NiSource (NI): A Costly Quarter Masks A Bigger Bet

NiSource (NI): A Costly Quarter Masks A Bigger Bet

Sun, August 16, 2026 at 1:01 PM GMT+3 4 min read

On August 5, NiSource Inc. (NYSE:NI) held its second-quarter earnings call, and the numbers told two different stories at once. Adjusted EPS fell to $0.16 from $0.22 a year earlier, yet management walked away reaffirming every long-term target on the books. That gap between a rough quarter and an unshaken outlook is the story here, and it centers on a data center bet that regulators keep approving faster than expected.

Bull Case: Betting Big On Digital Growth

NiSource's growth story increasingly runs through data centers rather than traditional rate base additions. In June, the Indiana Utility Regulatory Commission approved the original Amazon special contract along with its related power purchase agreement, and in July it approved the company's Alphabet partnership too, with load expected to ramp toward full capacity by 2030. Those two agreements alone are projected to return about $1.4 billion in bill reductions to existing NIPSCO electric customers over the life of the contracts, or up to $124 a year for an average residential bill, with savings starting as early as the fourth quarter of 2026. Demand keeps building behind that: management pointed to 3 gigawatts of large-load customers in active negotiations, another 2 gigawatts with clear line of sight, and a broader 9 gigawatt pipeline.

Despite the weak quarter, NiSource reaffirmed 2026 adjusted EPS guidance of $2.02 to $2.07 and its long-term growth rate of 6% to 8% through 2030. The company also flagged more than $40 million in cost optimization work already identified. Economic momentum is showing up outside the utility too, with Virginia landing more than $1.7 billion in new aerospace and defense manufacturing investment.

Bear Case: Storms And Costs Pile Up

The quarter's earnings decline was not just a rounding issue. Management pointed to higher operations and maintenance spending tied to an unusually active storm season, calling 2026 a record year for tornadoes across its service territory, along with elevated costs to keep its workforce steady during ongoing union negotiations. Regulatory risk is also showing up in less predictable places. In June, NiSource received a third federal order requiring it to keep running the Schahfer coal plant, and the company is now trying to recover those compliance costs through a FERC filing, with approval sought within 60 days. Rate cases filed in Virginia and Kentucky will not see decisions until the first half of 2027, leaving those investments in limbo for months.

Funding the buildout is not free either. NiSource's five-year plan calls for $21 billion in base capital spending plus $7.6 billion tied to its data center customers, supported by roughly $400 million to $600 million of annual equity issuance and a targeted FFO to debt ratio of 14% to 16%. And in Indiana, affordability discussions tied to the GenCo strategy were only just getting underway as of August 7, meaning the regulatory framework around the company's biggest growth driver is still being negotiated.

What Wall Street Sees

Hedge fund ownership of NiSource slipped from 50 funds to 47 in the most recent quarter, a modest pullback rather than a rush for the exits. Short interest sits at just 3.57% of the float, suggesting little organized skepticism toward the stock. As of August 14, shares trade at a forward price-to-earnings ratio of 20.83, a premium that assumes the data center pipeline converts into earnings largely as promised.

The Bet Investors Are Making

NiSource is asking investors to look past a rough quarter and focus on a data center pipeline regulators keep approving. Management's reaffirmed guidance assumes the Amazon and Alphabet ramps will offset a stretch of storm damage and coal plant costs. But the unresolved Schahfer recovery and delayed Virginia and Kentucky rate decisions are reminders that a regulated utility does not fully control its own timeline. Whether the data center bet outpaces those cost pressures should start to show up in results as those two contracts ramp toward full capacity in the coming years.

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