NRG swung to a $506M profit ($2.31/share) on an 11% revenue rise, but the gain came mostly from hedge accounting and a lapsed legal charge; the LS Power plants lifted adjusted EBITDA 34% while new debt and shares cut adjusted EPS 14%.
Revenue
$7.5B
+11.0% YoY
Net income
$506M
Diluted EPS
$2.31
Operating margin
13.0%
Headline: the LS Power plants doubled the East's earnings, but Texas shrank and interest costs swallowed the gain
NRG reported GAAP net income of $506 million ($2.31 per diluted share) for the second quarter of 2026, up from a $104 million loss (−$0.62) a year earlier. Revenue rose 11% to $7.48 billion. That swing looks dramatic, but most of it comes from accounting and one-off items. On the company's own adjusted basis, which strips out those items, earnings per share fell from $1.73 to $1.49.
Two things explain the gap between the two views:
Hedge accounting swung from a loss to a gain. NRG uses derivatives (financial contracts that lock in future power and gas prices) to hedge its supply. Their value is marked to the current market price every quarter, but the customer contracts they protect are not. This quarter those hedges produced a $271 million unrealized gain within operating costs. A year ago they produced a $282 million loss. The company says these are "temporary unrealized gains or losses that may differ from expected results when the contracts settle." The total mark-to-market swing was +$572 million, more than enough to turn last year's loss into this year's profit on its own.
Last year's quarter carried a legal charge that didn't repeat. Selling, general and administrative costs fell $162 million, and the 10-Q attributes $167 million of that to a "decrease in reserves primarily for legal matters settled in 2025." Operations and maintenance cost another $33 million less for the same reason, in the East.
Underneath those items, the operating business did grow. The main driver was the LSP Portfolio: 18 gas-fired and dual-fuel plants totaling about 13 GW, plus the CPower demand-response business, bought from LS Power on January 30, 2026. The deal roughly doubled NRG's generation fleet to about 25 GW. It also brought $162 million more quarterly interest expense and $150 million more depreciation, and NRG issued 24.25 million new shares to pay for it. Those three costs are why higher operating profit did not show up as higher adjusted EPS.
Key figures
Metric
Q2 2026
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n/m = not meaningful, because the prior-year figure was a loss or zero. Adjusted EBITDA means earnings before interest, taxes, depreciation and amortization, excluding hedge fair-value swings and one-offs. It is NRG's main measure of operating profit.
Segment performance: the East gained, Texas lost ground
NRG reports four segments. The segment figures below are adjusted EBITDA from the earnings release.
Segment
Q2 2026
Q2 2025
Change
Texas
$381M
$512M
−$131M
East
$469M
$99M
+$370M
West/Other (incl. Corporate)
$66M
$39M
+$27M
Vivint Smart Home
$301M
$259M
+$42M
Total
$1,217M
$909M
+$308M
East (+$370M): almost entirely the acquisition and capacity payments. The 10-Q breaks down the East's $434 million rise in economic gross margin (revenue minus fuel and purchased power, before hedge swings). Of that, $264 million came from "an increase in capacity from the acquisition of the LSP Portfolio and at Midwest Generation." Another $61 million came from demand-response activity, "including the acquisition of CPower and higher PJM auction prices." Capacity revenue is what grid operators pay plants to be available when demand peaks, whether or not they actually run. In PJM, the grid covering the mid-Atlantic and parts of the Midwest, those prices have jumped. Consolidated capacity revenue rose from $61 million to $392 million. East retail electricity margin added $128 million, mostly from better pricing and product mix. Retail natural gas margin fell $61 million because selling prices dropped by more than supply costs.
Texas (−$131M): higher supply costs and lower load. In Texas, NRG's plants and its retail customers (Reliant and others) are run as one business. The 10-Q attributes the drop to a 13%, or $101 million, increase in the cost to serve retail load, "driven by higher realized power prices associated with the Company's diversified supply strategy, including the assets acquired from the LSP Portfolio." Put simply, more of Texas load is now supplied through channels that cost more per megawatt-hour, even though ERCOT Houston on-peak spot prices fell 17% to $37.01/MWh. Lower load cost another $45 million, "driven by changes in customer mix and attrition, as well as weather." Average Texas residential customers fell from 2.95 million to 2.83 million, and residential electricity volume fell 7% to 9,381 GWh. Weather was close to normal: 1,073 cooling degree days against 1,102 last year and a 10-year average of 1,035. So this was not a heat-driven quarter in either direction. The loss of customers is a structural problem, not a weather effect.
Vivint Smart Home (+$42M): more subscribers paying more. Customer growth added $40 million and higher monthly revenue per customer added $19 million. Ending subscribers rose 8% to 2.52 million.
West/Other (+$27M): mostly lower operating expenses after the Cottonwood plant lease expired in May 2025, a cost saving that won't repeat next year.
The cost of the deal: interest, depreciation and dilution
The acquisition moves profit higher at the operating level but costs a lot further down the income statement:
Interest expense doubled to $310 million, "primarily attributable to the LSP acquisition, including the borrowing to finance the acquisition, the assumption of Lightning debt, and the refinancing activity." Total long-term debt and finance leases rose from $16.4 billion at year-end to $21.7 billion at June 30. In April NRG issued $2.1 billion of unsecured notes at 5.875% and 6.125%, $500 million of secured notes, and a $900 million term loan.
Depreciation and amortization rose $150 million to $494 million, as the new plants are written down over their useful lives.
Diluted share count rose to 212 million from 196 million. That is despite $921 million of buybacks in the first half at an average $156.52 per share, because 24.25 million shares went to LS Power.
Liquidity fell to $5.3 billion from $9.6 billion, and cash dropped from $4.7 billion to $162 million, because the deal was funded partly from the balance sheet and $2.5 billion drawn on the revolving credit facility.
Takeaway: GAAP profit turned from a loss to $506M mainly because of a $572M swing in non-cash hedge values and a legal charge that didn't repeat. The underlying story is a trade-off. The LS Power plants and higher PJM capacity prices lifted adjusted EBITDA by 34%, but the new debt and new shares meant adjusted EPS still fell 14%. Whether the acquisition pays off per share depends on capacity prices staying high while Texas retail margins recover.
Data centers: from strategy to a named project
Power demand from data centers features prominently in this release, with more concrete detail than in earlier quarters:
1.2 GW gas plant for a hyperscaler. NRG says it and "a leading global cloud and AI hyperscaler" are "aligned on principal commercial terms" to develop a 1.2 GW combined-cycle gas plant in Texas under its "Bring Your Own Power" model, where the data-center customer backs the cost of new generation. The deal is still "subject to final documentation and approvals," so it is not yet a signed contract and there is no disclosed revenue or return.
PJM capacity at the price cap. On July 14, 2026, PJM's auction for the 2028/2029 delivery year cleared at the FERC-approved cap of $325/MW-day across the whole region. NRG cleared about 6,839 MW and expects about $811 million of PJM capacity revenue for that year. Clearing at the cap, with a roughly 6,800 MW shortfall that PJM will try to fill through a special procurement between September 30 and October 21, 2026, points to a supply-constrained market. Large-load growth such as data centers is the policy focus in PJM's reform process.
Texas new build. T.H. Wharton (415 MW), NRG's first new plant in nearly a decade, began commercial operation on May 26, 2026. It is funded by a low-interest Texas Energy Fund loan and is eligible for up to $54.7 million in completion bonus grants. Cedar Bayou 5 (689 MW) and Greens Bayou 6 (443 MW) are under construction and "on time and on budget," with 1.5 GW in total targeted by mid-2028.
Outlook
Management reaffirmed full-year 2026 guidance:
2026 guidance (non-GAAP)
Range
Adjusted EBITDA
$5,325M – $5,825M
Adjusted EPS
$7.90 – $9.90
Adjusted net income
$1,685M – $2,115M
Free cash flow before growth investments
$2,800M – $3,300M
NRG does not guide GAAP net income because of the hedge accounting swings. The company plans $1.0 billion of buybacks this year ($932 million completed through July 31) and has raised its annual dividend 8% to $1.90.
Our read: First-half adjusted EBITDA of $2,297 million is about 41% of the $5,575 million guidance midpoint. That puts a heavier load on the second half, which includes the Texas summer peak in Q3. Hitting the range depends on Texas recovering after its adjusted EBITDA fell 26% in the first half ($597M vs. $811M), and the stated causes (higher supply costs and customer losses) do not reverse on their own. In the East, higher capacity revenue is already contracted through auction results, and the $325/MW-day 2028/2029 clearing price gives visibility well beyond this year. The balance sheet is the main constraint: $21.7 billion of debt, $5.3 billion of liquidity, and quarterly interest now above $300 million. That limits how fast NRG can commit capital to data-center projects like the 1.2 GW Texas plant without leaning on customer funding, which is what the "Bring Your Own Power" structure is designed to provide.
Source: NRG Energy Form 10-Q for the quarter ended June 30, 2026 (filed August 4, 2026), and the Q2 2026 earnings release (Exhibit 99.1 to the Form 8-K filed the same day) for adjusted/non-GAAP figures, segment adjusted EBITDA and guidance.