Avista (AVA) Q1 2026 earnings review
Core Utility Stabilizes While Non-Regulated Segment Stops Bleeding
Avista delivered a strong Q1 2026, with GAAP EPS accelerating to $1.11 from $0.98 a year ago. Despite operating revenues falling 8% YoY to $555M, this was primarily driven by lower resource costs and the strategic exit from the Colstrip facility. Net income jumped 16% to $92M, buoyed by rate case implementations and a critical reversal in the non-regulated business, which flipped from a $3M loss in 25Q1 to a $1M gain. Management reaffirmed the 2026 non-GAAP EPS guidance of $2.52 to $2.72, signaling confidence that the massive capital plan and core utility fundamentals can offset ongoing structural headwinds like the Energy Recovery Mechanism (ERM).
🐂 Bull Case
The other businesses segment, which was a massive drag throughout 2025 (costing the company $0.15/share in H1 2025 alone), finally reversed course. Net investment gains generated $1M in income vs. a $3M loss a year ago, cleaning up consolidated earnings.
Natural gas margins expanded to $91M (up from $87M), successfully absorbing the effects of inflation through general rate cases. Electric margins held relatively stable at $185M despite shedding Colstrip revenues.
🐻 Bear Case
Avista expects to issue $90M in common stock and $230M in long-term debt in 2026 to fund its $615M base capital plan, risking shareholder dilution if returns on equity lag.
While improved significantly YoY ($1M pre-tax expense vs $7M in 25Q1), the structural flaw in the Energy Recovery Mechanism continues to penalize earnings. Guidance still bakes in a $0.10 per share hit for the full year.
⚖️ Verdict: 🟢
Bullish. Avista successfully eliminated the noise from its non-regulated segment and executed its rate cases. The drop in top-line revenue is a mirage caused by pass-through cost reductions and a planned plant exit, while the bottom line shows accelerating quality.
Key Themes
Data Center/Large Load Upside Excluded from Base Plan
Management's $615M CapEx guidance explicitly excludes potential investments for integrating a 'new large load customer.' Based on Q4 2025 disclosures of a 125-500 MW data center opportunity, this represents up to $350M in un-modeled incremental CapEx that could turbocharge rate base growth from a 5% base CAGR to 12%.
Colstrip Exit Creates Electric Margin Drag
Avista's exit from the Colstrip coal plant at the end of 2025 successfully reduced depreciation and amortization by $3M. However, the removal of associated recovery revenues caused Electric Utility Margin to decrease from $187M to $185M, contradicting the narrative that rate cases broadly lifted all utility margins.
Macro Weather & Tariff Normalization
The $2.52-$2.72 non-GAAP EPS guidance relies heavily on assumptions of 'normal weather.' Furthermore, management's risk disclosures highlight increasing costs from potential tariffs applied to energy commodities and equipment. Any deviation in weather patterns or severe supply chain disruptions could heavily pressure resource costs and utility margins.
AI-Enabled Grid Modernization & Wildfire Mitigation
Avista continues to deploy technology to de-risk its service territory. Building on 2025's rollout of AI-enabled cameras and weather stations targeting full high-risk circuit coverage, the company is systematically reducing Public Safety Power Shutoff events and limiting its liability exposure under newly passed state legislation.
Generative AI Cyber and Operational Risk
For the first time, Avista specifically called out Generative Artificial Intelligence as a standalone technology risk. The company noted that the use of new AI technologies by itself or counterparties introduces novel cybersecurity vulnerabilities and intellectual property uncertainties that require monitoring.
Other KPIs
Decelerating. Revenues dropped 8% YoY from $603M. However, this is largely artificial, driven by a $50M drop in 'Resource Costs' which act as a direct pass-through, alongside the removal of Colstrip recovery revenues.
Stable. Avista ended the quarter with $110M on its committed line of credit and $46M under its letter of credit facility. This provides adequate breathing room before the expected $230M long-term debt issuance scheduled for later in 2026.
Stable. The Q1 2026 effective tax rate of 12% is slightly down from 14% in 25Q1. Management expects the 12% rate to hold for the full year 2026, significantly below the statutory 21% due to ongoing customer tax credits and structural benefits.
Guidance
Stable. Management confirmed the guidance midpoint of $2.62. This implies low-single digit growth off the 2025 base, incorporating a previously disclosed $0.12 headwind from an industrial customer departure and a $0.10 ERM drag.
Accelerating. Up from $553 million spent across Avista Utilities and AEL&P in 2025. This initiates a staggering 5-year capital sequence that peaks at $800M in 2028, requiring significant ongoing equity issuance.
Stable. The long-term target remains anchored to the midpoint of the 2025 earnings guidance. Reaching the upper end of this range will likely depend on converting the un-budgeted data center opportunities into rate base additions.
Key Questions
Data Center MOU Status
Guidance explicitly excludes CapEx for the potential 125-500 MW large load customer. Given the 90-day timeline outlined in Q4 for signing the MOU, what is the current status of that agreement, and when will that $350M CapEx upside be baked into the base plan?
ERM Structural Fixes
While the Q1 ERM pre-tax expense was much lighter than last year ($1M vs $7M), full-year guidance still assumes a $0.10 negative impact. Will the upcoming rate case filings aggressively address the structural mechanics of the ERM to eliminate this persistent drag?
Non-Regulated Monetization
With the non-regulated segment returning to profitability this quarter, does this alter the timeline or valuation expectations for monetizing these assets to offset the planned $90M equity issuance?
Colstrip Exit Margin Dynamics
Electric utility margin fell $2M YoY largely due to the removal of Colstrip recovery revenues. When will the transition away from this facility become fully accretive to electric margins?