AES (AES) Q2 EPS Jumps 34%

AES (AES 1.97%), a global power company focused on renewable energy and utilities, reported its Q2 2025 results on July 31, 2025. The most notable news was a sharp beat on non-GAAP earnings, with Adjusted EPS (non-GAAP) rising to $0.51, compared to analyst estimates of $0.40. GAAP net results swung to a large loss, mainly due to accounting factors linked to lease arrangements and tax expense. The period (Q1 2025) demonstrated substantial growth in renewables and utilities, with renewables SBU adjusted EBITDA increasing approximately 45% year-over-year and the company on track to achieve 60% renewables growth year-over-year; utilities SBU growth was driven by tax attributes from new projects and rate base expansion, with management reaffirming annual 2025 non-GAAP earnings targets despite top-line pressure and accounting-driven headline losses.

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

Company overview and key business drivers

AES develops and operates electricity generation and distribution facilities, with a strong focus on expanding renewable energy such as solar and wind, alongside traditional utilities in the United States. The company is recognized for providing a large share of the world’s renewable power to corporate customers and was ranked the #1 provider of clean energy globally to corporations by BloombergNEF for the third consecutive year, and it maintains a substantial project pipeline across solar, wind, and energy storage.

Recently, the company has concentrated on scaling its renewables portfolio with long-term contracts, particularly in the fast-growing data center sector. AES’s U.S. regulated utilities, AES Indiana and AES Ohio, remain critical, with ongoing investments to support reliability and meet growing power demand. Success for AES hinges on the execution of new clean energy projects, management of regulatory risk, maintaining contractual revenue stability, and leveraging technology and partnerships to support efficient growth.

Quarter in detail: Financial and operational performance

Adjusted (non-GAAP) earnings per share rose sharply to $0.51 in Q2 2025, outpacing the $0.40 non-GAAP consensus and indicating 34.2% year-over-year growth. This outperformance stemmed largely from higher renewable energy contributions and favorable tax attributes (non-GAAP). However, on a GAAP basis, the company reported a GAAP net loss of $150 million for Q2 2025, compared to GAAP net income of $153 million in Q2 2024. This swing was primarily due to non-cash accounting related to sales-type leases in AES’s clean energy segment, as well as higher income tax expense.

Total revenue (GAAP) declined 3.0% in Q2 2025 compared to Q2 2024, reflecting lower contributions from the Energy Infrastructure segment. Renewables segment revenue climbed 4.1% year-over-year (GAAP), underpinned by new solar and wind projects and improved operations in Colombia. Buoyed by customer demand and regulatory advances, such as the filing of the first forward-looking rate case in Indiana in June 2025. Energy Infrastructure revenue dropped 10.7% year-over-year, affected by the loss of one-time PPA (power purchase agreement) monetization benefits and asset sales in the previous year.

Renewables Adjusted EBITDA—a non-GAAP metric reflecting operating performance before interest, taxes, depreciation, and amortization, adjusted for items like one-time gains or losses—jumped 56% versus Q2 2024. The main drivers were new project activations and a return to normal operations after outages in specific markets. During Q2 2025, AES signed or was awarded 1.6 GW of new long-term PPAs, all with data center companies, highlighting AES's growing role as a renewables provider for the technology sector. The company’s renewables pipeline stands at 12 GW as of Q2 2025, with 5.2 GW under construction and 3.2 GW on track for service in 2025 alone.

Despite overall revenue softness, the Utilities segment continued to deliver growth. Investments in grid modernization, new generation, and transmission for data center load drove a 6.5% year-over-year rise in revenue. The sell-down of a minority stake in AES Ohio in Q1 2025 helped fund expansion while maintaining balance sheet flexibility.

Segment-level performance was mixed. While Renewables and utilities improved. Energy Infrastructure trailed, in part due to absence of non-recurring gains seen last year. Adjusted EBITDA (non-GAAP) rose modestly by 3.5% year-over-year to $681 million. At the same time, Cash from operations (GAAP) strengthened to $976 million, more than double the prior year period, underscoring strong cash generation despite accounting-driven net losses.

On product-type detail, the data center-related clean energy projects are large-scale solar and wind installations—often coupled with energy storage—that provide contracted power to major technology and cloud companies. AES’s other advanced offerings include energy storage and digital management tools, such as Maximo, an artificial intelligence-powered robot for automating solar plant installation and maintenance.

Material one-off items affected reported net results. In particular, AES recognized significant "day-one losses on sales-type leases" in Q2 2025, which accounts for losses when certain renewable projects are leased to customers, excluding the value of investment tax credits from asset fair value calculations. Higher tax expenses and the absence of last year’s PPA monetization (notably the Warrior Run project) contributed further to the headline GAAP net loss. These complexities make adjusted figures especially relevant for comparison. The company also maintained its quarterly dividend at $0.17595 per share.

Looking ahead: Guidance and investor watch list

Management reaffirmed its financial outlook for fiscal 2025, including non-GAAP Adjusted EBITDA and Adjusted EPS guidance, expecting adjusted EBITDA (non-GAAP) between $2,650 million and $2,850 million and adjusted non-GAAP earnings per share between $2.10 and $2.26. This implies projected annualized non-GAAP Adjusted EPS growth of 7% to 9% through 2025, with similar annualized growth of 5% to 7% targeted through 2027, using 2023 as a base. The guidance for 2025 non-GAAP Adjusted EBITDA points to growth coming from new renewables entering operation, regulated utility investment, and the stabilizing of international businesses, while accounting for lower monetization events and higher taxes.

For the coming quarters, investors should watch trends in renewable energy origination—particularly in the data center vertical—as well as further rate proceedings in the Utilities segment. The ongoing effects of accounting on GAAP earnings, including lease and tax impacts, are likely to remain a source of volatility. AES enters the second half of the year with $2,194 million in parent company liquidity as of June 30, 2025, which includes revolver availability. The quarterly dividend was maintained at $0.17595 per share.

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