American States Water Q2 2026 earnings: Water rates lift diluted EPS 25.3%

American States Water (NYSE: AWR) reported Q2 2026 operating revenue of $181.3 million, up about 11.2% from $163.1 million a year earlier, while diluted EPS increased 25.3% to $1.09 from $0.87. CPUC-approved water rate increases provided the main earnings support, with higher water consumption, a favorable supply mix, and increased contracted-services construction also contributing.

Core earnings data

Revenue increased across all three operating segments for the quarter ended June 30, 2026. Operating income and net income grew faster than revenue because total operating expenses rose at a slower rate, expanding the operating margin by approximately 4.0 percentage points.

Business and segment performance

The water utility remained AWR’s largest earnings contributor, while contracted services recorded the fastest revenue growth. Diluted EPS contribution increased in every operating segment; these segment-level EPS figures are non-GAAP measures reconciled by the company to consolidated GAAP EPS.

Water operating revenue increased by $11.4 million, primarily because of rate increases effective January 1, 2026, recovery related to approved capital projects, higher per-unit water supply costs included in customer rates, and approximately 4% higher water consumption. A $1.6 million decline in billed surcharges partially offset the increase, but surcharge revenue changes have corresponding expense effects and therefore do not affect earnings.

Water supply costs increased by $0.7 million. Higher consumption and per-unit costs were partly offset by lower reliance on purchased water after wells returned to service in certain areas. Water segment EPS nevertheless faced offsets from higher net interest expense, unfavorable income-tax items, and approximately $0.02 per share of dilution from the ATM equity program.

Electric revenue benefited from CPUC-authorized fourth-year rate increases and additional recovery for capital projects. Contracted-services results were supported by more construction activity, higher management fees following the resolution of economic price adjustments, and lower net interest expense due to reduced average borrowing levels and interest rates.

Water rates drove earnings, but demand and supply mix remain variable

The CPUC-approved rate changes increased 2026 full-year adopted operating revenue less water supply costs by $32.0 million compared with 2025 adopted amounts, including $11.0 million associated with approved capital projects. These are full-year adopted figures rather than Q2 revenue, but they explain why the water segment generated most of the quarterly EPS increase.

Consumption and supply mix provided additional benefits that may be less predictable. The company said it is uncertain whether the quarter’s higher customer demand and lower reliance on purchased water will continue. Under the modified revenue decoupling mechanism and incremental water supply cost balancing account effective since January 1, 2025, changes in consumption and water sourcing can create earnings volatility. Weather, conservation, groundwater quality, and operating conditions at wells and basins are relevant variables.

Profitability and capital funding

Operating expenses increased more slowly than revenue despite higher construction expenses, labor costs, depreciation, and property taxes. Contracted-services construction expense rose to $16.7 million from $12.9 million, while depreciation and amortization increased to $12.7 million from $11.7 million. Administrative and general expense declined to $24.5 million from $25.2 million, helping moderate overall expense growth.

AWR completed its ATM equity offering on June 12 after reaching the program’s $200 million gross-proceeds capacity through the sale of 2,575,947 common shares. The higher weighted-average diluted share count reduced Q2 EPS by approximately $0.02, but the company said no further shares will be sold under this program and it has no plans to issue additional equity through at least the end of 2029 to support current operations.

Net property, plant, and equipment reached $2.367 billion at June 30, 2026, compared with $2.296 billion at the end of 2025. AWR’s regulated utilities remain on target to invest $185 million to $220 million during 2026. In July, S&P affirmed an “A” rating for AWR and an “A+” rating for its regulated water utility, both with stable outlooks.

The board also raised the quarterly dividend by 8.2%, from $0.5040 to $0.5455 per share. This represented the company’s 72nd consecutive year of annual dividend increases.

2026 outlook

AWR’s quantified outlook centers on contracted-services earnings and regulated utility investment. The contracted-services forecast implies that construction activity and contract economics will remain important to full-year performance.

Recent insider transactions

The reported six-month insider summary showed 52,899 shares purchased across 29 transactions and 1,966 shares sold across two transactions, resulting in net purchases of 50,933 shares. The ten most recent reported records consisted mainly of stock awards, which should be distinguished from purchases and sales when assessing insider activity.

These transactions do not, by themselves, establish insiders’ views of AWR’s future performance.

Risks investors should monitor

• Water demand and supply-source volatility: The 4% consumption increase and favorable supply mix helped Q2 earnings, but management said these benefits may not continue or could reverse.
• Operating and financing costs: Labor, depreciation, property taxes, and water-segment net interest expense increased, creating potential pressure if revenue recovery does not keep pace.
• Contracted-services execution: Higher construction activity and resolved economic price adjustments supported the quarter, making project timing, costs, and activity levels important to the segment’s $0.63-$0.67 EPS outlook.
• Continuing share-count effects: The ATM program is complete, but the shares already issued increased the diluted share count and reduced Q2 EPS by approximately $0.02.

Summary

American States Water’s Q2 2026 earnings improvement was led by approved water rate increases, supplemented by higher consumption, a favorable water supply mix, and increased contracted-services construction. Revenue growth outpaced operating expense growth, expanding margins, although investors should monitor whether the variable water benefits persist and whether contracted services delivers within its full-year EPS range while AWR carries out its regulated utility investment program.