Xcel Energy (XEL) Q3 2026 earnings review
Xcel Energy lifts its spending plan, while financing costs rise
Xcel Energy, a regulated electric and gas utility in eight states, raised its five-year construction plan while leaning on non-operating gains to lift quarterly profit. Third-quarter profit per share excluding one-offs rose 23%, helped by hot summer weather, construction accounting credits, and paper gains on technology investment funds. Chief executive Bob Frenzel rolled out a $70 billion five-year spending plan and a 2027 profit outlook of $4.48 to $4.62 per share, up 10% at the middle of the range.
| Profit per share, excluding one-offs | $1.52 +22.6% from a year ago |
|---|---|
| Five-year capital investment plan (2027–2031) | $70.0B +$10.0B vs prior five-year plan |
| Weather-adjusted electric sales growth | +3.0% +2.5% year-to-date (vs ~3% plan) |
| 2027 profit per share outlook | $4.48–$4.62 middle of the range: +10.2% vs 2026 |
⚖️ Verdict: 🟢 Bullish
The story got better because the utility locked in the regulatory approvals and construction projects needed to drive double-digit profit growth next year. Colorado regulators approved its electric and gas rate settlements, and Texas approved the bulk of its new power plants, moving $10 billion of pipeline projects into the base plan. Two cautions remain: cash rider revenue was cut for a fourth time in favor of construction credits, and Texas wildfire costs reached the $525 million insurance limit.
The question now is whether electricity demand and cash rate recovery can catch up to the utility's borrowing and share issuance. Either new data centers and oilfield demand push electric sales growth to the 5% pace assumed for 2027, or rising interest and dilution from $34 billion of planned financing eat into returns. Fourth-quarter weather-adjusted electric sales and the 2026 cash flow statement will show if demand is accelerating.
🐂 Bull Case
Five-Year Spending Plan Rises by $10 Billion
Xcel Energy, which supplies electricity and natural gas across eight western and midwestern states, makes money by investing in power lines and plants and earning a regulated return on that spending. Chief executive Bob Frenzel said "our updated five-year investment plan gives us a clear path to extend this growth cycle" into the next decade.
The company rolled its five-year capital plan forward to cover 2027 through 2031 and raised the total to $70 billion, up from $60 billion in the prior five-year plan. Its Southwestern Public Service (SPS) utility in Texas and New Mexico leads the increase at $25.8 billion, up $6.8 billion, after Texas regulators approved most of its new power plant portfolio in October.
The company also initiated its 2027 profit outlook at $4.48 to $4.62 per share excluding one-offs, which is 10.2% above the middle of this year's range by our math. That pace sits above the utility's long-term target of 6% to 8+% annual growth, and the $70 billion base plan "does not include any potential incremental generation" from open bidding processes or future data center deals.
What to watch: the regulatory filing for up to 3,500 megawatts of Upper Midwest power projects by the end of 2026. Approval would move those projects from the upside pipeline into the base spending plan.
Colorado and Minnesota Rate Orders Clear the Way
Public Service Company of Colorado (PSCo), Xcel Energy's Colorado utility, earned well below its allowed return last year while contentious rate cases were pending. Consumer groups and the City of Boulder opposed the electric settlement, raising the risk that regulators would reject the deal and delay the profit recovery.
In September, Colorado regulators approved the electric settlement for a $184 million rate increase and a 9.3% allowed return on equity (ROE), the profit rate regulators let a utility earn on shareholder capital. They also approved a $123 million natural gas increase taking effect in October, while New Mexico hearing examiners recommended approving SPS's $90 million electric settlement.
Meanwhile, the Minnesota utility proposed freezing customer base rates for 2027 and 2028 by using federal battery storage tax credits to offset new construction costs. With Colorado rates now decided and the 2027 outlook projecting a $560 million to $570 million jump in infrastructure rider revenue, regulatory lag is easing.
What to watch: the Minnesota commission's decision on the two-year rate freeze proposal, requested by January 2027. Approval would lock in cost recovery for ongoing capital improvements without a contested rate case.
Positives this quarter didn't test
Two standing growth drivers from earlier quarters received no new numbers in the third-quarter earnings release because management typically updates its commercial pipeline on the conference call.
- Data center contracts: the release noted that a regulatory decision on the Google data center agreement in Minnesota is still expected in early 2027, but gave no update on total gigawatts under contract.
- Equipment supplier partnerships: no new turbine reservations or joint development projects were disclosed in the release.
🐻 Bear Case
Venture Gains and Construction Credits Carried Profit
Xcel Energy reported third-quarter profit per share of $1.52 excluding one-offs, up 22.6% from $1.24 a year ago. The company said the increase was "primarily driven by increased recovery of electric infrastructure investments, earnings on equity method investments and unseasonably warm weather, partially offset by higher financing costs".
Look closer at those lines. Equity method investments added $0.09 per share of the $0.28 gain, driven by "unrealized gains on the investment funds’ interests in energy technology companies" ($77 million vs $6 million a year ago). Another $0.11 per share came from allowance for funds used during construction (AFUDC), an accounting credit for the cost of financing power plants while they are being built, and hot summer weather added $0.06.
At the same time, the company cut its 2026 forecast for cash capital rider revenue — charges on customer bills that pay for new equipment — for a fourth time, down $110 million at the middle of the range to $375 million. To keep the full-year profit outlook intact, it raised its forecast for non-cash AFUDC equity credits by $30 million and lowered expected depreciation by $40 million.
What to watch: fourth-quarter equity method earnings and 2026 cash from operations in the annual report. A reversal in venture fund valuations would show how much of this year's profit beat came from paper gains rather than utility rates.
New Shares and Debt Eat Into Customer Growth
Building $70 billion of grid equipment requires far more cash than Xcel Energy generates internally. Through the first nine months of 2026, the utility entered forward sale agreements for 62.1 million shares of common stock, leaving 79.4 million unsettled shares waiting to be issued for at least $5.8 billion.
- Total debt: $40.6 billion at September 30, up from $33.9 billion at year-end 2025 (62% of total capital vs 59%)
- Third-quarter financing drag: higher interest charges cut profit by $0.13 per share, and share dilution cut another $0.10
- 2027–2031 funding plan: $26.2 billion of new debt and $8.0 billion of new equity alongside $35.8 billion of operating cash
- 2027 interest outlook: net interest expense projected to rise another $320 million to $330 million
For 2026, management raised its expected net interest expense increase by $50 million back to a range of $290 million to $300 million. Moody's and S&P Global Ratings both carry a negative outlook on Colorado utility PSCo's debt, and Moody's holds a negative outlook on the parent company, leaving little room for cost overruns as a $1.5 billion term loan matures in January 2027.
What to watch: how many of the 79.4 million forward shares Xcel Energy settles by year-end 2026, and the resulting diluted share count for 2027. Settling those shares transfers the financing drag from interest expense into permanent per-share dilution.
Underlying Electricity Demand Still Trails the Full-Year Target
Xcel Energy's investment pitch rests on rising electricity demand from data centers, oil and gas fields, and manufacturing. Hot summer weather pushed actual retail electricity sales up 7.3% from a year ago in the third quarter, but stripping out weather leaves growth at 3.0%, driven by 5.6% growth in Texas and New Mexico while Colorado grew 1.0%.
That 3.0% reading improved on the second quarter's 1.5% pace, so the quarter argued against a deeper stall. However, nine-month weather-adjusted electricity sales are up only 2.5%, while management held its full-year assumption at about 3%. By our math, hitting 3% for the year requires fourth-quarter growth of about 4.5%, and the new 2027 outlook assumes demand jumps to about 5%.
Meanwhile, weather-adjusted natural gas sales fell 2.2% in the quarter and 1.6% over nine months, forcing the company to cut its 2026 gas volume forecast from 1% growth to flat.
What to watch: fourth-quarter weather-adjusted retail electric sales in the full-year report. A reading below 4% would mean Xcel Energy missed its 3% initial electric sales forecast for a second straight year just as it asks investors to believe a 5% target for 2027.
Smokehouse Creek Wildfire Costs Match the Insurance Cap
Texas forestry investigators determined that power lines owned by Xcel Energy's SPS subsidiary ignited the February 2024 Smokehouse Creek Fire after wooden poles failed. The utility has now settled 358 claims totaling $410 million, with 141 plaintiff groups still outstanding.
This quarter, the company raised its total estimated losses and legal expenses for the fire to $525 million ($475 million in losses plus $50 million in legal costs), up from $503 million in June. That $525 million figure exactly matches its $525 million annual insurance limit, so the buffer is gone.
Xcel Energy warned that final costs "could exceed our insurance coverage of $525 million for the annual policy period" because its accrual sits at the low end of the range and excludes exemplary damages, oil and gas equipment claims, and penalties sought by the Texas Attorney General. Separately, ongoing wildfire exposure in Colorado and federal renewable permitting rules saw no new developments in the release.
What to watch: any fourth-quarter charge to earnings for Smokehouse Creek losses above the $525 million insurance cap, as discovery in the Texas Attorney General's lawsuit continues into 2027.
💲 Other KPIs
Day-to-day operating and maintenance (O&M) costs rose 9.7% from a year ago, or 0.5 percentage points of revenue, to $759 million. After falling 1.6% in the first quarter and rising 2.4% in the second, higher power plant, wildfire mitigation and gas system costs pushed Xcel Energy to raise its full-year O&M growth forecast from 3% to 5%.
The average diluted share count rose 6.2% from a year ago to 632 million, compared with 8.5% growth in the first quarter and 6.6% in the second. The utility settled 10.5 million shares for $819 million in cash during the third quarter to help fund its construction program.
The effective income tax rate rose to 6.7% from 1.5% a year ago, following negative rates of -9.2% in the first quarter and -11.4% in the second. Wind and solar production tax credits lowered the rate by 12.2 percentage points, down from 17.0 points last year, though those credits are passed through to customers in lower bills.
🔮 Guidance
Raised. Xcel Energy lifted the bottom of its 2026 profit per share range by $0.06, moving the middle of the range up $0.03 to $4.13, or 8.7% growth. With $3.37 already earned in the first nine months, the plan leaves $0.76 for the fourth quarter by our math, down 20.8% from $0.96 a year ago as construction credits and tax timing normalize.
New. The initial 2027 outlook calls for $4.55 at the middle of the range, which is 10.2% above the new 2026 midpoint by our math. The plan assumes normal weather, a 5% jump in weather-adjusted electric sales, and $560 million to $570 million of new capital rider revenue, partially offset by $460 million to $470 million in higher depreciation.
Unchanged. Management kept its full-year electricity demand growth forecast at about 3%. Because growth averaged 2.5% across the first nine months, hitting the full-year number requires fourth-quarter demand to accelerate to about 4.5% by our math.
Cut. The utility lowered its 2026 natural gas volume forecast from 1% growth to flat after nine-month weather-adjusted sales fell 1.6% on lower use per customer. For 2027, the company projects gas volumes will rebound by about 1%.
Cut. The middle of the range fell by $110 million, marking the fourth cut in four quarters: -$15M, -$30M, -$25M, and -$110M. The company said the lower rider revenue is offset by lower depreciation and higher construction financing credits.
Raised. Expected day-to-day operating and maintenance cost growth stepped up by 2 percentage points to about 5% after third-quarter expenses rose 9.7% on power plant, wildfire mitigation and gas system spending.
Cut. Expected full-year depreciation expense growth dropped by $40 million at the middle of the range. It is the fourth consecutive reduction: -$20M, -$20M, -$190M (when nuclear plant life extensions were recognized), and -$40M.
Unchanged. Property taxes are still projected to rise by $30 million to $40 million over 2025 levels, with the same $30 million to $40 million increase projected for 2027.
Raised. Net interest expense is now expected to climb $50 million more than previously planned, reversing the two prior reductions (+$10M, -$30M, -$30M, +$50M) as total debt passed $40.6 billion.
Raised. Non-cash equity credits for projects under construction moved up $30 million at the middle of the range, following moves of $0M, -$10M, and +$20M in prior quarters, offsetting delayed cash rider revenues.
❓ Key Questions
Have Any New Data Center Contracts Been Signed?
Contracted data center load stood at 2 gigawatts for three straight quarters, while management previously targeted signing at least 1 additional gigawatt by the end of 2026. The release gave no update on signed capacity.
Will Venture Fund Gains Stay in Ongoing Profit?
Unrealized gains on energy technology investment funds added $0.09 per share in the third quarter and $0.21 year-to-date ($166 million vs a $3 million loss last year). Investors need to know how much of the 2026 and 2027 outlooks rely on these paper gains.
What Drives the Jump to 5% Electric Sales Growth?
Weather-adjusted electric sales grew 2.2% in 2025 and 2.5% through nine months of 2026, yet the new 2027 outlook assumes growth accelerates to 5%. Which specific industrial or data center projects come online in 2027 to double that pace?
How Large Are the Uninsured Texas Wildfire Claims?
Recorded Smokehouse Creek Fire losses and legal costs of $525 million now match the $525 million insurance cap, excluding Texas Attorney General penalties and oilfield equipment claims. Any further settlements will hit shareholder profit directly.