Cuộc họp công bố kết quả kinh doanh quý 3/2026 của Itron (ITRI): EBITDA điều chỉnh đạt kỷ lục, nâng triển vọng EPS

Điểm nhấn chính

• Doanh thu Quý 3/2026 tăng 3% so với cùng kỳ năm trước lên 599 triệu USD, đạt mức cao nhất trong khoảng dự báo của Itron.
• EBITDA đã điều chỉnh đạt mức kỷ lục theo quý là 115 triệu USD, tương đương 19% doanh thu. Lợi nhuận từ hoạt động kinh doanh phi GAAP tăng 20% lên 107 triệu USD.
• EPS pha loãng phi GAAP tăng lên 1,94 USD từ mức 1,54 USD của cùng kỳ năm trước. EPS pha loãng GAAP tăng lên 1,61 USD từ mức 1,41 USD.
• Doanh thu định kỳ hàng năm đạt 423 triệu USD, tăng khoảng 25% so với cùng kỳ năm trước, nhờ sự hỗ trợ từ phần mềm ứng dụng, phân tích dữ liệu và dịch vụ.
• Giá trị đơn hàng ký mới tăng 27% lên 482 triệu USD, trong khi giá trị đơn hàng tồn đọng cuối quý đạt 4,3 tỷ USD. Ban lãnh đạo cho biết lượng đơn hàng ký mới trong tháng 10 tạo đà khởi đầu mạnh mẽ cho Quý 4.
• Itron đã thu hẹp khoảng dự báo doanh thu cả năm xuống 2,37 tỷ - 2,385 tỷ USD và nâng dự báo EPS pha loãng phi GAAP lên 6,72 - 6,82 USD.

Kết quả tài chính cốt lõi

Dòng tiền tự do giảm so với cùng kỳ năm trước chủ yếu do sự gia tăng vốn lưu động, chi phí thuế cao hơn và thu nhập từ lãi giảm. Vào cuối quý, tổng nợ đạt 1,6 tỷ USD, tỷ lệ đòn bẩy ròng là 1,9x và thanh khoản đạt khoảng 1,6 tỷ USD, bao gồm 840 triệu USD tiền và các khoản tương đương tiền.

Kết quả hoạt động và kinh doanh

Doanh thu phân khúc Giải pháp Thiết bị đạt 102 triệu USD. Biên lợi nhuận gộp đã điều chỉnh tăng 450 điểm cơ bản lên 35%, trong khi biên lợi nhuận hoạt động tăng 440 điểm cơ bản lên 28%, phản ánh cơ cấu sản phẩm thuận lợi và hiệu quả hoạt động.

Phân khúc Giải pháp Mạng tạo ra 390 triệu USD doanh thu. Biên lợi nhuận gộp đã điều chỉnh đạt khoảng 42% và biên lợi nhuận hoạt động đạt khoảng 34%, đều tăng 250 điểm cơ bản so với cùng kỳ năm trước. Doanh thu của phân khúc Giải pháp Thiết bị và Giải pháp Mạng đều giảm 1% trên cơ sở tỷ giá cố định.

Doanh thu phân khúc Giải pháp Kết quả tăng 9% lên 92 triệu USD, nhờ doanh thu dịch vụ cao hơn. Biên lợi nhuận gộp đã điều chỉnh tăng 110 điểm cơ bản lên 40%. Giải pháp Khả năng phục hồi đóng góp 16 triệu USD doanh thu, với biên lợi nhuận gộp đã điều chỉnh là 74% và biên lợi nhuận hoạt động là 26%.

Itron đã xuất xưởng hơn 19,4 triệu thiết bị điểm cuối tích hợp trí tuệ phân tán. Ban lãnh đạo cho biết việc áp dụng mô hình doanh thu định kỳ đang mở rộng sang thị trường tầm trung khi các thiết bị điểm cuối hỗ trợ phần mềm, phân tích dữ liệu và dịch vụ.

Hoạt động của khách hàng bao gồm mở rộng chương trình tài nguyên năng lượng phân tán với Pepco Holdings, tiếp tục triển khai OpenWay Forward cho một công ty tiện ích lớn ở miền Tây Hoa Kỳ và nhận các hợp đồng mới về an toàn lao động, phòng ngừa thiệt hại và quản lý xây dựng kỹ thuật số. Itron cũng mở rộng hợp tác với PG&E để triển khai hàng nghìn thiết bị điểm cuối Grid Edge tại các khu vực có nguy cơ cao nhằm phát hiện sự cố và giảm thiểu nguy cơ cháy rừng.

Dự báo của Ban lãnh đạo

Itron dự kiến doanh thu Quý 4/2026 đạt 621 triệu - 636 triệu USD. Ở mức trung vị, con số này tương ứng với mức tăng trưởng 10% so với cùng kỳ năm trước và tăng 5% so với quý trước. Ban lãnh đạo cho rằng mức tăng dự kiến là nhờ các dự án triển khai đang diễn ra tại vùng Caribe, Đông Nam và Đông Bắc Hoa Kỳ.

Công ty đã thu hẹp khoảng dự báo doanh thu cả năm xuống 2,37 tỷ - 2,385 tỷ USD. Công ty dự kiến EPS pha loãng phi GAAP Quý 4 đạt 1,70 - 1,80 USD và nâng dự báo EPS pha loãng phi GAAP cả năm lên 6,72 - 6,82 USD.

Ban lãnh đạo dự kiến chi phí hoạt động Quý 4 sẽ tăng so với Quý 3, một phần do sự kiện khách hàng Itron Inspire và chi phí hoa hồng bán hàng liên quan đến quý thường có lượng đơn hàng mới mạnh nhất trong năm của công ty.

Rủi ro và các yếu tố cần theo dõi

• Các hợp đồng lớn từ các công ty tiện ích vẫn chưa đồng đều do thời gian ký kết phụ thuộc vào quy trình của khách hàng và cơ quan quản lý.
• Chi phí bộ nhớ và một số linh kiện chọn lọc đang tăng lên, mặc dù ban lãnh đạo cho biết các cơ chế định giá, đa dạng hóa nguồn cung và các biện pháp tăng năng suất cho đến nay vẫn giữ được nhịp độ thích ứng.
• Dòng tiền tự do Quý 3 bị ảnh hưởng do vốn lưu động tăng, chi phí thuế cao hơn và thu nhập từ lãi giảm.
• Ngân sách đầu tư phát triển của các công ty tiện ích tiếp tục phản ánh tình hình lạm phát, trong khi nhu cầu nước ở Bắc Mỹ cũng đang chịu ảnh hưởng từ việc các chương trình kích thích kinh tế trước đó của chính phủ hết hiệu lực.
• Cơ hội gia tăng trong lĩnh vực khí đốt vẫn chưa đóng góp đáng kể vào giá trị đơn hàng ký mới hoặc báo cáo kết quả hoạt động kinh doanh. Ban lãnh đạo dự kiến các hợp đồng sẽ được trao trong 2 đến 3 năm tới, sau đó là việc triển khai hệ thống trong khoảng 3 đến 5 năm.

Tóm tắt phiên Hỏi & Đáp với chuyên viên phân tích

Ban lãnh đạo mô tả OpenWay Forward là một chương trình tương thích cả về sau lẫn về trước, cho phép các công ty tiện ích bổ sung các năng lực tiên tiến mà không cần thay thế các tài sản hiện có trước khi chúng khấu hao hết. Itron coi đây là một lợi thế cạnh tranh giúp củng cố vị thế hiện hữu và có thể tạo ra một chuỗi các đơn hàng nhỏ ổn định hơn thay vì chỉ một hợp đồng lớn duy nhất.

Về giá trị đơn hàng ký mới, ban lãnh đạo từ chối đưa ra mục tiêu tỷ lệ đơn hàng trên doanh thu (book-to-bill), nhưng cho biết tháng 10 đã có khởi đầu mạnh mẽ và danh mục cơ hội tiềm năng vẫn rất thuận lợi. Công ty sẽ cung cấp dự báo cho năm 2027 vào tháng 2.

Ban lãnh đạo cho biết số lượng thiết bị điểm cuối ngành khí đốt dự kiến được ký kết trong 2 đến 3 năm tới cao gấp nhiều lần so với mức bình thường. Cơ hội này một phần được thúc đẩy bởi chu kỳ thay thế pin và tiềm năng nâng cấp đồng thời khả năng đo lường cũng như các tính năng an toàn tích hợp.

Itron đang sử dụng AI trong mô hình hóa thời tiết, triển khai tài sản ứng phó bão, nhận diện mối nguy hiểm đối với an toàn lao động, quản lý xây dựng kỹ thuật số, dự báo và phát hiện bất thường tại thiết bị Grid Edge. Ban lãnh đạo nhìn nhận cơ hội mở rộng tiếp theo là ở cấp độ trạm biến áp thông qua việc tích hợp dữ liệu thiết bị biên và SCADA, trong khi các ứng dụng truyền tải có thể nằm ở giai đoạn xa hơn.

Toàn văn biên bản cuộc họp báo cáo kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good day, and thank you for standing by. Welcome to Itron's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. I will now hand the conference over to your speaker host, Paul Vincent, Vice President of Investor Relations. Please go ahead.

Paul Vincent

Good morning, and welcome to Itron's Third Quarter 2026 Earnings Conference Call. Tom Dietrich, Itron's President and Chief Executive Officer; and Joan Hooper, Senior Vice President and Chief Financial Officer, will review Itron's third quarter results and provide a general business update and outlook. Earlier today, the company issued a press release announcing its results. This release also includes details related to the conference call and webcast replay information. Accompanying today's call is a presentation that is available through the webcast and on our corporate website under the Investor Relations tab. Following prepared remarks, the call will open for questions using the process the operator described.

Before Tom begins, a reminder that our earnings release and financial presentation include non-GAAP financial information that we believe enhances the overall understanding of our current and future performance. Reconciliations of differences between GAAP and non-GAAP financial measures are available in our earnings release and on our Investor Relations website. We will be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from these expectations because of factors that were presented in today's earnings release and comments made during this conference call as well as those presented in the Risk Factors section of our Form 10-K and other reports and filings with the Securities and Exchange Commission. All company comments, estimates or forward-looking statements are made in a good faith attempt to provide appropriate insight to our current and future operating and financial environment. Materials discussed today, October 27, 2026, may materially change, and we do not undertake any duty to update any of our forward-looking statements.

Now please turn to Page 4 of our presentation as our CEO, Tom Dietrich begins his remarks.

Thomas Deitrich

Thank you, Paul. Good morning, everyone, and thank you for joining us today. Itron delivered a strong third quarter. Revenue returned to year-over-year growth at the top end of our outlook. Adjusted EBITDA set a new quarterly record and non-GAAP earnings per share were well ahead of our expectations. In July, I said Itron is a different company than in prior cycles. The third quarter proved it again. Last quarter, we delivered record gross margin on lower revenue. This quarter, growth returned with strong margins. Non-GAAP operating income grew 20% on 3% growth. That is structural. The product of several years of commercial and operational work not an industrial cycle. Not every quarter will set a record, but our performance now starts from a higher floor. We are delivering earnings leverage while continuing to invest in technology and capabilities our customers need.

Turning to Slide 4 for the highlights. Revenue of $599 million, annual recurring revenue of $423 million, adjusted EBITDA of $115 million, non-GAAP earnings per share of $1.94 and free cash flow of $96 million.

Turning to Slide 5. The operating environment remains dynamic and the long-term demand drivers are strengthening. Utilities must address load growth, aging infrastructure, reliability, resiliency and affordability, all at the same time. These pressures are not temporal. They are fundamental and the investment in technology and infrastructure they require is, in our view, inevitable. New generation and transmission are part of the answer that those assets take years to plan and build. In the meantime, utilities need more capacity and better performance from the infrastructure they already have. Intelligence is the fastest and least expensive capacity still available. This is exactly where Itron sits in the value chain. Our technology gives utilities greater visibility into the distribution system that enables them to operate existing assets more intelligently.

We see the demand across our markets. In electricity, opportunities for non-wires alternatives, time to power and reliability solutions are expanding. The opportunity with gas distribution customers remains outsized relative to historic norms. The regulatory environment is complex, but constructive. Regulators are focused on the same affordability, reliability and resiliency priorities as the utilities they oversee. Grid Edge Intelligence is scaling. We have now shipped more than 19.4 million distributed intelligence enabled endpoints, expanding the installed base. Our applications software, analytics and services portfolio drove annual recurring revenue growth to approximately 25% year-over-year, accelerating from 21% last quarter. End points become platforms and platforms become recurring revenue. That is the model, and it is working with adoption continuing to broaden into the mid-market. Our supply chain remains steady across labor and most materials. Memory and selected component costs are rising, and we have kept pace with them as third quarter gross margin demonstrates.

We continue to thoughtfully buffer materials, diversify our supply base and employ pricing mechanisms and other productivity actions to create earnings leverage. Integration of our resiliency solutions segment continues as planned, and we are beginning to see the benefits of the combined portfolio. A few of the awards I will mention in a moment came from that segment.

Turning to Slide 6. Third quarter bookings were $482 million, up 27% year-over-year and in line with our expectations. And October bookings have given the fourth quarter a strong start. Total backlog was $4.3 billion at quarter end, with our Outcomes and Resiliency Solutions segments, our most software and services intensive segments together represent more than 25% of the total. Large customer awards will always be uneven quarter-to-quarter because they are tied to utility and regulatory processes. Regulatory calendars shape when programs move forward rarely, whether they move at all. What matters is the pipeline behind them and it is growing with strength in gas and Grid Edge Intelligence. Several wins during the quarter illustrate the breadth of demand. Pepco Holdings and Exelon company selected Itron to expand its distributed energy resource program, adding to the value of the multipurpose Itron network. The program will provide real-time operational data and significantly increase the flexible load Pepco can call on, capacity it can offer into the constrained PGM region and use to support the grid.

Customers value our ability to move their installed base smoothly to more advanced solutions. Through our OpenWay Forward program, we continue to support a large utility in the Western U.S. as it moves towards next-generation use cases and distributed intelligence. Resiliency solutions gained momentum in the quarter, adding multiple new customers across our worker safety, damage prevention and digital construction management applications. A large Midwestern utility selected our worker safety application after seeing clear improvements in hazard recognition and field engagement. We also expanded worker safety and another utility from a single operating company to a 5-year enterprise agreement covering its operations in Pennsylvania, Kentucky and Rhode Island. And a diversified energy company broadened its use of Itron damage prevention adopting ticket and intervention management across multiple operating companies, asset types and states.

Together, these wins show a repeatable pattern. Customers come to Itron to address a problem and stay for the portfolio. That demand and the way we are executing against it gives us the confidence to narrow our full year revenue range and raise our full year earnings outlook.

With that, I will turn the call over to Joan to walk through the details.

Joan Hooper

Thank you, Tom. Please turn to Slide 7 for a summary of consolidated GAAP results. Third quarter revenue of $599 million was at the top end of our outlook range and increased 3% year-over-year driven by continued growth in outcomes and the contribution from resiliency solutions. Gross margin of 41% increased 320 basis points year-over-year due to favorable mix, operational efficiencies and continued cost discipline. GAAP net income of $71 million or $1.61 per diluted share compared to $66 million or $1.41 per share in the prior year. The increase was due to higher operating income.

Moving to the non-GAAP metrics on Slide 8. Adjusted gross margin of 41.3% increased 350 basis points year-over-year. Non-GAAP operating income of $107 million increased 20% year-over-year. Adjusted EBITDA of $115 million or 19% of revenue are both new quarterly records for Itron. Non-GAAP net income for the quarter was $86 million or $1.94 per diluted share versus $72 million and $1.54 a year ago. Free cash flow was $96 million in Q3 versus $113 million a year ago. The decrease was primarily due to growth in working capital, higher tax payments and lower interest income.

Year-over-year revenue growth by business segment is on Slide 9. Device Solutions and Network Solutions revenue both decreased 1% on a constant currency basis. Outcomes revenue increased by 9%, driven by higher services and resiliency solutions contributed $16 million of revenue in Q3.

Moving to the non-GAAP year-over-year EPS bridge on Slide 10. Our Q3 non-GAAP EPS of $1.94 per diluted share increased $0.40 year-over-year. Operating income contributed an increase of $0.38 per share, which was partially offset by lower interest income of $0.14 per share. Taxes and share count had a positive impact of $0.16 per share versus last year.

Turning to Slides 11 through 14. I'll review the Q3 segment results compared with the prior year. Device Solutions revenue was $102 million. Adjusted gross margin of 35% increased 450 basis points year-over-year and operating margin of 28% increased 440 basis points due to favorable mix and operational efficiencies. Network Solutions revenue was $390 million, adjusted gross margin of approximately 42% and operating margin and approximately 34%, both increased 250 basis points year-over-year, reflecting operational efficiencies and favorable mix. Outcomes revenue was $92 million, adjusted gross margin of 40% increased 110 basis points year-over-year due to operational efficiencies. Resiliency Solutions contributed $16 million of revenue with adjusted gross margin of 74% and operating margin of 26%.

Turning to Slide 15, I'll review debt and liquidity at the end of the third quarter. Total debt was $1.6 billion, and our net leverage was 1.9x. Our liquidity position was approximately $1.6 billion at the end of Q3, comprised of cash and equivalents of $840 million and $722 million available for borrowing under our revolving line of credit.

Now please turn to Slide 16 for our fourth quarter outlook. We anticipate Q4 revenue to be within the range of $621 million to $636 million, which, at the midpoint, is up 10% versus last year and 5% sequentially. This narrows the full year outlook range to $2.37 billion to $2.385 billion. We anticipate fourth quarter non-GAAP earnings per share to be within a range of $1.70 to $1.80 per diluted share. This raises the full year EPS outlook to a range of $6.72 to $6.82 per diluted share. We continue to position Itron to benefit from the long-term durable market opportunities to provide solutions for our customers as they modernize their infrastructure responsibly and affordably.

Now I'll turn the call back to Tom.

Thomas Deitrich

Thank you, Joan. Before we open the line for questions, let me come back to the larger point. The need for intelligence, automation and operational visibility across utility networks continues to grow, and the environment continues to move towards Itron. We saw this directly last week at Itron Inspire, where more than 1,000 attendees representing hundreds of utilities joined us in Houston. The conversations focused on immediate operating priorities, improving outage awareness, preventing faults, increasing reliability, mitigating wildfire risk and extending the value of existing infrastructure. These are not theoretical use cases. They are operational and financial issues that our customers must solve.

Wildfire risk is not abstract for us. This summer, the Spokane area, home to our headquarters and many of our employees experienced devastating wildfires that destroyed hundreds of homes and forced more than 60,000 people to evacuate. Our thoughts remain with the families and communities still recovering. Events like these are why we invest in helping utilities see and act on risk before it becomes an ignition. Earlier this month, we announced an expanded collaboration with PG&E to deploy thousands of Itron Grid Edge endpoints in high-risk areas. Using distributed intelligence and advanced waveform analytics, these devices will detect, classify and pinpoint fault indicators such as a down live conductor that could ignite vegetation so utilities can act before a fault becomes an outage or a fire. That example captures the broader Itron value proposition. Grid Edge Intelligence is not simply a single end product or application; it is a platform that gives utilities greater visibility into their systems and helps them solve a growing range of operational challenges all through a reusable investment.

We entered the fourth quarter with market leadership, financial strength and a strong start to bookings. Our priorities are clear: execute for our customers, grow recurring revenue, protect backlog quality and deliver durable earnings and cash flow over time. The modernization of energy and water infrastructure is a long-term structural trend. Quarterly timing may move, the underlying need will not. Itron is the intelligence layer of those systems helping customers unlock capacity, improve reliability, enhance safety and get more from their infrastructure. The model is working and the need we serve is durable. Thank you for joining us today.

Operator, please open the line for questions.

Operator

[Operator Instructions] Our first question coming from the line of Noah Kaye with Oppenheimer.

Phần hỏi đáp

Noah Kaye

Congrats on the nice quarter. First, maybe just a quick housekeeping modeling one, OpEx was fairly low as a percentage of revenue. Was that just timing? And what should we be modeling for the full year?

Joan Hooper

Yes, it was somewhat timing, a little bit below our expectations as well. So obviously, we try to keep a lid on OpEx, but I certainly expect Q4 to be higher Q4 is typically a much higher quarter than Q3, which tends to be our low quarter. You have our customer event that just happened last week, which adds to it as well as we expect a higher bookings quarter. Typically, Q4 is our highest bookings quarter and therefore, you get sales comp and things of that nature. So going forward, I would expect the OpEx to tick back up to where it had been looking at.

Noah Kaye

Okay. Great. Joan, I can't resist since you just mentioned the bookings. We've got just a few months left. And as you mentioned, 4Q is usually the high water mark. Is there any way to maybe bracket expectations around those bookings and where we might end up on book-to-bill?

Joan Hooper

I'll start and I'll let Tom comment. I mean no, we're not going to guide specifically to book-to-bill. But if you look historically, Q4 is our strongest quarter. I don't know, Tom, if you get more.

Thomas Deitrich

Yes. bookings are lumpy by nature. So Q3 isn't a clear signal in terms of what it looked like. October is off to a really nice start for what we expect. It is the highest quarter as was already mentioned. We like the pipeline that is in front of us, we see the opportunities and are excited to work with the customers to close out on the available items.

Noah Kaye

Got it. Maybe just one more. I know you had some new deployments that got going here in the back half, supporting the sequential revenue increase. At this point, when you look at the programs that are going on and their expected duration, is the 4Q revenue run rate a good starting point to think about '27 any nuance you could put around that?

Thomas Deitrich

Yes. We're not going to get into guiding '27 today, and you'll get that in February. Fourth quarter, the outlook that we just put out is underpinned by the bookings, is underpinned by the ongoing deployments. We have some pretty nice deployments going on in that Caribbean, in the Southeast and in the Northeast that drive that sequential growth and year-over-year growth, which is really what we wanted to see.

Operator

Our next question in queue coming from the line of Ben Kallo with Baird.

Ben Kallo

Tom, in your prepared remarks, you talked about the Western utility and you mentioned that OpenWay Forward. Could you just give a little bit more detail what about the OpenWay Forward and what that entails? And I have a follow-up.

Thomas Deitrich

Sure. I normally characterize this as forward/backward compatibility, really, which is a way that a utility that has existing assets in the field, perhaps some of them are not fully depreciated. How do they move those forward seamlessly to have additional functionality and new functionality, meaning the coexistence of older technology and some of the newer, more advanced use cases and allow that to happen seamlessly? That's exactly what the OpenWay Forward program does for many utilities, some of the earlier adopters that were out there. The deal that was in my prepared remarks really is just another example of how we can allow that asset continuity and enable the utility to seamlessly add new capabilities where they need it and do it at the pace that is affordable to them.

The current environment from a regulatory standpoint, I think is important to note -- okay, regulatory commissions are certainly asking the requisite questions that all of us expect as consumers and users that are on the systems themselves. And when we can enable the utility to work within that affordability concern of the regulator allow the new functionality that is needed to cope with the dynamic environment that's out there. It really is a win-win for everybody.

Ben Kallo

And just maybe an extension on the answer there -- a question. Just how does that change just in terms of the bookings -- does it -- is it a competitive advantage that allows you to keep your incumbency or does it lower the amount of bookings that you would get from a project because you're not replacing everything? Or how do you view that?

Thomas Deitrich

Yes. Certainly, it is a very strong moat that is out there if a customer really needed to rip and replace underappreciated capital, that is very difficult from a financial point of view. So enabling that smooth transition is very good feature from a customer perspective, and that obviously helps the incumbent, which we are to a great extent in the marketplace.

On the bookings front, I think it tends to create a smoother bookings profile instead of the really big bang, if you will. So maybe the customer would do 10 or 11 $10-million deals rather than one $100 million deal, just as an example. Where you are buying under -- with the area under the curve being the same or greater and certainly probably greater from a margin perspective is really what it looks like, but it tends to make the bookings slightly less lumpy when customers go down the path of utilizing the capability we provide a forward/backward compatibility.

Operator

Our next question coming from the line of Chip Moore with Road Capital Partners.

Chip Moore

Tom, you talked about, again, about size of opportunity on the gas side. Maybe you could put a finer point on that in terms of scale and sense of timing. Are you starting to see that flow through yet? Or is that still on the come?

Thomas Deitrich

So the number of endpoints, if I use that is the metric that we expect will be awarded right over the next, let's say, I don't know, 2, 3 years kind of time frame for the awards is multiples higher than what the normal run rate for gas would be. So very, very strong opportunities in the marketplace. The awards come in, let's say, the next 2, 3 years, the rollout of those systems, let's say, 3, 5 years, something like that would be my expectation. That gives you a sense of the size of the pie. The underlying dynamics as to why it's that large is you do have an asset life cycle where you have batteries that need to be replaced. So if you're going to roll a truck to go replace the battery and there is much, much better technology with integrated safety built in, perhaps maybe you want to upsize and replace the metrology as well as the battery that's in the device itself. That's really the underlying dynamic and why we're really optimistic. It has not yet shown itself in the bookings and the P&L in any significant way. That's still ahead of us.

Chip Moore

Perfect. I appreciate that. And maybe just my follow-up, again, on the regulatory. You talked about it already in some of the complexities. Any thoughts on midterms? Is there any impact there? Or should we expect any changes post elections?

Thomas Deitrich

Yes. I wouldn't expect that there would be any unique impact from the midterms on the regulatory environment. The regulatory environment is handled at the state level by and large. So whatever is going on with the federal government, obviously, can have some macroeconomic impacts, but I don't think there's anything specific that would apply to our market on the regulatory policy itself, at least not in the short term.

Operator

Our next question coming from the line of Scott Graham with Seaport Research Partners.

Scott Graham

I wanted to maybe ask you about what we're seeing kind of on the water utility side where there's -- depending upon where fiscal years are in the budgets that there's been some crowding out of some of the enterprise budgets from inflation on items that don't need to be replaced, for example, water meter -- just as one example, I'm sure, obviously, many other things. Can you talk about what your electric utility customers are saying about inflation and how it's impacting their budgets? And if the next sort of budget period, whether that's July or whenever maybe includes more contemplates more inflation? .

Thomas Deitrich

Good question, Scott. I would say that certainly, inflation has rolled through the entire supply chain, certainly, our input components and -- we've obviously done a decent job of managing costs on our side as well as having pricing mechanisms in place. When that rolls all the way through, it does drive CapEx budgets up across the board, so you've seen increases in distribution capital spending into the low to mid-single digits and that certainly is driven by overall inflation, but it's also driven by the need for more advanced use cases demand growth better resiliency, better reliability. So that trend clearly is alive and present in the electricity market itself.

You mentioned it in water. Certainly, I think that there is an inflation component in water, but certainly, in water North America, there's also some changes when it comes to the government stimulus side of things where the stimulus packages kind of roll through, let's say, a couple of years ago, a year ago and now you're seeing the rebound effects of that certainly in North America, less so in Europe, where our water business is a larger portion of the portfolio.

Scott Graham

Okay. I would just follow up by just maybe including the answer to my previous question. There are some G-R-I-P, GRIP provisions in, I believe, it's IIJA that bar electricity. So maybe you can bring a comment to bear on that. But also more broadly, Itron is much different company, the way it goes to market and the way you provide solutions today versus 5 years ago. And I know you talked about your north of 50% share in intelligence and network. And I'm just wondering, who do you see day-to-day competitively in those markets as your business has changed?

Thomas Deitrich

Sure. So let's take that the government program first. So some of the initial project awards that came out under GRIP got caught up, and this is 18 months or so ago in some of the changes around the administration and what they were making. So GRIP programs have been replaced with Spark programs, different acronym, slightly different program mix. But those Spark programs are largely moving through. some of that money is in years ahead, meaning not yet spent, but it looks to be on track to carry forward. So some of that churn that we saw 18, 24 months ago is largely behind us now, and things are moving forward.

On the competition side of things, I would say that the competitive landscape has not changed dramatically. There are competitors who are the usual suspects, if you will, that have traditionally played in the utility networking space with wells metrology space. today, we certainly see a mix of competitors on the outcome side, where you have some very large tech forward companies and some start-ups that play in the space in the metrology space at large, it tends to be a very, very fragmented market outside of the United States.

And again, I have not seen a lot of changes in the competitive dynamics that are present in the marketplace. Certainly, growth in cellular technology in certain pockets of the market, more so in the gas and water space, which, again, is just another way to attack the market and our portfolio covers that piece of the puzzle as well.

Operator

Our next question in queue coming from the line of Joseph Osha with Guggenheim Securities.

Joseph Osha

I have 2 questions. First, looking at outcomes and resiliency, especially thinking about things like urban, Tom, I'm wondering what opportunities you've had to deploy AI and how you're thinking about that going forward. And I do have a follow-up.

Thomas Deitrich

Sure. In the AI space, specifically in resiliency solutions, if I narrow my answer to that, for the first part of the question. The weather models that we use, the asset deployment models for storm response are AI-based programs overall, the worker safety module has an AI component to it, which helps you to identify hazards out in the field in real time. In the digital construction management space, AI allows you to populate the data that is required for construction and compliance, so it really does save a lot of time and adds intelligence to how field workers are using products across the board, whether it's in times of high stress, like a storm response or just day-to-day operations, worker safety, not that safety isn't involved in both sides or digital construction management.

On the more Itron traditional side of things, certainly, our forecasting business has been machine learning AI based for decades now. We also see it in things like anomaly detection, one of the items that I mentioned in the prepared remarks around wildfire detection and some of the indicators associated with it, that is AI-based out at the edge of the network. So very strong growth in all of those applications, and it really does solve the types of problems our customers are up against.

Joseph Osha

Great. And that kind of neatly anticipates my second question. You've gotten really good at the edge of the grid anomaly detection. I'm a California resident, I know it's not just edge of the grid, we've got fire risk everywhere. So I'm wondering if you ever think about deploying some of those skill sets a little further from sort of your core area more into sort of the transmission level parts of the grid, whether that's a possibility, especially in the anomaly detection for fires.

Thomas Deitrich

Sure. I would say that we probably will continue to move from where we are towards the center of the grid. I think some of the work that we are doing today, where we're integrating edge data with SCADA data at the next level up in the grid by combining both of those data sets and being able to understand what is happening. You can spot precursors or fires, and again, try to get ahead of it. The best fire defense you have is preventing ignition from the start, which is really around some of the press releases we had done towards the middle of the year. in that particular space. So think of it as moving into the substation level next, transmission somewhere still ahead of us, but I do believe that potentially, there's an opportunity there in the future.

Operator

[Operator Instructions] I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Tom Deitrich for any closing remarks.

Thomas Deitrich

Thank you very much for joining us today. The need that we serve is durable and our model is performing. So we look forward to updating you again next quarter. Thanks.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.