Constellation Energy (CEG) Q3 2026 earnings review
Constellation raises its profit outlook and signs Google and Amazon
Constellation Energy locked in multi-decade nuclear contracts with technology giants while summer heat and its Calpine gas fleet lifted profit. Profit per share excluding one-offs rose 66% to $5.06, and chief executive Joe Dominguez announced deals with Google and Amazon that fund over 1,000 megawatts of nuclear expansions. Finance chief Shane Smith raised the full-year outlook, but by our math the plan leaves fourth-quarter profit per share at $2.30, unchanged from a year ago.
| Power volume from businesses owned a year ago | -3.2% total volume +53.8% with Calpine |
|---|---|
| Profit per share, excluding one-offs | $5.06 +66% from a year ago |
| Long-term clean power signed since March | 43M MWh 45% of 2032 clean fleet contracted |
| Full-year profit per share outlook | Raised $0.65 middle of the range: $12.65 (+35%) |
⚖️ Verdict: 🟢 Bullish
The story got better because Google and Amazon agreed to back $7.3 billion of nuclear upgrades and the Energy Department committed up to $5 billion in low-cost loans. In addition, $2.5 billion of third-quarter free cash flow paid for $1 billion of buybacks and cut short-term debt. One caution: the new nuclear contracts do not start until 2028 to 2032, and the company models lower above-baseline trading margins for 2027.
The question now is whether 2027 profit can keep growing before the new data center contracts start paying in 2028. Bulls point to power prices above baseline assumptions and continued share buybacks; skeptics point to capped Mid-Atlantic capacity prices, weak Texas gas margins and a $900 million drop in modeled 2027 trading margins. Next quarter's first formal 2027 profit outlook will settle it.
🐂 Bull Case
Google and Amazon Fund One Gigawatt of New Nuclear Power
Constellation wants technology companies to pay for long-term nuclear power and fund plant upgrades. Chief executive Joe Dominguez said this quarter's deals help with "powering a growing economy while protecting existing customers" and bring new power "coming online with no costs being borne by existing customers".
The power producer signed contracts for about 4,560 megawatts across three customers this quarter. Since March, long-term deals cover 43 million megawatt-hours of annual power by 2032, lifting the contracted share of its clean baseload fleet to 45%.
- Google: a 20-year agreement enabling $4.3 billion of investment across 11 nuclear units to add 890 megawatts, plus a 15-year, 2,700-megawatt power supply deal
- Amazon: a 20-year, 690-megawatt agreement enabling over $3 billion of investment at Calvert Cliffs, adding 190 megawatts
- Peak+: a first 20-year, 270-megawatt contract for "an integrated solution that brings together new capacity, including new generation and demand response, with energy products to help large customers meet their evolving needs"
- Federal loan: a conditional commitment from the Department of Energy for up to $5 billion at 0.375 percentage points above US Treasury rates, saving about $40 million a year before taxes
These agreements matter because hyperscale data centers are paying to expand existing nuclear plants rather than waiting for new gas turbines. What to watch: the remaining 113 million megawatt-hours of uncontracted 2032 nuclear output. More deals under the Peak+ structure would show that pending grid rules do not slow customer signing.
Summer Heat, Calpine and Lower Fuel Costs Lifted Profit
Constellation added natural gas power plants by acquiring Calpine in January and benefited from higher grid capacity prices in the Mid-Atlantic and Midwest. Operating profit per share excluding one-offs jumped 66% from a year ago to $5.06. "This strong performance allowed us to raise the midpoint of our adjusted operating earnings guidance range for the second time this year," finance chief Shane Smith said.
Operating margin rose 9.6 percentage points to 26.1% of revenue. Purchased power and fuel — the cost of buying electricity and gas to run plants and serve customers — fell by 8.2 percentage points of revenue to 46.1%, and operating and maintenance costs fell by 2.2 points to 20.8%.
Reference power prices in PJM West rose 50% from a year ago to $69.97 per megawatt-hour while natural gas prices fell, widening profit margins despite $175 million in extra employee bonus costs for the year. What to watch: fourth-quarter commercial margins, because a second quarter of wide spreads would lift the starting base for 2027.
One Billion Dollars of Buybacks Paid Down Debt Too
During the first half of the year, Constellation spent $2.0 billion buying back its own stock while free cash flow was negative, funding the purchases with short-term debt. In the third quarter, the utility group spent another $1.03 billion on buybacks, bringing the nine-month total to $3.0 billion and leaving $2.0 billion under its authorization.
Unlike in the first half, third-quarter operations generated $2.49 billion of free cash flow by our math. That cash covered the stock purchases and allowed Smith to cut short-term borrowings by $1.24 billion to $3.99 billion, lowering total debt net of cash to $22.38 billion.
What to watch: the closing of the required power plant sales by year-end, represented by $5.66 billion of assets held for sale on the balance sheet. Collecting that cash will show whether Constellation retires the remaining short-term debt.
🐻 Bear Case
New Tech Contracts Do Not Lift Profit Until 2028
Dominguez highlighted over 1,000 megawatts of new clean power deals alongside the raised 2026 profit outlook. However, the Google nuclear upgrades begin in 2028, the Peak+ contract starts in 2028, and the Amazon expansion at Calvert Cliffs comes online between 2030 and 2032. None of the agreements signed in 2026 are even included in the company's contracted clean power table through 2030.
- Fourth-quarter profit per share implied by the full-year outlook: $2.30 at the middle of the range, unchanged from $2.30 a year ago by our math
- PJM capacity price growth: slowed to 22% from a year ago ($329.17 per megawatt-day), down from 165% growth last quarter, because auctions hit the price cap
- 2027 enhanced gross margin (profit above baseline assumptions): modeled at $2.15 billion to $2.55 billion, down from $3.20 billion to $3.30 billion in 2026
Meanwhile, Constellation still did not disclose the exact prices Google or Amazon will pay, keeping its broad $20 to $50 per megawatt-hour premium estimate. Because grid capacity prices are already at their cap and new nuclear deals start years from now, near-term profit growth is slowing. What to watch: the first-time 2027 profit outlook next quarter, which will test whether lower enhanced margins cause earnings to drop next year.
Texas Power Prices Fell After Buying Calpine
Purchasing Calpine gave Constellation a large fleet of natural gas power plants in Texas (the ERCOT grid). While power prices jumped in the Mid-Atlantic, third-quarter reference electricity prices in North Texas slipped 1.8% from a year ago to $34.41 per megawatt-hour.
In the company's modeling tables, the 2026 North Texas spark spread — the profit margin a gas plant earns after paying for fuel — stood at $12.82 per megawatt-hour as of September 30, well below its $21.00 baseline assumption. In addition, the natural gas, oil and hydro fleet recorded a 5.9% forced outage rate (the share of time plants were unexpectedly unavailable).
What to watch: North Texas forward spark spreads for 2027, currently $17.26 per megawatt-hour against a $22.00 baseline assumption. A reading that stays below the baseline would drag on gas fleet profits next year.
Risks This Quarter Did Not Answer
Several standing regulatory, contract and accounting risks received no final resolution in the third-quarter materials.
- Grid rules for large customers: Constellation noted that "Regulatory goals are clear, although rules are not final" in PJM; a final Federal Energy Regulatory Commission order will settle how data centers connect.
- Illinois state nuclear credits: volumes under the Illinois Carbon Mitigation Credit program drop from 53 million megawatt-hours in 2026 to 23 million in 2027 when the program expires in May 2027, shifting those plants to the federal tax credit floor.
- Calpine contract accounting drag: non-cash charges for amortizing acquired Calpine commodity contracts were $39 million ($0.11 per share) in Q3 after $149 million in Q2, and will continue across the contracts' multi-year life.
- Former Calpine owners' stock lock-up: the second tranche of 25 million shares unlocks on June 30, 2027.
- Crane nuclear restart: received no new milestone update this quarter ahead of its planned second-half 2027 return.
👓 Other Themes
Constellation Buys a New England Gas Plant for $715 Million
Constellation agreed to buy the Rhode Island State Energy Center from Shell Energy North America for $715 million. The natural gas plant has 609 megawatts of capacity and sells power into the competitive New England wholesale market. The deal price works out to about $1,174 per kilowatt, below the roughly $1,419 per kilowatt Constellation is receiving for selling its Brazos Valley gas plant in Texas, and requires regulatory approval.
💲 Other KPIs
Total power supplied rose 53.8% from a year ago because the Calpine acquisition added 40,277 gigawatt-hours. By our math, power supplied by businesses Constellation owned a year ago fell 3.2% to 68,397 gigawatt-hours, as lower wholesale power purchases in other regions offset flat nuclear output.
Nuclear reliability rose from 96.8% a year ago and 93.0% last quarter, reaching 99.2% across the summer months. The power producer completed 20 planned refueling outage days, down from 23 a year ago, which kept its reactors running when summer power prices peaked.
Reported profit nearly doubled from $930 million a year ago ($5.19 per share vs $2.97), reversing last quarter's 39% drop. Favorable paper gains on economic hedges ($127 million after tax) and a $108 million state tax adjustment lifted reported profit above the $1,792 million figure excluding one-offs.
🔮 Guidance
Raised. The middle of the range moved up $0.65 to $12.65 per share, representing 34.7% growth for the year. It is the second raise this year: +$0.50 in Q2 and +$0.65 in Q3. By our math, after earning $10.35 in the first nine months, the plan leaves $2.30 per share for Q4, unchanged from $2.30 in Q4 last year despite owning Calpine.
Raised. Expected full-year operating and maintenance costs excluding one-offs increased by $50 million. Baseline plant operating costs stayed flat at $6,900 million, but the utility group added $50 million of employee bonus expenses (to $175 million in total) tied to beating its commercial trading targets. For 2027, total operating and maintenance costs are modeled flat at $7,075 million.
❓ Key Questions
Why does the outlook point to flat fourth-quarter profit?
By our math, the raised full-year outlook leaves $2.30 per share for Q4, matching last year's $2.30 before Constellation owned Calpine. Did the third quarter pull trading profits forward from the fourth quarter?
What prices are Google and Amazon paying for nuclear power?
Constellation signed 1,580 megawatts of 20-year nuclear agreements with Google and Amazon to fund $7.3 billion in plant investments, but kept its wide $20 to $50 per megawatt-hour premium range without giving project returns.
What is the 2026 profit growth without Calpine?
Calpine provided 37% of third-quarter power volume, but Constellation no longer separates Calpine's profit contribution from its legacy nuclear and retail businesses.
How will Constellation use the $5.9 billion from plant sales?
The company still carries $3.99 billion of short-term borrowings and has $5.66 billion of power plants held for sale closing by year-end, alongside $2.0 billion left on its buyback plan.