between U.S. ports. CO2 produces, transports and markets CO2 for enhanced oil recovery and owns oil and gas producing fields plus RNG, LNG and landfill gas-to-energy facilities. KMI says most of its pipeline capacity is sold under long-term take-or-pay contracts.
Business Segments
Competitive Landscape
Kinder Morgan competes corridor by corridor. Management points to existing right-of-way — on Project 219 South it notes four pipes already run through the same corridor — and to storage, with more than 700 Bcf in play, as the differentiators. But it describes the competitive field plainly: the Southeast is 'highly competitive,' Permian Link is 'still competitive,' and management declined to discuss its Double H NGL expansion 'because it's so competitive.' It named Boardwalk's Borealis project as a competitor on the Northeast corridor.
- Energy Transfer (ET)Named in the supply-chain wiring map as a competitor and as the 50/50 partner with KMI's Citrus in the Florida Gas Transmission joint venture. The neighbor read-through cites ET's raised 2026 EBITDA guidance and its Desert Southwest Pipeline.
- BoardwalkNamed in the Q2 2026 call as developer of the Borealis project competing with KMI's TGP Project 219 South; management declined to discuss it.
- CO2 resource owners (McElmo Dome, Bravo Dome, Sheep Mountain)The 10-K names suppliers with ownership interests in these CO2 resources as KMI's primary competitors for CO2 sales.
Supply Chain
Kinder Morgan sits in the midstream, between gas producers and processing plants on one side and LNG terminals, power plants, utilities, industrials and refiners on the other. It buys compressors, turbines, pipe and valves to build capacity.
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