PG&E (PCG) Q2 Revenue Slips 1.5%

PG&E (PCG 1.67%), California’s largest natural gas and electric utility, released its Q2 FY2025 earnings on July 30, 2025. The most relevant headlines: Non-GAAP earnings per share (EPS) and GAAP revenue both fell short of Wall Street forecasts, and management reduced its GAAP earnings targets for the year, while holding its adjusted profit outlook steady. For the quarter, non-GAAP core EPS was $0.31 compared to an analyst expectation of $0.32, and the company’s top-line revenue (GAAP) came in at $5.898 billion versus the $6.239 billion market estimate. Both figures reflect flat year-over-year performance and misses of 3.1% (non-GAAP EPS) and 5.5% (GAAP revenue), respectively, versus analyst estimates. Overall, the period was a modest one for the utility, with operational progress offset by persistent financial headwinds.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Model and Strategic Focus

PG&E is the main utility provider serving millions of electric and natural gas customers across Northern and Central California. Its core business is delivering electricity and gas reliably and safely, under a highly regulated structure set by state and federal agencies like the California Public Utilities Commission (CPUC) and the Federal Energy Regulatory Commission (FERC).

The company’s recent focus centers on five key areas: regulatory compliance, climate change adaptation, financial health, operational safety, and customer engagement. Regulatory compliance is essential for setting customer rates and funding investments. Climate adaptation guides spending on wildfire mitigation and infrastructure resilience. Managing costs and capital is top-of-mind, particularly due to past financial distress. Operational safety takes priority given previous wildfire-related incidents that led to significant legal liabilities. In parallel, greater customer engagement and service reliability are now part of the company’s push to rebuild trust and support long-term infrastructure upgrades.

Quarter in Review: Financial and Operational Details

The company reported $5.90 billion in GAAP revenue, falling below the analyst consensus by about $341 million (GAAP) and declining compared to the same period of the previous year. Non-GAAP core EPS met last year’s level but missed estimates by $0.01. Net income (GAAP) increased to $549 million, up 4.8% year-over-year, though both adjusted and unadjusted EPS came in flat relative to the prior year. The electric segment generated $4.41 billion in revenue, down from prior-year levels, while natural gas revenue dropped to $1.484 billion.

The cost of electricity and natural gas both fell year-over-year—by 21.5% and 45.6%, respectively—which helped offset modest increases in operating and maintenance spending compared to the prior year. Wildfire-related claims and wildfire fund expenses rose nearly 40% compared to the prior year, with $50 million in wildfire claims and $109 million in wildfire fund expenses (GAAP) booked during the period.

On the regulatory side, the utility submitted its smallest proposed general rate case (GRC) increase in a decade in its filing to California regulators. If regulators approve this plan, residential gas and electricity bills in 2027 are expected to remain flat compared to 2025. The company also highlighted a 42% reduction in methane emissions from its gas pipeline system in 2024 compared to a 2015 baseline, exceeding an earlier commitment to a 20% cut. This signals progress in both environmental risk management and regulatory engagement.

From an operational standpoint, PG&E connected more than 3,300 new electric customers and over 2,000 new electric vehicle charging ports to its grid. It expanded its data center project pipeline to 10 gigawatts, an increase that could bolster growth in coming years by supporting digital infrastructure demand. The company continues to invest heavily in its wildfire mitigation programs, with 32 miles of underground powerlines and 103 miles of system hardening were completed. It plans significant further investments—approximately 700 miles of undergrounding and 500 miles of additional safety upgrades—across 2025 and 2026. The U.S. Nuclear Regulatory Commission completed a positive review of the Diablo Canyon Power Plant, finding it safe to operate for another 20 years, thus safeguarding the company’s ability to provide reliable baseload electricity and support California’s carbon reduction targets.

For the quarter, wildfire-related costs net of recoveries totaled $40 million after tax (an impact of $0.02 per share). The company noted a long safety record without employee fatalities, reaching 814 days—its best run in more than 25 years as of April 2025. However, legacy legal costs and non-core items, such as bankruptcy resolution and regulatory remedies, continue to affect adjusted (non-GAAP core) results and warrant attention going forward. The company mainly prioritizes reinvestment in the business to support its capital plans.

Looking Ahead: Guidance and Strategic Outlook

For fiscal 2025, PG&E reaffirmed its non-GAAP core EPS forecast at $1.48 to $1.52 per share, citing confidence in its ongoing cost reduction efforts and the capital plan. However, management lowered its GAAP guidance to a range of $1.26 to $1.32 per share, down from the previous range of $1.29 to $1.35. This downward revision to GAAP earnings guidance stems mainly from unrecoverable interest expense and other residual cost pressures attributable to wildfire-related and regulatory expenses. The company emphasized that its $63 billion five-year capital plan through 2028 is fully funded following the December 2024 equity issuance. This equity raise was dilutive to current shareholders, but it improved the balance sheet and supports future infrastructure investments.

Management did not declare or raise a dividend for the period. PCG does not currently pay a dividend. In the coming quarters, investors should pay close attention to regulatory decisions, the pace of wildfire mitigation efforts, and growth in large-load demand segments such as data centers and vehicle electrification. The company’s outlook projects growth opportunities from this new demand, but revenue recovery will remain influenced by California’s regulatory environment, capital costs, and unpredictable wildfire-related liabilities. Long-term growth aspirations remain tied to ongoing execution on operational safety, regulatory engagement, and progress on large-scale grid upgrades.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.