AEP Raises 2026 Guidance on Surging Data Center Demand

American Electric Power (AEP) has raised its 2026 operating earnings per share guidance to a range of $6.25 to $6.55, up from the previous forecast of $6.15 to $6.45. The utility announced the increase following the signing of six gigawatts of new load in the second quarter alone, a move that reflects accelerating demand from data centers and industrial customers within its service territory.

The company now has 69 gigawatts of contracted load, with a significant portion concentrated in Texas where 45 gigawatts are in the interconnection process. This expansion is heavily influenced by artificial intelligence infrastructure, including a $105 billion guarantee for an OpenAI data center in Ohio backed by Nvidia. Customers have already posted nearly $2 billion in collateral to secure these grid connections, directly linking AEP’s revenue growth to the broader AI buildout.

Capital Plan Expands to Support Load

To handle this increased demand, AEP is executing a capital plan of approximately $78 billion through 2030, with over $10 billion in additional projects currently under consideration. CEO Bill Fehrman described the environment as generational growth that will extend well into the next decade. However, the company faces operational challenges, as severe Midwest storms recently knocked out power to more than 700,000 homes, highlighting the reliability pressures on its infrastructure.

Valuation Reflects Strong Growth Metrics

Financial models project a revenue compound annual growth rate of 7.6% through 2027, significantly higher than typical regulated utility averages. Operating margins are expected to reach 27.6%, well above the company’s historical low-20% range. The stock trades at a forward price-to-earnings multiple of 17.4x, which is slightly below AEP’s 10-year average of 18.2x. This valuation suggests the market is pricing in steady growth rather than a dramatic re-rating.

The implied total upside from current levels is approximately 13.3% over 2.3 years, resulting in a 5.6% annualized return. While this return is below the 10% threshold often considered attractive for aggressive growth plays, it reflects the stability of AEP’s regulated business model. The primary driver of shareholder value remains the successful conversion of contracted gigawatts into actual revenue, balancing the high capital intensity of the expansion with regulatory constraints on rate increases.

Competitive Landscape in Utility Sector

AEP’s growth trajectory contrasts with peers like Duke Energy, which targets 5% to 7% long-term EPS growth and has secured 7.8 gigawatts of data center agreements. AEP’s pipeline is substantially larger, offering greater upside potential but also higher execution risk due to ERCOT grid constraints. As noted in coverage of utility stocks by GN auto stocks/utilities, the sector is navigating a shift from traditional rate-based growth to demand-driven expansion, with AEP taking the most aggressive position in the AI infrastructure race.