Key Takeaways:
Constellation Energy expects base earnings to grow more than 20% annually through 2029 as AI data centers drive the biggest surge in US electricity demand in decades.
Constellation Energy Corp. expects base earnings to grow more than 20% annually through 2029, betting that AI data centers will drive the biggest surge in US electricity demand in decades. The Baltimore-based power producer runs the largest nuclear fleet in the country, giving it a competitive edge in supplying the around-the-clock carbon-free power that hyperscalers require.
"Load growth remains strong across our primary markets," Vistra Corp. CEO Jim Burke said in the company's latest earnings call, reflecting a sentiment shared across the merchant power sector. Data center electricity consumption has more than doubled since 2018, rising from 1.9% of total US electricity use to 4.4% in 2023, with Lawrence Berkeley National Laboratory projecting it could reach 12% by 2028.
Constellation has secured long-term clean-energy supply contracts with leading technology and commercial customers. The company signed a 15-year power purchase agreement with Walmart for 176 megawatts from the Dresden Clean Energy Center, a 20-year agreement with Microsoft linked to the restart of the Crane Clean Energy Center, and a 380 MW agreement with CyrusOne in Texas with an option to expand by another 380 MW. To meet rising demand, Constellation has submitted nearly 5,000 MW of new generation projects, including nuclear uprates, natural gas plants and battery storage. The acquisition of Calpine added a large fleet of flexible natural gas plants, strengthening the company's ability to supply reliable electricity.
The company's Q1 revenue reached $11.12 billion, up 63.9% year over year, with adjusted EPS of $2.74. Its trailing-12-month return on equity stands at 16.81%, more than double the industry average of 7.15%. The Zacks Consensus Estimate calls for 2026 EPS growth of 25.03% and 2027 EPS growth of 16.02% year over year.
Nuclear Fleet and Data Center Demand
Constellation is the second-largest capacity owner in the PJM Interconnection with 20.3 GW, and its nuclear fleet delivers reliable, carbon-free power that commands premium pricing as tech companies seek to meet both AI computing needs and sustainability targets. Vistra, the largest independent power producer in PJM with 13.9 GW, signed 20-year PPAs with Meta for 2,600 MW of zero-carbon nuclear power. AES Corp. expanded its Google partnership with 20-year PPAs to supply co-located power for a Texas data center.
The structural shift in electricity demand extends beyond any single heat wave or weather event. PJM forecast record load of 166 GW for July 3, which would surpass the previous all-time record set in August 2006 by 5 GW. Merchant generators with dispatchable capacity capture the upside when wholesale prices spike during such events.
Shares of Constellation closed at $240.41, down 29.49% year to date, against a consensus analyst target of $360.24. The stock jumped 11% after the last PJM capacity auction, reflecting the market's recognition of tightening supply-demand dynamics. The earnings growth outlook is supported by long-term customer contracts, nuclear energy production tax credits, growing free cash flow and increasing demand from hyperscale data centers. Investors will watch the next PJM capacity auction results and follow-on data center PPA announcements as the next catalysts for the stock.
This article is for informational purposes only and does not constitute investment advice.
