Pinnacle West Capital Corporation (PNW) Earnings & Analysis

Latest quarter

Pinnacle West reported Q3 FY2026 revenue of $2.0 billion, up from $1.8 billion a year earlier. Its revenue of $1.97 billion exceeded the consensus estimate of $1.94 billion. Diluted earnings per share rose to $3.49 from $3.39.

The company attributed the year-over-year earnings increase principally to customer usage and growth and the effects of weather. Its filing said higher depreciation and amortization, interest charges and lower other income partly offset those gains. Pinnacle West reported that weather-normalized retail sales rose 9.5% in the quarter, including growth in both residential and commercial and industrial sales.

Pinnacle West’s gross margin narrowed to 61.6% from 64.0%, while operating margin declined to 31.5% from 32.0%. The filing said depreciation and amortization expenses rose primarily because more plant was in service. Free cash flow fell to $75.4 million from $100.4 million a year earlier.

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

What management said on the call

On the Q2 earnings call, CFO Andrew Cooper said customer and sales growth had supported results across residential and commercial and industrial customers. He attributed the latter group’s sales increase in part to expanding data center and advanced manufacturing customers. Cooper said higher interest and depreciation costs and lower transmission revenue had offset some of the benefit from weather and usage.

Asked about the durability of demand, Cooper said growth was spread across residential customers and several data centers, alongside semiconductor development. CEO Ted Geisler said the company would include committed customer growth in its resource plan and add resources to match it. Asked about Taiwan Semiconductor Manufacturing Company’s expansion, Geisler said APS was still working with the customer on capacity needs and the timing of its facilities’ ramp-up.

Geisler also discussed plans to convert two retired coal-fired units to natural gas, saying the project was expected to provide approximately 380 megawatts of generation by 2029. Cooper said the conversion could add up to approximately $440 million in capital investment, mostly in 2027 and 2028. On transmission, Cooper said the company was pursuing projects to serve growth, improve system resilience and reach resources outside its service area; he noted that wheeling revenue helps customer affordability.

On pricing, Geisler said APS was seeking a framework for recovering its investments through its rate case. He expected a final commission decision before year-end at the time of the call. In its subsequent filing, APS said the hearing had concluded and briefs had been filed, but it could not predict the outcome or when the commission would decide. Asked about Colorado River allocation negotiations, Geisler said the company did not anticipate an operational impact and described water as a longer-term economic issue.

Guidance

Pinnacle West raised its 2026 consolidated earnings guidance to $5.05 to $5.25 per diluted share, citing customer and sales growth and weather through the first three quarters. Its previous estimate was $4.55 to $4.75 per diluted share on a weather-normalized basis.

APS now projects weather-adjusted retail electricity sales growth of 8.0% to 10.0% in 2026 and average annual growth of 8.0% to 10.0% through 2030. On the Q2 call, Cooper had cited ranges of 4% to 6% for 2026 and 5% to 7% through 2030.