Few corners of the US equity market are being asked to do as much as utilities. Power demand is setting records, data centers are reshaping long-range load forecasts, and yet the sector’s third-quarter earnings expectations are modest next to the broader index. For investors trying to separate the structural story from the quarterly noise, the numbers published by FactSet and the Energy Information Administration (EIA) offer a useful, if mixed, picture.
What Q3 earnings expectations show
According to FactSet Insight’s Q3 2026 utilities preview, the sector is expected to report year-over-year earnings growth of 7.0%, the seventh-highest among the 11 S&P 500 sectors. That is lower than the 8.8% expected on June 30, which means analysts trimmed their estimates during the quarter. For comparison, FactSet’s October 9 Earnings Insight put expected growth for the whole S&P 500 at 29.6%, up from 26.7% on June 30, with 19 companies having reported at that point. Utilities, in other words, are growing but are not leading this season.
All five utility industries are projected to grow:
- Independent Power and Renewable Electricity Producers: 14%
- Gas Utilities: 12%
- Multi-Utilities: 9%
- Electric Utilities: 6%
- Water Utilities: 5%
The spread is worth noting. The industries with more exposure to wholesale power markets are expected to grow fastest, while the more traditional regulated electric and water businesses sit at the lower end. Looking ahead, FactSet’s data shows analysts expecting 15.6% growth for the sector in Q4 2026, a step up from the third quarter, though the preview also shows quarter-to-quarter growth that is uneven rather than a smooth climb.
Record load: the demand side of the story
The FactSet preview also highlights how strong electricity demand was in September. It describes the month as the hottest September on record in the US Lower 48, with record monthly load and generation. Average load reached 541 GW, which was 43.5 GW, or 8.7%, above the previous high set a year earlier. Solar and wind generated 17.4 GW more than a year ago, while gas added 9.2 GW and coal added 9.6 GW.
Two readings of that data are reasonable. On the constructive side, demand that outruns prior records supports the case for continued grid investment and for generators that can supply power. On the cautious side, a heat-driven spike is weather, not trend, and weather can reverse. The preview also cites a forecast “super El Niño” as a near-term influence on seasonal demand, which adds a further variable that investors cannot control or reliably forecast.
Data centers: the long-run driver, and a policy wildcard
Looking beyond the weather, the EIA, as reported by Semafor in August, projects that US power demand will reach new highs in both 2026 and 2027 following two years of record peaks, with data centers identified as the main source of growth. That is the central pillar of the bullish narrative for the sector: a large, identifiable customer class that needs reliable power at scale.
The same coverage contains a reminder that this demand is not guaranteed to arrive on schedule. The EIA lowered its Texas demand outlook after the state’s governor imposed a moratorium on data center construction, and FactSet’s preview notes that Texas Governor Greg Abbott ordered a pause on new data center approvals pending an audit of the state’s large-load interconnection queue. A single state policy move was enough to change a federal forecast, which illustrates how sensitive the demand thesis is to local permitting and grid-connection decisions.
Semafor also reports that governors across the political spectrum are increasingly stepping in to limit electricity prices. For utilities, that is a double-edged development. Rising demand creates a case for investment, but affordability pressure can narrow the room regulators have to approve rate increases.
Opportunities and risks at a glance
| Potential opportunities | Potential risks |
|---|---|
| Record load and EIA projections of record demand in 2026 and 2027 | Weather-driven demand can reverse; one hot month is not a trend |
| Data center buildout as a long-term source of new load | State-level pauses, such as in Texas, can delay or reshape that load |
| All five industries expected to post earnings growth in Q3 | Sector growth of 7.0% trails the broader index, and estimates slipped during the quarter |
| Generation growth across solar, wind, gas and coal in September | Political pressure to limit electricity prices may constrain returns |
The mix of generation matters
The September generation figures show growth in every major source: solar and wind up 17.4 GW, coal up 9.6 GW and gas up 9.2 GW. The EIA, per Semafor, projects coal’s share of US generation falling to 15% by 2027, mostly replaced by renewables. For investors, that means the sector is not a single bet. Independent power and renewable producers, gas utilities, multi-utilities and regulated electric and water companies each have different sensitivities to fuel prices, power markets and regulation, which is partly why FactSet’s industry growth estimates range from 5% to 14%.
What to watch as earnings arrive
- Estimate direction: Utilities estimates fell from 8.8% to 7.0% during the quarter. Whether reported results land above or below the revised figure will say something about how conservative analysts have become.
- Management commentary on load growth: Updates on data center contracts and interconnection timelines, especially in states weighing restrictions, may matter more than the headline quarterly number.
- Regulatory tone: Statements from state officials on electricity prices could influence how much of the demand story reaches earnings.
- Q4 expectations: The 15.6% growth estimate for Q4 2026 sets a higher bar, and weather in the coming months will influence whether it holds.
- Broader market backdrop: With S&P 500 growth estimates near 30%, relative performance for slower-growing sectors can be shaped as much by market rotation as by company fundamentals.
A balanced takeaway
The utilities picture combines unusually strong demand evidence with ordinary earnings growth and genuine uncertainty about how fast new load can be connected. Record September load and EIA projections give weight to the long-term case, while estimate cuts, state-level pauses and price-affordability politics show that the path from demand to profit is far from automatic. Investors weighing the sector may find it more useful to think in terms of which industries and regulatory environments are exposed to each factor than to treat the sector as a single trade.
This article is for informational purposes only and is not investment advice.
Sources: FactSet Insight (S&P 500 Utilities Sector Earnings Preview, Q3 2026); FactSet Earnings Insight (October 9, 2026); Semafor (August 13, 2026).
