NRG Energy, Inc. (NRG) Earnings & Analysis

Latest quarter

NRG reported Q2 FY2026 revenue of $7.5 billion, up 11.0% from $6.7 billion a year earlier. Revenue exceeded the consensus of $5.9 billion, while adjusted EPS of $1.49, as the consensus counts it, was below the $1.66 consensus.

The filing reports diluted EPS of $2.31, compared with −$0.62 in Q2 FY2025. NRG reported gross margin of 26.9%, versus 16.5% a year earlier, a change of 10.4 percentage points, while operating margin was 13.0%.

NRG said adjusted EBITDA increased $308 million year over year to $1.2 billion, driven primarily by the acquired LS Power portfolio, higher PJM capacity values and Smart Home growth. Bruce Moore said Texas adjusted EBITDA declined $131 million as lower load and power prices reduced operating and optimization opportunities, while East adjusted EBITDA rose $370 million primarily from the acquired portfolio. Moore said Smart Home adjusted EBITDA increased $42 million on customer growth and higher recurring service margin per customer. NRG reported free cash flow of $7.6 billion, compared with $86.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Robert Gaudette said NRG is pursuing a bring-your-own-power project in Texas under principal commercial terms aligned with a global cloud and AI customer. Gaudette said the customer has committed capital to support 1.2 gigawatts of new generation and that the relationship could expand to 2.4 gigawatts. He said NRG plans to develop, own and operate a combined-cycle gas plant supporting a one-gigawatt data-center load, while the project is designed to add more generation than the data center is expected to require.

Gaudette said the initial contract term is expected to be at least 15 years from commercial operation, targeted for late 2029, and remains subject to negotiations, land-related matters and required internal approvals. He said the commercial structure uses capacity payments to recover capital and target returns, with fuel and operating costs recovered separately. Gaudette said 95% of project free cash flow is expected to be supported by capacity payments regardless of data-center utilization, while the customer’s obligations would have an investment-grade parent guarantee.

Moore said the project is expected to require $3.2 billion of investment and generate $500 million of annual adjusted EBITDA and $375 million of annual free cash flow before growth at full operation. Moore said NRG expects to fund it with operating cash flow and balance-sheet capacity, including less liability management over the construction period, while retaining its long-term net-leverage target of three times. He said $721 million of 2026 project investment is expected, largely for equipment procurement, and that NRG may evaluate financial partners as development advances.

On quarterly pricing and margins, Moore said Texas adjusted EBITDA fell as ERCOT Houston around-the-clock prices averaged $33 per megawatt hour, below both the prior year and NRG’s $52.00 planning assumption. Moore said higher PJM prices did not fully benefit the acquired portfolio because of pre-existing hedges, while Virginia’s return to RGGI created an estimated $70 million of incremental 2026 cost for acquired Virginia assets.

Analysts asked Gaudette about returns, construction timing, project size and the status of commercial discussions. Gaudette said turbine deliveries and construction commercial-operation dates determine project timing, and he declined to set a timetable for another project update. He said NRG will sign deals within its 12% to 15% return hurdles if construction costs rise.

Guidance

NRG reaffirmed its 2026 financial guidance and said it updated its 2026 capital-allocation plan to add $721.0 million of Texas project investment. Moore said the added investment would be funded through lower liability management, resulting in less net debt reduction in 2026 than previously planned. NRG said its commitment to at least $1.0 billion of annual share repurchases remains unchanged. For the project at full operation, NRG expects $500.0 million of annual adjusted EBITDA and $375.0 million of annual free cash flow before growth.