Texas Pacific Land Corporation (TPL) | The Buildout — AI Infrastructure
The Verdict
TPL is a Permian Basin land and royalty owner. It does not drill, complete or operate wells. It monetizes the AI data-center and power buildout through what it already owns: surface acreage, easements, water, aggregates, and produced-water desalination for cooling. Its stated role in these projects is capital-light — land, water and aggregates across the life of a development, with the developer carrying the heavy spending. That makes the surface and water position the differentiator, and the conversion of early conversations into signed agreements the thing to watch.
| Market Cap | — |
| Revenue (TTM) | $898M |
| Revenue Growth | +20.8% |
| EBITDA Margin (TTM) | 82.5% |
| Net Cash | $233M |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Two consecutive quarters of record revenue, net income and free cash flow; Q2 2026 revenue was ~$246M and adjusted EBITDA $216M at an 88% adjusted EBITDA margin.
- Project Kilby: a signed agreement to provide land and water to Chevron for a multi-gigawatt power facility supporting a customer data center in Reeves County, Texas. The related Q1 2026 land sale was $43M structured over 20 years, plus a separate water agreement.
- Management says it is in advanced conversations with multiple hyperscalers, AI labs and power generators on 25 gigawatts of projects, and expects at least one major definitive agreement 'in the near term.'
- A ~$100M acquisition of over 10,000 acres in Shackelford and Jones County, a step-out beyond the legacy Permian footprint into a fast-growing data-center region.
- Balance sheet: $248.6M cash and $15.5M total debt as of 2026-06-30, with FY2026 capex guided at $65–$75M.
What We’re Watching
- Whether the 'near term' power/compute definitive agreement(s) are announced. No named PPA, interconnect, utility or COD for any TPL power project appears in TPL-issued evidence.
- Water sales fell 19% sequentially to 663,000 bbl/d on weak in-basin natural gas prices; recovery depends on new gas pipeline capacity entering service 'over the next few quarters.'
- Net line-of-sight wells fell from 20.7 (Q1 2026) to 18.4 (Q2 2026), and the Q2 call gave no normalized lateral-length update.
- Customer concentration: three unnamed customers represented 39.6% of FY2025 total revenues. AI/data-center revenue is not separately disclosed.
The thesis strengthened this year. TPL moved from discussing data-center demand to a signed, named Chevron agreement, a ~$100M out-of-basin land purchase, and a desalination facility entering commissioning, while the legacy royalty and water engine set records. What has not happened is conversion of the 25 GW conversation pipeline into definitive agreements, and AI-linked revenue remains undisclosed. The open question is whether the 'near term' power/compute agreements land and whether the desalination economics hold at commercial scale.
Earnings
Q2 2026 revenue was approximately $246 million, up 4% sequentially and 31% year over year — a quarterly record. TPL has no separate gross margin line; its headline margin metric is adjusted EBITDA margin, which the CFO put at 88% for the quarter, with adjusted EBITDA of $216 million, up 19% sequentially. Oil and gas royalty production set a record at roughly 39,700 Boe/d, up 7% sequentially and 20% year over year.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $246M | $237M | $188M | +31.3% |
| Gross margin | 100.0% | 82.1% | 88.2% | +1180bps |
| EBITDA | $208M | $196M | $157M | +32.5% |
| EPS | $2.23 | $2.07 | $1.68 | +32.6% |
| SLEM revenues | $24M | n/a | n/a | +37% sequentially |
| O&G royalty production | ~39,700 Boe/d | ~37,001 Boe/d | n/a | +20% YoY |
we're in advanced conversations with multiple hyperscalers, AI labs and power generators on 25 gigawatts of projects right now.— Tyler Glover, CEO, 2026-08-06
Management tone: The Q2 2026 call was sharper and more specific than the Q1 call. Management named Chevron and Project Kilby, quantified a 25 GW pipeline, disclosed a nine-figure out-of-basin acquisition, and gave a direct timing expectation — where Q1 had declined to comment on size or counterparty. Management also volunteered unfavorable facts, including water sales down 19% sequentially and a lower line-of-sight well count, while cautioning against over-reading any single quarter.
Management Guidance
On the Q2 2026 call management reaffirmed the fiscal year capital expenditure guide of $65 million to $75 million, after the guide went unmentioned on the Q1 2026 call. Year-to-date 2026 capex was $29 million, and the CFO said H2 spend on colocation cooling and waste-heat capture at Orla Phase 2b was embedded in the original guidance. Management also said it expects the oil cut mix to trend back up to 40%+ over time and produced-water royalty revenue per barrel to stay steady to increasing.
Trajectory
Revenue has climbed across the trailing quarters, from about $188M in Q2 FY2025 to $246M in Q2 FY2026, and the code-computed signal reads accelerating. The royalty line is commodity-driven and TPL is fully unhedged: every $10/bbl move in oil realizations is about $50M of annual revenue. On reported figures, gross margin has compressed about 610 basis points, while operating margin is stable and EBITDA margin is down about 110 basis points. Cash conversion is healthy, with TTM free cash flow at 98% of net income. The soft spot is water sales, down 19% sequentially, and forward completion inventory fell from 20.7 to 18.4 net line-of-sight wells.
The Model
The model projects FY+1 revenue of $990M and EBITDA of $831M (83.9% margin), and FY+2 revenue of $1,110M and EBITDA of $935M (84.2%). The near term is anchored on the legacy royalty and water engine plus early contributions from signed agreements; FY+2 assumes the power-and-compute pipeline begins to convert. The FY+2 revenue spread across the model's five runs is 13%, from $1,075M to $1,224M.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $798M | $990M | $1.1B |
| YoY Growth | — | +24.0% | +12.1% |
| EBITDA | $655M | $831M | $935M |
| EBITDA Margin | 82.0% | 83.9% | 84.2% |
Projections are the median of 5 independent model runs. The model’s revenue sits 0.2% below analyst consensus.
On the Q2 2026 call management reaffirmed the fiscal year capital expenditure guide of $65 million to $75 million, after the guide went unmentioned on the Q1 2026 call. Year-to-date 2026 capex was $29 million, and the CFO said H2 spend on colocation cooling and waste-heat capture at Orla Phase 2b was embedded in the original guidance. Management also said it expects the oil cut mix to trend back up to 40%+ over time and produced-water royalty revenue per barrel to stay steady to increasing.
What Could Go Right — and Wrong
- One of the 25 GW conversations converts into a signed, long-duration power/compute agreement.
- The Shackelford/Jones definitive agreement lands and names the compute customer.
- Orla Phase 2b ramps to 10,000 bbl/d and demonstrates commercial-scale produced-water desalination.
- A separate AI/data-center revenue line is disclosed, ending the 'not known' label.
- The Delaware mix shifts back and the oil cut mix normalizes to 40%+, lifting the highest-value production.
- The 25 GW pipeline fails to convert into definitive agreements on the 'near term' timeline.
- Sustained weak in-basin gas prices or delayed third-party pipeline capacity keep water sales volumes pressured.
- An oil or NGL price decline hits the largest revenue line with no hedge in place.
- The oil cut mix stays mid-30% rather than normalizing to 40%+.
- A documented competitor such as LandBridge converts the same data-center land and water demand first.
Looking Ahead
The next twelve months turn on conversion. Management points to near-term definitive agreements for power/compute and a separate agreement for the Shackelford/Jones project, an Orla Phase 2b ramp toward 10,000 bbl/d, desalination colocation studies 'this year,' and new gas pipeline capacity entering service 'over the next few quarters' that would let Delaware development shift back. It also expects the oil cut mix to normalize to 40%+ over time. None of the largest pipeline items had converted as of the latest filing.
- Very near termShackelford/Jones agreement — Expected after tax-abatement work; may name the compute user.
- Near termPower/compute definitive deal — Tests whether the 25 GW pipeline converts to signed agreements.
- This yearDesal colocation studies — Tests commercial structures for desalination colocation.
- Over the next few quartersNew gas pipeline capacity — Would let Delaware development shift back, lifting water sales.
- Coming quartersOrla operations update — Tests desal economics and commercial terms at scale.
- Over timeOil cut mix to 40%+ — Tests whether the mid-30% oil mix normalizes.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $706M | $798M | $898M | +13.1% |
| Gross Margin | 90.8% | 99.3% | 100.3% | +853bps |
| EBITDA | $564M | $655M | $740M | +16.0% |
| EBITDA Margin | 80.0% | 82.0% | 82.5% | +207bps |
| Net Income | $454M | $481M | $541M | +6.0% |
| Free Cash Flow | $341M | $486M | $527M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)100.3%
- EBITDA Margin (TTM)82.5%
- Net Margin (TTM)60.3%
- ROIC36.9%
- FCF Conversion71.2%
- SBC / Revenue1.9%
The Company
TPL is one of the largest landowners in Texas, with approximately 882,000 surface acres and 224,000 net royalty acres, principally in the Permian Basin. It earns oil and gas royalties, easements, commercial lease income, land-sale proceeds, water sales and produced-water royalties, and it does not drill, complete or operate wells. For the AI buildout it supplies land for data-center and power campuses, water for construction and cooling, and produced-water desalination output.
The company reports in two segments: Land and Resource Management, which manages the surface and royalty acreage, and Water Services and Operations, which provides full-service water offerings through its wholly-owned subsidiary Texas Pacific Water Resources LLC (TPWR). Corporate headquarters are leased space in Dallas, Texas, and TPWR's office is leased in Midland. TPL owns no manufacturing plant, factory or module-assembly capacity. Management describes its emerging power/compute role as capital-light: land, water and aggregates across the life of a project, with the developer carrying the heavy spending.
Business Segments
Competitive Landscape
The 10-K says Land and Resource Management 'has few direct peers,' but adds that any owner of property in comparable areas is a potential competitor. TPWR competes with landowners, water supply and transfer companies, and companies that engage in the sale or treatment of produced water. LandBridge is the documented competitor, pursuing the same data-center land and water demand in the Permian — and it is simultaneously a contractual counterparty to TPL in a reciprocal crossing and produced-water royalty arrangement.
- LandBridge (LB)Documented competitor in Permian surface land monetization for energy, water and data-center uses; also a contractual counterparty in a reciprocal crossing and produced-water royalty/revenue-sharing arrangement.
- ARISSpider-sourced: named doing produced-water treatment for data-center cooling via freeze desalination, overlapping TPL's claimed freeze-desal process.
- FANGSpider-sourced: named in Permian data-center acreage and energy solutions.
- NGLSpider-sourced: named in data-center water and land supply in Reeves County.
Supply Chain
TPL sits upstream in the Permian, owning surface and royalty acreage and providing land, water, aggregates and easements to oil and gas operators and, prospectively, to data-center and power developers. No verified neighbor names TPL; Chevron's own disclosure of a 2.67 GW Microsoft power agreement is the closest direct corroboration.
More on TPL: Earnings recap