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Dominion Energy posts strong Q2 results on regulated segment strength and margin expansion, but maintains cautious full-year guidance amid ongoing project and regulatory uncertainties.

# Dominion Energy Delivers Strong Q2 FY2025 Beat on Regulated Segment Strength, But Maintains Cautious Full-Year Outlook

---

## Executive Summary

- **Dominion Energy (D)** reported a robust **Q2 FY2025**, with **operating revenue up 9% YoY to $3,810M** and **GAAP net income surging 35% YoY to $760M ($0.88/share)**, both well ahead of consensus. The outperformance was driven by the company’s regulated Virginia and South Carolina segments, which offset underperformance in Contracted Energy.
- **Margins expanded sharply**, with net income margin rising to **19.9% from 16.2% YoY**, reflecting disciplined cost control and favorable regulatory outcomes. Operating earnings grew by $291M against a modest $33M increase in expenses, underscoring strong earnings quality.
- **Management struck a bullish tone** on operational execution and project progress (notably the CVOW project), but **reaffirmed rather than raised full-year EPS guidance** ($3.28–$3.52), signaling a conservative approach amid macro and operational uncertainties.
- **Key risks** include regulatory changes, weather volatility, and execution challenges—especially in the Contracted Energy segment and ongoing large-scale projects. However, **regulatory tailwinds** (e.g., proposed 9.8% allowed ROE in Virginia) and continued margin improvement present upside potential.
- **Catalyst watch:** Q3 is typically Dominion’s largest sales quarter and could prompt a guidance revision if current trends persist. Progress on the CVOW project and regulatory developments in Virginia and South Carolina remain key near-term watchpoints.

---

## Performance Snapshot

| Metric         | Reported | Consensus | Surprise | YoY Change |
|----------------|----------|-----------|----------|------------|
| Revenue        | $3,810M  | $3,700M*  | +$110M   | +9%        |
| GAAP EPS       | $0.88    | $0.75*    | +$0.13   | +37.5%     |
| Net Income     | $760M    | —         | —        | +35%       |
| Net Margin     | 19.9%    | —         | —        | +3.7pp     |
| Operating EPS Guidance (FY) | $3.28–$3.52 | $3.40 (midpoint) | In line | — |

*Consensus estimates are indicative.

---

## Earnings Quality

Dominion Energy’s Q2 earnings quality was high, with **margin expansion driven by regulated segment strength** and disciplined cost management. The **regulated Virginia and South Carolina businesses** delivered robust results, while the Contracted Energy segment lagged due to planned nuclear outages. The company’s ability to grow operating earnings by $291M against a minimal $33M increase in expenses highlights effective cost controls and a favorable revenue mix. There was no evidence of one-off gains or unsustainable drivers, supporting the durability of the earnings beat.

---

## Management Commentary & Guidance

Management’s tone was **confident and constructive**, emphasizing operational execution, project milestones (notably the CVOW project running ahead of schedule), and regulatory clarity. However, they **reaffirmed full-year operating EPS guidance** at $3.28–$3.52, with a midpoint of $3.40, reflecting a conservative stance. The decision not to raise guidance, despite a strong quarter, signals caution ahead of the seasonally larger Q3 and ongoing macro uncertainties. Management highlighted regulatory progress in Virginia and South Carolina as key positives.

---

## Key Risks

- **Regulatory risk:** Potential changes in allowed returns or adverse policy shifts could impact earnings, especially in core regulated markets.
- **Operational risk:** Weather volatility and execution challenges (notably with the CVOW project and planned outages in Contracted Energy) could pressure results.
- **Commodity price risk:** Fluctuations in input costs may affect margins, though regulated frameworks provide some insulation.

---

## Expected Market Reaction

Analysts and investors are likely to **respond positively to the strong revenue and margin beats**, but the **lack of upward guidance revision** and continued weakness in Contracted Energy may temper enthusiasm. The market may reward Dominion Energy for its operational discipline and regulatory progress, but a more significant re-rating likely awaits further clarity in Q3 or on project execution milestones.

---

## Final Takeaway

Dominion Energy delivered a **strong, high-quality quarter**, with regulated segment outperformance and margin expansion driving a clear earnings beat. The market may be **underappreciating the durability of margin improvements and regulatory tailwinds**, while overemphasizing short-term headwinds in Contracted Energy. **Key upcoming catalysts** include Q3 results (potential for guidance revision) and further regulatory developments in Virginia and South Carolina. Investors should monitor execution on large projects and regulatory outcomes as the next drivers of share price performance.

Dominion (D): Regulated Strength Drives Q2 Beat, Guidance Steady

Dominion Energy is set for a strong quarter, driven by margin expansion, robust data center demand, and insider confidence, with manageable risks from offshore wind tariffs.

# Dominion Energy, Inc.: Margin Expansion and Data Center Demand Set the Stage for a Strong Quarter

## Executive Summary: Bullish Outlook on Margin Strength and Data Center Tailwinds

We are **Bullish** on Dominion Energy, Inc. (NYSE: D) heading into the upcoming quarter, driven by robust revenue growth and significant margin expansion. **Q1 2025 revenue rose 12.2% YoY to $4.08B**, while **operating margin improved to ~30% from 23% YoY**, reflecting disciplined cost management and favorable regulatory outcomes. The market may be underestimating the near-term earnings impact of **sustained data center demand** and the positive effect of recent regulatory settlements, particularly in Virginia and South Carolina. However, **potential cost headwinds from offshore wind tariffs** remain a risk to monitor.

## Recent Trends Signal What’s Next: Revenue and Margin Momentum

Dominion’s last two quarters have established a clear upward trajectory in both top-line and profitability metrics. **Q1 2025 revenue of $4.08B** (up from $3.64B in Q1 2024) and **gross margin of 50.5%** (vs. 47.2% YoY) highlight the company’s ability to capture demand and manage costs. **Operating margin expanded to ~30%**, up sharply from ~23% a year ago, as regulatory settlements and segment mix improved. Net income in the Virginia segment jumped from $424M to $561M, underscoring the impact of favorable rate cases and strong customer demand.

### Quarterly Financial Trend Table

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | EPS  |
|--------------|--------------|------------------|----------------------|------|
| Q2 2024      | 3.72         | 48.1             | 24.5                 | 0.68 |
| Q3 2024      | 3.85         | 49.0             | 25.2                 | 0.70 |
| Q4 2024      | 3.95         | 49.7             | 27.0                 | 0.72 |
| Q1 2025      | 4.08         | 50.5             | 30.0                 | 0.75 |

**Trend:** Consistent revenue growth and margin expansion, with EPS rising each quarter.

## Management’s Forward Tone and Positioning: Cautious Optimism with Conservative Guidance

Management’s recent commentary has been **“highly confident”** while emphasizing **“manageable risks”** and describing full-year 2025 guidance as **“appropriately conservative.”** This marks a shift from the more cautious tone of prior quarters, where macro headwinds and regulatory uncertainty were more prominent. For example, in the Q1 2025 call, management stated:  
> “We’re seeing early signs of normalization in demand and remain confident in our ability to deliver on our operating earnings targets.”  
This signals a more constructive outlook, with management positioning for steady performance despite external uncertainties such as tariffs and supply chain constraints.

## KPI Trends & Upcoming Quarter Drivers: Data Center Demand and Project Execution

The most relevant KPIs for the next quarter are:

- **Electric Customer Base:** Stable at **3.6M** (flat QoQ, +1% YoY), supporting predictable regulated revenue.
- **Data Center Contracting:** **~40 GW in contracting stages** (up from 36 GW YoY), indicating robust demand pipeline.
- **CVOW Project Completion:** **55% complete** (vs. 40% last quarter), signaling progress on a key capex initiative.

### KPI Movement Table

| KPI                        | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|----------------------------|---------|---------|---------|------------|------------|
| Electric Customers (M)     | 3.56    | 3.59    | 3.60    | +1%        | Flat       |
| Data Center Contracting GW | 36      | 39      | 40      | +11%       | +2.5%      |
| CVOW Completion (%)        | 30      | 40      | 55      | +25 pts    | +15 pts    |

**Impact:**  
- **Customer base stability** underpins regulated revenue.
- **Data center growth** is a key incremental driver for both revenue and margin.
- **CVOW progress** supports future earnings, though near-term FCF remains pressured by capex.

## Missed by the Street: Insider Conviction and Subtle Demand Signals

A key overlooked signal is **significant insider stock purchases by board members in 2025**, as disclosed in recent filings. This insider activity suggests strong internal confidence in near-term operational and financial performance, a factor not fully reflected in consensus estimates. Additionally, management’s subtle shift in language—moving from “uncertainty” to “manageable risks”—indicates rising conviction in execution, especially around data center demand and regulatory outcomes.

## Scenarios for the Upcoming Quarter: Bull, Base, and Bear Cases

### Scenario Table

| Scenario  | Revenue ($B) | EPS   | Operating Margin (%) | Key Assumptions                                              |
|-----------|--------------|-------|----------------------|--------------------------------------------------------------|
| Bull      | 4.20         | 0.80  | ~31                  | Regulatory upside, strong data center demand, easing tariffs |
| Base      | 4.08         | 0.75  | ~30                  | Steady demand, stable costs, continued project execution     |
| Bear      | 3.95         | 0.70  | ~28                  | Tariff headwinds, operational disruptions, soft residential  |

**Most Likely:** The **Base case** is most probable, given current demand visibility, stable customer base, and management’s conservative guidance. Upside exists if data center demand accelerates or input costs ease, while downside is limited by regulated revenue and cost controls.

## Appendix – Data Tables & Management Quotes

### Quarterly Financials Table

| Quarter      | Revenue ($B) | EPS  | Gross Margin (%) | Operating Margin (%) |
|--------------|--------------|------|------------------|----------------------|
| Q2 2024      | 3.72         | 0.68 | 48.1             | 24.5                 |
| Q3 2024      | 3.85         | 0.70 | 49.0             | 25.2                 |
| Q4 2024      | 3.95         | 0.72 | 49.7             | 27.0                 |
| Q1 2025      | 4.08         | 0.75 | 50.5             | 30.0                 |

### KPI Movement Table

| KPI                        | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|----------------------------|---------|---------|---------|------------|------------|
| Electric Customers (M)     | 3.56    | 3.59    | 3.60    | +1%        | Flat       |
| Data Center Contracting GW | 36      | 39      | 40      | +11%       | +2.5%      |
| CVOW Completion (%)        | 30      | 40      | 55      | +25 pts    | +15 pts    |

### Key Management Quotes

1. **“We’re seeing early signs of normalization in demand and remain confident in our ability to deliver on our operating earnings targets.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Management expects stable to improving demand, supporting earnings visibility.*

2. **“Our full-year 2025 operating earnings guidance remains appropriately conservative given current market conditions.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Guidance is set with a margin of safety, suggesting potential for upside.*

3. **“We continue to benefit from favorable regulatory settlements, particularly in Virginia and South Carolina.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Regulatory outcomes are a key margin driver for the next quarter.*

4. **“Board insiders made significant stock purchases in 2025.”**  
   *2025 Proxy Statement*  
   *Interpretation: Strong internal confidence in near-term performance.*

5. **“Tariff-related cost pressures on offshore wind equipment could add up to $0.4B if extended.”**  
   *Q1 2025 10-Q*  
   *Interpretation: Input cost risk remains a potential margin headwind.*

6. **“Data center customer demand remains robust, with over 40 GW in contracting stages.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Data center segment is a key growth engine for the next quarter.*

7. **“Residential sales softness observed in Q1 is expected to normalize as we move through the year.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Temporary weakness in residential demand is not expected to persist.*

---

**Conclusion:**  
Dominion Energy enters the next quarter with strong revenue and margin momentum, underpinned by regulated customer stability and accelerating data center demand. While input cost risks persist, management’s tone and insider activity suggest confidence in delivering on guidance. Investors should watch for updates on regulatory settlements, project execution, and any shifts in demand trends post-earnings.

Dominion (D): Margin Expansion & Data Center Tailwinds