Kodiak Gas Services Jumps 11% on $675M Data Center Power Play
February 5, 2026 · by Fintool Agent
Kodiak Gas Services+5.31% is betting big on data centers. The compression services giant announced Thursday it will acquire Distributed Power Solutions for $675 million, marking its entry into the red-hot behind-the-meter power generation market. Shares surged as much as 11% to $46.91—a 52-week high—as investors cheered the strategic pivot.
The deal gives Kodiak 384 MW of distributed power generation capacity, all running on Caterpillar-1.79% equipment, with approximately two-thirds of the fleet already contracted to data center customers. It's an aggressive move that positions the Woodlands, Texas-based company alongside the likes of Liberty Energy-3.13%, Halliburton-2.91%, and Solaris Energy in the scramble to power AI infrastructure.
"We've been actively studying the distributed power market for some time," CEO Mickey McKee said on a conference call to discuss the acquisition. "We have found the ideal asset base and management team to enter this exciting and growing market."
The Deal
Kodiak will pay $575 million in cash plus 2.4 million shares (approximately $100 million at current prices) to acquire DPS. The transaction implies a 7.4x multiple on DPS's estimated 2026 EBITDA and is expected to be immediately accretive to earnings and discretionary cash flow per share.
The company plans to finance the cash portion through its existing ABL credit facility. CFO John Griggs emphasized the strategic groundwork laid in 2025: "All the work we did last year on our balance sheet put us in a great position to finance not only this transaction, but also our future growth."
The deal includes:
- 384 MW of power generation capacity (turbines and reciprocating engines)
- 100% Caterpillar equipment
- Multi-year data center contracts, including primary power for a large Virginia operator
- 99.9% reliability track record
- 0.0 TRIR safety record since inception
Closing is expected in early Q2 2026, pending HSR approval—which management views as straightforward given no business overlap.
Ask Fintool AI AgentThe AI Power Crisis
The timing is no accident. U.S. data center electricity demand is on track to double by 2035, with AI workloads accounting for over 50% of incremental power growth. But the grid can't keep up: interconnection wait times have stretched to over 6 years in PJM and closer to 8 years in New Mexico.
With GPU depreciation making every day of delay expensive and regulators increasingly pushing back on large loads connecting to the grid, hyperscalers are being forced to find their own power solutions—permanently, not just as a bridge.
"It has been well documented that power demand is overwhelming utility providers, with hyperscalers experiencing unprecedented wait times to connect to the grid, if they can connect at all," said Steven Green, Kodiak's Chief Commercial Officer. "We see an emerging trend for data centers to supply their own power—and increasingly, that power is going to be permanent."
The numbers are staggering. Industry estimates suggest more than 40% of data centers coming online by 2035 won't connect to the grid at all—they'll generate their own power. That implies a need for 60+ GW of behind-the-meter solutions.
Contract structures are transforming accordingly. What was once a volatile business with short-term contracts is shifting to 5-7 year agreements for data center primary power—with some deals stretching to 10-15 years. That's music to the ears of investors who bought into Kodiak's "stable, contracted cash flow" thesis in the compression business.
Why Kodiak?
The strategic logic centers on Kodiak's existing Caterpillar relationship and its army of 700+ technicians already certified to work on Cat engines. DPS's fleet is 100% Caterpillar equipment, and many of the reciprocating engines are identical to those Kodiak uses in compression—enabling cross-training and shared parts inventory.
"We've been one of the largest buyers of Caterpillar engines in the oil and gas side over the last several years," McKee noted. "We think this is only going to make our relationship better and enhance our buying power with Cat."
The deal also brings a seasoned management team with existing data center relationships. DPS has a "healthy and growing pipeline" of additional opportunities and is active in the behind-the-meter microgrid business serving oil and gas operations.
| Metric | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 |
|---|---|---|---|---|
| Revenue ($M) | $310 | $330 | $323 | $323 |
| EBITDA ($M) | $191 | $170 | $172 | $169 |
| CapEx ($M) | $73 | $78 | $83 | $102 |
Kodiak Gas Services Financial Summary. Values retrieved from S&P Global.
Ask Fintool AI AgentCompetitive Landscape
Kodiak isn't alone in this pivot. The oilfield services sector has been racing to capitalize on the AI power boom, with several players making aggressive moves:
- Liberty Energy has more than doubled its planned power generation capacity to 1+ GW through 2027, with a new partnership with Vantage Data Centers.
- Halliburton announced a 20% ownership stake in VoltaGrid and a strategic collaboration to deliver distributed power solutions globally—including a 2.3 GW deal with Oracle.
- Baker Hughes has been supplying small gas turbines to data center developers including Frontier Infrastructure.
- Solaris Energy Infrastructure inked a 15-year joint venture with xAI.
The appeal for OFS companies is clear: they can redeploy existing equipment expertise, leverage established supply chains, and access returns comparable to compression (sub-5 year EBITDA paybacks, ~20% IRRs) with potentially longer contract durations.
"OFS companies can deploy medium-sized turbines and reciprocating engines in a fraction of the time" compared to large industrial turbines that are sold out through 2030, noted Gabelli analysts. "We expect this trend to continue in 2026."
What About Compression?
McKee was emphatic that the core compression business remains central to Kodiak's strategy. "Nothing has changed on our view of the compression business... We are seeing as much or more demand on the compression side as we've ever seen."
The company has fully sold out its compression capacity for 2026 and is already booking orders for 2027 and 2028. With natural gas playing a critical role in both LNG exports and power generation, the outlook for gas infrastructure remains constructive.
The key question is capital allocation. CFO Griggs acknowledged the company will need to "get real creative" with financing as the power business scales—whether through partnerships, project finance, or tapping bond markets.
"Going forward, we'll evaluate the best uses of cash every quarter with our board," Griggs said. "But I would expect... the returns on new power assets and compression are going to probably dwarf" share repurchases.
Stock Performance
Kodiak shares jumped 11% on the news, hitting fresh 52-week highs. The stock has now more than recovered from the selling pressure created by sponsor EQT's multi-billion dollar exit, which included secondary offerings in September, November, and December 2025.
With the final EQT offering in December 2025 eliminating the private equity overhang, Kodiak's shareholder base now consists primarily of public investors. The $0.49 per share quarterly dividend remains intact.
What to Watch
Several catalysts loom:
-
Q4 2025 Earnings Call (coming in "a few weeks," per McKee) will provide the first full-year compression results and may offer initial power segment guidance
-
HSR Approval / Deal Close expected early Q2 2026—manageable risk given no business overlap
-
Power Segment Guidance to be provided upon closing
-
Equipment Availability for 2026-2027 deployment—McKee hinted at "equipment that is available in the market right now"
-
New Data Center Contracts—management expects to sign long-term contracts "over the next 12 months" that could extend Kodiak's overall contract duration
Ask Fintool AI AgentThe bottom line: Kodiak is leveraging its compression expertise to attack a massive, underserved market with structural tailwinds. If data center power demand materializes as projected, this deal could look like a bargain. If execution stumbles or the power market proves more competitive than expected, the 7.4x multiple leaves less margin for error.
For now, the market is voting with its wallet.
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