Bank of America Reaffirms Utilities Outlook on Strong Earnings, Data Center Demand

Bank of America has reaffirmed its positive growth outlook for the U.S. power and utilities sector, citing a strong second-quarter 2026 earnings season where the majority of companies surpassed expectations. The bank's mid-quarter review noted that robust demand, particularly from data centers, and constructive regulatory execution are key drivers supporting the sector's performance.

Strong Q2 Earnings Beat Expectations

According to the BofA report, the earnings season was largely successful, with 12 of the 14 covered utilities exceeding the bank’s own earnings estimates. Furthermore, eight companies beat consensus market expectations, four met forecasts, and only two missed.

The positive results were attributed to several factors, including rate relief, growth in customer numbers and electricity load, and earnings from construction projects. These tailwinds successfully offset headwinds from higher interest expenses, depreciation, share dilution, and general operating costs.

Data Center Demand Fuels Growth Outlook

Surging electricity demand from data centers continues to be a primary catalyst for growth. The report highlighted significant increases in contracted load and development pipelines across the sector:

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• AEP reported its contracted load has reached 69 gigawatts.
• FirstEnergy (FE) saw its contracted and pipeline demand increase by 30% to 24.8 gigawatts.
• Xcel Energy (XEL) maintained a development pipeline of more than 20 gigawatts.
• NextEra Energy (NEE) increased its large-load forecast for its Florida Power & Light subsidiary to 8 gigawatts.

Reflecting this confidence, most utilities reaffirmed their annual guidance. Several firms issued upward revisions, including AEP, which raised its 2026 range by $0.10, and Idaho Power's parent company, IDACORP (IDA), which increased its guidance floor by $0.05. Xcel Energy also raised its expected average growth rate through 2030 to above 9%.

Regulatory Execution and Risk Management

The report observed a trend of constructive regulatory execution, with utilities increasingly linking their growth plans with affordability measures for existing customers. To manage the risks associated with large-scale infrastructure projects, companies are implementing specific tariffs and protections.

These measures include large-load tariffs, customer collateral requirements, minimum-demand provisions, and termination protections. BofA noted that these tools are designed to shield existing ratepayers from the risks of stranded assets should a large new customer, like a data center, alter its plans. The bank pointed to a pipeline reset at Exelon (EXC) and cautious commentary from NorthWestern Energy (NWE) as examples highlighting the importance of signed agreements and realistic project timelines.