NiSource Inc (NI) | The Buildout — AI Infrastructure
The Verdict
NiSource is an energy holding company whose subsidiaries are fully regulated natural gas and electric utilities serving about 3.8 million customers across six states. It does not make chips or servers. It sells the electricity that large data-center customers need, through a structure management calls GenCo in northern Indiana, and it distributes natural gas across Ohio, Pennsylvania, Virginia, Kentucky and Maryland. The data-center side runs through two contracted counterparties, Amazon and Alphabet, who need power faster than new generation can be built. NiSource's pitch is time-to-power: it assembles a pooled generation portfolio — gas turbines, batteries, contracted generation and market purchases — and sells the output under bilateral special contracts approved by the Indiana regulator. The company also applies AI internally, under a program it calls Project Apollo, to cut its own operating costs. Management's transcripts never label the data-center demand as AI; the linkage is inferred from who the counterparties are, and the earnings case rests on contracted load.
| Market Cap | — |
| Revenue (TTM) | $6.9B |
| Revenue Growth | +12.3% |
| EBITDA Margin (TTM) | 45.5% |
| Net Debt | $17.5B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Signed data-center load is roughly 4 GW. The 3 GW in active strategic negotiations and the roughly 2 GW of line of sight sit outside guidance, so converting them would be additive.
- The long-term consolidated adjusted EPS CAGR is 9%–10% for 2026–2033, above base plan adjusted EPS growth of 6%–8% through 2030. The difference is the GenCo and data-center layer.
- Management says the GenCo accretion does not require the company to own all assets and does not run off a return-on-rate-base model, so the incremental earnings come with less balance-sheet intensity than traditional utility capex.
- Customer savings of about $1.4 billion, up to $124 a year per residential customer, are expected to begin flowing as early as the fourth quarter of 2026.
- Regulatory milestones arrived on the dates management gave: the IURC approved the original Amazon special contract in June 2026 and the Alphabet agreement in July 2026, and parties agreed to 90–120 day expedited schedules for future agreements.
What We’re Watching
- The Indiana gas TDSIC order landed the morning of the August 5 call. Management is still evaluating it and says recovery will be pursued through TDSIC, FMCA or a NIPSCO Gas rate case.
- 2026 is back-half weighted: second-quarter adjusted EPS fell to $0.16 from $0.22, and reaching the $2.02–$2.07 full-year guide depends on approved recovery mechanisms, new Virginia and Ohio regulatory activity, and Alphabet energization.
- Second-quarter O&M was elevated by higher-than-usual storm activity and by expenses to keep work going during union negotiations. The 10-Q shows a lockout that began April 2, 2026 and a tentative agreement on April 16.
- Pipeline conversion carries no date. Management declined to comment on undisclosed agreements or on Microsoft and LaPorte County reporting.
The thesis looks intact and, on the regulatory side, strengthening: management raised the growth algorithm in the first quarter of 2026 and held every component of it in the second, and the milestones it promised — the original Amazon contract approval and the Alphabet agreement — arrived on schedule. The questions that remain are about conversion and execution rather than demand. 2026 earnings are back-half weighted, the Indiana TDSIC order leaves a recovery path unresolved, and the 3 GW in negotiations plus roughly 2 GW of line of sight sit entirely outside guidance. The open question is whether the pipeline converts into signed, approved contracts fast enough to keep adding to the guided growth rate.
Earnings Beat
NiSource reported second-quarter 2026 revenue of $1,342.4M and a gross margin of 50.2%. Adjusted EPS was $0.16, down from $0.22 in the year-ago quarter, and GAAP net income available to common was $45.5M, or $0.09 a diluted share, versus $102.2M and $0.22. Management attributed the decline to higher O&M from storm activity and from keeping the workforce going during union negotiations, partly offset by new rates and recovery mechanisms. Year-to-date adjusted EPS was $1.22, up $0.03.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $1.3B | $2.4B | $1.3B | +4.6% |
| Gross margin | 50.2% | 51.0% | 48.7% | +150bps |
| EBITDA | $590M | $1.1B | $550M | +7.4% |
| EPS | $0.09 | $1.05 | $0.22 | −56.3% |
| Adjusted EPS | $0.16 | $1.06 | $0.22 | −27.3% |
You should not interpret that we're looking at the ability to expand further as any sign of a constraint, but more as preplanning so that we can focus on execution.— Michael Luhrs, 2026-08-05
Management tone: The tone shifted from the raise-and-explain register of the first-quarter 2026 call to what the transcript read describes as constructive-but-cautious on regulation and confident-but-disciplined on data centers. The second-quarter call ran the same morning an adverse Indiana gas TDSIC order landed; management said it was still evaluating the order, called it not a reflection of the broader Indiana environment, and stated no change to capital plans or EPS outlook as of that day. GenCo segment reporting was firmed to a date — by the end of the fiscal year — after conditional language the prior quarter. Management disclosed the drivers of the earnings decline directly, declined to comment on Microsoft and LaPorte County reporting, and acknowledged the non-answer on Microsoft in the moment.
Management Guidance
Management reaffirmed 2026 consolidated adjusted EPS guidance of $2.02–$2.07, roughly 8% year-over-year growth at the midpoint, and held every long-term component: base plan adjusted EPS growth of 6%–8% through 2030, consolidated adjusted EPS CAGR of 9%–10% for 2026–2033, base plan rate base growth of 8%–10% through 2030, and consolidated rate base growth of 9%–11%. The five-year capital outlook is unchanged at $21 billion base business plus $2 billion upside plus $7.6 billion GenCo. FFO to debt is committed at 14%–16% in each year of the plan, with annual equity issuance of $400M–$600M. Management said the guidance includes only signed customer contracts, not the 3 GW in strategic negotiations or the roughly 2 GW of line of sight.
Trajectory
Revenue is decelerating on the computed trajectory while margins expand. Second-quarter 2026 revenue of $1,342.4M was up 4.6% from $1,283.0M a year earlier, a slower rate than the 8.2% growth in the first quarter ($2,363.1M versus $2,183.2M). Gross margin was 50.2% in the second quarter against 48.7% a year earlier, and EBITDA margin 44.0% against 42.8%. Reported earnings are seasonal and lumpy — adjusted EPS of $0.16 in the second quarter followed $1.06 in the first, and management calls the second quarter a shoulder quarter, with 2026 growth weighted to the second half. Underneath is a regulated base growing through rate base and recovery mechanisms, with a contracted GenCo layer added on top that management says is not rate-base-driven.
The Model
The model projects FY+1 revenue of $7,113M and EBITDA of $3,279M, a 46.1% EBITDA margin, and FY+2 revenue of $7,660M with EBITDA of $3,547M, a 46.3% margin. The near-term anchor is the base regulated utility, where the growth algorithm was reaffirmed and rate base is guided to grow 8%–10% through 2030. The FY+2 step-up would depend on the GenCo layer — $7.6 billion of GenCo and data-center capital inside a five-year plan of $21 billion base plus $2 billion upside — and on pipeline conversion, since the 3 GW in negotiations and the roughly 2 GW of line of sight sit outside guidance.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $6.6B | $7.1B | $7.7B |
| YoY Growth | — | +7.1% | +7.7% |
| EBITDA | $3.0B | $3.3B | $3.5B |
| EBITDA Margin | 45.2% | 46.1% | 46.3% |
Projections are the median of 5 independent model runs. The model’s revenue sits 5.0% above analyst consensus.
Management reaffirmed 2026 consolidated adjusted EPS guidance of $2.02–$2.07, roughly 8% year-over-year growth at the midpoint, and held every long-term component: base plan adjusted EPS growth of 6%–8% through 2030, consolidated adjusted EPS CAGR of 9%–10% for 2026–2033, base plan rate base growth of 8%–10% through 2030, and consolidated rate base growth of 9%–11%. The five-year capital outlook is unchanged at $21 billion base business plus $2 billion upside plus $7.6 billion GenCo. FFO to debt is committed at 14%–16% in each year of the plan, with annual equity issuance of $400M–$600M. Management said the guidance includes only signed customer contracts, not the 3 GW in strategic negotiations or the roughly 2 GW of line of sight.
What Could Go Right — and Wrong
- Conversion of the 3 GW in active strategic negotiations, or the roughly 2 GW of line of sight, into signed and approved contracts would add revenue and EBITDA on top of a guide that includes only signed contracts.
- Expansion beyond the 9 GW pipeline, which management is pre-planning for land, zoning, transmission, fuel supply and equipment.
- A favorable resolution of the Indiana TDSIC order through FMCA or a NIPSCO Gas rate case would remove a near-term recovery overhang on the gas capital program.
- GenCo segment reporting by the end of fiscal 2026 could show a margin and return profile different from the rate-base business, and successful FERC Section 205 recovery would keep Schahfer compliance costs off the base utility.
- Cost optimization beyond the $40 million line of sight, plus a return to normal weather and resolution of union negotiations, would relieve the O&M pressure that hit the second quarter.
- Adverse Indiana regulatory outcomes beyond the TDSIC order — an affordability technical conference producing a less constructive multiyear rate plan, ROE pressure or tracker disallowances — could slow rate base growth or recovery.
- Execution delays in the GenCo build would push back the contracted load: Amazon load energization begins in 2027 and Alphabet ramps to full capacity by 2030.
- Counterparty credit deterioration at Amazon or Alphabet would challenge the contracted-load case behind the GenCo accretion.
- Union negotiations re-escalating or storm activity staying above normal would add further O&M, on top of a second quarter that already carried higher-than-usual storm activity.
- Failure to convert the pipeline leaves the FY+2 step-up dependent on the base utility alone, and continued GAAP-to-adjusted divergence alongside $400M–$600M of annual equity issuance would weigh on growth rate.
Looking Ahead
The next twelve months carry a dated sequence. Alphabet service is targeted for summer 2026 with load ramping to full capacity by 2030; customer savings of about $1.4 billion, up to $124 a year per residential customer, are expected to start flowing as early as the fourth quarter of 2026; the IURC final order on the Amazon +400 MW amendment is sought by November 2026; and GenCo becomes a reportable segment by the end of the fiscal year. Amazon load energization begins in 2027, and Virginia and Kentucky rate case decisions are expected in the first half of 2027. The Indiana affordability technical conference that began August 7, 2026 will inform when the company files rate cases, with the multiyear rate plan filing still expected in the second half of 2028.
- Summer 2026Alphabet energization — First load served under the 340 MW, 15-year contract; ramp runs to 2030.
- November 2026Amazon final order — IURC order sought on the +400 MW amendment and associated PPA.
- Q4 2026Customer savings begin — ~$1.4B in bill credits, up to $124 a year per residential customer.
- End of fiscal 2026GenCo segment reporting — Isolates the data-center economics for the first time.
- 1H 2027Virginia, Kentucky rate cases — Commission decisions in two new rate jurisdictions.
- 2H 2028Indiana multiyear rate plan — Filing tied to the affordability conference outcomes.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $5.5B | $6.6B | $6.9B | +21.8% |
| Gross Margin | 51.5% | 50.5% | 50.8% | 98bps |
| EBITDA | $2.5B | $3.0B | $3.1B | +20.2% |
| EBITDA Margin | 45.8% | 45.2% | 45.5% | 60bps |
| Net Income | $760M | $930M | $905M | +22.2% |
| Free Cash Flow | −$862M | −$420M | −$1.1B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)50.8%
- EBITDA Margin (TTM)45.5%
- Net Margin (TTM)13.2%
- ROIC5.4%
- FCF Conversion-34.7%
- SBC / Revenue0.0%
The Company
NiSource is an energy holding company whose primary subsidiaries are fully regulated natural gas and electric utilities, serving approximately 3.8 million customers in six states. Substantially all revenue and earnings come from those rate-regulated businesses. It reports in two segments: Columbia Operations, which distributes natural gas to roughly 2.4 million residential, commercial and industrial customers in Ohio, Pennsylvania, Virginia, Kentucky and Maryland, and NIPSCO Operations in northern Indiana, which includes NIPSCO Gas at about 0.9 million customers and NIPSCO Electric at about 0.5 million customers across 20 northern Indiana counties. The data-center connection runs through NIPSCO Electric only — the gas utilities have no comparable exposure. The transcripts do not label the demand as AI; management says data-center customers, large-load customers and hyperscalers, and the linkage is inferred from the counterparties.
The company owns generation rather than only buying it. The 10-K plant table lists coal stations at R.M. Schahfer and Michigan City, the Sugar Creek combined-cycle plant, hydro, wind and solar sites — the wind and solar concentrated in White and Jasper counties in Indiana — plus gas storage, LNG and propane facilities. Headquarters is the company-owned Southlake Complex, a 325,000 square-foot building in Merrillville, Indiana. The data-center business sits in a ring-fenced structure management calls GenCo: pooled resources, an initial pool of about 800 megawatts sized to meet load plus reserve margins, made up of combined-cycle gas turbines, batteries, contracted generation and market purchases. GenCo files special contracts with the Indiana regulator, and management says separate CPCN approvals are not required for pooled resources. The pool can be sized in 300 megawatt and 3,000 megawatt increments.
Business Segments
Competitive Landscape
The 10-K frames competition in categories rather than company names: investor-owned, municipal and cooperative electric utilities across the service areas; other regulated and unregulated natural gas intra and interstate pipelines; and alternate fuels such as propane and fuel oil. The data-center-relevant overlap is with other utilities courting the same large-load customers. Duke Energy's Indiana large-load tariffs and data center contracts sit closest to NIPSCO, with AEP's PJM and Ohio data center tariffs also in the competitive set.
- Duke EnergyIndiana large-load tariffs and data center contracts — direct overlap with NIPSCO.
- AEPPJM and Ohio data center tariffs.
- Regulated large loads.
- Hyperscaler contracts.
- Gas distribution.
Supply Chain
NiSource sits at the delivery end of the chain — buying turbines, batteries, transformers, EPC construction and gas supply, then selling power to data centers and to retail customers. Supplier Quanta Services named NiSource directly, expecting its generation work in backlog in the third quarter.
More on NI: Earnings recap