Southern Co Earnings - Q4 2025 Analysis & Highlights
Southern Company reported strong 2025 financial results and substantially increased long-term earnings guidance driven by exceptional large load customer growth, robust economic development activity, and significant capital investment opportunities in its Southeast service territories.
Key Financial Results
Adjusted earnings per share of $4.30 for 2025, representing the top of the company's 2025 guidance range and 6% growth from adjusted earnings in the prior year, with 9% average annual growth from 2023.
Achieved adjusted earnings results at the top of or above annual guidance range for the 11th year in a row, demonstrating consistent execution.
Weather-normalized total retail electricity sales grew 1.7% compared to 2024, which is substantially higher than recent historical growth and more than double the cumulative growth seen over the last decade.
Georgia Power achieved 2.5% weather-normal sales growth from 2024, with all three customer classes showing positive growth.
Added 39,000 new residential electric customers and 25,000 new customers across natural gas distribution businesses in 2025.
Data center commercial sales grew 17% year-over-year for the second consecutive year, demonstrating strong demand from large load customers.
Industrial customer sales grew 1.4% in 2025, with four of the largest industrial customer segments showing gains including primary metals, lumber, paper, and transportation.
Dividend increased for the 24th consecutive year, with a remarkable 78-year track record of annual dividend payments.
Business Segment Results
Georgia Power's total retail electric sales growth is projected to be approximately 13% over the 2026-2030 period, significantly outpacing overall company growth.
Southern Power operates an industry-leading portfolio with over 13 gigawatts of capacity across 55 generating facilities in 15 states, including over 7 gigawatts of natural gas generation in the Southeast.
Southern Company Gas has exceeded expectations since its acquisition 10 years ago, with the four state-regulated local distribution companies tripling their authorized rate base while increasing customer value.
PowerSecure is positioned to grow as demand for customer-sited solutions increases, including bridge power for commercial and industrial customers and solutions in response to extreme weather events.
Southern Telecom deploys fiber optic infrastructure in partnership with electric utilities, serving as an attractive additional product offering for data-intensive customers.
Capital Allocation
Base capital investment forecast of $81 billion over the next five years, representing an $18 billion or approximately 30% increase from the forecast one year ago.
95% of capital investment is at state-regulated utilities, with the main drivers related to new generation facilities and the approved Integrated Resource Plan in Georgia.
Approximately $42 billion or over half of the five-year capital plan is expected to be invested through 2030 to reliably serve projected growth through new generation, enhancements to existing generation assets, and expansions of transmission and interstate pipeline systems.
Projected long-term state-regulated average annual rate base growth of approximately 9%, a 2% increase from the forecast one year ago.
Proactively addressed $9 billion of equity needs in 2025 through internal equity plans, junior subordinated notes receiving 50% equity treatment, $4 billion through at-the-market program with forward contracts settling through 2026, and $2 billion through mandatory convertible equity units settling in 2028.
Remaining equity or equity equivalents need of approximately $2 billion through 2030 to continue supporting long-term credit objectives.
Projected continued modest dividend increases over the next several years, with dividend payout ratio expected to lower into the low to mid-60% range in the latter portion of the forecast horizon.
Plan to finance incremental capital investment above current plan with approximately 40% equity or equity equivalents.
Industry Trends and Dynamics
Over 120 companies either made decisions to locate new facilities or announced expanded operations in Southern Company's electric and gas service territories over the past year, expected to support over 21,000 new jobs.
Large technology companies known as hyperscalers have made significant investments in Southern Company's service territories, along with companies in manufacturing, automotive, aerospace, and metals industries including General Electric, US Steel, Duracell, and Mercedes-Benz.
Robust economic development activity at utilities provides a tremendous foundation for sustainable growth, with strong in-migration of population into service territories.
Market demand for capacity has increased pricing roughly 2 to 3 times higher than where many Southern Power assets are currently contracted, creating significant repricing opportunities as contracts come up for renewal beginning in the early 2030s.
The burgeoning need for reliable, dispatchable energy provides significant opportunities for Southern Power, particularly as data center demand continues to grow.
Competitive Landscape
Southern Company's vertically integrated model provides a one-stop shop for customers because the company owns generation, transmission, and distribution networks to reliably serve customer needs at significant scale.
The orderly, transparent, and constructive regulatory processes in which utilities operate are designed to reliably and sustainably serve growth while helping ensure all customers benefit from that growth.
Southern Company's scale, balance sheet strength, and experience with large construction projects bolster execution capabilities necessary for ongoing expansion, as demonstrated by recently completing the only two new nuclear units in three decades.
Regulatory frameworks across all electric jurisdictions allow for bilaterally negotiated contracts for large load customers rather than standard tariffs, providing necessary flexibility to appropriately price large load customers.
Macroeconomic Environment
Winter Storm Fern in January demonstrated the value of the vertically integrated system, with the system serving the second highest winter peak electric load of over 39,000 megawatts.
Extreme cold weather temperatures and severe weather conditions over the last two months impacted daily lives of millions across the Eastern United States, including Southern Company's service territories.
Strong and resilient economy in Southeast service territories is demonstrated by positive growth across all three customer classes and robust economic development activity.
Growth Opportunities and Strategies
26 signed contracts representing 10 gigawatts of fully contracted electric service agreements, which is 2 gigawatts higher than reported last quarter and 4 gigawatts higher than a year ago.
Nearly all 26 customer projects are currently under construction, with load ramps totaling 8 gigawatts by the end of the five-year planning horizon, ultimately ramping up to 10 gigawatts beyond 2030.
In late-stage discussions for another 10 gigawatts of load, with 3 gigawatts working through final reviews and highly likely to progress to executed contracts in the near-term.
Total large load pipeline has increased to over 75 gigawatts, supported by robust interest from a wide range of large load customers including hyperscalers.
Commercial sales, which currently comprise roughly one-third of total retail sales, are projected to more than double, growing roughly 20% annually through the end of the decade.
Contracts include minimum terms of at least 15 years for data centers, with some extending further, and include fixed or minimum bill provisions designed to cover at least 100% of annual incremental cost to serve.
Contracts include strong protections in the form of termination payments tied to incremental cost to serve over the life of remaining contract, with significant collateral requirements providing additional security.
Georgia Power quantified approximately $1.7 billion of benefits that will help lower cost to serve existing customers from 2029 through 2031, directly attributable to value created by the approach to contracting and serving new large load customers.
Georgia Power and Alabama Power implemented multi-year rate stabilization agreements to help ensure existing customers benefit as growth serves to support rate stability.
Southern Power has opportunities to remarket approximately 1,000 megawatts of natural gas generation capacity beginning in the early 2030s as contracts come up for renewal.
In late-stage discussions to move forward with uprates of up to an additional 700 megawatts of capacity with Southern Power's legacy natural gas fleet to meet future projected market demand.
Southern Power is exploring opportunities to add new natural gas generation at existing plant sites in the Southeast, as well as options for new generation resources in other markets to serve data centers and other large load customers.
Alabama Power and Georgia Power have either begun or expected to begin request for proposal processes to procure generation resource needs forecasted in the early to mid-2030s, which could represent several gigawatts of additional new generation.
Potential natural gas pipeline investments through FERC-regulated interstate pipelines or midstream-like investments at local distribution companies to directly or indirectly serve projected growing energy needs.
All-of-the-above strategy for generation resources including gas, battery energy storage, and uprate opportunities.
Gas supply and battery components are physically secured for 2028 and 2029 generation projects.
Financial Guidance and Outlook
Adjusted earnings per share guidance range for 2026 is $4.50 to $4.60 per share, representing 7% growth from the top and bottom of 2025 adjusted EPS guidance range.
Estimate for adjusted EPS for the first quarter of 2026 is $1.20.
Expected adjusted earnings per share growth of 8% to 9% from 2026 through 2028.
Initial guidance range for 2027 is adjusted earnings per share of $4.85 to $4.95, representing approximately 8% growth from 2026.
For 2028, projected adjusted earnings per share to grow approximately 9% from 2027, resulting in initial guidance range of $5.25 to $5.45.
Longer term, expected adjusted earnings to grow approximately 7% to 8% from 2028 guidance range.
Average annual adjusted earnings growth profile of 8% from 2026 guidance midpoint to 2030.
Projected retail electric sales growth of at least 3% across three electric operating companies in 2026.
On average from 2026 through 2030, projected annual electricity sales growth of 10%, an increase of 2 percentage points from prior long-term sales projections.
Projected credit metrics of roughly 15% FFO to debt through 2027, with improvement to approximately 17% FFO to debt by 2029.
Potential for continued momentum on growth above base plan and incremental capital deployment opportunities, as well as success in repricing portions of Southern Power's capacity through the next decade, could provide upside to long-term outlook.
Outlook expected to be durable, supported by a large and growing portfolio of large load contracts, robust capital investment plan, and visibility on efficient equity and debt financing plan designed to support credit quality and customer rate stability.
Georgia Power must file in 2028 regarding rate stability, with opportunities to continue deep focus on rate stability as growth continues.
Operational Excellence and Resilience
Recently deployed AI tools help leaders pre-position crews to safely and quickly respond to service interruptions.
Self-healing networks allow transmission and distribution lines to isolate outages and reroute power, accelerating restoration efforts.
Recently recognized as the number one electric and gas utility in Fortune Magazine's list of Most Admired Companies for 2026.
Thorough preparation and commitment of employees demonstrated exceptional performance providing reliable energy and quick response to service interruptions during extreme weather events.
