Enbridge (ENB) Q1 2026 earnings review
Gas and Utility Growth Offsets Liquids Weakness as Backlog Hits $40B
Enbridge delivered a stable Q1 2026 with Adjusted EBITDA flat at $5.81B and Distributable Cash Flow (DCF) edging up 2% to $3.85B. The headline stability masks a significant mix shift: Liquids Pipelines, the company's historical engine, decelerated sharply with a 12% YoY EBITDA drop due to lower tolls and higher earnings sharing. This was fully offset by accelerating growth in Gas Transmission (+5.5% YoY) and Gas Distribution (+6.8% YoY), driven by favorable contracting and recent rate case settlements. Management's capital allocation continues to lean heavily into the energy transition and tech demand, sanctioning $2B in new projects (including a wind farm for Meta) and pushing the secured backlog to a record $40B. Leverage ticked up to 5.0x, hitting the ceiling of the target range.
🐂 Bull Case
The secured project backlog grew to $40B (up from $32B in 25Q2), providing a highly visible runway for the company's projected ~5% post-2026 EBITDA and DCF CAGR.
Rate escalators in Ontario and successful rate cases in Utah and North Carolina are proving the utility model's value. Gas Transmission also capitalized on favorable U.S. contracting, showcasing robust pricing power.
🐻 Bear Case
Despite running at apportionment with 3.2M bpd of volume, Liquids Pipelines EBITDA fell $318M YoY. Lower Line 9 tolls and higher earnings sharing are suppressing the profitability of the legacy business.
Debt-to-EBITDA climbed to 5.0x, the absolute top end of management's 4.5x-5.0x target range, potentially limiting financial flexibility for future M&A or requiring higher capital retention.
⚖️ Verdict: ⚪
Neutral. Enbridge's massive backlog and utility rate base growth are excellent long-term stabilizers, but the 12% profit drop in the core Liquids segment and maxed-out leverage ratio keep us on the sidelines for immediate outperformance.
Key Themes
Liquids Pipeline Segment Declining
Adjusted EBITDA for Liquids Pipelines reversed from $2.62B in 25Q1 to $2.30B in 26Q1 (-12% YoY). While volumes remain high (3.2M bpd), the profitability is decelerating due to higher earnings sharing mechanisms, lower Mainline tolls on Line 9 deliveries, and the absence of a prior-year litigation settlement. Management is leaning on Mainline Optimization Phase 2 to add 250 kbpd of egress to reverse this trend, but current quarter margins reflect structural pressure.
Gas and Utility Segments Accelerating
Gas Transmission and Gas Distribution stepped up to offset the Liquids shortfall. Gas Distribution EBITDA hit $1.71B (+6.8% YoY), benefiting from rate escalators in Ontario and newly settled base rates in Utah and North Carolina. Gas Transmission generated $1.52B (+5.5% YoY) due to highly favorable contracting on U.S. assets and higher seasonal spreads at Aitken Creek. The shift underscores the stability of Enbridge's utility-like revenue model.
Hyperscaler Power Demand Securing Backlog
Enbridge continues to directly monetize tech data center demand. The company sanctioned the $0.7B 'Cone' project, a 300 MW onshore wind facility in Texas fully contracted under a long-term PPA with Meta Platforms. This brings the total Enbridge-Meta partnership to over 1 GW of combined power generation. This macro theme of data center power consumption is a primary catalyst for the Renewable segment's long-term viability.
Leverage Creeping Upward
Debt-to-EBITDA climbed to 5.0x for the trailing 12 months ending 26Q1. This metric has steadily worsened over the past year (4.7x in 25Q2, 4.8x in 25Q3 and 25Q4). While technically still within the company's 4.5x-5.0x target range, touching the ceiling removes the balance sheet buffer and raises questions about how the $10B-$11B annual investment capacity will be funded without straining the credit profile.
LNG Export Infrastructure Execution
Management sanctioned a $0.4B brownfield expansion at the Tres Palacios natural gas storage facility, adding 25 Bcf of capacity. This is targeted directly at rising LNG export demand and power generation needs along the U.S. Gulf Coast, complementing previously sanctioned expansions at Egan and Moss Bluff. New capacity is expected ratably from 2028 to 2030.
Other KPIs
Stable and slightly accelerating. DCF increased $74M YoY. Lower current taxes (driven by U.S. tax depreciation rules) and higher cash distributions in excess of equity earnings fully offset the headwinds of higher non-cash revenue recognition from make-up rights.
Decelerating. Down $0.05 YoY from $1.03 in 25Q1. The drop was driven by flat operating EBITDA fighting against higher depreciation from new assets placed into service and the absence of investment tax credits (ITCs) from the Fox Squirrel Solar project that benefited the prior year.
Accelerating. The backlog continues a multi-quarter upward trajectory, moving from $32B in 25Q2 to $39B in 25Q4, and now $40B in 26Q1. Enbridge added $2B in new projects this quarter, ensuring a massive multi-year pipeline for capital deployment.
Guidance
Reaffirmed. The midpoint of $20.5B implies a stable ~2.7% growth over FY25's $19.95B actuals. This growth relies on the back-half weighting of the $8B in new capital projects expected to enter service this year.
Reaffirmed. Implies stability relative to prior long-term guidance, anchoring the company's dividend payout strategy.
Reaffirmed. Management continues to project a 5% average compound annual growth rate for Adjusted EBITDA, DCF per share, and EPS post-2026, relying heavily on the $40B secured backlog and $10B-$11B annual investment capacity.
Key Questions
Leverage Limits and Capital Funding
With Debt-to-EBITDA touching the 5.0x ceiling of your target range this quarter, how will the company fund its aggressive $10B-$11B annual capital investment capacity without issuing equity or pushing leverage past the target?
Liquids Pipelines Margin Reversal
Liquids Pipelines EBITDA dropped 12% YoY despite the system being apportioned all year. Are these headwinds from earnings sharing and Line 9 tolls structural, and when do you expect the segment to return to EBITDA growth?
Unsanctioned Opportunities Timeline
Management highlighted actively advancing $50 billion in unsanctioned opportunities. Given the existing $40B backlog extending to 2030, what is the realistic timeline for reaching FID on the next wave of these unsanctioned mega-projects?