Xcel Energy Inc. (XEL) | The Buildout — AI Infrastructure
The Verdict
Xcel Energy is a regulated electric and natural gas utility serving customers across eight states. It does not sell anything into the AI stack — no chips, servers, racks or cooling. Its AI exposure is demand-side: data centers are a new and very large class of electricity customer, and serving them requires Xcel to build generation, transmission and interconnection. That capital goes into rate base and earns a regulated return, gated at every step by state regulators.
| Market Cap | — |
| Revenue (TTM) | $14.6B |
| Revenue Growth | +4.7% |
| EBITDA Margin (TTM) | 41.8% |
| Net Debt | $38.3B |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- The base plan stands without AI, resting on retiring coal, grid hardening, renewables and Permian oil-and-gas electrification, with 2026 weather-adjusted electric sales guided up 3%.
- Capital line of sight compounded twice, from $7-plus billion above the base plan to $10-plus billion, against a base plan of about $60 billion.
- The equity overhang is largely pre-cleared: roughly $6 billion, or 85%, of the $7 billion five-year base equity need was addressed in six months.
- The data-center contract architecture protects existing customers, with minimum bills, termination fees, credit requirements and incremental cost tests; the Google ESA carries over $1 billion of customer benefits.
- Delivery record: management says it has met earnings guidance for 22 consecutive years, and it won 2,600 MW company-owned in the competitive SPS RFP.
What We’re Watching
- Q3 2026 roll-forward: management is to publish a new five-year capital, financing and sales plan with a '27–'31 view.
- Whether any of the roughly 6 GW of data-center load moves into the base plan rather than staying in the upside bucket.
- Colorado electric rate case decision expected by the end of Q3 2026; management has tied near-term rate-base-to-EPS convergence to Colorado ROE recovery.
- Texas large-load tariff filing, targeted Q3 2026 — the first jurisdiction where disclosed hyperscaler pushback must be absorbed.
Xcel's regulated compounding story looks intact, and the visible capital pipeline has grown in each of the last two quarters. The AI piece is strengthening as a narrative — the Google ESA quantified, the NextEra agreement made definitive, large-load tariffs advancing — but it stays upside that the reaffirmed guidance does not depend on. The open question is whether any of the roughly 6 GW of data-center load moves into the base plan at the Q3 2026 roll-forward.
Earnings
Xcel reported Q2 2026 GAAP earnings of $586 million, or $0.93 per share, versus $444 million, or $0.75, a year earlier. Ongoing earnings were $589 million, or $0.93 per share. Revenue was $3,119 million, with gross margin of 53.1% and EBITDA of $1,398 million, a 44.8% margin. Management highlighted 1 GW of data centers in operation or under construction and 1 GW under signed ESAs.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.1B | $4.0B | $3.3B | −5.1% |
| Gross margin | 53.1% | 44.9% | 47.4% | +570bps |
| EBITDA | $1.4B | $1.5B | $1.3B | +5.1% |
| EPS | $0.93 | $0.89 | $0.76 | +22.5% |
| Data centers in operation or under construction | 1 GW | n/a | n/a | — |
Our base plan has very little data center growth baked into it.— Van Abel, CFO, 2026-07-30
Management tone: Management's tone was constructive and more positive than the prior quarter. The CFO raised the long-term language from 9% to 9-plus percent EPS growth through 2030 and confirmed the change when an analyst asked. In the same quarter, the incremental capital line of sight was raised to $10-plus billion after the SPS RFP award. On the hardest question — the EPS uplift from that award — management deferred the arithmetic to the Q3 roll-forward without disputing the analyst's estimate of about 250 basis points of rate-base uplift.
Management Guidance
Management reaffirmed 2026 ongoing EPS of $4.04 to $4.16 and full-year weather-adjusted electric sales growth of 3%. It reaffirmed 6% to 8-plus percent long-term EPS growth and lifted the 2030 average EPS growth framing to 9-plus percent. The 2026 assumption set has capital rider revenue up $505 million to $515 million, O&M up about 3%, depreciation up about $330 million to $340 million, interest expense up $270 million to $280 million net, and AFUDC-equity up $130 million to $140 million. It assumes constructive outcomes in all pending regulatory proceedings and normal weather patterns.
Trajectory
Revenue has moved on weather, riders and rate outcomes rather than on AI load. Q1 2026 revenue was $4,021 million and Q2 2026 was $3,119 million, on the seasonal swing, with gross margin reaching 53.1% in Q2. The computed trend shows revenue decelerating while margins expand. The operating driver is capital: Q1 2026 operating income rose to $754 million from $677 million a year earlier, helped by $84 million more in non-fuel rider revenue and $36 million more from sales and demand. The same construction program lifts AFUDC-equity, which flows straight to pre-tax income.
The Model
The model projects FY+1 revenue of $14,900 million with EBITDA of $6,273 million, a 42.1% margin. For FY+2 it projects revenue of $15,700 million with EBITDA of $6,798 million, a 43.3% margin. The near term is anchored on the reaffirmed 2026 guidance and the base capital plan. FY+2 assumes continued rate-base growth from the SPS RFP award and the wider capital pipeline, most of which management places beyond 2030.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $14.7B | $14.9B | $15.7B |
| YoY Growth | — | +1.6% | +5.4% |
| EBITDA | $6.0B | $6.3B | $6.8B |
| EBITDA Margin | 40.6% | 42.1% | 43.3% |
Projections are the median of 5 independent model runs. The model’s revenue sits 7.7% below analyst consensus.
Management reaffirmed 2026 ongoing EPS of $4.04 to $4.16 and full-year weather-adjusted electric sales growth of 3%. It reaffirmed 6% to 8-plus percent long-term EPS growth and lifted the 2030 average EPS growth framing to 9-plus percent. The 2026 assumption set has capital rider revenue up $505 million to $515 million, O&M up about 3%, depreciation up about $330 million to $340 million, interest expense up $270 million to $280 million net, and AFUDC-equity up $130 million to $140 million. It assumes constructive outcomes in all pending regulatory proceedings and normal weather patterns.
What Could Go Right — and Wrong
- Additional data-center ESAs signed — 4 GW targeted by year-end 2027, including at least 1 GW by the end of 2026.
- Any of the roughly 6 GW of data-center load moving into the base plan, making guided earnings depend on large load.
- Minnesota approval of the Google ESA, expected early 2027, proving the carbon-free template replicable in Colorado and SPS.
- RFP awards converting into rate base — including the 2,600 MW SPS award — lifting rider revenue and the earnings base.
- Large-load tariffs approved in Texas and New Mexico on terms hyperscalers accept.
- A materially adverse Colorado wildfire outcome would shift attention from growth to balance-sheet defense.
- An unfavorable Colorado electric rate case outcome; management has tied near-term rate-base-to-earnings convergence to Colorado ROE recovery.
- Hyperscaler rejection of the credit and collateral terms in the large-load tariffs, pushing load to other utilities.
- Supply-chain cost inflation or schedule slips pushing projects past their tax-credit windows.
- The data-center pipeline stalling below 6 GW, leaving the incremental line of sight resting on oil-and-gas electrification and transmission.
Looking Ahead
Over the next 12 months the near-term checkpoints are regulatory and procedural more than commercial. The Q3 2026 roll-forward is to reset the five-year capital, financing and sales plan with a '27–'31 view and tighten the 2026 guidance range. The Colorado electric case is expected to decide by end of Q3 2026 and the New Mexico electric case in Q4 2026; Texas is to receive a large-load tariff filing in Q3 and the NSP RFP update is expected by end of 2026. Minnesota approval of the Google ESA is expected in early 2027.
- Q3 2026Capital plan roll-forward — New five-year capital, financing and sales plan with a '27–'31 view.
- End of Q3 2026Colorado electric decision — Whether the settlement is approved constructively; ROE recovery is the swing.
- Q3 2026Texas large-load tariff — First test of hyperscaler acceptance of credit and collateral terms.
- Q4 2026New Mexico electric decision — A dated decision on the New Mexico electric rate case.
- Q4 2026NSP RFP update — Recommendation filing for about 4 GW of renewables by 2030.
- Early 2027Minnesota Google approval — Converts the template project into a delivered precedent.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $13.4B | $14.7B | $14.6B | +9.1% |
| Gross Margin | 45.6% | 47.1% | 48.9% | +155bps |
| EBITDA | $5.3B | $6.0B | $6.1B | +13.3% |
| EBITDA Margin | 39.1% | 40.6% | 41.8% | +150bps |
| Net Income | $1.9B | $2.0B | $2.2B | +4.2% |
| Free Cash Flow | −$2.7B | −$6.8B | −$7.7B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)48.9%
- EBITDA Margin (TTM)41.8%
- Net Margin (TTM)15.3%
- ROIC3.9%
- FCF Conversion-125.8%
- SBC / Revenue0.3%
The Company
Xcel Energy is a regulated electric and natural gas delivery company headquartered in Minneapolis. It serves about 3.9 million electric customers and 2.2 million natural gas customers across eight states: Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin. It generates, purchases, transmits and distributes electricity, and purchases, transports and distributes natural gas.
Xcel operates four utility subsidiaries. Electricity operations span all four; natural gas operations run through NSP-Minnesota, NSP-Wisconsin and PSCo. It earns on the rate base it is permitted to own and the returns regulators allow it, not on a spot price for power, and fuel and gas costs generally pass through. Management describes Xcel as the largest builder of new high-voltage transmission lines in the country and says it may be building 20% of the 765 kV lines in the country.
Business Segments
Competitive Landscape
Xcel competes for large-load customers against other utilities and against third-party developers. Management frames the company's edge as speed to power, a replicable carbon-free portfolio structure, and what it calls among the lowest C&I rates in the country. The source material names few direct competitors; it notes that hyperscalers have choices. The filed record shows no disclosed sole-source dependency.
- NextEra Energy (NEE)Named as a joint development partner; the source notes that as a peer it competes for the same equipment and the same data-center customers.
Supply Chain
Xcel sits between equipment and engineering suppliers and large customers. The 10-K flags stretched supply chains for combustion turbines, transformers and large electrical equipment, and a strained labor market. Its own mitigants are Tier 1 partnerships and slotted equipment.
More on XEL: Earnings recap