PNW · Q4 2025 Earnings

Neutral

Pinnacle West Capital

Reported February 25, 2026

30-second summary

Pinnacle West closed 2025 with FY GAAP EPS of $5.05 on revenue of $5.34B (+4.2% YoY), landing in the upper half of the Q3-raised $4.90–$5.10 band, with Q4 GAAP EPS of $0.13 on $1.13B of revenue. FY EPS declined YoY from $5.24 (2024) to $5.05 (2025), a step-down management attributed primarily to a ~71-cent weather drag as 2025 reverted closer to normal versus an exceptionally hot 2024. Management reaffirmed all forward guidance — FY2026 EPS at $4.55–$4.75 weather-normalized, 5–7% long-term sales growth through 2030, 7–9% rate-base growth through 2028 — and now frames APS's growth machine as three discrete tiers (committed, organic, uncommitted-via-subscription), with the formula rate cast as the mechanism that will unlock linear earnings and multi-year disclosure once the 2026 case concludes. The print is in-line; the substance is the structural narrative around how 2027+ earnings get delivered.

Headline numbers

EPS

Q4 FY2025

$0.13

Revenue

Q4 FY2025

$1.13B

+3.0% YoY

Operating margin

Q4 FY2025

10.7%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$1.13B	+3.0%	$1.82B	-38.0%
EPS	$0.13	—	$3.39	-96.2%
Operating margin	10.7%	—	31.9%	-2121bps

Guidance

APS reaffirmed all 2026 and long-term guidance ranges with no adjustments; strong FY2025 execution with 2.4% customer growth and 5% weather-normalized retail electricity sales growth support confidence in forward outlook.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Reaffirmed unchanged this quarter: EPS (2026 guidance) ($4.55 to $4.75), Weather-normalized sales growth (2026) (4% to 6%), Long-term sales growth (through 2030) (5% to 7% annually), Rate-based growth (through 2028) (7% to 9%), Customer growth (through 2030) (1.5% to 2.5% average annual growth)

Other KPIs

Q4 FY2025

Segment	Q4 FY2025
Customer Growth Rate	2.4%
Weather-Normalized Retail Electricity Sales Growth	5.0%
Peak Demand Growth YoY	5%+
Operating Margin (Q4)	10.73%
Operating Margin (FY2025)	20.0%
Generating Capacity	6,200 MW
Retail Customer Count	1.4 million

Management tone

Q2 Arizona growth thesis hardens → Q3 Multi-year guidance crystallizes → Q4 Mechanistic execution playbook articulated

The formula rate has been promoted from "regulatory ask" to "disclosure architecture." Two quarters ago the formula rate was one of two structural elements being filed in the 2026 case. This quarter, management is explicit that it will reshape how PNW communicates earnings: Ted noted "the formula rate will allow us more prompt recovery to give you more detail on what that means for financing and ultimately for the trajectory of our EPS," with a goal of "more linearity" and longer-dated disclosures matching earnings, rate base, and capital plan out to year five. The UNS case outcome — characterized as "a secure formula rate for perpetuity" with no pilot required — was cited as constructive precedent. The implication: investors should expect a materially upgraded disclosure framework once the case concludes.

The uncommitted queue is now described as a subscription mechanism, not a passive waiting list. Last quarter introduced the "growth pays for growth" rate design; this quarter Andrew described the operational mechanic in detail: APS identifies infrastructure and projects at gigawatt scale, offers them to counterparties in the uncommitted queue, works through fit, and files an executed agreement with the commission — "on somewhat of a repeatable basis going forward." The framing has shifted from "we have a 20GW queue we might convert" to "we have a procurement engine that systematically converts queue." Management says it intends to file at least one such agreement with the ACC this year.

Distributed-generation offset shrinkage flagged as an emerging tailwind. Andrew highlighted that rooftop-solar applications are declining and "produced pretty small offsets to residential sales" in 2025 — but caveated that 2026 should revert to "normal dynamics." This is a new variable for the model: if DG application declines persist, residential sales growth has a structural tailwind beyond population/usage that management is not yet baking into the 4–6% guide.

The IRP refresh mid-year is framed as the visibility anchor. Management plans to file an updated 15-year IRP showing "robust and strong growth" — generation and transmission needed to serve the 4.5GW of committed high-load-factor demand over 15 years, plus organic load growth, with any uncommitted-queue conversions stated as incremental on top. This positions the mid-2026 IRP as the next forcing function for forward capital-plan expansion.

Recurring themes management leaned on this quarter:

Large load customer commitment execution and cadence (TSMC, data centers)Formula rate as mechanism for linear earnings and extended disclosure visibilityRate design modernization ensuring growth pays for growth via high-load-factor tariffsSequential subscription model converting uncommitted queue into infrastructure-backed commitmentsO&M per megawatt-hour declining despite inflation and growth investmentsRegulatory lag pressures on FFO-to-debt offset by formula rate recovery mechanism

Risks management surfaced:

Regulatory lag impacting credit metrics (FFO-to-debt pressure in 2026 pre-rate-relief)Weather normalization sensitivity (2025 experienced near-normal weather vs. 2024 hot summer)Distributed generation (rooftop solar) offsets to residential sales growthUncommitted queue finalization timing and negotiation riskTSMC expansion timing uncertainty beyond currently committed 4.5 GW

Answers to last quarter's watch list

FY2025 landing inside $4.90–$5.10 — FY2025 GAAP EPS came in at $5.05, in the upper half of the raised range. Q4 contributed $0.13 (vs. the implied -$0.03 to +$0.17 window), so the result lands consistent with the mechanical expectation. Status: Resolved in-line

Quantification of the 2026 lag bridge — the press release reaffirms FY2026 at $4.55–$4.75 weather-normalized but does not publish an explicit weather-vs-lag decomposition; management characterized 2026 as still facing FFO-to-debt pressure pre-rate-relief in tone analysis, consistent with the lag thesis.

Continue monitoring

Rate-case formula-rate mechanism — ACC procedural milestones — Management reiterated focus on "processing our rate case" and remains "open to settlement with a long track record of successful settlements." Staff and intervener testimony expected next month with hearings scheduled to begin in May. The UNS case was cited as constructive precedent — formula rate granted without a pilot.

Continue monitoring

Transmission CapEx trajectory — Not specifically updated on the Q4 print; the mid-year IRP refresh was flagged as the forcing function for any glidepath disclosure.

Continue monitoring

Desert Sun Phase Two subscription conversions — Management framed the subscription model generically (~gigawatt-scale infrastructure offered to uncommitted queue, intent to file at least one agreement with the ACC this year) but did not call out Desert Sun Phase Two specifically or any signed counterparties.

Continue monitoring

Customer growth in 2026 holding the 1.5–2.5% band — FY2025 came in at +2.4%, at the top of the range, and the 1.5–2.5% guide was reaffirmed through 2030. No housing-permit or in-migration data disclosed to confirm 2026 specifically.

Continue monitoring

What to watch into next quarter

Rate case settlement vs. litigated track — management is "open to settlement" but currently focused on the traditional hearing process with staff/intervener testimony next month and hearings in May. Watch whether a settlement filing surfaces and what scope (formula rate mechanics, large-customer rate design, ROE).

First subscription-model agreement filed with the ACC — management committed to filing at least one converted uncommitted-queue agreement this year. Watch counterparty type (data center vs. semiconductor), MW size, and infrastructure cost-recovery terms.

Mid-year IRP refresh — the 15-year plan update will quantify generation and transmission needed for committed 4.5GW + organic growth, with uncommitted conversions stated as incremental. This is the next forcing function for rate-base trajectory beyond the 7–9% through 2028 frame.

Distributed-generation application trend — if rooftop-solar application declines persist into 2026, residential sales growth has upside vs. the reaffirmed 4–6% guide. Watch whether management quantifies the DG offset reduction.

2026 lag-vs-weather bridge — with the 2024→2025 step-down ($5.24 → $5.05) explicitly attributed to a 71-cent weather drag, the relevant 2026 bridge runs from the $5.05 starting point against the $4.55–$4.75 weather-normalized guide; a more granular regulatory-lag decomposition is the next disclosure to watch.

FFO-to-debt trajectory pre-rate-relief — flagged as a 2026 pressure point. Watch the financing plan (equity issuance cadence, debt maturity profile) disclosed alongside the 10-K.

Sources

Pinnacle West Capital Q4 FY2025 earnings press release (8-K Exhibit 99.1): https://www.sec.gov/Archives/edgar/data/764622/000076462226000010/pnw202512318kexhibit991.htm
Q4 FY2025 earnings call commentary (management prepared remarks as captured in tone analysis input)

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