The Southern Company (SO) | The Buildout — AI Infrastructure
The Verdict
The Southern Company is a holding company that owns three vertically integrated electric utilities in the Southeast, a wholesale power generator, and a natural gas distribution business. It does not sell a technology product; it sells the electricity, grid capacity, and interconnection that data centers need to run. Its role in the AI build-out is as a regulated power provider to large-load and hyperscale customers, served through long-term bilateral contracts and through the generation and transmission built to supply them.
| Market Cap | — |
| Revenue (TTM) | $30.2B |
| Revenue Growth | +6.4% |
| EBITDA Margin (TTM) | 44.2% |
| Net Debt | $74.1B |
| Earnings Beats | 5 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Contracted large load is over 17 GW by the mid-2030s, up roughly 6 GW in one quarter from over 11 GW, after four projects including the 3.2 GW OpenAI contract.
- The prospective pipeline remains well above 75 GW, with 8 GW in late stages and 3 GW projected to be finalized near term.
- 10 GW of approved company-owned generation is under construction — thermal, battery, and solar, plus hundreds of miles of new transmission.
- Large-load contracts carry minimum bills covering 100% of incremental cost to serve and about $21 billion of portfolio collateral targeting an A- or better position.
- The remaining equity need through 2030 was cut to $1.1 billion from $1.8 billion, alongside $26.5 billion of DOE loans and a stated path to 17% FFO to debt by 2029.
What We’re Watching
- Ramp timing: management says project ramps 'may not be what was predicted,' and the 3 GW near-term finalization does not begin service until 2028 and beyond.
- RFP outcomes: Georgia and Alabama selections land by year-end 2026 with certification through much of 2027, and none of that capital is in the current plan.
- Conversion risk on the late-stage bucket: of the 8 GW in late stages, only 3 GW is projected to finalize near term; the remaining 5 GW is not yet near-final.
- The rate stability timeline is inconsistent in the record: prepared remarks say Georgia and Alabama through 2029, while one Q&A response said through 2028.
The thesis reads as strengthening on the contracted side of the business. Contracted load, the pipeline, the approved build-out, and the financing picture all moved in the right direction across 2026, and the OpenAI contract is the source's described landmark large-load contract. The near-term reported economics are less clean: revenue grew 8.0% in Q1 2026 while operating income grew 0.4%, with wind-repowering depreciation, fuel and gas costs, and interest expense all dragging. The open question is whether the contracted load ramps on schedule and whether the RFPs add company-owned generation to the capital plan.
Earnings Beat
Q2 2026 revenue was $6,977M at a 51.3% gross margin and $3,210M of EBITDA, or 46.0% of revenue. Adjusted EPS was $1.13, $0.21 higher than the second quarter of 2025. Data-center usage rose 55% year over year and 49% year-to-date, and the CFO said weather-normal retail sales growth through June was the highest in nearly two decades.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $7.0B | $8.4B | $7.0B | +0.1% |
| Gross margin | 51.3% | 46.5% | 50.1% | +120bps |
| EBITDA | $3.2B | $3.6B | $3.2B | −0.1% |
| EPS | $1.03 | $1.20 | $0.80 | +29.2% |
| Contracted large load | >17 GW | >11 GW | n/a | +~6 GW QoQ |
| Data center usage growth | +55% | +42% | n/a | — |
The load is very real. And so we know it may not be there initially, but we know that it is coming.— Christopher C. Womack, CEO, 2026-07-30
Management tone: On the Q1 2026 call, management was confident on operational momentum but did not reaffirm full-year 2026 EPS guidance even after a strong quarter. On the Q2 2026 call, management reaffirmed the annual range and pointed it near or at the top, gave a Q3 estimate, and detailed collateral, contract structure, and RFP timing. Management was direct on new nuclear and corrected a collateral figure mid-answer.
Management Guidance
Management projects full-year 2026 adjusted EPS near or at the top of the $4.50 to $4.60 range, with a Q3 2026 adjusted EPS estimate of $1.50. Retail base rates are held stable in Georgia and Alabama until 2029 in prepared remarks, with one Q&A response saying through 2028. RFP selection is expected by year-end 2026 and certification through much of 2027; none of that capital is in the current plan, and the rule of thumb is about $2 billion per 1 GW of new generating capacity.
Trajectory
Revenue has moved with seasonal and pass-through swings: $7,823M in Q3 FY2025, $6,981M in Q4 FY2025, $8,397M in Q1 FY2026, and $6,977M in Q2 FY2026, with TTM revenue of $30,178M at a 44.2% EBITDA margin. Code-computed signals describe a decelerating revenue trajectory and compressing margins. The Q1 2026 filing shows revenue up 8.0% while operating income rose just $8 million, as fuel and purchased power rose $193M, cost of natural gas rose $252M on a 38.0% gas price increase, and depreciation rose $134M — including $127M of accelerated depreciation tied to wind repowering at Southern Power.
The Model
The model projects FY+1 revenue of $30,775M and EBITDA of $13,603M, a 44.2% margin, and FY+2 revenue of $32,155M and EBITDA of $14,309M, a 44.5% margin. The near term is anchored by the base utility: weather-normal retail sales growth, the 10 GW build under construction, and rate stability through 2028/2029. FY+2 reflects the beginning of the contracted large-load ramp, with the OpenAI contract taking service in phases beginning 2028.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $29.6B | $30.8B | $32.2B |
| YoY Growth | — | +4.1% | +4.5% |
| EBITDA | $13.2B | $13.6B | $14.3B |
| EBITDA Margin | 44.6% | 44.2% | 44.5% |
Projections are the median of 5 independent model runs. The model’s revenue sits 0.7% below analyst consensus.
Management projects full-year 2026 adjusted EPS near or at the top of the $4.50 to $4.60 range, with a Q3 2026 adjusted EPS estimate of $1.50. Retail base rates are held stable in Georgia and Alabama until 2029 in prepared remarks, with one Q&A response saying through 2028. RFP selection is expected by year-end 2026 and certification through much of 2027; none of that capital is in the current plan, and the rule of thumb is about $2 billion per 1 GW of new generating capacity.
What Could Go Right — and Wrong
- The 8 GW late-stage pipeline converts faster than the 3 GW guided, lifting total contracted plus late-stage large load above 25 GW.
- Georgia and Alabama RFPs select company-owned resources, adding incremental rate-base capital at roughly $2 billion per 1 GW.
- Southern Power recontracts rolling-off tolling agreements at higher prices, which management says contributes to the durability of the long-term plan.
- Demand response becomes standard in large-load contracts after its first use for a data center in the OpenAI deal.
- New nuclear engagement converts into a structured arrangement with federal and hyperscaler cost-overrun participation.
- Ramp slippage: OpenAI or the Alabama projects push service dates meaningfully past 2028 while capital is already being spent.
- RFPs select third-party resources instead of company-owned generation, removing the incremental rate-base growth from the load.
- A regulatory turn — a hostile commission, an earlier rate case, or county-level moratoriums spreading into the territory.
- Counterparty or collateral failure on a large contract, given the 3.2 GW, 25-year exposure to a counterparty that may not be investment grade.
- The equity need re-expands above $1.1 billion, pressuring the stated path to 17% FFO to debt by 2029.
Looking Ahead
The next 12 months turn on conversion. Georgia and Alabama RFP selections are expected by year-end 2026, with certification through much of 2027 and none of that capital in the current plan. Three gigawatts of late-stage large load is projected to be finalized near term, with ramp-up in 2028 and beyond. The OpenAI contract begins service in phases from 2028, and Southern Power continues recontracting tolling agreements rolling off into the next decade.
- Near term3 GW load finalization — Conversion of late-stage large load into signed contracts.
- Q3 2026Q3 2026 earnings — Management guides Q3 adjusted EPS of $1.50.
- Year-end 2026Georgia, Alabama RFP picks — Tests whether company-owned generation joins the capital plan.
- 2027RFP certification — Selected resources move through certification through much of 2027.
- 2028OpenAI service begins — 3.2 GW Georgia contract takes service in phases from 2028.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $26.7B | $29.6B | $30.2B | +10.6% |
| Gross Margin | 49.8% | 43.0% | 43.4% | 675bps |
| EBITDA | $12.3B | $13.2B | $13.3B | +6.7% |
| EBITDA Margin | 46.2% | 44.6% | 44.2% | 160bps |
| Net Income | $4.4B | $4.3B | $4.7B | -1.4% |
| Free Cash Flow | $201M | −$3.2B | $2.6B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)43.4%
- EBITDA Margin (TTM)44.2%
- Net Margin (TTM)15.4%
- ROIC5.1%
- FCF Conversion19.3%
- SBC / Revenue0.4%
The Company
The Southern Company is a holding company that owns three traditional electric operating companies — Alabama Power, Georgia Power, and Mississippi Power — plus Southern Power and Southern Company Gas. The electric utilities are vertically integrated, owning generation, transmission, and distribution facilities and serving retail customers in three Southeastern states plus wholesale customers. Southern Power develops, owns, and operates power generation assets, including battery energy storage, and sells electricity at market-based rates. Southern Company Gas distributes natural gas in Illinois, Georgia, Virginia, and Tennessee.
The company's AI linkage is as a power provider, not a technology vendor. Georgia Power signed a 3.2 GW, 25-year electric service contract with OpenAI at a site near Savannah, including 1 GW of flexible demand response and service in phases beginning 2028. The generation fleet spans nuclear, coal, natural gas, hydro, solar, wind, battery storage, fuel cells, and cogeneration, with assets including the Farley, Hatch, and Vogtle nuclear plants and large gas fleets across Alabama and Georgia.
Business Segments
Competitive Landscape
The source material does not describe a competitive set for the regulated electric utilities, which serve a regulated service territory. For natural gas distribution, the 10-K names the competitive set as 'electric utilities and fuel oil and propane providers serving the residential, commercial, and industrial markets in their service areas for customers who are considering switching to or from a natural gas appliance.'
- Duke Energy (DUK)Named in the source's inferred competitive wiring as serving data center power supply in the Southeast; not discussed by the company.
- NextEra Energy (NEE)Named in the source's inferred competitive wiring as a Southeastern utility with data center demand; not discussed by the company.
- Dominion Energy (D)Named in the source's inferred competitive wiring for hyperscale data center power supply and nuclear generation; not discussed by the company.
- American Electric Power (AEP)Named in the source's inferred competitive wiring for data center power supply in other regions; not discussed by the company.
- Entergy (ETR)Named in the source's inferred competitive wiring as an electric utility; not discussed by the company.
Supply Chain
The Southern Company sits between equipment and fuel suppliers and the data centers and ratepayers it serves. It buys turbines, transformers, fuel, and construction labor, then sells regulated electricity and wholesale power. Most supplier relationships in the source are inferred from wiring rather than documented in filings.
More on SO: Earnings recap