APS Boosts Q3 Net Income, Revenues Amidst Rising Capital Spend

TL;DR

**APS is spending big on infrastructure, driving up debt but delivering solid Q3 earnings, signaling long-term growth despite short-term profit dip.**

AI Summary

ARIZONA PUBLIC SERVICE CO (APS) 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, representing a 2.9% increase. For the nine-month period, operating revenues increased to $4.21 billion from $4.03 billion, a 4.5% rise. Fuel and purchased power expenses increased by $24.6 million to $656.0 million for the three-month period and by $86.6 million to $1.51 billion for the nine-month period. The company's total assets grew significantly to $29.89 billion as of September 30, 2025, from $26.10 billion at December 31, 2024, driven by a substantial increase in construction work in progress to $2.32 billion from $1.59 billion. Long-term debt also increased to $9.20 billion from $8.06 billion, reflecting increased capital expenditures. The company also saw a significant increase in operating lease right-of-use assets to $3.65 billion from $1.61 billion.

Why It Matters

This filing reveals ARIZONA PUBLIC SERVICE CO's continued growth in operating revenues and net income for the quarter, signaling robust demand for its utility services. However, the nine-month net income decline and substantial increase in long-term debt and capital expenditures, particularly in construction work in progress, suggest significant investment in infrastructure that could impact future profitability and investor returns. The competitive landscape for utilities often hinges on efficient capital deployment and rate recovery, making these investments critical. Employees may see job stability and growth opportunities from these infrastructure projects, while customers could face potential rate adjustments to cover rising costs. The broader market will watch how APS manages its debt and capital structure in a rising interest rate environment, setting a precedent for other regulated utilities.

Risk Assessment

Risk Level: medium — The company's risk level is medium due to a significant increase in long-term debt to $9.20 billion from $8.06 billion, coupled with a substantial rise in construction work in progress to $2.32 billion from $1.59 billion. While these investments are for growth, they expose APS to higher interest rate risks and the challenge of timely and adequate rate recovery, as highlighted in the 'Forward-Looking Statements' section regarding 'our ability to achieve timely and adequate rate recovery of our costs'.

Analyst Insight

Investors should monitor ARIZONA PUBLIC SERVICE CO's upcoming rate cases closely to assess its ability to recover increased capital expenditures and rising debt costs. Evaluate the impact of these significant infrastructure investments on future earnings per share and dividend sustainability. Consider the company's long-term growth prospects in Arizona, but be mindful of the increased leverage.

Financial Highlights

revenue

$4.21B

total Assets

$29.89B

total Debt

$9.20B

net Income

$601.1M

cash Position

$30.89M

revenue Growth

+4.5%

Revenue Breakdown

Key Numbers

• $413.2M — Net Income Attributable to Common Shareholders (Q3 2025) (Increased from $395.0M in Q3 2024, showing quarterly growth.)
• $601.1M — Net Income Attributable to Common Shareholders (9 months 2025) (Decreased from $615.6M in 9 months 2024, indicating a year-to-date decline.)
• $1.82B — Operating Revenues (Q3 2025) (Increased by 2.9% from $1.77B in Q3 2024.)
• $4.21B — Operating Revenues (9 months 2025) (Increased by 4.5% from $4.03B in 9 months 2024.)
• $2.32B — Construction Work in Progress (Sept 30, 2025) (Significantly increased from $1.59B at Dec 31, 2024, reflecting major capital investments.)
• $9.20B — Long-Term Debt (Sept 30, 2025) (Increased from $8.06B at Dec 31, 2024, indicating higher leverage.)
• $3.65B — Operating Lease Right-of-Use Assets (Sept 30, 2025) (Substantially increased from $1.61B at Dec 31, 2024, showing significant lease activity.)
• $656.0M — Fuel and Purchased Power (Q3 2025) (Increased by $24.6M from Q3 2024, impacting operating expenses.)
• $1.51B — Fuel and Purchased Power (9 months 2025) (Increased by $86.6M from 9 months 2024, contributing to higher operating costs.)
• $30.89M — Cash and Cash Equivalents (Sept 30, 2025) (Increased from $3.84M at Dec 31, 2024, improving liquidity.)

Key Players & Entities

• ARIZONA PUBLIC SERVICE CO (company) — registrant
• Pinnacle West Capital Corporation (company) — parent company
• $413.2 million (dollar_amount) — Net Income Attributable to Common Shareholders for Q3 2025
• $395.0 million (dollar_amount) — Net Income Attributable to Common Shareholders for Q3 2024
• $601.1 million (dollar_amount) — Net Income Attributable to Common Shareholders for nine months 2025
• $615.6 million (dollar_amount) — Net Income Attributable to Common Shareholders for nine months 2024
• $1.82 billion (dollar_amount) — Operating Revenues for Q3 2025
• $1.77 billion (dollar_amount) — Operating Revenues for Q3 2024
• $29.89 billion (dollar_amount) — Total Assets as of September 30, 2025
• $9.20 billion (dollar_amount) — Long-Term Debt as of September 30, 2025

FAQ

Risk Factors

• Regulatory Environment Uncertainty [high — regulatory]: Changes in regulatory policies and decisions by the Arizona Corporation Commission (ACC) can significantly impact APS's ability to recover costs and achieve authorized returns. For instance, the ACC's decisions on rate cases and capital investments directly affect financial performance.
• Fuel and Purchased Power Price Volatility [medium — market]: Fluctuations in the cost of fuel and purchased power directly impact operating expenses. For the three months ended September 30, 2025, these costs increased by $24.6 million to $656.0 million, and for the nine-month period, they rose by $86.6 million to $1.51 billion, affecting profitability.
• Increased Debt Levels [medium — financial]: The company's long-term debt increased to $9.20 billion from $8.06 billion at December 31, 2024. This rise is attributed to increased capital expenditures, which could lead to higher interest expenses and increased financial risk if not managed effectively.
• Capital Expenditure Execution [medium — operational]: Significant increases in construction work in progress to $2.32 billion from $1.59 billion indicate substantial ongoing capital investments. The successful and timely execution of these projects is critical to future revenue generation and operational efficiency.
• Lease Obligations [medium — financial]: Operating lease right-of-use assets have substantially increased to $3.65 billion from $1.61 billion. This significant rise in lease obligations requires careful management of cash flows and financial commitments.

Industry Context

Arizona Public Service Company operates in the regulated electric utility sector in Arizona. The industry is characterized by significant capital intensity, long-term infrastructure investments, and a heavily regulated operating environment. Key trends include the transition to cleaner energy sources, grid modernization, and evolving customer demand patterns, all of which require substantial capital expenditure and regulatory approval.

Regulatory Implications

APS is subject to the oversight of the Arizona Corporation Commission (ACC), which approves rates and significant capital projects. Changes in regulatory philosophy or adverse decisions in rate cases can materially impact earnings and the company's ability to fund necessary infrastructure investments. The company's significant increase in construction work in progress highlights its reliance on favorable regulatory treatment for future recovery.

What Investors Should Do

1. Monitor regulatory proceedings and rate case outcomes.
2. Analyze the impact of rising fuel and purchased power costs.
3. Evaluate the company's debt management strategy.
4. Assess the progress and financial implications of major capital projects.

Key Dates

• 2025-09-30: End of Q3 2025 — Reporting period for the latest financial results, showing mixed performance with quarterly net income growth but year-to-date decline.
• 2024-09-30: End of Q3 2024 — Prior year comparable period for Q3 2025 results, highlighting year-over-year changes in revenue and net income.
• 2024-12-31: Year-end 2024 — Prior year-end balance sheet figures used for comparison of asset and debt growth.

Glossary

Construction Work in Progress

Costs incurred for construction projects that are not yet completed and placed into service. These are capitalized assets that will be depreciated once operational. (A significant increase to $2.32 billion indicates substantial investment in new infrastructure or upgrades, impacting future depreciation and operational capacity.)

Operating Lease Right-of-Use Assets

Assets recognized under accounting standards for leases, representing the lessee's right to use an underlying asset for the lease term. (A substantial increase to $3.65 billion signifies a significant expansion of leased assets, impacting the balance sheet and future lease payments.)

Fuel and Purchased Power

Costs associated with acquiring fuel for electricity generation and purchasing electricity from external sources. (These are major operating expenses for a utility. An increase to $656.0 million for Q3 2025 and $1.51 billion for the nine months indicates rising energy commodity prices or increased energy consumption.)

Net Income Attributable to Common Shareholders

The portion of a company's profit that is available to its common shareholders after all expenses, taxes, and preferred stock dividends have been paid. (This is a key measure of profitability. The increase in Q3 2025 ($413.2M vs $395.0M) is positive, but the year-to-date decrease ($601.1M vs $615.6M) warrants attention.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, Arizona Public Service Co. has demonstrated revenue growth, with Q3 revenues up 2.9% to $1.82 billion and nine-month revenues up 4.5% to $4.21 billion. However, net income attributable to common shareholders shows a mixed trend, with a quarterly increase but a year-to-date decrease from $615.6 million to $601.1 million. The company has also significantly increased its asset base, with total assets growing to $29.89 billion, driven by substantial investments in construction work in progress and a notable rise in operating lease right-of-use assets, alongside an increase in long-term debt to $9.20 billion.

Key Financial Figures

• $2.50 — MPANY Number of shares of common stock, $2.50 par value, outstanding as of October 28

Filing Documents

• pnw-20250930.htm (10-Q) — 3187KB
• exhibit311-093025.htm (EX-31.1) — 11KB
• exhibit312-093025.htm (EX-31.2) — 11KB
• exhibit313-093025.htm (EX-31.3) — 11KB
• exhibit314-093025.htm (EX-31.4) — 10KB
• exhibit321-093025.htm (EX-32.1) — 9KB
• exhibit322-093025.htm (EX-32.2) — 9KB
• 0000764622-25-000087.txt ( ) — 16567KB
• pnw-20250930.xsd (EX-101.SCH) — 115KB
• pnw-20250930_cal.xml (EX-101.CAL) — 141KB
• pnw-20250930_def.xml (EX-101.DEF) — 668KB
• pnw-20250930_lab.xml (EX-101.LAB) — 1121KB
• pnw-20250930_pre.xml (EX-101.PRE) — 924KB
• pnw-20250930_htm.xml (XML) — 3006KB

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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