USA Compression Partners, LP (USAC) | The Buildout — AI Infrastructure
The Verdict
USA Compression Partners owns and operates natural gas compression units and, through J-W Power, manufactures compression packages. It does not sell into AI directly; its relevance to the AI buildout is indirect—natural gas demand from power generation, including data-center load, requires more compression to move gas from wellhead to pipeline. Its physical horsepower platform is part of the gas infrastructure that underpins that power demand.
| Market Cap | — |
| Revenue (TTM) | $1.1B |
| Revenue Growth | +12.2% |
| EBITDA Margin (TTM) | 58.2% |
| Net Debt | $3.0B |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Fleet of approximately 4.95 million horsepower at 92% utilization as of Q2 2026.
- Remaining performance obligations of $1,219.5 million as of March 31, 2026, with $560.0 million due in the rest of 2026.
- Nearly 110,000 new horsepower expected in 2026, over 90% already contracted.
- Engine and package orders placed into 2028 and a portion of 2029, with 2030 under consideration.
- Q2 leverage of 3.72x, just below the 3.75x near-term target, despite higher expansion capex.
What We’re Watching
- Adjusted gross margin has fallen from 66.8% in Q4 2025 to 64.4% in Q1 2026 and 63.5% in Q2 2026; management expects slight sequential improvement later this year into 2027.
- Lube-oil cost expected to rise about $1 million per month in 2H 2026, with no direct pass-through.
- J-W synergy target of $10–20 million annual run-rate by year-end 2027 is tracking but not yet achieved.
- Elevated stops in Q2 and weaker idle-unit pricing could pressure utilization if they persist.
The thesis is intact and, on demand visibility, strengthening: 2027 and 2028 capacity is being contracted far earlier than historical norms, and management has formalized a 500,000-horsepower buildout. The open question is whether margins can recover—J-W mix and lube-oil costs have compressed adjusted gross margin, and the efficiency and synergy offsets are not yet visible.
Earnings
In Q2 2026, USA Compression reported total revenues of $342.1 million, up 37% year over year. Contract operations revenue was $304.9 million, up 34%, and parts and service contributed $22.1 million. Adjusted gross margin was 63.5%, and net income was $45.7 million.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $331M | $252M | $245M | +35.1% |
| Gross margin | 38.1% | 38.2% | 66.7% | -2860bps |
| EBITDA | $178M | $151M | $140M | +27.3% |
| EPS | $0.27 | $0.22 | $0.17 | +54.5% |
| Revenue per revenue-generating HP/month | $22.84 | $22.73 | n/a | +7% y/y |
We continue to maintain our full year adjusted EBITDA range of $770 million to $800 million, distributable cash flow range of $480 million to $510 million, maintenance capital range of $60 million to $70 million and expansion capital range of $230 million to $250 million.— Christopher Paulsen, Chief Financial Officer, 2026-08-04
Management tone: Management's tone stayed confident and measured across Q1 and Q2. The Q2 call added concrete out-year commitments—the formal 500,000-horsepower plan and 2027/2028 contracted percentages—while also disclosing elevated stops, softer idle-unit pricing, and a $1 million per month lube-oil headwind. Guidance was held and distribution expectations were tempered.
Management Guidance
Management maintained FY2026 guidance in Q2: adjusted EBITDA $770–800 million, distributable cash flow $480–510 million, maintenance capital $60–70 million, and expansion capital $230–250 million. Expansion capital includes $38 million of non-compression related capital per press release footnotes. Management also expects nearly 110,000 new horsepower in 2026, over 90% contracted, and Q2 leverage came in at 3.72x, below the 3.75x near-term target.
Trajectory
Revenue trajectory is accelerating; the J-W acquisition drove the Q1 2026 sequential jump to $331.3 million, and Q2 was the first full combined quarter at $342.1 million, up 37% year over year. Adjusted gross margin stepped down from 66.8% in Q4 2025 to 64.4% in Q1 2026 and 63.5% in Q2 2026, as lower-margin J-W manufacturing and aftermarket mix dilutes the legacy compression platform. Revenue per revenue-generating horsepower reached $22.84 in Q2, up 7% year over year.
The Model
The model projects FY+1 revenue of $1,385 million and EBITDA of $783 million at a 56.5% margin, rising to $1,510 million and $883 million at a 58.5% margin in FY+2. Near-term revenue is anchored by the first full year of J-W contribution, contracted 2026 horsepower, and pricing near $22.84 per revenue-generating horsepower per month. FY+2 adds another year of approximately 2.5% fleet growth and a fuller contribution from J-W synergies and efficiency-driven margin recovery.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $998M | $1.4B | $1.5B |
| YoY Growth | — | +38.8% | +9.0% |
| EBITDA | $593M | $783M | $883M |
| EBITDA Margin | 59.4% | 56.5% | 58.5% |
Projections are the median of 5 independent model runs. The model’s revenue sits 4.1% above analyst consensus.
Management maintained FY2026 guidance in Q2: adjusted EBITDA $770–800 million, distributable cash flow $480–510 million, maintenance capital $60–70 million, and expansion capital $230–250 million. Expansion capital includes $38 million of non-compression related capital per press release footnotes. Management also expects nearly 110,000 new horsepower in 2026, over 90% contracted, and Q2 leverage came in at 3.72x, below the 3.75x near-term target.
What Could Go Right — and Wrong
- 2027 and 2028 contracted percentages rise further from roughly 50% and mid-teens, locking in the multiyear buildout.
- Adjusted gross margin inflects higher as J-W contract migration and $10–20 million of run-rate synergies are realized by year-end 2027.
- Extended engine lead times persist, preserving USAC's early-order and in-house manufacturing advantage.
- Idle J-W horsepower is redeployed, adding revenue without new-build lead times.
- Data-center and LNG gas demand materializes, supporting management's 4–6 Bcf/d data-center increment and 30+ Bcf/d total demand growth.
- Engine deliveries slip further from already 200-week lead times, delaying deployments.
- Lube-oil costs of about $1 million per month in 2H 2026 are not recovered through pricing or CPI-U escalators.
- Elevated stops continue and idle-unit pricing stays weak, pressuring utilization.
- J-W margin dilution persists if integration and telemetry efficiencies arrive later than planned.
- A commodity or macro reversal reduces customer contracting and makes forward-ordered engines harder to redeploy at favorable economics.
Looking Ahead
The next twelve months revolve around execution: nearly 110,000 new horsepower in 2026, a 2027 order book about half contracted, and J-W integration work including contract migration and idle horsepower evaluation. Management expects margins to improve slightly quarter-over-quarter later this year into 2027 as telemetry and remote monitoring take hold, while lube-oil costs run at roughly $1 million per month in the second half. A decision on 2030 engine orders is also open.
- 2H 2026Lube-oil contract renewals — Tests pricing and CPI-U offset against roughly $1M/month incremental cost.
- Near term2030 engine order decision — Shows how far management extends out-year capital exposure.
- 2026–2027J-W idle horsepower evaluation — Redeployment could add revenue without new lead times.
- By year-end 2027J-W synergy realization — Tests $10–20M annual run-rate synergy target.
- 2027Telemetry critical mass — Tests predictive maintenance and margin efficiency claims.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $950M | $998M | $1.1B | +5.0% |
| Gross Margin | 67.5% | 59.9% | 51.6% | 760bps |
| EBITDA | $559M | $593M | $3.3B | +6.1% |
| EBITDA Margin | 58.8% | 59.4% | 58.2% | +60bps |
| Net Income | $100M | $111M | $129M | +12.0% |
| Free Cash Flow | $136M | $277M | $1.2B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)51.6%
- EBITDA Margin (TTM)58.2%
- Net Margin (TTM)11.9%
- ROIC7.9%
- FCF Conversion47.9%
- SBC / Revenue0.3%
The Company
USA Compression Partners is one of the largest independent providers of natural gas compression services in the U.S. by total compression fleet horsepower. Its compression services support centralized natural gas gathering systems, processing facilities, pipeline transportation, and gas lift on crude oil wells. It also provides natural gas treating services—CO₂ and H₂S removal, cooling, and dehydration—and, after the J-W Power acquisition, manufactures compression units at Longview and Kilgore, Texas.
The partnership operates a single reportable segment, all within the U.S. As of Q2 2026, total fleet horsepower was approximately 4.95 million, with 92% utilization and revenue per revenue-generating horsepower of $22.84 per month. The J-W acquisition added approximately 1.037 million horsepower and in-house manufacturing; Q2 2026 was the first full combined quarter. Energy Transfer affiliated entities are related parties, with $15.895 million of related-party revenue in Q1 2026, $76.0 million of binding purchase commitments as of March 31, 2026, and a packaging/assembly relationship through Standard Equipment.
Business Segments
Competitive Landscape
USAC competes in a compression market where delivery certainty increasingly matters because engine lead times have reached 200 weeks. The source set treats Kodiak Gas Services as an inferred competitor, not a peer named in USAC's filings; Kodiak reported engine lead times over 180 weeks. USAC's own 10-K emphasizes dependence on a limited number of suppliers as a key vulnerability.
- Kodiak Gas ServicesInferred competitor; reported >180-week lead times.
Supply Chain
USAC sits between gas producers and midstream customers, supplying compression for gathering, processing, pipelines, and gas lift. Its supplier and customer relationships are partly disclosed in the 10-K and 10-Q; Kodiak appears only as an inferred peer.
More on USAC: Earnings recap