AWK Q2 2025 Filing: Revenue Growth Meets Rising Costs

American Water Works Company (AWK), the nation's largest publicly-traded water and wastewater utility, recently released its financial results for the second quarter of 2025. An analysis of the company's latest 10-Q filing reveals a story of steady growth fueled by its core regulated operations, even as it navigates the persistent pressure of rising costs.

A Stream of Growing Revenue

For the quarter ending June 30, 2025, American Water reported total operating revenues of $1.276 billion, a notable 11% increase from the $1.149 billion recorded in the same period last year. This top-line growth supported a net income of $289 million, or $1.48 per diluted share, up from $277 million, or $1.42 per share, in Q2 2024.

This growth is a direct result of the company's foundational strategy: continuously investing in its vast infrastructure and working with state regulators to update customer rates to reflect those investments. According to the filing, new rates from general rate cases and infrastructure surcharges authorized in 2025 are expected to add a combined $270 million in annualized revenue.

To better understand how revenue flows through the company to become profit, the following diagram visualizes the key components of American Water's income statement for the quarter.

The Regulated Bedrock

The engine of American Water's performance is its Regulated Businesses segment, which provides essential water and wastewater services to millions of customers. This segment alone generated $1.178 billion in revenue, accounting for over 92% of the company's total for the quarter. This represents a solid increase from the $1.057 billion it brought in during the same quarter last year.

The company's "Other" segment, which includes its Military Services Group that manages water systems on U.S. military bases, contributed the remaining $98 million in revenue. While much smaller, this segment provides a degree of diversification to the company's primary utility operations.

The Rising Tide of Expenses

While revenue growth is strong, it's crucial to look at the other side of the ledger. Total operating expenses climbed to $787 million from $700 million a year ago, a 12.4% increase that slightly outpaced revenue growth. The two main drivers of this increase were:

• Operation and Maintenance (O&M): These costs rose to $480 million from $427 million. The company attributes this to higher employee-related costs, increased production costs for items like chemicals and power, and more spending on operating supplies and services. This reflects the broad inflationary pressures affecting many industries.
• Depreciation and Amortization: This non-cash expense increased to $221 million from $193 million. This is an expected consequence of the company's heavy capital investment program. As American Water spends to upgrade and replace aging infrastructure—investing $1.281 billion in capital expenditures in the first half of 2025—the value of its asset base grows, leading to higher annual depreciation charges.

Final Thoughts

American Water's second-quarter results paint a picture of a company executing its core strategy effectively. The regulated utility model provides a stable and predictable path to growth, driven by necessary infrastructure investment and regulatory cooperation. However, the report also underscores the challenges of managing rising operational costs in the current climate. For investors and observers, the key will be to watch how successfully the company can manage these expenses while continuing to secure timely rate relief to support its critical, capital-intensive work of delivering safe and reliable water services.