PG&E Q3 2026 Earnings: Core EPS Falls as Wildfire Risk Drives Strategic Review

PG&E reported third-quarter operating revenue of $6.19B, down 1% from a year earlier, while GAAP EPS declined to $0.34 from $0.37. Non-GAAP core EPS fell more sharply, to $0.41 from $0.50, reflecting a lower authorized CPUC return on equity, the absence of a prior-year tax catch-up benefit, and higher costs tied to the Wildfire Fund.

The headline earnings decline contrasts with improving year-to-date core EPS and continued cost savings. However, the central investment issue remains PG&E’s wildfire-liability exposure and the resulting cost of capital, which has prompted a $2B reduction in its 2027 capital plan and a strategic review aimed at achieving investment-grade credit ratings.

Earnings Snapshot

The Bigger Story

PG&E’s quarter reinforced that its operating and financial plans are increasingly constrained by the cost of capital rather than by an immediate deterioration in utility operations.

Management reaffirmed 2026 and 2027 core EPS guidance, but it has reduced its planned 2027 capital spending by $2B as high financing costs make some investments less economic for customers. The company is also conducting a strategic review that could lead to changes in capital allocation, corporate ring-fencing, asset sales, separations, or other structural alternatives.

The stated goal is to create one or more investment-grade businesses. Management expects to communicate a more definitive plan no later than summer 2027, although it said it could disclose material developments sooner.

Wildfire policy reform remains PG&E’s preferred outcome. Management argues that a durable liability framework would be the fastest way to lower financing costs and support its larger long-term capital program. That outcome remains uncertain, even as state-level discussions continue.

Revenue and Operating Performance

Third-quarter operating revenue declined $62M year over year to $6.19B. Electric revenue fell $95M to $4.66B, while natural-gas revenue increased $33M to $1.53B.

For a regulated utility, revenue trends are less important than rate base growth, authorized returns, cost recovery, and the ability to finance capital investment. PG&E said customer capital investment remained the primary contributor to year-to-date core EPS growth, adding $0.12 per share over the first nine months of 2026.

The company also continued to report operational progress in wildfire mitigation. Management said its weather-normalized ignition rate has declined 74% since 2017 and that the utility is in its fourth year without a major wildfire associated with its equipment. These metrics are important because operational performance could influence future wildfire-related claims, regulatory outcomes, and the company’s ability to maintain its safety certification.

PG&E filed a 10-year electric undergrounding plan covering 5,000 additional miles between 2028 and 2037. The proposal contemplates $16.6B of investment, following roughly 1,900 miles that management expects to complete by the end of 2027. Management estimates the new plan could generate $117B of long-term customer benefits and avoid $6B of future vegetation-management and operating costs.

Those benefits and the spending plan remain subject to regulatory review. PG&E expects the approval process for the undergrounding plan could conclude in the second quarter of 2028.

Profitability and Margins

Operating income increased to $1.25B from $1.21B despite lower revenue. Lower electricity procurement costs and lower O&M expense helped offset higher depreciation and a larger Wildfire Fund expense.

O&M expense declined $98M year over year to $2.54B in the quarter. Management said it remains on track to achieve its target of reducing non-fuel O&M costs by 2% to 4% annually. For the first nine months, O&M savings contributed $0.04 per share to core EPS, although PG&E redeployed $0.02 per share of those savings.

GAAP EPS declined to $0.34 from $0.37. The company attributed the decrease primarily to a lower CPUC-authorized return on equity in 2026, the absence of the full benefit from a tax-methodology catch-up recognized in the prior-year quarter, and higher Wildfire Fund expense. Higher earnings on rate base growth and O&M savings partly offset those pressures.

Non-GAAP core EPS declined to $0.41 from $0.50. The year-ago comparison included a catch-up benefit from a tax-methodology change that covered the first and second quarters of 2025, making the quarterly comparison particularly difficult.

The gap between GAAP and core earnings was $0.07 per share in the quarter. PG&E excluded, among other items, $0.04 per share for Wildfire Fund contribution amortization, $0.02 per share of strategic repositioning costs, and smaller costs tied to investigation remedies, securitization, and wildfire-related claims. The strategic repositioning costs included workforce severance and advisory costs related to organizational changes and the strategic review.

Demand, Customers and Pricing

PG&E continues to position large-load growth, particularly data centers, as an opportunity to improve system utilization and customer affordability if new loads are priced appropriately.

The utility has energized 174 MW of new data-center projects since 2024. Management said the 1.8 GW of data-center projects it had previously identified as expected to come online by 2030 remain in its plan despite the 2027 capital reduction.

Management emphasized that large-load customers will need to make meaningful financial commitments as projects advance. The company’s objective is to connect projects that can support system economics rather than shift costs to existing customers. PG&E estimates that each 1 GW of incremental data-center load could reduce customers’ monthly electric bills by 1% or more if pricing and project economics are structured appropriately.

The $2B capital reduction may still slow some customer interconnections, clean-energy projects, system-expansion work, and housing-related upgrades. Management said the reduction applies specifically to 2027, while its data-center pipeline spans multiple years.

What is PG&E’s guidance for 2026 and 2027?

PG&E reaffirmed full-year 2026 non-GAAP core EPS guidance of $1.64 to $1.66 and 2027 guidance of $1.78 to $1.82.

Management said the midpoint of its 2026 range represents 10% growth from 2025, while the 2027 midpoint represents a further 9% increase. Expected earnings drivers include returns on customer capital investment, savings initiatives, allowance for funds used during construction, incentive revenues, tax benefits, and other earnings factors, offset by unrecoverable net interest expense and below-the-line costs.

The company is not providing guidance beyond 2027 while the strategic review is underway. Management nonetheless reiterated that it does not expect to need new equity through 2030 under its existing financing plan and the strategic alternatives it is considering.

Balance Sheet, Cash Flow and Capital

PG&E’s capital plan is the key financial variable following its recent reset. The company now expects 2027 capital spending of $11.4B, reflecting the previously announced $2B reduction.

Management said the reduction should not affect 2027 rate base because many deferred projects had longer development and construction timelines and were not expected to enter service until after 2027. The more meaningful impact is on the company’s longer-term growth, customer connection work, and ability to pursue its previously outlined $73B capital program.

PG&E expects to finance 2027 capital spending through cash from operations and $4B to $5B of utility debt issuance, including about $1B of debt maturities. Management reiterated that it would not issue common equity at the current valuation.

The company’s credit profile remains constrained by wildfire-policy risk. Fitch revised its outlook on PG&E to negative during the quarter, while management said rating agencies view wildfire liability as the principal obstacle to an investment-grade rating. PG&E is targeting FFO-to-debt in the mid-teens as it evaluates strategic alternatives.

Separately, PG&E received a favorable proposed decision in its 2027 general rate case that would allow $456M of interim rate recovery over 12 months beginning in January, if approved. Management said this would better align cash flow with costs and reduce financing expense.

What Investors Should Watch

1. Wildfire-policy reform and the strategic review

The core question is whether California adopts a more durable wildfire-liability framework or whether PG&E must rely on structural and financing changes to improve its credit standing. Policy reform could reduce financing costs more quickly, while a corporate restructuring could require regulatory approvals and take longer to implement.

2. Credit ratings and borrowing costs

PG&E’s ability to achieve investment-grade ratings will shape customer costs, capital spending, and long-term earnings capacity. Further negative rating actions would increase pressure on management to pursue more aggressive capital-allocation or structural changes.

3. Execution of the reduced capital plan

The 2027 plan remains sizable at $11.4B, but the $2B reduction demonstrates the trade-off between affordability and investment. Investors should watch whether project deferrals affect rate-base growth, customer connections, safety work, or the data-center pipeline beyond 2027.

4. Wildfire cost-recovery outcomes

A proposed decision is expected in the Kincade and Dixie cost-recovery proceeding. Management characterized it as the first wildfire recovery case involving a utility operating under the AB 1054 safety-certificate framework and associated presumption of prudency. The outcome could influence the perceived value of those regulatory protections.

5. O&M savings and core EPS delivery

PG&E’s full-year guidance depends partly on sustained cost discipline. Continued O&M reductions would support earnings despite higher interest costs and lower authorized returns, while a slowdown in savings would put more pressure on capital investment and other earnings levers.

AlgovestIQ Takeaway

PG&E remains on track to meet its 2026 core EPS target despite a weaker third-quarter comparison. Year-to-date core EPS increased to $1.24 from $1.14, supported by customer capital investment and O&M savings, and the company maintained both 2026 and 2027 guidance.

The quarterly decline in core EPS was not solely an operating issue. It reflected a difficult comparison with a prior-year tax catch-up benefit, as well as a lower allowed return on equity and higher Wildfire Fund costs. Operating income increased, and O&M expense declined, suggesting that the company’s underlying cost-control efforts remain intact.

What remains unresolved is the cost of capital. PG&E is reducing its 2027 capital plan, deferring some customer and system-expansion projects, and reviewing potential corporate restructuring options because wildfire-related policy risk continues to prevent an investment-grade rating.

The central investment question is therefore less about whether PG&E can operate its electric, gas, and generation assets effectively and more about whether it can establish a financing and liability framework that supports affordable investment. Evidence of constructive wildfire legislation, favorable cost-recovery decisions, improved credit metrics, or a customer-beneficial strategic alternative would strengthen that case. Further capital reductions, rating pressure, or unfavorable regulatory decisions would underscore the constraints facing the company’s longer-term growth plan.