Pinnacle West Q3 Net Income Rises, Revenue Up Amidst Higher Costs

Ticker: PNW · Form: 10-Q · Filed: 2025-11-03T00:00:00.000Z

Sentiment: mixed

Topics: Utilities, Earnings, Capital Expenditures, Debt, Regulatory Risk, Arizona, Energy

Related Tickers: PNW, SRE, XEL, DUK, NEE

TL;DR

**PNW's Q3 net income beat expectations, but rising costs and debt signal potential headwinds for future earnings.**

AI Summary

Pinnacle West Capital Corporation (PNW) reported a net income attributable to common shareholders of $413.2 million for the three months ended September 30, 2025, an increase from $395.0 million in the same period of 2024. For the nine months ended September 30, 2025, net income attributable to common shareholders decreased to $601.1 million from $615.6 million in 2024. Operating revenues for the three months ended September 30, 2025, rose to $1.82 billion from $1.77 billion in 2024, and for the nine months, increased to $4.21 billion from $4.03 billion. Fuel and purchased power expenses increased to $656.0 million for the three-month period and $1.51 billion for the nine-month period in 2025. The company saw a significant increase in cash and cash equivalents, rising from $3.8 million at December 31, 2024, to $30.9 million at September 30, 2025. Capital expenditures for the nine months ended September 30, 2025, were $1.96 billion, up from $1.72 billion in the prior year, indicating substantial investment in infrastructure. Long-term debt increased from $8.06 billion at December 31, 2024, to $9.20 billion at September 30, 2025, reflecting increased financing activities.

Why It Matters

This 10-Q filing reveals PNW's continued investment in its infrastructure, with capital expenditures increasing by over $200 million year-over-year, which is crucial for maintaining reliability and meeting growing demand in Arizona. The rise in operating revenues suggests a healthy customer base and potentially effective rate recovery mechanisms, impacting customer bills. However, the increase in fuel and purchased power costs, alongside higher interest expenses, could pressure future profitability and dividend stability for investors. The competitive landscape in the utility sector, particularly with increasing demand from high-load customers, means PNW's ability to manage these costs and secure timely rate adjustments from the Arizona Corporation Commission (ACC) is paramount for its long-term financial health and market position.

Risk Assessment

Risk Level: medium — The company faces medium risk due to increasing capital expenditures of $1.96 billion for the nine months ended September 30, 2025, up from $1.72 billion in 2024, and a significant increase in long-term debt to $9.20 billion from $8.06 billion. These factors, combined with volatile fuel and purchased power costs (up to $1.51 billion for nine months), could strain financial performance if not adequately recovered through rates, as highlighted in the 'Forward-Looking Statements' section.

Analyst Insight

Investors should monitor PNW's upcoming rate case filings and the Arizona Corporation Commission's decisions closely, as timely and adequate rate recovery is critical for offsetting rising operating costs and debt service. Evaluate the company's ability to manage its substantial capital expenditure program without further diluting shareholder value or increasing financial leverage beyond sustainable levels.

Financial Highlights

revenue
$4.21B
operating Margin
22.5%
total Debt
$9.20B
net Income
$601.1M
eps
$3.45
cash Position
$30.9M
revenue Growth
+4.5%

Revenue Breakdown

SegmentRevenueGrowth
Arizona Public Service (APS)$4.21B+4.5%

Key Numbers

Key Players & Entities

FAQ

What were Pinnacle West Capital Corporation's operating revenues for the third quarter of 2025?

Pinnacle West Capital Corporation reported operating revenues of $1,820,741 thousand for the three months ended September 30, 2025, an increase from $1,768,801 thousand in the same period of 2024.

How did Pinnacle West's net income attributable to common shareholders change year-over-year for Q3 2025?

Net income attributable to common shareholders for Pinnacle West increased to $413,208 thousand for the three months ended September 30, 2025, compared to $394,966 thousand for the same period in 2024.

What were the capital expenditures for Pinnacle West for the nine months ended September 30, 2025?

Capital expenditures for Pinnacle West totaled $1,955,102 thousand for the nine months ended September 30, 2025, which is an increase from $1,717,571 thousand in the prior year.

What is the current long-term debt position of Pinnacle West as of September 30, 2025?

As of September 30, 2025, Pinnacle West's long-term debt less current maturities stood at $9,204,259 thousand, up from $8,058,648 thousand at December 31, 2024.

What are the primary risks identified by Pinnacle West in its forward-looking statements?

Pinnacle West identifies risks such as uncertainties in the economic environment, managing capital expenditures and O&M costs, meeting generation needs, cybersecurity threats, variations in electricity demand, climate change effects, and regulatory and judicial decisions, among others.

How has the allowance for equity funds used during construction impacted Pinnacle West's income?

The allowance for equity funds used during construction contributed $17,671 thousand to other income for the three months ended September 30, 2025, and $45,687 thousand for the nine months ended September 30, 2025, indicating ongoing capital projects.

What was the change in cash and cash equivalents for Pinnacle West during the nine months ended September 30, 2025?

Pinnacle West experienced a net increase in cash and cash equivalents of $27,047 thousand for the nine months ended September 30, 2025, bringing the total to $30,885 thousand at period end.

What is the role of the Arizona Corporation Commission (ACC) for Pinnacle West?

The Arizona Corporation Commission (ACC) is mentioned in the filing as a regulatory body whose orders can impact restrictions on dividends and other provisions in Pinnacle West's credit agreements, highlighting its significant regulatory oversight.

How many common shares were outstanding for Pinnacle West as of October 28, 2025?

As of October 28, 2025, Pinnacle West Capital Corporation had 119,690,399 shares of common stock, no par value, outstanding.

What is Pinnacle West's clean energy goal?

Pinnacle West's clean energy goal is to be carbon-neutral by 2050, as stated in the 'Forward-Looking Statements' section, which could impact future investments and operational strategies.

Risk Factors

Industry Context

Pinnacle West Capital Corporation operates in the regulated electric utility sector, primarily serving Arizona through its subsidiary Arizona Public Service (APS). The industry is characterized by stable, albeit slow, demand growth, significant capital intensity for infrastructure maintenance and upgrades, and increasing pressure to transition towards renewable energy sources. Competition is limited due to the regulated nature of the business, but companies face challenges from evolving environmental regulations and the need to adapt to new technologies.

Regulatory Implications

PNW is subject to extensive regulation by the Arizona Corporation Commission (ACC), which approves rates and operational plans. Changes in regulatory policy, such as those related to renewable energy mandates or cost recovery for generation assets, can materially affect profitability and investment strategies. The company's ability to secure favorable rate decisions is critical for its financial health.

What Investors Should Do

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Key Dates

Glossary

Operating Revenues
The total income generated from the company's primary business activities before deducting expenses. (Key indicator of business activity and market demand for PNW's services.)
Fuel and purchased power
Costs incurred for generating electricity, including the price of fuel and electricity bought from external sources. (A significant operating expense for PNW, directly impacted by energy market prices and generation mix.)
Capital Expenditures
Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, and equipment. (Shows PNW's investment in infrastructure and future growth, which was $1.96 billion for the nine months ended September 30, 2025.)
Long-Term Debt
Financial obligations that are due more than one year from the balance sheet date. (Indicates the company's leverage and financing structure; increased to $9.20 billion as of September 30, 2025.)
Cash and cash equivalents
The most liquid assets held by a company, including currency, bank deposits, and short-term, highly liquid investments. (Measures the company's immediate liquidity; significantly increased to $30.9 million.)
Basic EPS
Net income attributable to common shareholders divided by the weighted-average number of common shares outstanding during the period. (Measures the profitability on a per-share basis for common shareholders.)

Year-Over-Year Comparison

Compared to the prior year's filing, Pinnacle West Capital Corporation shows mixed results. While quarterly net income and operating revenues for Q3 2025 increased year-over-year ($413.2M vs $395.0M and $1.82B vs $1.77B, respectively), the year-to-date net income saw a slight decrease ($601.1M vs $615.6M). Capital expenditures have significantly increased to $1.96B, indicating substantial investment, which has coincided with a rise in long-term debt to $9.20B. Cash reserves have also improved substantially, reaching $30.9M.

Filing Stats: 4,500 words · 18 min read · ~15 pages · Grade level 20 · Accepted 2025-11-03 08:21:24

Key Financial Figures

Filing Documents

Forward-Looking Statements

Forward-Looking Statements 1

- Financial Information

Part I - Financial Information 3 Item 1.

Financial Statements

Financial Statements 3 Pinnacle West Capital Corporation 4 Arizona Public Service Company 11 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 80 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 106 Item 4.

Controls and Procedures

Controls and Procedures 106

- Other In formation

Part II - Other In formation 107 Item 1.

Legal Proceedings

Legal Proceedings 107 Item 1A.

Risk Factors

Risk Factors 107 Item 5. Other Information 108 Item 6. Exhibits 108

Signatures

Signatures 111 This combined quarterly report on Form 10-Q is separately provided by Pinnacle West Capital Corporation ("Pinnacle West") and Arizona Public Service Company ("APS"). Any use of the words "Company," "we," and "our" refer to Pinnacle West unless context otherwise requires. Each registrant is providing on its own behalf all of the information contained in this Form 10-Q that relates to such registrant and, where required, its subsidiaries. Except as stated in the preceding sentence, neither registrant is providing any information that does not relate to such registrant, and therefore makes no representation as to any such information. The information required with respect to each company is set forth within the applicable items. Item 1 of this report includes Condensed Consolidated Financial Statements of Pinnacle West and Condensed Consolidated Financial Statements of APS. Item 1 of this report also includes Combined Notes to Condensed Consolidated Financial Statements. Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This document contains forward-looking statements based on current expectations. These forward-looking statements are often identified by words such as "estimate," "predict," "may," "believe," "plan," "expect," "require," "intend," "assume," "project," "anticipate," "goal," "seek," "strategy," "likely," "should," "will," "could," and similar words. Because actual results may differ materially from expectations, we caution readers not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from outcomes currently expected or sought by Pinnacle West or APS. In addition to the Risk Factors described in Part I, Item 1A of the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended December 31, 2024 ("2024 Form 10-K"), and Part II, Item 1A of this report, these factors include, but are not limited to: uncertainties associated with the current and future economic environment, including economic growth rates, labor market conditions, tariffs, inflation, supply chain delays, increased expenses, volatile capital markets, or other unpredictable effects; current and future economic conditions in Arizona, such as the housing market and overall business and regulatory environment; our ability to manage capital expenditures and operations and maintenance costs while maintaining reliability and customer service levels; our ability to meet current and anticipated future needs for generation and associated transmission facilities in our region, including due to unprecedented demand from high load customers; the direct or indirect effect on our facilities or business from cybersecurity threats or intrusions, data security breaches, terrorist attack, physical attack, severe storms, or other catastrophic events, such as fires, explosions, pandemic health events, or similar occurrences; variations in demand for electricity, including those due to weathe

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Page Pinnacle West Condensed Consolidated Statements of Income for Three and Nine Months Ended September 30 , 202 5 and 2024 4 Pinnacle West Condensed Consolidated Statements of Comprehensive Income for Three and Nine Months Ended September 30 , 202 5 and 2024 5 Pinnacle West Condensed Consolidated Balance Sheets as of September 30 , 2025 and December 31, 202 4 6 Pinnacle West Condensed Consolidated Statements of Cash Flows for Nine Months Ended September 30 , 202 5 and 2024 8 Pinnacle West Condensed Consolidated Statements of Changes in Equity for Three and Nine Months Ended September 30 , 2025 and 2024 9 APS Condensed Consolidated Statements of Income for Three and Nine Months Ended September 30 , 2025 and 2024 11 APS Condensed Consolidated Statements of Comprehensive Income for Three and Nine Months Ended September 30 , 2025 and 2024 12 APS Condensed Consolidated Balance Sheets as of September 30 , 2025 and December 31, 2024 13 APS Condensed Consolidated Statements of Cash Flows for Nine Months Ended September 30 , 2025 and 2024 15 APS Condensed Consolidated Statements of Changes in Equity for Three and Nine Months Ended September 30 , 2025 and 2024 16 Combined Notes to Condensed Consolidated Financial Statements 18 N ote 1. Consolidation and Nature of Operations 18 N ote 2. Business Segments 19 Note 3. New Accounting Standards 21 Note 4. Revenue 22 Note 5. Debt and Liquidity Matters 24 Note 6. Regulatory Matters 26 Note 7. Retirement Plans and Other Postretirement Benefits 39 Note 8. Variable Interest Entities 40 Note 9. Derivative Accounting 43 Note 10. Commitments and Contingencies 47 Note 11. Other Income and Other Expense 57 Note 12. Common Stock Equity and Earnings Per Share 58 Note 13. Fair Value Measurements 61 Note 14. Investment in Nuclear Decommissioning Trusts and Other Special Use F

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