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July 30, 2025 • 3 min read
Today, we're diving into the second-quarter 2025 earnings report for American Electric Power (AEP), one of the nation's largest electric utilities, serving customers across 11 states. AEP's latest 10-Q filing reveals a dramatic surge in reported profits, but as always, the story behind the numbers is what truly matters. Let's break down what's driving their performance.
At first glance, AEP's results are staggering. Earnings attributable to common shareholders skyrocketed to $1.2 billion for the second quarter of 2025, a massive increase from $340 million in the same period last year. Total revenues also climbed to $5.1 billion from $4.6 billion year-over-year.
To better understand how AEP generates its income, check out the following Sankey flow diagram based on the company's latest financial data. This visual breakdown shows how revenue from different segments flows through various costs and expenses to arrive at the final net income.
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While the growth is impressive, it's crucial to understand that it isn't all from selling more electricity. The massive jump in GAAP earnings is heavily influenced by two key factors: a weaker comparison quarter in 2024 that included significant one-time expenses, and a major, favorable regulatory ruling in 2025.
The most significant event this quarter was a favorable order from the Federal Energy Regulatory Commission (FERC) concerning the treatment of Net Operating Loss Carryforwards (NOLCs). In simple terms, NOLCs are tax assets created when a company's losses in one year are used to reduce its tax liability in future years.
The FERC ruling allowed AEP to reverse $480 million in charges that had been set aside for potential customer refunds. This single, non-recurring item had a profound impact, particularly on the AEP Transmission Holdco segment, which saw its earnings jump from $201 million to $578 million year-over-year. This is a prime example of why investors often look at a company's "Operating Earnings"—a non-GAAP measure that strips out such one-time events. AEP's operating earnings still showed healthy growth, rising to $766 million from $662 million, reflecting solid underlying performance.
Beyond the accounting adjustments, AEP is navigating a profound shift in energy demand, largely driven by the boom in data centers and other large-scale industrial customers. The filing highlights that AEP is actively creating new "Large Load/Data Center Tariffs" in states like Indiana, Ohio, and Virginia to manage and capitalize on this surging demand.
To meet this need, AEP is aggressively expanding its generation portfolio. The company has over 2,600 megawatts (MW) of approved renewable energy projects in the works and is seeking proposals for an additional 7,700 MW of new power generation, including both renewables and natural gas. This strategic expansion is critical for ensuring grid reliability as electricity demand continues to grow.
American Electric Power's second-quarter results paint a picture of a company benefiting from a favorable regulatory decision while simultaneously investing heavily to meet future energy needs. The massive GAAP earnings are impressive but mask the more modest, yet still strong, growth in its core operations. The real challenge—and opportunity—for AEP lies in its ability to successfully build out its infrastructure to power the growing digital economy while navigating the complex and ever-changing regulatory landscape.
Last updated: July 30, 2025