Big Beat, Bigger Plans: AEP Stock Powers Up on Data Center Boom
Shares of American Electric Power Co., Inc. (NASDAQ: AEP) are up more than 3% on July 30 after the company delivered a double beat in its second quarter earnings report. That pushes the stock’s year-to-date gain over 21%. That's significantly better than the Utilities Select Sector SPDR Fund (NYSEARCA: XLU), which is up 12.6% in 2025.
AEP reported earnings per share (EPS) of $1.43, which easily beat analysts’ expectations for $1.27 and was 14% higher year over year (YOY). The company also affirmed its full-year earnings guidance and predicted it would fall in the upper half of a range between $5.75 and $5.95.
On the revenue front, the company recorded $5.06 billion, beating estimates for $4.85 billion. That number was also 10% higher YOY.
This rate of growth makes AEP one of the best-performing utilities stocks. However, in stock price growth alone, the company is exceeding its average total return over the last five and 10-year periods.
That’s significant because AEP is known as a quality high-yield dividend stock that currently offers a yield of 3.28%. The company has increased its dividend for 15 consecutive years and will likely extend that streak later this year.
Growth Is Being Driven by Data Center Demand
The highlight of the report was the company’s strong customer load growth. AEP announced it had secured agreements for 24 gigawatts of new load by 2030. That was up from the 21 gigawatts the company had previously announced. Analysts expect that this growth will push the company’s peak load beyond 60 gigawatts.
That will make it one of the fastest-growing utilities in the sector.
On the earnings call, President and Chief Executive Officer (CEO) Bill Furman noted that these new agreements were driven primarily by a combination of data centers, reshoring, and manufacturing. Furman quickly emphasized that these are signed customer agreements that protect the company from changes in usage-driven volatility.
The growth story may have much further to go. American Electric Power has a wide service area that is attractive to data centers. A large part of the company’s footprint is in Ohio, which, according to the company, “has become a recognized hub for data centers.”
AEP has the largest transmission system in the country with ample fiber capacity and a reliable supply of water. All of this makes the company an attractive partner for companies looking to build data centers.
The company has also had several regulatory wins that have strengthened and lengthened current tariff provisions. These provide financial protection for the company as they make investments to handle these larger loads.
Should Rising Capital Spending Concern Investors?
Of course, this new power load comes with a cost. In the earnings report, the company announced a new five-year capital plan that will total approximately $70 billion, an increase from its current $54 billion plan.
The increased spending isn’t unusual. AEP is executing a strategic plan that emphasizes integrating renewable energy technologies, which has increased the company’s long-term debt to around $45 billion. The new capital plan includes the possibility of small nuclear reactors (SMRs) among other solutions.
That means the company’s debt-to-equity ratio of 1.42 is likely to move higher. However, AEP’s rock-solid business model, which generates about 90% of its revenue from fully regulated operations, will provide the reliable revenue and steady earnings to support growth, pay down the debt, and still add shareholder value.
Should You Buy AEP Stock?
AEP stock is up over 21% in 2025, which, as mentioned above, puts the stock above its historical averages. Investors should consider whether this year is an outlier or the beginning of a multi-year trend.
The AEP analyst forecasts on MarketBeat give the stock a consensus Hold with a price target of $108.31, 4.5% below its current stock price.
The stock is also trading at a slight premium to its historical averages based on price-to-earnings (P/E) and price-to-sales (P/S) ratios.
That means those investors looking to start a position in AEP stock may want to wait for a pullback.
However, the probability of increased revenue in the coming years, combined with the company’s reliable dividend, makes the stock a Hold for current investors.
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