American Water Works (AWK 3.60%), the largest publicly traded U.S. water and wastewater utility, reported results for Q2 2025 on July 30, 2025. The company delivered an 11.1% increase in GAAP revenue to $1,276 million compared to Q2 2024, comfortably above analyst GAAP revenue estimates of $1,217.25 million. However, GAAP earnings per share came in at $1.48, missing the anticipated $1.52. This result was shaped by strong regulated revenue growth and higher capital investment, offset by a notable rise in operating and interest costs. Overall, the quarter underscored American Water Works's continued focus on acquisition-driven expansion and infrastructure renewal, while highlighting the importance of regulatory approvals and cost management.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $1.48 | $1.52 | $1.42 | 4.2% |
| Revenue (GAAP) | $1,276 million | $1,217.25 million | $1,149 million | 11.1% |
| Operating Income | $489 million | $449 million | 8.9% | |
| Net Income Attributable to Common Shareholders | $289 million | $277 million | 4.3% | |
| Operating Expenses | $787 million | $700 million | 12.4% |
Source: Analyst estimates for the quarter provided by FactSet.
Company Profile and Strategic Focus
American Water Works is a regulated utility serving more than 14 million people across 14 states. Its primary mission is to provide clean water and reliable wastewater services through a network of regulated utilities, which together generated 92% of operating revenue for the year ended December 31, 2024.
The company’s business revolves around several key focus areas. These include navigating complex regulatory environments to secure rate adjustments, making substantial capital investments in infrastructure renewal, and executing growth through targeted acquisitions. Regulatory approval is crucial, impacting everything from customer rates to the recovery of millions spent on upgrading pipes or water quality systems. Operational efficiency, compliant with evolving environmental mandates and health regulations, remains central to its long-term success.
Quarter in Review: Growth Drivers, Challenges, and Notable Activity
The second quarter showcased robust regulated revenue gains, driven by both rate increases and acquisition activity. Company-managed net income from its regulated segment rose to $288 million, up from $274 million in Q2 2024, reflecting the effect of new rate cases and recent acquisitions. The regulated segment saw a $121 million increase in operating revenue compared to the prior year period. This growth came largely from the successful implementation of rate adjustments and the closing of new system purchases—including the large-scale acquisition of Nexus Water Group operating systems in eight states, with approximately 87,000 customer connections under agreement in total as of July 30, 2025.
Operating expenses, however, rose sharply by $83 million year over year (GAAP), primarily due to higher employee-related and technology costs, general taxes on new capital investment, and costs tied to completed acquisitions. Depreciation also increased, consistent with American Water Works's higher spending on capital investment. Interest expense rose by more than 15% for the three months ended June 30, 2025, compared to the same period in 2024, reflecting increased debt taken to fund ongoing capital projects. Notably, the company made $1.3 billion in capital investments during the first half of 2025, keeping it on pace for a projected $3.3 billion full-year total.
On the regulatory front, the company achieved major milestones. Since January 1, 2025, new and ongoing general rate cases and surcharges have authorized an additional $270 million in regulated annualized revenue, with pending cases totaling requests for another $126 million as of the end of the quarter. Progress in states like Missouri, Indiana, and Virginia—where legislative actions now allow forward-testing of investments and acceleration of recovery for specific types of capital costs—could help better align company returns with investment pace, though regulatory lag remains a persistent risk. Recent laws in these states reflect a broader industry push toward more responsive regulation, a key to sustaining cash flows as investment needs climb.
Several one-time and recurring factors affected quarter results. Wet weather reduced earnings by $0.03 per diluted share in the quarter and by $0.06 per diluted share for the first half of 2025. Despite this, the company held steady on its infrastructure spending trajectory, citing ongoing and growing needs for environmental improvement and pipe replacement. American Water Works has not adjusted its capital plan in response to new U.S. standards for PFAS or lead in water as of the first quarter of 2025, and estimates compliance will require about $1 billion in capital expenditures by 2029. The continued upward trend in capital expenditures supports not only regulatory obligations but also increased system reliability and resilience, especially for drought-prone regions such as California, where a major desalination project is projected to break ground in 2025.
Looking Ahead: Guidance, Dividend, and What to Watch
American Water Works tightened its full-year 2025 earnings guidance to $5.70 to $5.75 per share on a weather-normalized basis, up from a previous range of $5.65 to $5.75. Management continues to affirm long-term targets for earnings and dividend growth of 7% to 9%. This confidence rests on a mix of authorized rate increases, ongoing capital deployment, and a strong acquisition pipeline, highlighted by approximately 87,000 customer connections under agreement as of July 30, 2025. Interest income is also receiving a $0.10 per share tailwind in 2025 from the earlier amendment to the seller note on its Homeowner Services sale.
The company declared a quarterly dividend of $0.8275 per share for the period, and payable on September 3, 2025. Looking ahead to future quarters, investors should monitor key areas: execution on capital projects, the pace of closing and integrating acquisitions, developments in state-level regulation for rate cases and environmental requirements, as well as any shifts in cost trends—particularly for labor and financing. Though overall leverage remains consistent with internal targets and supports its strong investment-grade credit ratings.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
