Xcel Energy reported a significant increase in second-quarter 2026 earnings as longer-than-expected operating lives for its nuclear plants reduced depreciation expense and created an unusual benefit in the company’s quarterly results.
Net income increased 32% to $586 million from $444 million in the prior-year quarter. Diluted earnings per share rose to $0.93 from $0.75, even as operating revenue declined to approximately $3.12 billion from $3.29 billion.
One of the more distinctive contributors was a $60 million year-over-year reduction in depreciation and amortization expense. Xcel attributed much of the decrease to changes associated with extending the expected operating lives of its nuclear generation assets.
Depreciation allows a company to recognize the cost of a long-lived asset gradually over its expected useful life. When the estimated life of an asset is extended, the remaining book value can be spread over additional years, reducing the depreciation expense recorded during each period.
The accounting change does not generate immediate cash or increase the amount of electricity produced. However, the lower noncash expense can increase reported operating income and earnings during the period in which the revised useful lives take effect.
Xcel plans to operate its Monticello nuclear plant through 2050. Its resource plan also contemplates operating Prairie Island Unit 1 through 2053 and Prairie Island Unit 2 through 2054, subject to the remaining regulatory and licensing approvals. The company’s existing federal operating licenses for the Prairie Island units currently extend through 2033 and 2034.
Extending the plants’ operating lives would allow Xcel to continue using existing carbon-free generation for several additional decades. It could also delay the need to replace the plants with other generation resources and postpone portions of the facilities’ decommissioning schedules.
However, the depreciation reduction is not necessarily a dollar-for-dollar economic windfall for shareholders.
As a regulated utility, Xcel generally recovers depreciation expenses through customer rates. When depreciation falls, the amount collected from customers can also decline through regulatory accounting adjustments.
The nuclear life extensions therefore reduced both depreciation expense and associated regulated revenue. This makes the accounting effect more complicated than a traditional corporate cost reduction because part of the lower expense is offset elsewhere on the income statement.
The quarter illustrates how regulated utility earnings can be affected by changes in accounting assumptions even when customer demand, electricity production, and cash generation have not changed by comparable amounts.
Lower fuel and purchased-power expenses also reduced both revenue and costs during the quarter. These energy expenses are generally passed through to customers, meaning fluctuations can significantly change reported revenue without producing an equivalent effect on earnings.
Xcel’s earnings also benefited from its equity-method investments. Earnings from these investments increased to approximately $76 million from a loss of $8 million, primarily reflecting unrealized gains in funds holding investments in emerging energy-technology companies.
The combination of investment gains, lower depreciation, and increased recovery of infrastructure investments helped offset rising financing costs associated with Xcel’s large capital program.
The company is issuing substantial amounts of debt and equity to fund investments in generation, transmission, distribution, and infrastructure needed to support growing electricity demand. Higher interest expense and a larger number of outstanding shares limited the increase in earnings per share.
Despite the strong quarterly earnings increase, Xcel maintained its full-year 2026 ongoing earnings guidance of between $4.04 and $4.16 per share. The unchanged outlook indicates that management does not expect the entire second-quarter benefit from nuclear depreciation and investment gains to recur at the same level during future quarters.
The nuclear accounting change is strategically important beyond its immediate financial effect. Keeping Monticello and Prairie Island operating into the 2050s would preserve a large source of around-the-clock generation as Xcel adds renewable energy, storage, transmission infrastructure, and resources needed to serve data centers and other large electricity customers.
For investors, the quarter demonstrates why Xcel’s earnings increase cannot be viewed solely as a reflection of higher electricity sales. Changes in nuclear asset lives, regulatory revenue treatment, and investment valuations all contributed to the year-over-year improvement.
The life extensions lowered near-term depreciation while spreading the remaining cost of Xcel’s nuclear assets across a much longer period. Although that supported quarterly earnings, the associated reduction in regulated revenue means the change is better understood as a shift in the timing of expenses and customer recovery rather than a simple $60 million increase in economic profit.
KEY QUOTES:
“At Xcel Energy, we continue to make energy work better for our customers and our past quarter showcased our keen focus on execution and delivering on our plans to strengthen and modernize the grid, expand our energy sources, and deploy innovative technologies to ensure that energy remains safe, reliable, and affordable.”
Bob Frenzel, Chairman, President And Chief Executive Officer Of Xcel Energy
