Earnings call transcript: Pinnacle West beats Q3 2025 estimates, raises guidance

Pinnacle West Capital Corp (PNW) reported stronger-than-expected earnings for the third quarter of 2025, with earnings per share (EPS) of $3.39, surpassing analysts’ forecast of $2.99. The company’s revenue also exceeded expectations, reaching $1.82 billion compared to the anticipated $1.79 billion. Following the earnings announcement, Pinnacle West shares rose by 2.79% in pre-market trading, reflecting investor optimism. According to InvestingPro data, the utility has been profitable over the last twelve months with a diluted EPS of $4.81.

Key Takeaways

• Pinnacle West raised its 2025 EPS guidance to $4.90-$5.10, up from $4.40-$4.60.
• The company announced the Desert Sun Power Plant project, aiming for 2,000 megawatts of natural gas generation.
• Arizona’s robust economic growth continues to drive demand for Pinnacle West’s services.

Company Performance

Pinnacle West’s performance in Q3 2025 reflects solid growth, with a modest year-over-year EPS increase of $0.02. The company’s sales growth, normalized for weather, was 5.4%, driven by a 6.6% increase in commercial and industrial sales and a 4.3% rise in residential sales. The company benefits from Arizona’s strong economic development, particularly in high-tech industries.

Financial Highlights

• Revenue: $1.82 billion, up from $1.79 billion forecast
• Earnings per share: $3.39, exceeding the $2.99 forecast
• Sales growth: 5.4% year-over-year

Earnings vs. Forecast

Pinnacle West’s Q3 2025 EPS of $3.39 was 13.38% above the forecast of $2.99, marking a significant earnings surprise. This performance is consistent with the company’s trend of exceeding expectations in recent quarters.

Market Reaction

The company’s stock rose by 2.79% in pre-market trading, reaching $90.05. This increase aligns with the positive earnings surprise and raised guidance, suggesting strong investor confidence. The stock remains within its 52-week range, with a high of $96.5 and a low of $81.47.

Outlook & Guidance

Pinnacle West revised its 2025 EPS guidance upward to $4.90-$5.10 and provided a 2026 EPS guidance of $4.55-$4.75. The company anticipates long-term sales growth of 5-7% through 2030, supported by capital investments in transmission and generation.

Executive Commentary

"Our service territory offers unique advantages, including strong growth across all customer classes," said Andrew Cooper, CFO. CEO Ted Geisler added, "We anticipate being able to continuously offer capacity to eat into that 20 gigawatts."

Risks and Challenges

• Potential regulatory changes affecting energy production
• Fluctuations in natural gas prices impacting project costs
• Competition from renewable energy sources
• Economic downturns affecting demand
• Supply chain disruptions impacting project timelines

Q&A

Analysts inquired about the company’s transmission investments and the subscription model for large energy customers. Discussions also covered Pinnacle West’s equity financing strategy and the breakdown of committed load across different customer segments.

Full transcript - Pinnacle West Capital Corp (PNW) Q3 2025:

Matthew, Conference Call Operator: Good day, everyone, and welcome to the Pinnacle West Capital Corporation Third Quarter 2025 Earnings Conference Call. At this time, all participants are placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Amanda Ho. Ma’am, the floor is yours.

Amanda Ho, Investor Relations, Pinnacle West Capital Corporation: Thank you, Matthew. I would like to thank everyone for participating in this conference call and webcast to review our third quarter earnings, recent developments, and operating performance. Our speakers today will be our Chairman, President, and CEO, Ted Geisler, and our CFO, Andrew Cooper. Jacob Tetlow, COO, and Jose Esparza, SVP of Public Policy, are also here with us. First, I need to cover a few details with you. The slides that we will be using are available on our investor relations website, along with our earnings release and related information. Today’s comments and our slides contain forward-looking statements based on current expectations, and actual results may differ materially from expectations. Our Third Quarter 2025 Form 10-Q was filed this morning.

Please refer to that document for forward-looking statements, cautionary language, as well as the risk factors and MD&E sections, which identify risks and uncertainties that could cause actual results to differ materially from those contained in our disclosures. A replay of this call will be available shortly on our website for the next 30 days. It will also be available by telephone through November 10, 2025. I will now turn the call over to Ted.

Ted Geisler, Chairman, President, and CEO, Pinnacle West Capital Corporation: Thank you, Amanda, and thank you all for joining us today. In the third quarter, we delivered strong operational and financial performance, underscoring the discipline and focus that define our strategy. Today, I’ll share how we plan to continue to meet rising customer demand and how we successfully navigated a dynamic summer season. I’ll also highlight our long-term planning efforts and strategic investments that position us for sustainable growth. Then, Andrew will walk through how increased sales and transmission revenue have led us to revise our 2025 earnings guidance, along with our forward-looking financial expectations. Importantly, our long-term planning and resource procurement paid off as we reliably served customers over multiple record-peak days this quarter. I’m proud of our entire team for stepping up during the summer season to support our customers and communities with industry-leading reliability, a hallmark of our company.

Our crews battled storms, flooding, and extreme heat, yet we were prepared to ensure customers were taken care of with rapid response and operational excellence. Additionally, Palo Verde Generating Station operated at 100% capacity factor the entire summer, delivering a solid performance for our customers and the entire Desert Southwest region. Our peak demand record reflects the strong underlying economic growth in our service territory, with weather-normalized sales growth of 5.4% and residential sales growth of 4.3% in the third quarter alone. Arizona’s population growth remains robust, fueled by major employers expanding their operations and driving demand for skilled labor. The state’s ability to attract and retain high-quality talent is truly a key differentiator and a powerful signal of the long-term economic vitality we’re helping support.

Semicon West, recognized as North America’s largest microelectronic exhibition and conference, was held outside California for the first time in more than 50 years, with Phoenix being selected as the host city. Our region’s economic momentum continues to accelerate. Site Selection Magazine recently named Maricopa County the top county in the nation for economic development in 2025. Citing its success in attracting high-growth industries like semiconductors, data centers, and logistics, Taiwan Semiconductor reaffirmed its commitment to Arizona, accelerating production of two nanometer wafers and advanced technologies. They also announced plans to acquire a second location in Phoenix to support their vision for a standalone Gigafab cluster. Meanwhile, Amkor Technology broke ground on a $7 billion advanced semiconductor packaging and testing facility, which is an increased investment of $5 billion over their original plans. The first phase is expected to be completed by mid-2027, with production beginning in early 2028.

To support this growth, we’re executing our plan for long-term investments in both transmission and baseload generation, which are essential to secure a reliable grid for the long term. In Q2, we announced our role as the anchor shipper on the Desert Southwest expansion project. Just days ago, we announced our plans to develop a new generation site near Gila Bend, just southwest of Phoenix, which could add up to 2,000 megawatts of reliable and affordable natural gas generation to our customers. The Desert Sun Power Plant is a two-phase project designed to serve both existing customers and the rising demand from extra-large energy users like data centers and manufacturers. Phase one is expected to begin serving committed customers by late 2030. Phase two is expected to support new demand from our queue of high load factor customers.

Importantly, we’re working with customers now to contract for the phase two capacity using our subscription model, a commercial construct designed to ensure growth pays for growth while protecting affordability for all customers. Investment in generation alone will not be enough to support the growth in customer demand. We’re making significant investments in transmission as well, with multiple projects underway and more in development. These projects are expected to enhance reliability, resiliency, and integration of new resources. They also expand our access to out-of-state generation and regional markets. Transmission investment benefits from constructive and timely recovery through our firm formula rate and creates opportunities for additional wheeling revenues that support affordability for our retail customers. Turning to our pending rate case, we remain actively engaged with interveners in responding to data requests and remain on track for a hearing in Q2 of next year.

As we approach the end of 2025, our priorities remain clear: executing our mission to deliver reliable and affordable service to our customers, investing in baseload generation and transmission to serve growth, and achieving a constructive regulatory outcome that protects customer affordability while reducing regulatory lag. Thank you for your time today. I’ll now turn it over to Andrew.

Andrew Cooper, CFO, Pinnacle West Capital Corporation: Thank you, Ted, and thanks again to everyone for joining us today. This morning, we released our third quarter 2025 financial results. I’ll walk through the key drivers behind our performance, provide context on our updated 2025 guidance, and share our outlook for 2026 and beyond. We reported earnings of $3.39 per share for the quarter, a modest increase of $0.02 year over year. This result was primarily attributable to higher transmission revenues and higher sales, driven by robust sales growth across customer classes. These gains were partially offset by lower weather-driven sales compared to last year’s Q3, higher interest expense, reduced pension and OPEB benefits, and an increase in our outstanding share count.

Based on strong sales growth, along with above-normal weather, an increase in transmission revenues, and contributions from El Dorado, we are raising our 2025 EPS guidance from a range of $4.40-$4.60 per share up to $4.90-$5.10 per share. With the ability to de-risk future operating expenses, our updated guidance reflects an increase to our forecasted O&M for the year to a range of $1.025 billion-$1.045 billion. Sales growth across all customer classes continues to be strong. We experienced 5.4% weather-normalized sales growth for the quarter, including 6.6% C&I growth supported by the continued ramp-up of our large load customers and 4.3% residential growth. Year-to-date, residential sales growth stands at 2%, exceeding our expectations and fueled by continued customer growth at the top end of our range. We are therefore narrowing our customer growth guidance range to the high end of 2%-2.5% for the year.

As we look ahead to 2026, we anticipate earnings per share of $4.55-$4.75 per share. The expected year-over-year decrease compared to our revised 2025 earnings guidance is due to the projection of normal weather and higher financing and DNA costs as we work through the rate case process. We continue to expect robust customer and sales growth, increased transmission revenues, focused O&M management, and some positive contributions from our El Dorado subsidiary. Customer growth next year is expected at 1.5%-2.5%, supported by Arizona’s ongoing population and business expansion. Last year, we set a post-recession record with nearly 35,000 new meter sets. We’re on track to match that figure again in 2025, and our forecast for 2026 customer additions remains strong. For overall sales growth, we expect weather-normalized sales to continue to grow at 4%-6% in 2026.

With the strong residential sales growth trends and continued ramping and acceleration plans by our extra high load factor customers, including in the advanced manufacturing space, we are increasingly confident in our forecasted long-term sales growth range and are raising it up from 4%-6% to 5%-7% and extending it through 2030. Our capital and financing strategy remains focused on enabling growth while maintaining affordability and financial discipline. We’ve updated our capital plan through 2028 to include critical strategic investments in transmission and generation that support reliability and the demands of our rapidly growing service territory. As highlighted by Ted, we look forward to developing these new resources for the benefit of our customers. These investments are expected to drive rate-based growth of 7%-9% through 2028, an increase from our prior guidance of 6%-8% through 2027.

To support this plan, we’ve updated our financing strategy for 2026 through 2028, maintaining a balanced mix of debt and equity aligned with our balance sheet targets. For 2026, approximately 85% of our equity need has already been priced, with an additional $1 billion-$1.2 billion of Pinnacle West equity forecasted through 2028. On the O&M front, our 2026 outlook reflects our commitment to cost efficiency. We expect a slight year-over-year decrease despite continued customer growth, and we remain focused on reducing O&M per megawatt hour over the long term. Finally, we are affirming our long-term EPS growth guidance range of 5%-7% based on the midpoint of our original 2024 guidance range. We recognize that regulatory lag will continue to be a factor in 2026. However, we remain confident in our long-term financial strategy.

Our service territory offers unique advantages, including strong growth across all customer classes and a diversified economic base that includes advanced manufacturing, data centers, and continued population growth. Working closely with the Arizona Corporation Commission and stakeholders, we’re committed to addressing regulatory lag, improving recovery timing, and ensuring affordability as we continue serving new and existing customers. This concludes our prepared remarks. I will now turn the call back over to the operator for questions.

Matthew, Conference Call Operator: Certainly. Everyone at this time will be conducting a question-and-answer session. If you have any questions or comments, please press Star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you’re listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press Star 1 on your phone. Please hold while I pull for questions. Thank you. Your first question is coming from Julien Dumoulin-Smith from Jeffries. Your line is live.

Julien Dumoulin-Smith, Analyst, Jeffries: Hey, good morning, team. Thanks for the time. Appreciate it. Nicely done, I got to say again. Look, if I can kick it off here, obviously, the gas build is front and center here for you guys. Good progress. How are you thinking about just eventually giving visibility on 2029 and 2030, especially as what you’ve teed up here? Can you speak a little bit, to the extent possible, of what that trajectory, as you’ve rolled it forward here, would potentially look like in that context? Maybe speak a little bit more to the sequencing of getting this pipeline built in time and in service to align with what seems like a fairly tight timeframe altogether to build out this generation.

Ted Geisler, Chairman, President, and CEO, Pinnacle West Capital Corporation: Yeah, Julian, thanks very much. I’ll start, and then Andrew can talk about the capital plan. The pipeline is expected to be in service in 2029. We’re staying very close to that project and remain confident in the milestones between here and there. As you know, that was the first key step. The second step then is starting to announce some of the generation capacity projects that we’ve been working on, Desert Sun being the first major announcement and project that we would expect. As we’ve said, we think about this in really two phases. The first phase is going to be necessary to support committed customers. That’s a part of the 4.5 gigawatts that we’ve already committed to and are building out to serve. We’d expect to be able to have that phase in service in 2030.

Still a healthy margin past when the pipeline’s in service, but a schedule that we’re comfortable with meeting. Importantly, we’ve got all the key equipment secured. Land interconnection is in place. I think we’re in a good spot to be able to deliver on that timeline. The second phase of that project, we’ve identified the opportunity to be able to serve our subscription customers with. We’ve rolled out an opportunity to subscription customers for 1.2 gigawatts. We’re actively working with those counterparties on their desired timing and ramp rate to be able to take advantage of that second phase. One of the benefits of the subscription model is we can ensure that the delivery timeline of that second phase corresponds with the counterparty’s ramp rate, and we make sure that reliability is protected by keeping those two in sync.

Both will, of course, take service from the new pipeline, but we’re comfortable with the timing and how that coincides with the pipeline’s in service. We’ll continue to monitor pipeline progress along the way and be prepared to adjust if needed. We’re comfortable with the timeline we’ve laid out. Andrew, you want to speak to the capital plan?

Andrew Cooper, CFO, Pinnacle West Capital Corporation: Sure. Yeah. Julian, as it specifically relates to the Desert Sun project, there is some of the capital related to that project, both on the generation side as well as a small amount on the transmission side in the current plan. You’ve got long lead equipment and land and things like that that are in the plan. Certainly, given the in-service date that Ted’s talking about for phase one, you would see that CapEx ramp up as we get closer to the end of the decade. Certainly, around the broader capital plan, as we work through the rate case and understand the dynamics of the formula rate and continue to develop our subscription model with our customers, that will provide us the opportunity to give more visibility as we certainly want to make sure that growth pays for growth.

The plan that we put forward through 2028 reflects the beginnings of some of those really big, longer lead-time investments we’re making on the generation and the transmission side. You could see it in the 2028 kind of new run rate for transmission investments and some of the additional information we provided about our ability to start to look at that additional $6 billion backlog of FERC-regulated transmission assets and start to begin to develop those in parallel with a project like Desert Sun. That’s the plan. We feel good about the plan for 2028. As we are able to, we’ll certainly provide more information about the timeline through the end of the decade. We’ve tried to start to do that with some of the construction work in progress disclosure that we’ve been providing over the last few quarters.

Julien Dumoulin-Smith, Analyst, Jeffries: Got it. Next one, just to kind of tee up the next piece, how is that progress going on the subscription? This part? You talk about this 1.2 gigawatt opportunity. Where are you in sort of "filling that bucket" or that opportunity?

Ted Geisler, Chairman, President, and CEO, Pinnacle West Capital Corporation: Yeah, we’ve got active dialogue. This was tranche one of our subscription. And recognize that the timing of tranche one coincides with developing that phase two of Desert Sun as well as the in-service, the new pipeline. So we’re working with counterparties now to match that up with their desired in-service timing. But conversations are active, and we remain optimistic in being able to deploy a subscription model to both continue to serve part of the 20 gigawatt queue that is ready to begin service in our service territory, while also designing it in a way that helps with financing and protects customer affordability. I think the key elements of the model have been well received by the market. We’re actively working with counterparties. If it’s going to be a good way to be able to serve that queue both now and going forward.

Julien Dumoulin-Smith, Analyst, Jeffries: Yeah, fair enough. One little detail here. On 2026, you’ve got this $0.55 bump here on transmission. That’s a sustainable level, right? I guess that’s a pretty big bump.

Andrew Cooper, CFO, Pinnacle West Capital Corporation: Yeah. Yeah, Julian will provide guidance as we go forward, obviously, on that. I think it’s reflective of the trend. We’ve been very committed to investing in our FERC-regulated transmission business. That’s some of the capital that I was talking about, both because of that need to access resources from further field and to serve our growth. Given the FERC construct, the formula rate, and the amount of capital that we’ve stepped into there, this is just the natural reflection of the plan that we’ve put forward and converting it now into annual earnings opportunity.

Julien Dumoulin-Smith, Analyst, Jeffries: Got it. Excellent. Thank you, guys. All the best. All right, good luck.

Ted Geisler, Chairman, President, and CEO, Pinnacle West Capital Corporation: Thanks, Julian.

Matthew, Conference Call Operator: Thank you. Your next question is coming from Nick Campanella from Barclays. Your line is live.

Hi, good morning, team. This is Fay from Nick today. Thanks very much for taking my questions. Quickly, just one. Clarification on equity dilution, if I could. Since 2026, equity need is 85% taken care of, which is the $550 million already prized, as you put in the slides. What’s the true incremental equity needs for 2026 through 2028, especially when we look at that $1 billion to $1.2 billion total equity needs for the three-year guidance period? Also, I guess, how should we think about the cadence of issuing through 2026 and 2027? How should we think about any equity need mitigation, given the strong sales growth backdrop that you just provided in the update? Thanks.

Andrew Cooper, CFO, Pinnacle West Capital Corporation: Thanks, Fay. Yeah, on the equity, as you pointed out, we have substantially de-risked the need in 2026 through all the equity that we’ve prized both through the block issuance we did in 2024 and our use of our ATM over the last two years. We feel like we’re in a good position. If we look over the incremental need over the three years, that 2026-2028 period, that’s what that $1 billion-$1.2 billion represents. Certainly, these projects are lumpy, so the cadence of issuance need kind of goes with that. That’s where an ATM has worked well for us to date to be able to time our drawdowns and our issuance with the CapEx as we go through some of these larger projects. Your last question around mitigation is really the key one.

When you think about that range and our ability to meet our long-term aspirations around the balanced capital structure and to minimize the amount of equity dilution within that balanced capital structure, it really comes back to all the work we’re doing, both around reducing regulatory lag through the rate case process to improve retained earnings and our ability to fund that capital from internally generated funds, and then to look to our large load customers in this subscription discussion to make sure that to the extent that we can secure cash upfront to fund those investments that it reduces the need for us to go out to the market for equity. While that’s the range today of forecasted need, we’re going to continue to work through the rate case process and the engagements on the large load side to try to mitigate that as much as possible.

Got it. That’s very helpful. Secondly, just on the transmission capital investment slide you laid out, if I could. Appreciate the clarity on the $2.6 billion cumulative transmission CapEx through 2028 and also the $6 billion plus through 2034. Could you just comment on your assumption on annual transmission CapEx post-2028? How should we interpret the $6 billion plus, especially on what’s contributing and driving the upside? Thanks.

Yeah. We haven’t laid out the specifics of the plan post-2028 because these are really the projects that are reflected in the 10-year strategic transmission plan that we file with the commission every other year. There are a host of projects in there, 500-600 mi of high-voltage lines that we’re developing to meet different needs. There’s some fungibility in terms of if you develop this line or that line. We’re doing a lot of that work today. The way I would think about it overall is that we went from under $200 million a year of run rate CapEx five years ago in transmission for just sort of the local area projects or things that we do that are 69 kV plus. That number has increased into the $300 million-$400 million range of just the blocking and tackling CapEx we do on the transmission side.

The increments above that, that you see almost in that, the potential for that $850 million-plus number to be a run rate, there is a baseline $300 million-$400 million in there. The increment above that is reflective of the beginning of investing in those strategic transmission projects. It’s a really long runway, and the number will vary from year to year. I think if you look at 2028, that is a reflection of the opportunity on an ongoing basis through the combination of core transmission and that increment from strategic transmission.

Got it. That’s super helpful. If I could, just another quick clarification on the robust sales growth guidance you refreshed. I guess seeing it at a really elevated level of 5-7% through 2030, while looking at a 7-9% rate-based growth is through 2028. I guess, can you comment on your confidence level to possibly extend the 7-9% rate-based growth further into the horizon? I guess, what could be the key drivers contributing to that? Thanks.

Yeah. We have laid out through 2028 on the rate-based side. One of the reasons it is stepped up is that you are beginning to see some of those long lead projects come into service in 2028. The best example being Redhawk, the expansion of our natural gas facility there. As you get into 2029 and 2030 and beyond, more of these larger projects come in and service, to your point, the higher sales growth we are seeing, especially from the large load type customers. As we continue to kind of move forward and develop the CapEx plan around Desert Sun, around those strategic for that $6 billion in strategic transmission that we were just talking about, we will continue to look at that rate-based growth rate. Our confidence is that that runway is quite long.

What the level is, is what we will be able to kind of continue to work through. That CWIP disclosure that I mentioned earlier is also a good way to think about some of the projects that we know are already in the hopper that take us into 2029 and 2030, and a good way to extrapolate if you do some of that math.

Great. Appreciate the color. Thanks for the update.

Thanks, Fay.

Matthew, Conference Call Operator: Thank you. Your next question is coming from Shah Peruza from Wells Fargo. Your line is live.

Hey, good morning, everyone. This is actually Alex on for Shah. Thanks for taking my question.

Andrew Cooper, CFO, Pinnacle West Capital Corporation: Hey, Alex. Good morning.

Hey. Good morning. Just on the growth rate outlook, you guys are still targeting that 5-7% off the 2024 midpoint. In the context of today’s new 2026 guidance, can you help frame what you might use as your new base and will you roll forward the plan as soon as the rate case is concluded?

Sure. Yeah. So. Really, the rate case becomes the precipitant for us to look at all that. If you think about base years, we really try to set as high of a bar for ourselves as we can to make sure that we’re consistently meeting or exceeding expectations and doing so in the right way. We want to get to the point where that 5%-7% becomes evergreen. Right now, we’re in a situation where earnings are lumpy. We go and we have a rate case, and we get a rate increase. Then there’s regulatory lag through a lengthy rate case process. The formula rate is really an important element here to be able to convert that earnings growth rate from being kind of a long-term, look at 2024 and then look at 2028 to something that can be more evergreen.

I think as we work through the rate case process and the structure of the formula rate, we’ll be much better positioned to talk about what all that looks like. Ultimately, that’s the goal, to be able to deliver year in, year out. Produce more modest increases year over year for customers as well. That’s a really important part of it. Ultimately, that creates the better stability for us around our earnings growth.

Got it. Okay. That’s helpful. Just switching gears here, just give me a sense, more of a sense on the megawatt pipeline you have around the hyperscaler side and just sort of how you think about capacity first-generation needs. Thank you.

Yeah, sure, Alex. We continue to see just a robust pipeline of demand. As we’ve articulated in the slides, we’ve got 4.5 gigawatts of incremental demand that we’ve already committed to. That’s in part what Desert Sun is going to be serving, as well as future generation and transmission investments that are included in our guidance period and will have to be developed even beyond. In addition to that, we want to start making progress on committing and serving part of the 20 gigawatts of uncommitted load that is in our current queue. That’s also part of what Desert Sun will begin to be able to allow us to serve. Of course, we anticipate wanting to be able to offer much more than just that initial tranche of 1.2 gigawatts. The intent is to contract that first tranche, and then we’ll continue to identify generation and transmission capacity expansion opportunities.

As we get to a certain point in the pre-development of those projects to where we are confident in the timing and level of capacity available for us to be able to offer, then we’ll go to the market and offer another tranche of service to that uncommitted queue. That’s the model that we anticipate being able to deploy going forward. Bottom line is we anticipate being able to continuously offer capacity to eat into that 20 gigawatts. We think the 1.2 gigs that we’ve offered recently is just the first step into that trajectory.

Got it. Super helpful. I’ll leave it there. Thank you.

Thank you.

Matthew, Conference Call Operator: Thank you. Your next question is coming from Travis Miller from Morningstar. Your line is live.

Good morning. Thank you.

Andrew Cooper, CFO, Pinnacle West Capital Corporation: Morning, Travis.

Morning. Just want to confirm on the guidance for 2026, there’s no contribution from the rate case. Is that correct? If it’s correct, any ideas or guidance you could give on what maybe a dollar increase, so to speak, would be in the back end of the year? Any thoughts there?

Yeah, Travis, you’re correct. We have not made any assumptions for rate case conclusion that’s informed 2026 guidance. As we’ve said, we do anticipate the case resolving in the last quarter of the year. Given that’s such a small quarter for us anyhow, the timing just didn’t seem prudent for us to be able to make any assumptions at this point. Certainly, once the case concludes, that’ll allow us to step back and reevaluate the constructive nature of the outcome and what that means in terms of forward-looking guidance. We’d look to do that at that time, as well as the details around how the formula rate would work, both timing and level on a go-forward basis. Look for further updates once the case concludes on all those aspects.

Okay. Makes sense. Then separately, that 4.5 gigawatts of committed customers, can you elaborate on who those customers are? Maybe, is any of that going to your system-wide base with residential or small commercial? How would you break up that 4.5 gigawatts?

Yeah. The 4.5 gigawatts is a nice balance and blend between incremental industrial growth, such as chip manufacturing, TSMC and Amkor being examples of that, as well as their supply basis. As well as, of course, data centers that are already in development or even in service, but we expect a ramp through this period. Importantly, we continue to see just steady and robust residential and small business growth. I’d say that’s one of the hallmarks of our growth story, is a very diversified story, not too dependent on one industry or customer base or another. Maricopa County just recently ranked top county for economic development in 2025. It is the third fastest in the U.S. Phoenix just ranked number one of the top 15 growth markets for manufacturing. All of that is separate from a data center story. It just shows the true underlying growth.

We’re also pleased to see that affordability still is a hallmark of our service territory, favorable cost of living. Phoenix inflation is growing at about 1.4% versus national average at 2.9%. I think there’s a lot of drivers behind why we’re seeing diversified growth. That 4.5 gigawatts represents all sectors, which gives us confidence in the growth rate, but also means that we’ve got a lot of infrastructure to deploy to continue to keep up with the various sectors that are demanding it.

Okay. Yeah. No, that sounds good. And then so would most of that 4.5 gigawatts go into rate base? Or is some of that the subscription model you were talking about that might be outside of rate base?

Let’s be clear. All of our investment goes into rate base. The subscription model still goes into rate base. We are just contracting with those customers. Think about it as more of a special rate agreement rather than out of rate base. That special rate agreement just ensures that growth pays for growth and that the timing of their ramp coincides with the timing of the ramp of the infrastructure to be built to serve them, as well as potentially getting their help to finance some of that infrastructure so that we maintain a healthy balance sheet as we grow these rate-based investments specifically for data centers. It is all going into rate base. It is just a matter of how you recover the dollars that is really the difference in the subscription model.

Okay. Okay. Very good. No, that’s helpful. Thank you.

Thank you.

Matthew, Conference Call Operator: Thank you. Your next question is coming from Steve D’Ambrosi from RBC Capital Markets. Your line is live.

Hi, team. Good morning. Thanks very much for taking my questions.

Andrew Cooper, CFO, Pinnacle West Capital Corporation: Morning.

I just was hoping for a little bit more color on the year-over-year change in sales growth as an EPS driver. I know for 2025 guidance, you had embedded $0.58. And for 2026 guidance, it looks like you’re embedding $0.39. I guess I would just step back and say that it doesn’t seem like the magnitude or mix is really that different, given both years were 4-6% total, of which 3-5% was from large C&I. Can you just give a little color there? Is it mixed within the C&I classes, or what’s driving the difference in EPS magnitude uplift from sales growth?

Hey, Steve, it’s Andrew. Sure. Yeah. You’re right. 2026 does have a bit of a smaller contribution there. That’s really the fact that we’re talking about a pretty big group of customers that has puts and takes in their ramp rate from year to year. Some of those, as we’ve spent being in an early data center market, we’ve been able to develop more sophisticated forecasting on a customer-by-customer basis, who’s testing equipment, who’s actually ramping. You do see some variation within the customer class. The residential small business number is relatively stable. As we’ve seen this quarter and our guidance for this year, the expectation has continued pretty large new customer additions and an actual positive contribution from residential sales, despite the fact that we’ve continued to have energy efficiency and distributed generation pressed up against that.

It really is the year-to-year variability in some of our large load customers. I think where we really want to focus is the fact that this is a long-term set of customers with a trajectory now that we feel confident about through 2023, including raising that sales growth guidance by 100 basis points over that period. The fact that that means that the extra low tax contributions to that steps up by 100 basis points as well. Over the long term, feeling really good. There is some intra-year variability. Once you pair that with continued customer growth, residential growth, and then the continued conversion of our transmission investments into revenue through our firm formula, we’re feeling pretty confident about the ultimate outcome.

That’s really helpful. I guess that would be the put and take versus what kind of we were assuming is just the sales growth versus transmission. I know Julian asked about it, but can you talk a little bit more about that? Clearly, throughout the rest of the plan, transmission growth steps up materially into 2028. Does that $0.55 benefit scale linearly with the increase in transmission spending, or is there something that’s causing supernormal growth and recoveries?

Yeah. No. Over time, it should be proportionate to the investment. We earn pretty quickly, right, when we’re putting assets into service. I think the thing that will happen is it’ll get a little bit lumpier because in the near term, that $300 million-$400 million of runway projects, those are smaller projects that get done within a given year, maybe over two years at max. We are moving forward into lines that may take longer to build. Some of the things that we’re looking at are, can you energize them on a sectionalized basis so that we can reduce the regulatory lag? If we’re building a 100 mi line, can you do it in segments? That’s the type of thing that we’re thinking about to make sure that we continue to translate that opportunity into earnings.

The other thing that’s been nice about the transmission opportunity is that it’s part of the broader wholesale market. The opportunity to offset some of the impact to our retail customer base through others wheeling over our system has been a big part of our customer affordability story as well. There are multiple benefits to doing it. We are doing some larger projects. The scaling will ultimately get there over the long term. Intra-year, there could be some lumpiness, just given you’re talking about that increment above the core $300 million-$400 million being longer lead time projects that can take a few years to get into service.

Okay. That’s really helpful. Thanks very much for the time. Appreciate it.

Thanks, Steve.

Matthew, Conference Call Operator: Thank you. That completes our Q&A session. Everyone, this concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

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