Why did reported earnings decline in Q4 2025 even though revenues grew?

Reported net income fell to $416 million from $534 million, mainly because of non-recurring or non-operating items: a $123 million pre-tax loss on debt extinguishment, $116 million of pre-tax accelerated depreciation at Southern Power, and a $63 million Nicor Gas disallowance estimate. Higher depreciation, interest expense and non-fuel O&M also pressured results, offset partly by higher retail revenue.

What are the company's adjusted (non-GAAP) earnings, and what items are excluded?

Adjusted earnings were $612 million ($0.55 per share) in Q4 2025 and $4.7 billion ($4.30 per share) for full-year 2025. Excluded items include estimated losses on plants under construction (including Plant Vogtle 3 and 4 credits and Kemper-related charges), accelerated depreciation from wind repowering, debt extinguishment costs, the Nicor Gas disallowance estimate, disposition impacts, and a tax benefit adjustment at Southern Company Gas. Investors should weigh these exclusions carefully, since several recur in some form.

How much additional accelerated depreciation should investors expect at Southern Power?

At December 31, 2025, remaining pre-tax accelerated depreciation tied to wind repowering was projected at about $490 million in 2026 and $100 million in 2027. Repowering commercial operation dates are expected between Q3 2026 and Q3 2027, so this charge will continue to weigh on reported earnings until then, though it is excluded from adjusted EPS.

Does the convertible note repurchase signal further charges?

The company said similar debt extinguishment costs may occur in the future at Southern Company or its unregulated subsidiaries, but the amount and timing are uncertain. Investors should monitor future capital structure actions and related charges.

What is the main long-term growth driver highlighted by management?

Management pointed to projected generational demand growth, primarily from data centers and other large-load customers, which requires substantial new generation and transmission investment. The company frames its 'all-of-the-above' strategy as supporting rate stability and long-term customer savings, but this growth also creates capital access and revenue recovery risks for the traditional electric operating companies.

SOUTHERN CO 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed February 19, 2026. Cited figures are marked; the original filing is the authoritative source.

Southern Company (SO) reported fourth-quarter 2025 GAAP earnings of $416 million^a, or $0.38 per share, down from $534 million, or $0.49 per share, in the fourth quarter of 2024.

For full-year 2025, GAAP earnings were $4.3 billion^b, or $3.94 per share, versus $4.4 billion, or $4.02 per share, in 2024. Excluding the items the company identifies as non-GAAP adjustments, fourth-quarter earnings were $612 million, or $0.55 per share (vs. $0.50 a year earlier), and full-year adjusted earnings were $4.7 billion, or $4.30 per share (vs. $4.05). Operating revenues rose 10.1% in the quarter to $7.0 billion and 10.6% for the year to $29.6 billion, driven largely by retail non-fuel revenue growth and higher electric and gas sales volumes.

The headline GAAP decline in the quarter was driven mainly by non-recurring or non-operating items: a $123 million^c pre-tax loss on extinguishment of debt tied to repurchases of convertible senior notes, $116 million of pre-tax accelerated depreciation from wind repowering at Southern Power, and a $63 million estimated loss at Southern Company Gas from Illinois Commerce Commission disallowances of Nicor Gas capital investments. Partially offsetting these were a $19 million tax benefit adjustment at Southern Company Gas and a $27 million pre-tax credit related to Plant Vogtle Units 3 and 4. On an adjusted basis, the Traditional Electric Operating Companies were the primary contributor to growth, while Southern Power's earnings were weak, with a quarterly net loss of $16 million as reported.

For investors, the key watch items are the sizable remaining accelerated depreciation at Southern Power (about $490 million^d expected in 2026 and $100 million in 2027, pre-tax), continued growth in demand from data centers and large-load customers that requires substantial new generation and transmission investment, and the risk of further charges tied to the Nicor Gas disallowance and Kemper-related items. Management emphasized rate stability and customer affordability alongside growth. The company also noted higher interest expense and depreciation as headwinds to adjusted earnings in 2025.

02—Key points

Key Highlights

Q4 2025 GAAP EPS of $0.38 vs. $0.49 in Q4 2024; adjusted EPS of $0.55 vs. $0.50, up 10%.
Full-year 2025 GAAP EPS of $3.94 vs. $4.02; adjusted EPS of $4.30 vs. $4.05, up about 6%.
Operating revenues rose 10.1% in Q4 to $7.0 billion and 10.6% for full-year 2025 to $29.6 billion, supported by higher retail and wholesale sales.
Full-year 2025 retail kilowatt-hour sales grew 1.6% and wholesale sales grew 4.7%, with commercial and industrial demand growth as a key driver.
A $123 million pre-tax loss on extinguishment of debt in Q4 related to repurchases of Southern Company convertible senior notes weighed on reported earnings.
Accelerated depreciation from wind repowering at Southern Power reduced Q4 earnings by $116 million pre-tax, with about $490 million expected in 2026 and $100 million in 2027.
A $63 million estimated loss at Southern Company Gas related to Illinois Commerce Commission disallowances of Nicor Gas capital investments, with further charges possible.

03—Questions

Frequently Asked Questions

Why did reported earnings decline in Q4 2025 even though revenues grew?
Reported net income fell to $416 million from $534 million, mainly because of non-recurring or non-operating items: a $123 million pre-tax loss on debt extinguishment, $116 million of pre-tax accelerated depreciation at Southern Power, and a $63 million Nicor Gas disallowance estimate. Higher depreciation, interest expense and non-fuel O&M also pressured results, offset partly by higher retail revenue.
What are the company's adjusted (non-GAAP) earnings, and what items are excluded?
Adjusted earnings were $612 million ($0.55 per share) in Q4 2025 and $4.7 billion ($4.30 per share) for full-year 2025. Excluded items include estimated losses on plants under construction (including Plant Vogtle 3 and 4 credits and Kemper-related charges), accelerated depreciation from wind repowering, debt extinguishment costs, the Nicor Gas disallowance estimate, disposition impacts, and a tax benefit adjustment at Southern Company Gas. Investors should weigh these exclusions carefully, since several recur in some form.
How much additional accelerated depreciation should investors expect at Southern Power?
At December 31, 2025, remaining pre-tax accelerated depreciation tied to wind repowering was projected at about $490 million in 2026 and $100 million in 2027. Repowering commercial operation dates are expected between Q3 2026 and Q3 2027, so this charge will continue to weigh on reported earnings until then, though it is excluded from adjusted EPS.
Does the convertible note repurchase signal further charges?
The company said similar debt extinguishment costs may occur in the future at Southern Company or its unregulated subsidiaries, but the amount and timing are uncertain. Investors should monitor future capital structure actions and related charges.
What is the main long-term growth driver highlighted by management?
Management pointed to projected generational demand growth, primarily from data centers and other large-load customers, which requires substantial new generation and transmission investment. The company frames its 'all-of-the-above' strategy as supporting rate stability and long-term customer savings, but this growth also creates capital access and revenue recovery risks for the traditional electric operating companies.

04—Continue

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