The Southern Company 2026 Q2 Earnings Call

Please go ahead, sir. Thank you, Christine.

Good afternoon, welcome to Southern Company Second Quarter 2026 Earnings Call. Joining me today are Chris Womack, Chairman, President, and Chief Executive Officer of Southern Company, and David Poroch, Chief Financial Officer. Let me remind you that we will make forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K, Form 10-Q, and subsequent securities filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning, as well as the slides for this conference call, which are both available on our investor relations website at investor.southerncompany.com. At this time, I'll turn the call over to Chris.

Thank you, Greg. Good afternoon, everyone, thank you for joining us for today's update. As you can see from the materials that were released this morning, Southern Company continues to perform exceptionally well, which supports a very bright future. We reported strong adjusted earnings results for the second quarter with each of our businesses contributing to performance meaningfully above the estimate we provided last quarter. The extraordinary economic development momentum and demand for power across our southeast region that we've seen for the past several years continues particularly from data centers and other large load customers. Our utilities are capturing this growth in a way that meaningfully benefits the customers and communities we are privileged to serve and supports our long-term outlook.

In just the last quarter, through three projects across the state, Alabama Power added approximately three gigawatts, while Georgia Power signed a 3.2 gigawatt, 25-year contract for electric service with OpenAI for its recently announced site near Savannah, Georgia. This site, which is expected to take electric service in phases beginning in 2028, features one gigawatt of flexible demand response, helping to support reliable energy for all customers when demand is highest. Combined, these four projects, representing six gigawatts of newly contracted customer load, along with agreements previously signed, brings our total contracts and large load agreements across our electric subsidiaries to over 17 gigawatts by the mid-2030s. These projects are not just bringing in substantial construction work. They're creating thousands of permanent jobs and generating billions of dollars of investment for the local economies in our service territories.

We are proud to responsibly support this growth in a way that benefits the communities we serve. In Alabama, the three new contracts were a clear confirmation of the continued economic development momentum building across all our electric service territories and our differentiated large load capabilities. Increasingly, our vertically integrated, state-regulated model supports our ability to provide reliable power with speed and is an important differentiator for our new and existing customers. Our success attracting significant growth is a testament to the benefits that this model affords all our customers. As a comprehensive one-stop shop for power solutions and economic development, our electric operating companies utilized long-range integrated system planning processes to coordinate timely development of generation, transmission, and distribution assets through well-structured and transparent regulatory processes that are designed to serve the growth reliably.

The Southeast, with its robust network of transportation and logistics infrastructure, diverse workforce, and a constructive business climate, continues to be highly attractive for all forms of economic development, including hyperscalers, data center developers, and large industrial manufacturers. Looking ahead, the opportunities for additional new large load and data center customer growth remains robust. New projects continue to be added to our prospective pipeline, large industrial and data center projects, which remains well above 75 gigawatts. We are encouraged by the continued progression of potential large load projects in varying stages of advanced development. Beyond the 17 gigawatts already contracted, there are an additional 8 gigawatts of projects in late stages, including 3 gigawatts projected to be finalized in the near term. Clearly, the benefits of our approach are resonating with both new customers and several repeat large load customers during a time of increasing power demand.

We are privileged to support this transformative growth. David, I'll now turn the call over to you for an update on our financial performance.

Thanks, Chris. Good afternoon, everyone. For the second quarter of 2026, our adjusted EPS was $1.13 per share, $0.21 higher than the second quarter of 2025, and $0.13 above our estimate. The primary drivers of our performance for the current quarter compared to last year included increased usage and customer growth, along with higher AFUDC from ongoing construction projects, higher earnings from equity method investments, and tax-related impacts at our state-regulated electric utilities. The improved results in the second quarter compared to the second quarter of 2025 were also supported by contributions from Southern Company Gas and some of our smaller complementary businesses, including PowerSecure, where the distributed generation, backup generation, and bridge power solutions markets continue to expand. This was partially offset by interest expense from higher debt balances and dilution from additional shares outstanding.

A complete reconciliation of year-over-year earnings is included in the materials we released this morning. Combined with our first quarter results, our adjusted EPS for the first half of the year is $2.46, well above our year-to-date expectations. With customer rates held stable at our two largest subsidiaries, this strong performance continues to be driven by increased sales and customer growth and strong execution across each of our regulated businesses and Southern Power. These results exemplify Southern Company's commitment to delivering for customers and investors. Looking towards the second half of the year, we anticipate this momentum continuing and now project our full year 2026 adjusted earnings to be near or at the top of our 2026 adjusted EPS guidance range of $4.50-$4.60. Our adjusted EPS estimate for the third quarter is $1.65 per share. Turning now to retail electricity sales.

Year to date, weather normal retail electricity sales were 2.3% higher than the first half of 2025, consistent with the trends observed earlier this year. This represents the highest retail sales growth through June we've seen in nearly two decades. Year to date, weather normal retail electricity sales are higher across all customer classes, bolstered by continued residential customer additions, diverse industrial and manufacturing expansions, and significantly increasing usage from data centers. Approximately 11,000 new electric residential customers were added in the quarter, bringing our net electric customer adds to over 40,000 in the last year. Manufacturing and reshoring trends, particularly in Alabama in the primary metals, stone, clay, glass, and pipeline segments, supported continued industrial strength. Weather normal commercial sales grew 7.4% in the second quarter, bringing year-to-date weather normal commercial sales to 6% higher than the first half of 2025.

Notably, data center usage was 55% higher compared to the second quarter of 2025 and is now up 49% year to date, primarily due to accelerating load ramps from our large load customers. System-wide, our data center load now exceeds 1.2 gigawatts, an increase of more than 500 megawatts over the prior year, and we expect this trend to continue accelerating as our 17 gigawatts of contracted demand comes online. As Chris mentioned earlier, economic development activity in the Southeast continues to be strong. In the last quarter alone, announcements were made for nearly $14 billion of investment and more than 3,000 new jobs, led by several new data center facilities in Alabama and a new Amazon warehouse in Georgia.

The projects announced in the second quarter marked the second highest investment level ever recorded in our electric territories, underscoring the strength of regional trends in economic development and ultimately help shape future growth opportunities. Turning to our infrastructure build-out, the continued success of our operating territories in attracting significant new load is driving the need for additional new power generation and infrastructure across our Southeast region. Over the past several years, we worked constructively with regulators to meet the demand of our growing system, securing approvals for 10 gigawatts of new company-owned generation resources, including thermal, battery, and solar resources, as well as hundreds of miles of new transmission lines.

With the first two of several battery sites in service and benefiting customers and work on the three combustion turbines and plant gates advancing towards completion in the coming quarters, we continue to execute on the construction of our portfolio of new build generation projects. As our projected incremental load needs grow beyond our system's current and expected supply of generation capacity into the next decade, we remain well positioned to respond. Ongoing requests for proposals for RFPs at both Alabama Power and Georgia Power are underway for potential additional generation resources to help ensure that we can continue to provide a reliable and affordable service to all customers. These transparent and orderly processes are designed to facilitate the timely and cost-effective procurement of new generation needs in the early 2030s.