Pinnacle West Q3 2026 EPS Rises as APS Retail Sales Grow 9.5%

Pinnacle West Capital Corp. (NYSE: PNW) reported third-quarter 2026 earnings of $3.49 per diluted share attributable to common shareholders, up from $3.39 a year earlier, as customer growth and rising electricity demand—particularly from commercial and industrial users—lifted retail revenue and sales. The company set its 2026 EPS guidance at $5.05 to $5.25 and now expects weather-normalized retail electricity sales growth of 8% to 10% for the year.

Third-quarter operating revenue increased to $1.97 billion from $1.82 billion in the prior-year period. Retail revenue rose by $167 million to $1.90 billion, including increases of $98 million from business customers and $69 million from residential customers. Those gains were partly offset by lower wholesale and transmission revenue.

Operating revenue less fuel and purchased-power expense contributed $0.30 per share to the year-over-year earnings increase. Sales and usage added $0.35 per share, while weather contributed $0.09. Lower renewable-energy and demand-side-management margins reduced the comparison by $0.12 per share, and transmission reduced it by $0.04. Higher depreciation, interest, taxes and share count also offset part of the benefit from stronger sales.

Commercial demand drives sales growth

APS, Pinnacle West’s regulated utility, sold 12,694 GWh to retail customers during the quarter, up from 11,467 GWh a year earlier. Business-customer sales increased to 6,583 GWh from 5,739 GWh, while residential sales rose to 6,111 GWh from 5,728 GWh.

On a weather-normalized basis, retail sales grew 9.5% in the quarter. Weather-normalized business sales increased by 826 GWh, compared with a 253 GWh increase in residential demand. Year-to-date commercial and industrial sales growth was 13.9%, according to the presentation, as large customers continued to ramp their operations.

Average retail customer count increased 1.8% to approximately 1.46 million. The quarter also benefited from hotter conditions: cooling degree-days were 1,444, compared with 1,397 a year earlier and a 10-year average of 1,333. Weather added an estimated $28 million to pretax gross margin in the quarter and $73 million during the first nine months of 2026.

Pinnacle West expects 2026 weather-normalized retail sales growth of 8% to 10%, including a 5% to 7% contribution from new large manufacturing facilities and several large data centers. Retail customer growth is projected at 1.5% to 2.5%. The company assumes normal weather for the remainder of the year.

Earnings outlook balances load growth and higher costs

For 2026, Pinnacle West expects adjusted gross margin—excluding renewable-energy and demand-side-management programs—of $3.45 billion to $3.51 billion. Adjusted operations and maintenance expense is projected at $1.09 billion to $1.11 billion, while depreciation, amortization and taxes other than income taxes are expected to total $1.21 billion to $1.23 billion.

Management identified sales growth, customer additions, transmission revenue and 2026 weather as positive year-over-year earnings drivers. Higher depreciation, amortization and property taxes associated with additional plant in service, along with financing costs and O&M, are expected to weigh on results.

The company continues to target long-term EPS growth of 5% to 7% from the original midpoint of its 2024 guidance. It also expects weather-normalized retail sales to grow 8% to 10% annually through 2030, including a 7% to 9% contribution from large commercial and industrial customers.

APS has 5.8 GW of committed load growth, of which about 4.9 GW is not yet being served. More than 90% of that committed load is in various stages of construction or planning, and the projects span manufacturing, data centers, residential demand and other industrial customers. The utility’s 2026 integrated resource plan projects annual retail electricity needs will increase by about 42,000 GWh by 2041, more than doubling current demand.

Capital spending and financing

APS plans $10.35 billion of capital investment from 2025 through 2028 to support generation, transmission, distribution and other infrastructure. The estimate excludes up to approximately $440 million for converting the retired Cholla power plant to 380 MW of natural-gas generation and incremental spending related to a recently executed agreement referenced in the presentation.

Planned resource additions include about 720 MW of gas generation at Saguaro in 2030 and approximately 1,280 MW at Desert Sun in 2032. APS also expects to invest roughly $500 million more in Palo Verde’s capital program over the next decade, in addition to an approximately $200 million investment to acquire nearly 100 MW of nuclear capacity previously subject to a sale-leaseback arrangement.

The company’s 2026-2028 financing plan includes approximately $8 billion of cash from operations after shareholder dividends, $2.6 billion to $2.9 billion of net APS debt issuance, $300 million to $350 million of net Pinnacle West debt and $1.0 billion to $1.2 billion of Pinnacle West equity. As of October 2026, about $920 million of the incremental equity need had been priced through forward transactions. Management said its objectives include maintaining investment-grade ratings, keeping APS’s capital structure above 50% equity and preserving a long-term Pinnacle West funds-from-operations-to-debt ratio of 14% to 16%.

Regulatory and execution risks

APS’s pending Arizona rate case remains an important source of uncertainty. The utility is requesting a $609 million net revenue increase, representing an estimated 14.69% initial customer impact, and has proposed a 10.70% allowed return on equity. Arizona Corporation Commission staff testimony supported a lower ROE range of 9.55% to 9.80%. A final decision was estimated for December 2026, although the presentation said regulatory dates remain tentative and subject to change.

Pinnacle West’s outlook also depends on timely cost recovery, access to debt and equity capital, and the utility’s ability to add generation and transmission infrastructure as large loads develop. Other disclosed risks include fuel and purchased-power costs, extreme heat and wildfire exposure, nuclear operations, environmental and regulatory requirements, cybersecurity threats, supply-chain constraints and the possibility that projected data-center or manufacturing demand does not materialize as expected.