Iberdrola Earnings Call Highlights Networks-Driven Growth

Iberdrola ((IBDRY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Iberdrola’s latest earnings call struck a broadly positive tone, with management emphasizing double-digit adjusted profit growth, resilient regulated networks and an upgraded 2026 outlook. While foreign exchange, debt growth and pressure in Power & Customers weighed on reported figures, executives argued that strong cash generation from networks and improved credit metrics leave the group better positioned for the medium term.

Adjusted Net Profit Growth

Adjusted net profit climbed 11% year on year to €1,865 million in the first quarter of 2026, underlining the strength of Iberdrola’s core operations despite market volatility. Management stressed that without adverse currency moves, profit growth would have been around 17%, underscoring the underlying momentum in the business.

Adjusted EBITDA and Networks Strength

Group adjusted EBITDA rose 2.4% to €4.1 billion, as the regulated networks division more than offset weaker Power & Customers earnings. Networks EBITDA increased 9% to €2,048 million, or 14% excluding FX, powered by a 32% jump in the U.K. and 22% growth in the U.S., highlighting the appeal of predictable regulated returns.

Robust Investment Program and RAB Expansion

Iberdrola kept capital spending at a high pace, investing €2,705 million in the quarter and €14.5 billion over the last 12 months, mostly in regulated networks. This heavy outlay lifted its regulated asset base to €53 billion, about 8% higher year on year, with transmission RAB up roughly 29% to €14 billion, laying the groundwork for future earnings.

Asset Rotation and Balance Sheet Improvements

The completion of the Mexico asset rotation marked a strategic milestone, delivering capital gains and finishing the group’s planned disposals. Pro forma net debt stood at €50.3 billion and liquidity at €21.4 billion, enough to cover around 23 months of needs, which management presented as evidence of a more resilient balance sheet despite rising gross debt.

Renewables and Operational Output Gains

Renewable generation posted strong gains, with offshore output up 42% and U.K. wind production up 40% compared with last year, aided by record hydro reserves. The company added about 3,300 MW of new capacity over 12 months, mainly wind, solar and storage, reinforcing the long-term growth pipeline in low-carbon assets.

Improving Credit Metrics and Cash Flow

Cash generation improved, with funds from operations increasing 7%, which helped Iberdrola strengthen key credit indicators even amid heavy spending. Adjusted net debt to EBITDA fell to 3.4 times from 3.7 times and adjusted FFO to net debt climbed to about 24% from 21.2%, while adjusted leverage eased to 44% from 47% a year earlier.

AI and Digital Efficiency Initiatives

Management highlighted a large-scale artificial intelligence push, with more than 300 and nearly 400 projects cited, about 70% in generative AI and mostly developed internally. These initiatives are expected to support cost efficiencies and open new revenue streams across networks and customer businesses, adding a tech-driven layer to the investment story.

Power & Customers Business Pressure

The Power & Customers segment remained under pressure, with EBITDA slipping about 3% year on year to €2.0 billion as lower prices and specific cost items hit margins. Iberia’s EBITDA fell roughly 3.2% to €1,002 million and U.S. Power EBITDA dropped around 32% to $196 million, reflecting weaker wind and thermal contributions and timing effects in key contracts.

Foreign Exchange Headwinds

Currency movements significantly diluted reported performance, particularly the roughly 11.4% depreciation of the U.S. dollar versus the euro and smaller moves in the pound and Brazilian real. Management quantified the FX drag at about €99 million on adjusted net profit and €267 million at gross margin, noting that most growth metrics would appear stronger at constant exchange rates.

Net Debt Increase and 2026 Expectations

Reported net debt rose to €51.9 billion, up €1.7 billion since year-end 2025, largely driven by high capital expenditure and dividend payments despite asset sale proceeds. Looking ahead, the company anticipates year-end 2026 net debt of around €55 billion as it continues to fund its ambitious investment program, balancing growth with disciplined credit management.

Iberia Ancillary Costs and System Issues

In Iberia, system operation measures taken after last year’s blackout pushed ancillary service costs higher, weighing on Power & Customers profitability in the quarter. Management described the impact as nonrecurring in nature but acknowledged that these issues could have ongoing regulatory and operational implications that investors will watch closely.

Regulatory and Legal Uncertainties

The call also flagged several regulatory and legal risks, including potential higher ancillary charges in Spain and pending U.S. regulatory reviews that may affect allowed returns. Among the latter, possible changes to transmission returns in New England could trigger retroactive adjustments or legal challenges, adding a layer of uncertainty to future earnings in these markets.

Higher Depreciation and Provisions

Depreciation, amortization and provisions increased about 9% to €1,476 million, mirroring Iberdrola’s enlarged asset base and a normalization of provisions after unusual recoveries in the prior-year period. These non-cash items weighed on statutory net income in the short term but also reflect sustained investment in long-life infrastructure assets.

Forward-Looking Guidance and Outlook

Iberdrola raised its 2026 guidance to more than 8% adjusted net profit growth, excluding capital gains from asset rotations, with networks remaining the main growth engine. The company expects strong investment in the U.K., U.S. and Brazil, a growing regulated asset base, extensive production hedging through 2028 and an effective tax rate trending toward around 20%, underpinned by solid liquidity and stable credit ratios.

Iberdrola’s earnings call painted a picture of a utility leaning on its regulated networks and renewables pipeline to drive steady growth, despite currency headwinds, sector-specific costs and rising debt. For investors, the upgraded profit guidance, improving balance sheet metrics and visible investment pipeline suggest a company trading near-term noise for longer-term regulated and clean-energy cash flows.