Calpine lifted Constellation's Q2 revenue 23% to $7.5B, but mark-to-market hedge losses cut GAAP EPS to $1.42 from $2.67 while adjusted EPS rose to $2.55 and full-year guidance was raised to $11.50–$12.50.
Revenue
$7.5B
+23.0% YoY
Net income
$513M
-38.9% YoY
Diluted EPS
$1.42
-46.8% YoY
Operating margin
7.7%
Overview
Constellation Energy's second quarter of 2026 (three months ended June 30) is the second quarter to include Calpine, and the two headline numbers point in opposite directions. Revenue rose 23.0% to $7,504 million, almost entirely because Calpine's gas-fired plants and retail business are now included. But GAAP net income attributable to shareholders fell 38.9% to $513 million ($1.42 per diluted share, down from $2.67).
The drop is mostly an accounting effect rather than a weaker business. On the company's own "adjusted operating earnings" measure, which strips out paper gains and losses on hedges and nuclear decommissioning funds, profit rose to $920 million ($2.55 per share) from $599 million ($1.91). Management raised its full-year adjusted earnings guidance on the back of the quarter. The weak spot in the operating results was the nuclear fleet: more refueling outages cut nuclear output by 2.2%.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Operating revenues
$7,504M
$6,101M
+23.0%
Operating income
$580M
$951M
-39.0%
Operating margin
7.7%
15.6%
-7.9 pts
Net income attributable to common shareholders (GAAP)
$513M
$839M
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Nuclear fleet capacity factor (plants it operates)
93.0%
94.8%
-1.8 pts
Diluted shares outstanding
360M
314M
+14.6%
Operating margin is the share of revenue left after running the business (fuel, purchased power, staff, maintenance, depreciation), before interest and tax. Adjusted figures are the company's own non-GAAP measure, taken from the reconciliation in the 10-Q's MD&A.
First half of 2026: revenue of $18,626M (+44.5% from $12,889M), GAAP net income of $2,103M (up from $957M), diluted EPS of $5.88 (up from $3.05), and adjusted operating EPS of $5.30 (up from $4.05). The first half flatters GAAP profit for the opposite reason the second quarter hurts it: over six months, hedge marks were a large gain ($995M on the revenue line) instead of a loss.
Why GAAP profit fell while adjusted profit rose
A power producer like Constellation sells much of its future output in advance through hedges — contracts that lock in a price for electricity or fuel months or years ahead. Accounting rules require many of those contracts to be revalued at current market prices every quarter ("mark-to-market"). When power prices move, the paper value of the hedges moves too, and that change flows through GAAP profit even though no power has been delivered and no cash has changed hands. Constellation also holds large nuclear decommissioning trusts — investment funds (stocks and bonds) set aside to pay for dismantling its reactors decades from now. Gains and losses on those funds also flow through GAAP profit, so a good quarter for the stock market can lift reported earnings without the power business doing anything differently.
"Adjusted operating earnings" removes those items to show what the business earned from actually running its plants and selling power. The 10-Q's reconciliation for the quarter shows the main gaps (all figures after tax):
Item
Q2 2026
Q2 2025
GAAP net income to common shareholders
$513M
$839M
Unrealized (gain) loss on hedges and other fair-value items
+$340M
-$121M
Decommissioning-related activities (mostly trust fund gains)
-$221M
-$144M
Amortization of acquired Calpine commodity contracts
+$149M
—
Calpine merger and integration costs
+$84M
+$9M
Legal and environmental liabilities
+$35M
—
Pension/OPEB non-service costs, plant retirements
+$20M
+$16M
Adjusted operating earnings
$920M
$599M
The biggest swing is the hedges. In the MD&A, unrealized hedge results on the revenue line were a $320 million loss this quarter versus an $86 million gain a year earlier, and on the purchased-power-and-fuel line a $120 million loss versus an $81 million gain. Together that is roughly a $607 million pre-tax swing against GAAP profit that reverses as the contracts settle.
Two Calpine-related accounting items also depressed GAAP results: $205 million (pre-tax) of amortization on Calpine's contracts, which were revalued at market when the deal closed, and $87 million of merger and integration costs within operating and maintenance expense. Pulling the other way, decommissioning-trust activity added $598 million to "Other, net" versus $437 million a year ago.
Taxes widened the gap further. The effective tax rate jumped to 44.2% from 34.6%, which the 10-Q attributes to "higher qualified NDT fund income in the second quarter of 2026 which is taxed at a higher rate."
What Calpine added — and what it cost
Constellation closed the Calpine acquisition on January 7, 2026 for about $21.8 billion: 50 million new Constellation shares plus about $4.5 billion in cash. After required divestitures, Calpine brings about 23 gigawatts of mostly natural-gas and geothermal plants, plus a retail power business serving about 62 terawatt-hours of annual demand.
Revenue: Note 2 of the 10-Q attributes $1,907 million of second-quarter operating revenue to Calpine — more than the whole $1,403 million year-over-year increase. Excluding Calpine, revenue would have been lower than a year ago, although that remainder also absorbs the $406 million swing in unrealized hedge results on the revenue line. The company says it is "impracticable" to calculate Calpine's standalone earnings because integration has already begun.
Output: Calpine plants produced 24,914 GWh in the quarter, taking total supply to 89,815 GWh (+36.8%).
Costs: depreciation rose $189 million to $443 million, and operating and maintenance expense rose $636 million to $2,253 million, both driven mainly by the added plants and staff.
Debt: net interest expense more than doubled, to $283 million from $118 million, "primarily due to a net increase in outstanding debt" tied to the deal. Short-term borrowings plus long-term debt reached about $24.7 billion at June 30, up from about $9.0 billion at December 31, 2025.
Shares: the 50 million new shares lifted diluted shares to 360 million from 314 million. That is why adjusted EPS grew 33.5% while adjusted earnings in dollars grew 53.6%.
Required sales: to meet regulators' conditions, Constellation agreed in March to sell five PJM gas plants (about 4.4 GW) to LS Power for $5.0 billion. In August it agreed to sell the 606 MW Brazos Valley Energy Center in Texas to LS Power for $860 million. The company expects both sales to close by year-end and says they complete its regulatory divestiture commitments.
Nuclear operations: more refueling outages
The nuclear fleet produced 44,160 GWh (its ownership share), down 2.2% from 45,170 GWh. The capacity factor measures how much a plant actually produced compared with running at full power the whole time. For the plants Constellation operates, it slipped to 93.0% from 94.8%. The main reason is planned refueling: 86 refueling outage days versus 41 a year earlier. Unplanned (non-refueling) outage days were roughly flat at 20 versus 22. The earnings release (8-K Exhibit 99.1) names "unfavorable nuclear outages" as the main offset to Calpine and better market conditions in adjusted earnings. By region, nuclear output rose 3.4% in the Mid-Atlantic but fell 2.7% in the Midwest, 4.5% in New York, and 19.0% in ERCOT (Texas).
Power prices helped. The PJM West average day-ahead price was $51.40/MWh, up 21.1% from $42.43. In the Mid-Atlantic, the MD&A cites $160 million of higher retail revenue from higher contracted prices. For the gas fleet, Constellation now reports an equivalent forced outage factor (the share of time units were unavailable because of unplanned outages): 6.2% for the quarter.
Data-center and long-term contracts
The 10-Q describes these deals:
Crane Clean Energy Center (formerly Three Mile Island Unit 1): the restart is backed by a 20-year power purchase agreement with Microsoft. In June 2026, FERC granted Constellation's request to move grid-connection rights from the Eddystone gas units to Crane. This reduces the transmission upgrades needed before Crane can deliver fully to the grid; PJM's study had suggested some upgrades might not be finished until December 2030. The earnings release adds that the NRC approved Crane's fuel license amendment and that the company is targeting a restart in 2027. A DOE-guaranteed loan of up to $1.0 billion from November 2025 supports the restart.
CyrusOne data centers in Texas: a new 380 MW agreement to serve a data center next to the Freestone Energy Center, plus an exclusive agreement for a further 380 MW Phase 2. These are in addition to 400 MW of agreements Calpine signed with CyrusOne in 2025 at the Thad Hill Energy Center.
New nuclear contracts: 920 MW of additional 15- to 20-year nuclear power purchase agreements with investment-grade customers, starting between 2029 and 2032. This includes 176 MW with Walmart that will support a 30 MW capacity expansion at the Dresden plant in Illinois.
The 10-Q does not mention a Meta agreement, so this report does not cover one.
Future grid capacity prices look firm as well. PJM's 2028/2029 capacity auction cleared at its $325/MW-day price cap across the whole region, including all of Constellation's submitted units. Capacity payments are what the grid operator pays plants to be available when needed.
The nuclear production tax credit: small this year
Since 2024, Constellation's nuclear units can earn a federal production tax credit (PTC) of up to $15/MWh through 2032. The credit shrinks as power prices rise and disappears entirely once a plant's annual gross receipts reach $44.75/MWh. It is designed as a floor under nuclear economics, not a bonus in strong markets. With prices high, Constellation recognized only $15 million of PTC revenue in the quarter, compared with $45 million a year earlier, and said it did not record a material benefit because most units' expected receipts exceed the phase-out level.
The credit still affects cash flow. Some state programs, such as Illinois's zero-emission credits, require Constellation to refund state support up to the amount of any PTC it receives. In the first half the company refunded or offset about $920 million related to 2024 PTCs. Those state programs reduced first-half revenue by $275 million, compared with a $190 million increase a year earlier. That helps explain why first-half operating cash flow was $1,553 million, about flat with $1,584 million, even though adjusted earnings rose.
Capital returns
Buybacks: in the second quarter Constellation repurchased about 7.1 million shares for about $2.0 billion, at an average price of $276.08. That included 2 million shares bought back in June's secondary offering by former Calpine owners, in which the company sold no shares. In July it bought about 1 million more shares for about $250 million. Remaining authorization is about $2.8 billion after the board added $4.4 billion earlier in 2026.
Dividends: $0.4265 per share each quarter in 2026. Dividends paid in the first half totaled $309 million, compared with $244 million.
First-half buybacks ($1,971 million) and dividends ($309 million) exceeded operating cash flow ($1,553 million). Combined with the Calpine cash payment, this is part of why borrowing rose.
Takeaway: The 38.9% drop in GAAP profit is mostly a hedge-accounting reversal, not a weaker business. Adjusted earnings per share rose 33.5% despite 46 million more shares and a lower nuclear capacity factor. The real test of the Calpine deal now is cash: debt has nearly tripled to about $24.7 billion while buybacks and state PTC refunds exceeded first-half operating cash flow, so the $5.9 billion of asset sales due by year-end matter.
Guidance and outlook
According to the earnings release (8-K Exhibit 99.1, August 6, 2026), management raised full-year 2026 adjusted operating earnings guidance to $11.50–$12.50 per share from the $11.00–$12.00 range affirmed in May. With $5.30 already earned in the first half, the new range implies $6.20–$7.20 for the second half. That means the second half needs to be stronger than the first, even though Calpine was already included in both halves. The company does not give GAAP guidance, because hedge and trust-fund swings can't be forecast.
Our read: the pieces that drive adjusted earnings are moving the right way. Power prices are higher, PJM capacity pricing is locked at the cap for 2028/29, and more long-term nuclear contracts are being signed. The Crane restart is on track for 2027 after the FERC and NRC approvals. The risks to watch are nuclear outage days, which cost earnings this quarter; completing the $5.0 billion and $860 million asset sales, which need regulatory approval; and whether operating cash flow grows enough to pay down the debt taken on for Calpine.