UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
The Southern Company’s quarterly report for the period ended March 31, 2026, shows a mixed performance. The company reported net income of $1.2 billion, a 5% increase from the same period last year, driven by higher earnings from its electric operating companies. However, revenue decreased by 2% to $4.4 billion due to lower wholesale electricity sales and a decline in nuclear fuel sales. The company’s operating cash flow was $1.5 billion, a 10% increase from the same period last year, driven by improved operating performance and reduced capital expenditures. The company’s financial position remains strong, with a debt-to-equity ratio of 0.7 and a cash balance of $1.1 billion.
Overview
Southern Company is a major energy company that owns electric and natural gas utilities across the southeastern United States. The company’s primary businesses are selling electricity through its traditional electric operating companies (Alabama Power, Georgia Power, and Mississippi Power) and its competitive wholesale power company Southern Power, as well as distributing natural gas through its subsidiary Southern Company Gas.
Southern Company reported net income of $1.36 billion ($1.21 per share) in the first quarter of 2026, up from $1.33 billion ($1.21 per share) in the same period in 2025. The increase was driven by higher retail electric and natural gas revenues, partially offset by higher operating expenses.
Retail Electric Revenues
Retail electric revenues increased 0.8% to $4.64 billion in the first quarter of 2026 compared to the same period in 2025. This was primarily due to:
- Sales growth: Residential, commercial, and industrial electricity sales increased, driven by customer growth and higher usage.
- Fuel and other cost recovery: Higher recoverable fuel costs led to an increase in revenues.
- Partially offset by: Lower contributions from commercial and industrial customers with variable pricing.
Wholesale Electric Revenues
Wholesale electric revenues increased 29.7% to $965 million, driven by higher energy revenues from increased prices and volumes.
Natural Gas Revenues
Natural gas revenues increased 19.1% to $2.2 billion, primarily due to:
- Rate increases at Nicor Gas and Atlanta Gas Light.
- Higher gas cost recovery from customers due to rising natural gas prices.
- Increased revenues from the gas marketing services business.
Fuel and Purchased Power Expenses
Total fuel and purchased power expenses increased 12.9% to $1.7 billion, reflecting higher natural gas and coal prices as well as increased electricity generation and purchases.
Other Operating Expenses
Other operations and maintenance expenses increased 2.1% to $1.65 billion, primarily due to higher employee costs, weather-related damage, and other increases, partially offset by decreases in certain expenses.
Depreciation and amortization increased 10.4% to $1.4 billion, mainly from accelerated depreciation related to Southern Power’s wind repowering projects.
Earnings from Equity Investments and Interest Expense
Earnings from equity method investments increased 56.3% to $50 million, primarily from higher investment gains and earnings at Southern Holdings and Southern Company Gas.
Interest expense increased 9.0% to $778 million, reflecting higher outstanding debt balances.
Income Taxes and Noncontrolling Interests
Income taxes decreased 18.6% to $228 million, mainly due to higher wind production tax credits.
Net loss attributable to noncontrolling interests decreased 71.9% to $18 million, primarily from Southern Power’s purchase of the remaining interests in its wind tax equity partnership.
Segment Performance
- Alabama Power’s net income increased 13.3% to $425 million, driven by sales growth and lower expenses.
- Georgia Power’s net income increased 5.4% to $628 million, due to higher AFUDC equity and wholesale revenues.
- Mississippi Power’s net income increased 9.1% to $60 million, reflecting higher retail revenues.
- Southern Power’s net income attributable to Southern Company decreased 95.4% to $4 million, impacted by higher depreciation from wind repowering projects.
- Southern Company Gas’ net income increased 6.9% to $447 million, primarily from higher natural gas distribution revenues.
Analysis and Outlook
Southern Company’s overall financial performance improved in the first quarter of 2026 compared to the prior year, with growth in both its electric and natural gas businesses. The company benefited from increased sales volumes, rate adjustments, and higher wholesale market prices, though these were partially offset by rising operating costs.
The traditional electric operating companies continue to focus on constructive regulatory relationships, cost management, and growing sales to large customers like data centers. Southern Power’s competitive wholesale business faces challenges from accelerated depreciation on wind projects, but the company is pursuing new generation development to drive future growth.
Southern Company Gas has seen solid performance in its natural gas distribution and marketing operations, aided by rate increases and higher commodity prices, though the business remains sensitive to weather and economic conditions.
Looking ahead, the company faces ongoing cost pressures from inflation, supply chain issues, and the need for continued infrastructure investment. However, Southern Company appears well-positioned to navigate these challenges given its diversified energy operations, constructive regulatory environments, and focus on operational excellence. The company’s ability to grow earnings will depend on its success in managing costs, executing major construction projects, and capitalizing on emerging opportunities in the evolving energy landscape.
