Phillips 66 earned $3.85B ($9.55/share) in Q2 2026, up from $877M, as a near-doubling of refining crack spreads lifted refining pre-tax income to $3.06B; debt fell $6.6B in the quarter.
Revenue
$51.0B
+53.1% YoY
Net income
$3.8B
+338.7% YoY
Diluted EPS
$9.55
+344.2% YoY
Operating margin
9.7%
Headline: a refining windfall more than quadruples profit
Phillips 66 earned $3.85 billion ($9.55 per diluted share) in the second quarter of 2026, up from $877 million ($2.15) a year earlier. Almost all of the jump came from one place: refining. The company's refineries made $3.06 billion before tax, versus $359 million in Q2 2025, because the gap between what fuel sells for and what crude oil costs roughly doubled. A smaller but notable swing came from renewable diesel, which went from a $133 million loss to a $544 million profit.
Revenue rose 53% to $51.0 billion, but for a refiner that line mostly tracks commodity prices, not volume. The 10-Q says the increase was "primarily due to higher prices for refined petroleum products and crude oil." The cost of crude and products bought rose almost as fast (up 50%, to $43.7 billion). What matters is the gap between the two, and that gap widened sharply.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Sales and other operating revenues
$51,004M
$33,323M
+53.1%
Income before income taxes
$4,971M
$1,120M
+343.8%
Pre-tax margin (pre-tax income ÷ revenue)
9.7%
3.4%
+6.4 pts
Net income attributable to Phillips 66
$3,847M
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Phillips 66 does not report an "operating income" line, so the margin shown is pre-tax income as a share of sales. Adjusted EPS and realized refining margin are the company's non-GAAP measures from the earnings release (Exhibit 99.1).
What drove it: refining margins, not refining volume
A refiner's profit depends mainly on the crack spread: the difference between the price of the fuels it makes (gasoline, diesel, jet fuel) and the price of the crude it buys. The standard benchmark assumes three barrels of crude make two of gasoline and one of diesel (the "3:2:1" spread). For Phillips 66's mix of refineries, that benchmark averaged $41.63 a barrel in Q2 2026, against $21.65 a year earlier.
The 10-Q gives two reasons: "low seasonal product inventories, particularly diesel, and geopolitical events reducing global product resupply." Crude itself also got more expensive: West Texas Intermediate averaged $93.21 a barrel, up from $63.86, which the filing attributes to "geopolitical events in the Middle East restricting global crude supply." Product prices rose faster than crude, so margins widened.
Phillips 66 captured a large share of that. Its realized refining margin (what it actually kept per barrel after feedstock and product-mix effects) was $24.08, up from $11.25. The filing says the increase came from "improved market crack spreads and inventory impacts, including commodity derivative activity, partially offset by increased feedstock costs." The earnings release also names "favorable mark-to-market impacts," meaning gains on hedges and inventory as prices moved. That part is tied to prices rising during the quarter and may not repeat when they stop rising.
Every region improved:
Refining region
Pre-tax income Q2 2026
Q2 2025
Realized margin Q2 2026
Q2 2025
Atlantic Basin/Europe
$352M
$49M
$14.44/bbl
$8.16/bbl
Gulf Coast
$953M
$101M
$24.25/bbl
$8.71/bbl
Central Corridor
$1,599M
$392M
$29.56/bbl
$15.61/bbl
West Coast
$158M
-$183M
$29.65/bbl
$14.06/bbl
Worldwide
$3,062M
$359M
$24.08/bbl
$11.25/bbl
Volume was not the story. Refinery utilization (crude processed as a share of capacity) slipped to 96% from 98% because of "higher turnaround activity," meaning planned maintenance shutdowns, including at Wood River and Humber. Throughput still rose 6% only because the company now owns more capacity; see the next section.
Two portfolio changes make the year-over-year comparison uneven
Wood River and Borger are now fully owned. On October 1, 2025, Phillips 66 bought the other 50% of WRB Refining from Cenovus. Central Corridor crude capacity rose to 793,000 barrels a day from 531,000, and 100% of those two refineries' results are now consolidated, where Q2 2025 carried only a half-share as equity earnings. This raises revenue and volumes, and it is the main reason operating expenses rose $370 million (to $1.81 billion).
The Los Angeles refinery has stopped making fuel. Fuel production ended in Q4 2025, so West Coast capacity fell to 105,000 barrels a day from 244,000. It also flatters this year's profit: Q2 2025 included $239 million of accelerated depreciation on the LA assets, which is why depreciation and amortization fell 28% to $585 million. That is a one-time cost in the prior year, not a lasting saving.
The other segments
Segment (pre-tax income)
Q2 2026
Q2 2025
What the filing says drove it
Midstream (pipelines, gas processing, NGLs)
$785M
$731M
Wider Permian gas transport price differences and higher volumes, partly offset by customer recontracting
Chemicals (50% of CPChem)
$404M
$20M
"Improved polyethylene margins driven by higher sales prices"
Refining
$3,062M
$359M
Higher realized margins (above)
Marketing and Specialties
$583M
$571M
$110M gain on the German/Austrian retail sale, offset by lower U.S. fuel margins and legal accruals
Renewable Fuels
$544M
-$133M
"Higher values of regulatory credits"
Corporate and Other
-$407M
-$428M
Mostly interest expense and overhead
Chemicals: the benchmark polyethylene chain margin rose to 43.6 cents a pound from 7.4 cents, which the filing ties to "lower plant utilizations in Asia that were driven by Middle East supply concerns." This is also why equity earnings from affiliates rose $482 million. CPChem's sales volumes actually fell, to 5,006 million pounds from 6,128 million, so the gain is entirely price.
Renewable Fuels: government credits for low-carbon fuel drove the turnaround. The biodiesel RIN (a tradable credit under the federal Renewable Fuel Standard) roughly doubled to $2.12 from $1.08, and California's LCFS credit rose to $68.65 a ton from $52.33. Output rose to 53,000 barrels a day from 40,000. Because this profit depends on credit prices set by regulation, it can swing hard in either direction.
Midstream is the steady, fee-based business, up 7%. It set records for NGL fractionation (1.02 million barrels a day, up from 883,000) and for LPG exports.
Marketing and Specialties looks flat, but only because of the one-off $110 million gain. Excluding special items, adjusted pre-tax income fell to $514 million from $660 million, and the U.S. realized marketing fuel margin fell to $1.82 a barrel from $2.83. Fuel retail margins usually get squeezed when wholesale prices rise quickly, because pump prices lag.
One-off items: small this quarter
GAAP and adjusted results are close this time. Adjusted earnings were $3.79 billion, $59 million below reported earnings. The main items were the $110 million disposal gain (excluded) and $65 million of legal accruals, mainly for the Propel Fuels trade-secrets case (added back). Phillips 66 is appealing that case's $833 million judgment; post-judgment interest of 10% keeps accruing in the meantime.
The year-over-year comparison is where one-offs matter: Q2 2025 included an $89 million currency-hedge loss on the German/Austrian sale and $45 million of advisory fees, so adjusted EPS grew less than GAAP EPS (+295% vs. +344%).
Cash, debt and shareholder returns
Cash from operations was $7.26 billion, after cash used of $2.26 billion in Q1. The swing is largely working capital: the company tied up cash in inventory and receivables as prices climbed in Q1, then released it in Q2. Excluding working capital, operating cash flow was $4.32 billion in Q2 and $699 million in Q1.
Debt fell $6.6 billion in the quarter, to $20.6 billion from $27.1 billion at March 31, including repaying $1 billion of a $2.25 billion 364-day term loan taken out in March. Debt is still above the $19.7 billion at year-end 2025, and management targets $17 billion by the end of 2027. The debt-to-capital ratio fell to 39% from 48%.
Shareholders got $887 million ($508 million dividends, $379 million buybacks), and the diluted share count is 1.3% lower than a year ago. In July the board added $10 billion to the buyback authorization and kept the quarterly dividend at $1.27. By our arithmetic, the first-half payout of about $1.7 billion is roughly a third of operating cash flow excluding working capital. The company's stated target is more than 50%. Paying down debt came first this quarter.
Takeaway: This quarter was driven by the market, not by a change in the business. Profit rose because the refining crack spread nearly doubled amid Middle East supply disruption and low diesel stocks, while refinery utilization actually fell. The steadier businesses (Midstream up 7%, Marketing down on an adjusted basis) barely moved. A $3+ billion refining quarter depends on those spreads holding, so the durable gains are the ones that outlast them: $6.6 billion of debt repaid and a larger buyback authorization.
Outlook
Management gave no numerical earnings guidance in the filing. The stated targets are: 2026 capital spending of $2.4 billion (including $1.3 billion of growth capital, mostly Midstream), total debt of $17 billion by end-2027, returning more than 50% of operating cash flow (excluding working capital) to shareholders, clean product yield above 86%, and refinery utilization above the industry average. On the growth side, the Dos Picos II gas plant reached full production, and the company announced the 300 million cubic feet/day Zeus gas plant and a 100,000 barrel/day Coastal Bend fractionator. CPChem's Golden Triangle and Ras Laffan polymer projects are expected to reach full operations in 2027.
Our read: the second half depends on whether crack spreads stay near Q2 levels. The 10-Q warns that "continued disruptions could materially impact our future results" in either direction. With about 2 million barrels a day of crude capacity, each $1 a barrel of realized margin is worth roughly $180–190 million of refining profit a quarter (based on Q2's 186.9 million barrels processed). A normalization back toward last year's margins would take much of this quarter's earnings away. Two things to watch in Q3: whether realized margins hold above $20 a barrel as diesel inventories rebuild, and whether buybacks rise toward the 50% payout target now that debt is falling. Phillips 66 has said it will report Q3 2026 results on October 28, 2026.