Exelon (EXC) Q2 2026: Revenue Up 8.8% but H1 EPS Slips to $1.28
Exelon grew first-half revenue by $1.07 billion and still delivered less earnings per share than a year ago — H1 GAAP diluted EPS fell to $1.28 from $1.29 even as net income rose $15 million to $1,315 million. The gap is entirely mechanical: interest expense climbed $88 million, nearly six times the increase in net income, while the average diluted share count rose 1.6% as Exelon funded a capital program that consumed $4,558 million in six months. For one of the largest regulated transmission and distribution utilities in the United States, this is what the middle of a rate base build looks like — the growth is real and rate-recovered, but it is currently being financed rather than harvested. Management reaffirmed full-year adjusted operating EPS guidance of $2.81–$2.91 in its July 30, 2026 second-quarter release, and continues to target operating EPS growth near the top of a 5–7% range through 2029.
- Consolidated Balance Sheet
1-1. Principal Asset Movements
| Item | Dec 31, 2025 ($M) | Jun 30, 2026 ($M) | Change % |
|---|---|---|---|
| Cash and cash equivalents | 626 | 1,813 | +189.6% |
| Restricted cash | 525 | 608 | +15.8% |
| Customer accounts receivable, net | 3,297 | 3,059 | -7.2% |
| Other accounts receivable, net | 1,785 | 1,200 | -32.8% |
| Inventories (fuel + materials) | 868 | 894 | +3.0% |
| Property, plant and equipment, net | 84,318 | 87,123 | +3.3% |
| Regulatory assets (current + long-term) | 10,573 | 10,764 | +1.8% |
| Goodwill | 6,630 | 6,630 | 0.0% |
| Receivable — Regulatory Agreement Units | 4,755 | 5,280 | +11.0% |
| Total assets | 116,570 | 120,505 | +3.4% |
Source: Exelon Q2 2026 Form 10-Q, consolidated balance sheets.
Net PP&E rose $2,805 million in six months against $1,920 million of depreciation and amortization — the earning asset base is expanding roughly $1.4 billion per quarter net of wear. Accumulated depreciation reached $21,230 million against gross plant of $108,353 million, so the asset base remains young at roughly 80% net-to-gross. For a rate-regulated utility this historical-cost carrying value is not a conservatism problem the way it is for industrials: rate base is itself set on original cost, so book value and the earning asset are aligned by construction.
The $585 million drop in other accounts receivable and the $1,187 million cash build are two sides of the same mechanism. ComEd's Carbon Mitigation Credit rider swung from ComEd owing participating nuclear generators to ComEd collecting from them, which shows up as a receivable release rather than as earnings. The offset sits in regulatory liabilities, where ComEd's CMC regulatory liability declined and a corresponding CMC regulatory asset was recognized. Current regulatory liabilities fell 49.2% to $573 million as a result.
The "Receivable related to Regulatory Agreement Units" line — nuclear units whose decommissioning activities remain subject to agreements with the Illinois and Pennsylvania commissions, a legacy of the 2022 Constellation separation — grew to $5,280 million ($4,638 million at ComEd, $642 million at PECO). It is matched by a corresponding increase in the related regulatory liability. Both sides inflate the balance sheet without touching earnings.
Maturity and coupon profile. Long-term debt due within one year is $727 million, down from $1,665 million, so near-term maturities are light. The more relevant number is the refinancing spread. Exelon retired $1,600 million during the half and issued $3,600 million at materially higher prevailing rates, with tenors running to 2056. That step-up in coupon on refinanced paper, plus $2,000 million of net new long-term debt, explains the interest line and will keep explaining it.
1-2. Debt Structure — Financial vs. Operating and Regulatory
| Item | Dec 31, 2025 ($M) | Jun 30, 2026 ($M) | Change % |
|---|---|---|---|
| Short-term borrowings | 612 | 1,243 | +103.1% |
| Long-term debt due within one year | 1,665 | 727 | -56.3% |
| Long-term debt | 47,413 | 50,313 | +6.1% |
| Long-term debt to financing trusts | 390 | 390 | 0.0% |
| Total financial debt | 50,080 | 52,673 | +5.2% |
| Accounts payable + accrued expenses | 5,303 | 4,922 | -7.2% |
| Regulatory liabilities (current + long-term) | 12,144 | 12,300 | +1.3% |
| Pension + OPEB obligations | 2,295 | 1,993 | -13.2% |
| Total liabilities | 87,772 | 90,807 | +3.5% |
Source: Exelon Q2 2026 Form 10-Q, consolidated balance sheets.
Financial debt now stands at 63.9% of total capitalization, up from 63.5%. Interest coverage slipped to 2.29x in H1 2026 from 2.37x a year earlier — measured as operating income over total interest expense, which includes $12 million of interest to affiliates in each period on top of the $1,116 million (2026) and $1,028 million (2025) of net interest expense shown in the income statement. Neither figure is alarming for a regulated utility, but both are moving the wrong way while capital spending accelerates.
Short-term borrowings doubled to $1,243 million, including two Exelon Corporate term loans of $350 million and $150 million entered on March 25, 2026 at SOFR plus 0.85%, maturing March 2027. Revolving credit lines remained substantially undrawn at quarter-end.
The pension line needs unpacking, because the table and the underlying detail measure different things. The combined pension and OPEB obligation fell 13.2% to $1,993 million; within that, the pension obligation alone fell 18.3% to $1,429 million from $1,749 million, while the OPEB obligation rose to $564 million from $546 million. The decline was helped by $356 million of combined pension and OPEB contributions during the half (up from $302 million). That is real cash out the door, and it sits inside operating cash flow — so the reported $3,669 million of operating cash is already net of it.
1-3. Equity Structure
Total shareholders' equity rose 3.1% to $29,698 million. The composition matters more than the total. Retained earnings grew $454 million — net income of $1,315 million less $861 million of dividends declared ($860 million paid in cash), a 65.4% payout ratio against 62.2% a year earlier. Paid-in common stock rose $434 million to $22,540 million, of which $382 million was cash proceeds from at-the-market common stock issuance and $24 million from employee stock plans — that is, almost entirely external funding rather than retained profit. Accumulated other comprehensive loss narrowed slightly to $750 million from $762 million. There is no treasury share activity: the $123 million balance is unchanged.
The equity story is therefore one of external funding. Shares outstanding grew to 1,032 million from 1,023 million, and the outstanding forward sale agreements under the $2.5 billion ATM program — 3.6 million shares at $43.17, 11.5 million at $43.73, 0.8 million at $45.42, 5.4 million at $47.67, and 6.4 million at $48.68 — represent a further 27.7 million shares, or 2.7% of the current base, still to be settled. Separately, the $1 billion 3.25% convertible senior notes due 2029 convert at 17.5093 shares per $1,000, an initial conversion price of approximately $57.11, implying roughly 17.5 million additional shares. With Q2 issuance priced at a weighted-average net $44.03, and a July 6 settlement at $43.29, that conversion is well out of the money and contributed no incremental diluted shares this period.
- Consolidated Statement of Operations
2-1. Core Earnings Metrics
| Item | Q2 2025 ($M) | Q2 2026 ($M) | H1 2025 ($M) | H1 2026 ($M) | H1 Change % |
|---|---|---|---|---|---|
| Total operating revenues | 5,427 | 5,967 | 12,141 | 13,209 | +8.8% |
| Operating income | 927 | 979 | 2,463 | 2,584 | +4.9% |
| Operating margin (%) | 17.08 | 16.41 | 20.29 | 19.56 | -0.73pp |
| Net income to common | 391 | 396 | 1,300 | 1,315 | +1.2% |
| Net margin (%) | 7.20 | 6.64 | 10.71 | 9.96 | -0.75pp |
| Diluted EPS ($) | 0.39 | 0.39 | 1.29 | 1.28 | -0.8% |
| Diluted shares (M) | 1,012 | 1,028 | 1,011 | 1,027 | +1.6% |
Source: Exelon Q2 2026 Form 10-Q, consolidated statements of operations; margins calculated.
H1 2026 operating margin of 19.56% compares with 20.29% a year earlier — a 0.73 point compression, as revenue growth of 8.8% outpaced operating income growth of 4.9%. The 10-Q carries only the prior-year comparative, so this is a year-over-year read, not a claim about where the margin sits against the full post-separation history.
Where the revenue actually came from. Of the $1,068 million H1 revenue increase, $300 million is the swing in revenues from alternative revenue programs, which moved from negative $402 million to negative $102 million. That is a decoupling true-up, not a sale. Another $569 million was absorbed immediately below the line by higher purchased power ($520 million) and purchased fuel ($49 million), both fully passed through to customers. Taxes other than income taxes — largely gross utility receipts remitted onward — added $78 million of matched revenue and cost. Strip those out and durable margin-bearing revenue growth is a small fraction of the headline.
Operating leverage is running below one. Revenue rose 8.8% and operating income 4.9%, a ratio of 0.56x. That is the arithmetic signature of a pass-through-heavy revenue base: the top line inflates with commodity and rider costs while the earning spread grows only with rate base.
Below the operating line. Interest expense, net rose $88 million to $1,116 million. Other, net improved $42 million to $159 million, driven by higher allowance for funds used during construction at ComEd — an accounting credit for capital under construction that converts into cash only after those assets enter rate base. The effective tax rate rose to 18.6% from 15.6%, costing roughly $48 million relative to the prior-year rate.
Non-GAAP disclosure. Exelon reports adjusted operating earnings of $0.43 per share for Q2 (vs. $0.39) and $1.33 for H1 (vs. $1.31). The Q2 adjustment is a single item: $42 million net of $16 million of tax, or $58 million pre-tax, of severance under a cost management program. The H1 figure adds $11 million net of tax for disallowance of certain capitalized costs. Prior-year H1 adjustments totalled $24 million, primarily a $22 million capitalized-cost disallowance and a $2 million FERC audit liability change. The consequence is a widening wedge: adjusted EPS grew 1.5% while GAAP EPS fell 0.8%, a 2.3 percentage point divergence that did not exist a year ago.
2-2. Segment Performance and Cost Structure
| Segment (H1) | Revenue 2025 ($M) | Revenue 2026 ($M) | Net income 2025 ($M) | Net income 2026 ($M) | Capex 2026 ($M) |
|---|---|---|---|---|---|
| ComEd | 3,901 | 3,898 | 530 | 559 | 1,671 |
| PECO | 2,333 | 2,554 | 402 | 397 | 964 |
| BGE | 2,583 | 3,046 | 315 | 353 | 822 |
| PHI (Pepco/DPL/ACE) | 3,357 | 3,742 | 337 | 278 | 1,062 |
| Other and eliminations | (33) | (31) | (284) | (272) | 39 |
| Exelon | 12,141 | 13,209 | 1,300 | 1,315 | 4,558 |
Source: Exelon Q2 2026 Form 10-Q, segment disclosures and registrant cash flow statements.
ComEd is the clearest illustration of the pass-through problem. Headline H1 revenue was flat at $3,898 million, but that masks a $69 million decline in regulatory required programs offsetting $66 million of genuine growth in distribution, transmission and energy efficiency revenue. Purchased power fell $208 million with an exactly offsetting revenue reduction. ComEd's net income nonetheless rose 5.5% on higher rate base and AFUDC, and it absorbed $1,671 million of capex against $1,189 million a year earlier, up 40.5% — by far the most aggressive build in the fleet.
BGE was the strongest earner, with net income up 12.1% on multi-year plan rate increases, though S&P cut its long-term issuer and senior unsecured ratings from A to A- on April 30, 2026 and its commercial paper from A-1 to A-2. PHI was the weakest, down 17.5%, with Pepco alone falling 26.5% to $133 million after a March 31, 2026 Maryland order disallowed recovery and forced the write-off of $11 million of regulatory assets and $15 million of PP&E, a $26 million charge to operations and maintenance. PECO's net income slipped 1.2% despite 9.5% revenue growth, hit by higher depreciation, an 18.8% rise in segment interest expense, and tax repairs; Moody's downgraded PECO's long-term issuer rating from A2 to A3 on July 15, 2026.
Fixed cost behaviour is straightforward. Depreciation and amortization ($1,920 million, +6.4%) and operations and maintenance ($2,852 million, +6.9%) are the two structural fixed blocks and together grew $299 million — more than twice the $121 million increase in operating income. Purchased power and fuel, the variable and fully recoverable block, grew $569 million with no margin effect. This is why Exelon announced in May 2026 a plan to identify approximately $350 million of O&M savings across the group in 2027, and why the severance charge appeared this quarter.
The capital plan behind those savings. On its May 6, 2026 first-quarter call, Exelon raised its 2026–2029 capital plan to $41.7 billion from $41.3 billion — but the composition changed more than the total. The revision added roughly $1.5 billion of incremental transmission investment while deferring or reducing about $1.1 billion of PECO and BGE distribution spend, and management framed the $350 million O&M target as the cost consequence of a lower-investment distribution profile, sustainable through 2029 alongside a targeted voluntary separation program. Rate base is guided to grow about 7.9% a year on that plan, with transmission rate base growing far faster. The H1 capex figures above therefore should not be read as a uniform acceleration: ComEd's transmission-heavy build is running hot while two of the distribution utilities are being throttled back, and the mix shift is what makes the interest and share-count drag of this half a transition cost rather than a permanent one.
- Consolidated Statement of Cash Flows
| Item (H1, $M) | 2025 | 2026 | Change |
|---|---|---|---|
| Net cash provided by operating activities | 2,711 | 3,669 | +35.3% |
| Capital expenditures | (3,959) | (4,558) | +15.1% |
| Free cash flow after capex | (1,248) | (889) | +$359M |
| Dividends paid on common stock | (808) | (860) | +6.4% |
| Net cash provided by financing activities | 1,563 | 2,120 | +35.6% |
| Increase in cash + restricted cash | 312 | 1,229 | — |
| Cash + restricted cash, end of period | 1,251 | 2,430 | +94.2% |
Source: Exelon Q2 2026 Form 10-Q, consolidated statements of cash flows.
Operating cash flow rose $958 million, and the quality of that increase deserves scrutiny. Roughly $1,247 million of the swing came from accounts receivable, which contributed a positive $787 million this half against a negative $460 million a year ago — the CMC rider reversal described in Section 1-1, not a durable earnings improvement. Deferred income taxes added another $267 million of the swing. Working against those, the net movement in regulatory assets and liabilities consumed $874 million against $294 million a year earlier, and pension and OPEB contributions took $356 million. Strip the rider mechanics out and cash generation tracks earnings far more closely than the headline 35% suggests.
The funding gap is the whole story of this filing. Operating cash of $3,669 million did not cover $4,558 million of capex, leaving an $889 million shortfall before a single dollar of the $860 million dividend was paid — a combined $1,749 million to be raised externally. Exelon raised it with $3,600 million of new long-term debt against $1,600 million retired, $631 million of net new short-term borrowing, and $406 million from common stock issuance and employee plans. Financing inflows of $2,120 million exceeded the gap, which is why cash and restricted cash nearly doubled to $2,430 million — a deliberate pre-funding buffer, not surplus.
That is the honest summary of Exelon's first half. Revenue growth of 8.8% is mostly pass-through, margin compressed 0.73 points, and the entire $15 million improvement in net income was more than consumed at the per-share line by an $88 million interest increase and a 1.6% larger share count. Nothing here is broken: rate base is compounding, guidance is intact at $2.81–$2.91, and the capital plan is being tilted toward transmission where returns are set federally. But investors buying the 8.8% revenue headline are buying a number that the income statement does not, and for now cannot, convert into earnings per share.