Sempra (SRE) Q2 2026: GAAP EPS Jumps 70%, but Adjusted EPS Rises 30% as Sempra Infrastructure Leads the Quarter

Sempra's second-quarter earnings jumped while revenue did not move at all. Earnings attributable to common shares reached $796 million versus $461 million a year earlier, and diluted EPS rose to $1.21 from $0.71, even though total revenues came in at $2,997 million against $3,000 million. That headline number needs a qualifier the 10-Q does not carry: in its Aug. 6 earnings release, Sempra reported adjusted earnings of $762 million, or $1.16 per share, against $583 million and $0.89 a year earlier — a 30% gain, not 70%. The company also affirmed 2026 adjusted EPS guidance of $4.80 to $5.30 while lifting the GAAP range to $5.02–$5.55, which is itself an admission that the gap is one-off in nature.

The entire move happened below the revenue line: the Texas utility Oncor delivered $137 million more, and Sempra Infrastructure added $158 million that came mostly from suspended depreciation, tax adjustments and unrealized derivative gains tied to the pending KKR transaction. For a regulated utility, where revenue is largely a pass-through of fuel costs and rate awards, the quality of that earnings mix matters more than the headline growth rate.

1. Consolidated Balance Sheet

1-1. Major asset lines

Source: Sempra Form 10-Q for the quarter ended June 30, 2026, condensed consolidated balance sheets.

The $48 million cash balance is misleading on its own. Sempra's cash flow statement reconciles to $2,700 million of total cash and restricted cash at June 30, down from $3,552 million at year-end. Only $50 million of that sits outside the disposal group — $48 million of cash and equivalents plus $2 million of restricted cash. The other $2,650 million is inside Assets Held for Sale, and is nearly all restricted cash at the LNG construction entities rather than spendable holding-company liquidity. Liquidity therefore rests on committed credit facilities rather than cash on hand.

The Oncor investment grew $1,530 million in six months. That was not passive appreciation. Expenditures for investments in the first half totaled $1,485 million per the cash flow statement, primarily equity contributions to Oncor Holdings. Texas is absorbing cash faster than it returns it.

Property, plant and equipment rose only 1.5% despite $4,687 million of capital spending. The reason is that the fastest-growing asset base — the LNG projects — has been reclassified out of PP&E and into held-for-sale. Receivables and inventories both fell, the normal seasonal unwind after a winter gas-billing cycle.

1-2. Debt structure — financial versus operating liabilities

On-balance-sheet financial debt totals $36,664 million: short-term debt $3,566 million (down from $4,166 million), current maturities $2,075 million and long-term debt and finance leases $31,023 million. That is 4.7% higher than the $35,021 million at year-end. A further $9,460 million of debt sits inside Liabilities Held for Sale (per 10-Q Note 7), which rose to $12,992 million from $11,704 million — the balance Sempra expects to deconsolidate on closing the KKR sale.

Maturity and pricing are where the pressure shows. Per 10-Q Note 7, in the first half, Sempra retired first mortgage bonds carrying 2.50%, 2.60% and 6.00% coupons and issued new paper at 5.20% (SDG&E, 2036), 5.95% (SDG&E, 2056), 5.90% (SoCalGas, 2056) and 5.25% (Sempra, 2036), plus $2.0 billion of 6.43% senior secured notes at Port Arthur LNG. Short-term borrowings cost 4.38%, up from 4.32%.

Ratings sit outside the filing and come from the agencies themselves: Moody's rates Sempra Baa2 and moved the outlook to negative, citing weak credit metrics and execution risk on the planned sales of the Sempra Infrastructure interest and the Mexican gas distribution assets. S&P rates Sempra BBB+ with a stable outlook. The split view is the point — one agency treats the asset sales as the fix, the other as the risk.

Operating liabilities moved the other way. Trade payables fell to $1,225 million from $1,461 million, and accrued compensation dropped to $358 million from $521 million. Right-of-use assets from operating leases were roughly flat at $1,279 million — no accounting change worth flagging.

1-3. Capital structure

Paid-in common stock is $14,763 million against retained earnings of $18,066 million, up 5.7% from $17,092 million. Accumulated other comprehensive loss narrowed to $144 million from $197 million. Total Sempra shareholders' equity reached $32,685 million, or about $50.00 per share on 653.8 million shares, versus $48.40 at year-end.

Minority capital is unusually large here. Other noncontrolling interests of $7,293 million plus contingently redeemable noncontrolling interests of $3,308 million total $10,601 million — roughly a third of Sempra's own equity. That reflects existing partner stakes in the infrastructure business, including KKR's and ADIA's, and much of it relates to entities inside the disposal group heading out the door.

2. Consolidated Statement of Operations

2-1. Core earnings metrics

Source: 10-Q condensed consolidated statements of operations; adjusted figures from Sempra's Aug. 6, 2026 earnings release.

Operating margin above is computed from disclosed lines — revenues less fuel, purchased power, energy-related cost of sales, operation and maintenance, depreciation and franchise fees. Sempra does not print an operating income subtotal. The 10-Q itself contains no non-GAAP reconciliation, but the earnings release does, and it strips out the same held-for-sale and derivative items discussed below: adjusted earnings of $762 million ($1.16) versus $583 million ($0.89). Read the GAAP and adjusted numbers together, or the quarter looks 2.3 times as good as management says it is.

Revenue was flat, so the usual operating-leverage arithmetic — how much profit moves for each 1% of sales — says nothing useful. In a rate-regulated utility, fuel costs flow straight through to customer bills, so both revenue and cost fall together with gas prices without touching profit. What actually moved earnings was three things. Oncor equity earnings, net of tax, rose to $346 million from $209 million. The tax rate also shifted sharply: income tax expense fell to $112 million from $172 million even as income before taxes and equity earnings rose to $507 million from $298 million — an effective rate of 22% versus 58%. That $60 million tax saving was driven largely by tax adjustments tied to the held-for-sale classification. And energy-related cost of sales swung to a $69 million credit from an $85 million expense — a $154 million favorable swing, of which $77 million (gross, before tax and noncontrolling-interest allocations) was unrealized gains on undesignated commodity derivatives at the Port Arthur and ECA LNG projects.

Separating recurring from one-off matters here. Of Sempra Infrastructure's $158 million earnings increase, management attributes $46 million to tax adjustments from the held-for-sale classification, $37 million to depreciation that stopped being recorded in September 2025, $34 million (after tax and NCI) to unrealized commodity derivative gains, and $27 million to Mexican currency effects. That is $144 million of the $158 million. Strip it out and Infrastructure's underlying operating improvement was modest.

Interest expense rose 19.8% to $430 million. The reported figure understates the true cost of debt, because capitalized interest — financing cost charged to construction projects instead of the income statement — jumped to $195 million from $133 million. Add it back and gross interest was $625 million against $492 million, up 27%. When the LNG projects enter service, that capitalized amount starts hitting earnings.

Net income rose 81.5% but earnings attributable to common shares rose only 72.7%. The gap is $146 million of deductions this year against $58 million last year: noncontrolling interests absorbed $141 million versus $46 million — the LNG partners' share of the profit surge — plus $4 million of contingently redeemable NCI and $1 million of subsidiary preferred dividends, against $46 million of NCI, $11 million of Sempra preferred dividends (since redeemed) and $1 million of subsidiary preferred a year ago. Diluted EPS then grew 70.4% on the rounded figures; unrounded, the gain is approximately 72.0%, with the 0.42% rise in the diluted share count to 655,945 thousand from 653,224 thousand accounting for the difference from the 72.7% earnings growth rate — the wider gap between the stated 70.4% and the unrounded figure is almost entirely a rounding artifact of expressing per-share values to the nearest cent. There was no meaningful buyback: six-month repurchases totaled $21 million against a $32.7 billion equity base, while issuances added $30 million.

2-2. Fixed versus variable costs