Sign in

You're signed outSign in or to get full access.

AI

Archrock, Inc. (AROC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered robust growth: revenue $383.2M (+41% y/y), adjusted EPS $0.39, and adjusted EBITDA $212.7M; utilization held at a record 96% and total operating horsepower rose to 4.651M .
  • Raised FY 2025 guidance: adjusted EBITDA to $810–$850M (from $790–$830M), cash available for dividend to $502–$527M, AMS revenue to $205–$215M; narrowed growth capex to $340–$360M .
  • Consensus beats: revenue $383.2M vs $365.8M*, adjusted EPS $0.39 vs $0.34*, and adjusted EBITDA $212.7M vs $197.6M* (company-reported adjusted EBITDA; S&P “actual” EBITDA standardized at ~$200.9M*) .
  • Capital returns accelerate: dividend increased to $0.21 per share (3.4x coverage) and 1.227M shares repurchased (~$28.8M) in Q2; ~$58.9M repurchase capacity remains .
  • Stock catalysts: guidance raise, record margins/usage, AMS strength, divestiture proceeds to fund growth, and commentary pointing to durable 2026 demand across Permian and other basins .

What Went Well and What Went Wrong

What Went Well

  • Record operational metrics and profitability: contract operations adjusted gross margin reached ~70% for third straight quarter; spot utilization 96% and total operating horsepower 4.651M .
  • Backlog and pricing: fifteenth straight quarter of higher monthly revenue per horsepower to $23.75; order book visibility into 2026; “we place orders … only when we have a firm commitment and a firm contract in hand” .
  • Capital allocation discipline: leverage at 3.3x TTM EBITDA with increased dividend and buybacks; “we expect to continue to grow our dividends over time” .

What Went Wrong

  • AMS margin mix headwind: AMS adjusted GM% fell sequentially to 23% due to a large engine parts sale diluting margin, though AMS revenue strengthened to $64.8M .
  • Non-cash impairment tied to asset sale: $10.8M impairment related to compressors sold to Flowco (approx. $0.04 after-tax impact to adjusted EPS) .
  • S&P vs company EBITDA methodology gap: company adjusted EBITDA $212.7M vs S&P standardized “actual” EBITDA ~$200.9M*, potentially confusing for cross-comps (note methodology differences) .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$270.526 $347.163 $383.152
Net Income ($USD Millions)$34.425 $70.850 $63.420
GAAP EPS ($)$0.22 $0.40 $0.36
Adjusted EPS ($)$0.23 $0.42 $0.39
Adjusted EBITDA ($USD Millions)$129.712 $197.845 $212.678
Adjusted EBITDA Margin (%)48% 57% 56%
Total Adjusted Gross Margin ($USD Millions)$156.090 $222.107 $237.114
Total Adjusted Gross Margin (%)58% 64% 62%
SegmentQ2 2024Q1 2025Q2 2025
Contract Ops Revenue ($USD Millions)$225.468 $300.397 $318.327
Contract Ops Adjusted GM ($USD Millions)$146.190 $210.598 $222.175
Contract Ops Adjusted GM (%)65% 70% 70%
AMS Revenue ($USD Millions)$45.058 $46.766 $64.825
AMS Adjusted GM ($USD Millions)$9.900 $11.509 $14.939
AMS Adjusted GM (%)22% 25% 23%
KPIsQ2 2024Q1 2025Q2 2025
Total Operating Horsepower (HP ‘000s)3,601 4,283 4,651
Average Operating Horsepower (HP ‘000s)3,605 4,254 4,467
Spot Utilization (%)95% 96% 96%
Dividend per Share (Period) ($)$0.165 $0.190 $0.210
Dividend Coverage (x)2.6x 3.9x 3.4x
Q2 2025 Actual vs ConsensusRevenue ($USD Millions)EPS ($)Adjusted EBITDA ($USD Millions)
Actual$383.152 $0.39 $212.678
Consensus*$365.844*$0.34*$197.583*

Note: Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($M)FY 2025$790–$830 $810–$850 Raised
Cash Available for Dividend ($M)FY 2025$480–$495 $502–$527 Raised
Contract Ops Revenue ($M)FY 2025$1,260–$1,290 $1,260–$1,280 Narrowed (lower high end)
Contract Ops Adjusted GM (%)FY 202569–71% 69–71% Maintained
AMS Revenue ($M)FY 2025$190–$210 $205–$215 Raised
AMS Adjusted GM (%)FY 202522–24% 23–24% Raised low end
SG&A ($M)FY 2025$149–$144 $151–$147 Slightly higher range
Growth Capex ($M)FY 2025$330–$370 $340–$360 Narrowed
Maintenance Capex ($M)FY 2025$110–$120 $110–$120 Maintained
Other Capex ($M)FY 2025$35–$50 $35–$40 Narrowed/lowered high end
Quarterly Dividend ($)Q2 vs Q1 2025$0.19 $0.21 Raised
2026 Growth Capex Outlook ($M)FY 2026N/A≥$250 New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Demand drivers (LNG, power, AI/data centers)“Rising energy demand … natural gas required to support growing LNG exports and power generation” ; robust outlook reiterated Explicitly cites LNG, AI data centers, distributed power as drivers of order book and 2026 spend Strengthening
Pricing trajectoryHigh profitability, record utilization (implied pricing power) Pricing increases mid-single digits y/y; focus on efficiency and cost discipline Positive/moderate
Tariffs / supply chainNot highlightedTariff impact immaterial in 2025 and very limited in 2026; predominantly U.S.-based supply chain Stable/low risk
Electric vs gas-drive mixLeadership in electric motor drive after TOPS acquisition Mix shifting toward more gas-drive (20–25% EMD expected) due to power availability constraints Shift toward gas-drive
Utilization and stop activity96% utilization; backlog for 2025 and booking into 2026 Historically low stop activity; average on-location >6 years; utilization 96% Durable/stable
Regional trendsPremier associated gas plays (Permian) Permian ~55–80% of order book; incremental demand in Eagle Ford, Haynesville, DJ, Powder River, Marcellus Permian-led, diversifying
Capital allocationDividend increase; buyback capacity increase Confident in growing dividends; opportunistic buybacks enhanced by low leverage More aggressive returns

Management Commentary

  • “For the fifteenth straight quarter, monthly revenue per horsepower moved higher to $23.75 during the 2025, a new company record.”
  • “We plan to maintain a leverage ratio of between three to 3.5 times.”
  • “We expect 2026 growth CapEx to be not less than $250,000,000 and within the range of investment levels that we have made annually since 2023.”
  • “High confidence in our outlook underscored the decision to raise our 2025 adjusted EBITDA guidance, increase our quarterly cash dividend per share and accelerate share repurchases.”
  • “We place orders … only when we have a firm commitment and a firm contract in hand from our customers.”

Q&A Highlights

  • 2026 order book durability and minimum capex: Management views the 2026 capex outlook (≥$250M) as durable, supported by large midstream customers and natural gas volume growth .
  • Pricing and terms: Expect mid-single-digit price increases y/y, 3–5 year base terms for large HP; units staying on location >6 years on average .
  • Tariffs: Minimal impact expected in 2025–2026; supply chain largely domestic, costs embedded in guidance .
  • Mix shift: Slightly less electric motor drive given grid constraints; expect ~20–25% of capex on EMD vs 30%+ previously .
  • Capital returns: Continued dividend growth targeted; buybacks deployed opportunistically given perceived undervaluation and low leverage .

Estimates Context

  • Q2 2025 results vs consensus: Revenue $383.2M vs $365.8M*, adjusted EPS $0.39 vs $0.34*, adjusted EBITDA $212.7M vs $197.6M* (company-reported adjusted EBITDA; S&P standardized “actual” EBITDA ~$200.9M*) .
  • FY 2025 consensus: EBITDA ~$841.4M*, target price consensus ~$31.56* based on 9 estimates* [GetEstimates].
  • Implications: Street likely to raise AMS revenue and consolidated EBITDA on stronger-than-expected AMS and sustained 70% contract ops margin; note asset sale gains ($4.3M) and other income (~$3.0M) benefited Q2 .

Note: Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Operational momentum intact: record utilization, sustained ~70% contract ops margins, and expanding horsepower underpin earnings visibility into 2026 .
  • Guidance raised and capital discipline maintained: higher FY EBITDA and cash available for dividends with growth capex narrowed and leverage targeted at 3.0–3.5x .
  • Demand catalysts broadening: LNG, AI/data centers, and distributed power amplify multi-basin nat gas compression demand; Permian remains dominant but others contribute incrementally .
  • AMS upside with caution on mix: revenue strength supported by service work; margin can fluctuate on parts mix; monitor sequential AMS margin trajectory .
  • Mix shift to gas-drive due to power constraints: EMD remains strategic but expect 20–25% of capex vs 30%+ prior; watch grid availability as a swing factor .
  • Shareholder returns accelerating: dividend raised to $0.21 (3.4x coverage) and buybacks active; ~$58.9M repurchase capacity remains .
  • Near-term trading lens: Guidance raise and margin resilience are positive catalysts; any macro-driven oil activity softness is mitigated by gas volume growth and long-term contracts .