Title

Earning Preview: Southern revenue is expected to increase by 10.32% this quarter, and institutional views are bearish

Abstract

The Southern Company will announce its fourth-quarter 2025 results on February 19, 2026 Pre-Market, with consensus pointing to year-over-year revenue and EPS growth as investors watch demand trends, margins, and management’s guidance cadence for 2026.

Market Forecast

For the upcoming quarter, market-tracking estimates embedded in the company’s latest outlook point to revenue of $6.49 billion, up 10.32% year over year, EBITDA proxy (EBIT) of $1.40 billion, up 40.21% year over year, and adjusted EPS of $0.57, up 13.04% year over year. Margin forecasts have not been formally guided in the same dataset; investors will reference last quarter’s margins as a baseline while focusing on the trajectory implied by these revenue and earnings estimates.

The main business remains the core electric utility operations, which generated $6.93 billion in revenue in the prior quarter and powered company-level growth of 7.55% year over year; management’s recent commentary on accelerated load growth provides a constructive backdrop for near-term operations. The most promising area is incremental electric load tied to data centers, where management has indicated demand growth is running 8% to 10% annually; against a last-quarter electric revenue base of $6.93 billion, this demand trend is a central upside variable for the company’s revenue trajectory year over year.

Last Quarter Review

In the prior quarter (fiscal Q3 2025), The Southern Company delivered revenue of $7.82 billion (up 7.55% year over year), a gross profit margin of 55.02%, GAAP net profit attributable to the parent of $1.71 billion, a net profit margin of 21.87%, and adjusted EPS of $1.60 (up 11.89% year over year).

Sequential performance improved materially, with GAAP net profit rising 94.43% quarter over quarter, highlighting a strong rebound into the period captured by the most recent reported quarter. The core electric operations generated $6.93 billion in revenue, complemented by $734.00 million from the gas business and $202.00 million from other activities (with a $41.00 million intercompany elimination), aligning with the company’s 7.55% year-over-year top-line increase in the period.

Current Quarter Outlook (with major analytical insights)

Core Electric Operations

The quarter’s narrative centers on the electric operations, which accounted for $6.93 billion of revenue in the last reported period and anchor the forecasted $6.49 billion in total revenue for the quarter to be reported. Management’s near-term guidance framework references demand momentum that is consistent with the disclosed 8% to 10% annual growth in electricity needs related to data centers, offering a clear lens on why consensus expects double-digit year-over-year revenue growth this quarter. The EBIT estimate of $1.40 billion (up 40.21% year over year) and the adjusted EPS estimate of $0.57 (up 13.04% year over year) also imply operating leverage as fixed-cost absorption improves alongside load growth.

Within the electric footprint, investors should watch the spread between commodity and purchased power costs and allowed recovery mechanisms that can influence realized margins. While the forecast dataset does not explicitly provide a gross profit margin or net margin target for this quarter, last quarter’s 55.02% gross margin and 21.87% net margin provide a helpful baseline to assess cadence. As a result, the quarter’s debate will likely emphasize the degree to which higher revenue can translate into proportionate EBIT and EPS progression without margin dilution from fuel pass-throughs, storm restoration expenses, or timing differences in regulatory recovery.

Operational execution remains central. Recent updates indicate the company’s Georgia Power unit managed significant restoration work during January’s winter storm, which is constructive for customer reliability metrics but can temporarily elevate operations and maintenance expense. In the earnings print, investors will parse whether such expenses are transient or structural as management bridges to full-year expense guidance. The market will also look for any commentary about capital deployment and project in-service timing, given that incremental rate base growth and load additions are key to sustaining the earnings cadence implied by the 13.04% year-over-year EPS growth estimate.

Highest-Potential Growth Driver: Data-Center-Driven Load and Generation Uplift

Management recently highlighted a step-up in expected electricity demand growth—now characterized as 8% to 10% annually—driven by AI and data-center expansions across the company’s service territories. This demand theme is the most prominent growth lever entering the print and helps explain why consensus projects 10.32% year-over-year revenue growth and 40.21% year-over-year EBIT growth in the current quarter. Against the last-quarter electric revenue base of $6.93 billion, even modest translation of this expected load growth into billed sales can support both top-line and rate-base trajectories across 2026 and beyond.

Crucially, the incremental load potential is not just a volume story; it interacts with capital planning and asset mix. The company’s ongoing investment plans and the continued ramp of prior-year additions create conditions for positive operating leverage if cost recovery aligns with investment pacing. While detailed segment-level revenue forecasts are not enumerated in the same dataset, the economics of large-load connections typically have multi-year visibility, which can buffer volatility elsewhere in the portfolio. The quarter’s disclosures on contracted capacity, interconnection timelines, and construction cost inflation will therefore be key for translating the 8% to 10% demand growth commentary into concrete financial run-rates.

Investors will also evaluate how incremental load is being supplied—whether through existing generation, long-term purchase contracts, or new-build additions—and the impact on near-term O&M and depreciation. Clear signals that generation availability, network readiness, and regulatory frameworks are aligned to capture this demand can support a further narrowing of the gap between high revenue growth and even higher EBIT growth (40.21% year over year). Evidence that power sales mix is shifting toward larger customers with steadier usage profiles may also support a smoother earnings cadence, reducing variability in quarter-to-quarter comparisons even as the company absorbs periodic weather events or scheduled maintenance.

Stock Price Drivers This Quarter

Two sets of factors are most likely to drive shares around the release: the degree of confirmation of double-digit revenue and low-teens EPS growth, and the tone of management’s forward commentary on load growth and cost recovery. Confirmation of the $6.49 billion revenue and $0.57 adjusted EPS midpoint-like outcomes would validate the embedded acceleration story, while any commentary that refines the 8% to 10% annual demand increase can reset expectations for 2026 earnings without requiring explicit formal guidance changes. The market’s reaction function will also be sensitive to any indications of higher-than-normal O&M from January’s winter storm, especially if management signals the timing of recovery or offsets elsewhere in the cost stack.

Capital allocation remains relevant to sentiment. The board recently maintained the quarterly dividend at $0.74 per share (announced late January, payable March 6 to shareholders of record on February 17), which provides income support but does not change the near-term growth calculus. Any incremental commentary on investment pacing, balance sheet priorities, or equity needs will likely be interpreted through the lens of valuation relative to peers, especially given fresh rating moves among major brokers in January. A reiteration of the long-term EPS growth framework, alongside concrete data center connection milestones or booked capacity disclosures, could mitigate concerns that growth guidance might lag investor expectations in out-years.

Finally, the interplay between earnings quality and consensus estimates will be closely watched. The large expected year-over-year rise in EBIT (40.21%) raises the bar for what the market may view as a “clean” beat if it appears heavily influenced by timing or nonrecurring items. Clarity around the underlying drivers—including load volume, customer mix, allowed returns, and controllable O&M—will be important for investors gauging the sustainability of the 13.04% year-over-year EPS growth signal embedded in this quarter’s forecast. Any gaps between realized margins and prior-quarter baselines (55.02% gross, 21.87% net) will be quickly reconciled against the run-rate that investors expect for 2026.

Analyst Opinions

Among fresh views issued between January 1, 2026 and February 12, 2026, the balance of opinions skewed bearish. Notably, Morgan Stanley lowered its price target to $85 and maintained an Underweight rating on January 21, 2026, while Wells Fargo cut its rating to Underweight and adjusted its price target to $84 on January 20, 2026. A series of neutral stances remained in place elsewhere during January, but they do not change the majority tilt of bearish calls over this period.

The bearish case coalesces around two observations: valuation risk relative to the company’s guided earnings growth profile, and the concern that the market has already discounted the step-up in load growth tied to data centers. Morgan Stanley’s Underweight with an $85 target reflects a view that, despite credible demand acceleration, shares embed rich expectations that could be vulnerable if margins compress or if O&M and capex needs run ahead of regulatory recovery pacing. Wells Fargo’s Underweight and $84 target similarly frame a risk-reward skewed to the downside, emphasizing that the stock’s premium set by recent demand headlines may not be fully backed by near-term free-cash-flow translation or by above-trend EPS growth beyond the current quarter’s 13.04% year-over-year forecast.

These bearish perspectives also raise questions about sustainability. While the company’s management has cited 8% to 10% annual demand growth from data centers, bears argue the capex and grid readiness required to serve these loads introduce execution risk—both in timing and cost—against a backdrop where allowed returns, timing of rate proceedings, and absorption of storm costs can create variability. The upcoming print will test this narrative: if the company confirms revenue up 10.32% year over year, EBIT up 40.21% year over year, and adjusted EPS up 13.04% year over year while sustaining a margin trajectory that aligns with last quarter’s baselines, the stock could challenge the bearish stance. However, if the path to monetizing the incremental load appears elongated or if expense headwinds shave the near-term EPS cadence, the bearish valuation argument gains traction.

In assessing the next leg of performance, the bearish majority will pay attention to three signals. First, whether management can demonstrate that double-digit revenue growth is translating into proportionate cash earnings without a corresponding spike in working capital or deferred recovery accounts. Second, how the company frames 2026 demand visibility—concrete interconnection milestones and signed agreements would be a strong counterpoint to timing and execution concerns. Third, the cadence of cost recovery for winter storm-related expenses and any commentary on the run-rate O&M environment. Confirmation on these points can either soften or reinforce the bearish view that, at current valuation, the shares are exposed to downside if growth normalizes toward the mid-single-digit trajectory implied in longer-term frameworks.