01—Abstract
Summary
Summary of the 10-Q filed August 5, 2026. Cited figures are marked; the original filing is the authoritative source.
Phillips 66 reported a significant increase in profitability for the three and six months ended June 30, 2026, compared to the same periods in the prior year.
Net income attributable to Phillips 66 surged to $3.85 billiona and $4.05 billion respectively, a substantial leap from $0.88 billion and $1.36 billion in 2025. This performance was largely driven by a robust increase in realized refining margins, fueled by improving market crack spreads and favorable inventory impacts, as well as higher values of regulatory credits in the Renewable Fuels segment. The company also saw increased equity earnings from its chemicals joint venture, CPChem.
Operationally, Phillips 66 generated strong cash flow from operating activities, totaling $5.0 billionb for the first six months of 2026, a significant improvement from $1.0 billion in the prior year, supported by higher earnings and favorable working capital movements. The company continued to prioritize shareholder returns, declaring dividends and repurchasing shares, while also strategically investing in its Midstream and Chemicals businesses. Despite positive financial performance, investors should remain aware of the ongoing legal proceedings, particularly the Propel Fuels litigation, which carries a significant potential financial impact pending the appeal outcome.
02—Key points
Key Highlights
- Net income attributable to Phillips 66 dramatically increased to $3.85 billion for Q2 2026 and $4.05 billion for the first six months of 2026, up from $0.88 billion and $1.36 billion in the prior year, respectively.
- The Refining segment was a major contributor to the improved financial results, driven by significantly higher realized refining margins due to favorable market crack spreads and inventory impacts.
- The Renewable Fuels segment benefited from higher values of regulatory credits, contributing to the overall profit increase.
- Cash flow from operating activities showed substantial growth, reaching $5.0 billion for the first six months of 2026, up from $1.0 billion in the same period of 2025, primarily due to higher earnings and beneficial working capital changes.
- Phillips 66 continued its commitment to shareholder returns, with significant dividend payments and share repurchases executed during the period.
- The company actively manages its debt, with a focus on financial strength and flexibility, targeting reductions in total debt and debt-to-capital ratio by the end of 2027.
- A significant legal matter, the Propel Fuels litigation, has resulted in a substantial judgment against the company, with an appeal currently in progress, representing a material contingent liability.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2026, Phillips 66 kept $0.08.
- Revenue$51.00B100.0%
- Cost of revenue−$43.66B85.6%
- Gross profit$7.34B14.4%
- Operating costs−$3.29B6.4%
- Operating income$4.05B7.9%
- Interest, other & tax−$207.0M0.4%
- Net income$3.85B7.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed August 5, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $51.00B$33.32B | +53.1% |
| Cost of Revenue | $43.66B$29.08B | +50.2% |
| Gross Profit | $7.34B$4.25B | +72.9% |
| SG&A Expenses | $538.00M$582.00M | −7.6% |
| Operating Income | $4.05B$1.36B | +197.2% |
| Net Income | $3.85B$877.00M | +338.7% |
| EPS (Basic) | $9.59$2.15 | +346.0% |
| EPS (Diluted) | $9.55$2.15 | +344.2% |
| Shares Outstanding (Basic) | 400.95M406.76M | −1.4% |
| Shares Outstanding (Diluted) | 402.62M407.93M | −1.3% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant increase in net income for Phillips 66 in the second quarter of 2026?
The primary driver of the significant increase in net income for Phillips 66 in the second quarter of 2026 was the substantial improvement in realized refining margins, stemming from higher market crack spreads and favorable inventory impacts. Additionally, the Renewable Fuels segment benefited from higher values of regulatory credits, and equity earnings from the Chemicals segment (CPChem) also increased.
How did the company's cash flow from operations perform during the first six months of 2026?
Phillips 66 generated $5.0 billion in cash flow from operating activities for the first six months of 2026, a significant increase from $1.0 billion in the same period of 2025. This improvement was primarily due to higher earnings driven by stronger refining margins and favorable impacts from working capital management, including net timing of payments and collections, lower inventory, and higher taxes and accruals.
What is the status of the Propel Fuels litigation, and what is its potential financial impact?
Phillips 66 is appealing a jury verdict and subsequent final judgment of $833 million in the Propel Fuels litigation, which alleges misappropriation of trade secrets. As of June 30, 2026, the company had accrued $928 million related to this matter, reflected in 'Other liabilities and deferred credits'. The outcome of the appeal is uncertain, and there is a possibility of losses exceeding the amount accrued, which could materially affect the company's financial position.
How is Phillips 66 returning value to its shareholders?
Phillips 66 is committed to returning value to shareholders through a combination of dividends and share repurchases. During the first six months of 2026, the company returned $1.7 billion to shareholders through these methods. The Board of Directors declared quarterly cash dividends, and recently approved a significant increase to the share repurchase authorization, demonstrating a continued focus on enhancing shareholder value.
06—Continue