Utility ETFs in the Spotlight as Q3 Earnings Season Kicks Off

The U.S. stock market stands at a critical inflection point. While the protracted government shutdown and persistent economic uncertainty continue to weigh on sentiment, another powerful narrative is unfolding beneath the surface.

The rapid acceleration of artificial intelligence (AI) and data-driven infrastructure is sparking record electricity demand, breathing new life into one of the market’s most stable corners — the utility sector. In this environment, the upcoming third-quarter earnings from key utility players could prove pivotal for investors seeking both resilience and growth potential.

For exchange-traded fund (ETF) investors, this moment offers a timely window to evaluate opportunities across funds that are positioned to capture the sector’s steady performance amid an era of electrification and AI expansion.

The Q3 Lens: AI Demand, Infrastructure & Interest Rates

First Energy (FE) is the first S&P500 utility provider that kick-started the third-quarter earnings season of this year, posting better-than-expected revenues and earnings.

With two key utilities, PG&E Corp. (PCG) and CenterPoint Energy (CNP), set to release their quarterly numbers today, investors should focus on the core fundamentals that are driving the utility sector. The AI revolution and evolving economic policy — the same forces moving the broader market — are shaping the two core drivers of utility performance, namely load growth and financial stability.

Notably, the sector is experiencing a historic surge in electricity demand, largely driven by power-hungry data centers. This trend can be expected to have boosted load growth for major utilities, which should duly get reflected in the form of solid top-line growth in the third quarter. In line with this, utility provider Entergy (ETR) announced in August 2025 that during the past two years, Amazon Web Services and Meta Platforms (META) have been planning to locate data center campuses within Entergy’s service area, particularly in the Gulf South region of the United States.

Through September, U.S. power demand was up 2.3% year over year, largely due to significant growth in two data center hubs (as per a report by FactSet).

While surging demand for electricity continues to influence the growth story of the utilities, the financial cost of meeting this demand remains a key area for scrutiny. The sector is capital-intensive, and while the Federal Reserve's recent rate cut provided some relief, the cost of debt for funding massive new infrastructure projects remains a critical factor.

As the rate cut came only in the final month of the third quarter, elevated rates earlier in the quarter might have weighed on the sector’s bottom line. Investors should keep a close watch on how utilities are handling their balance sheets and funding their growth.

Expected Earnings Scenario

Let’s delve deeper into the likely earnings picture of the two utility providers that could drive the performance of the Utility sector ahead, with its total third-quarter earnings expected to drop 2.4% despite 5.8% revenue growth, per our Earnings Trend Report issued on Oct. 22, 2025.

The big utility companies that are set to report today are:

PG&E Corp: It is likely to report 46 cents per share in earnings on $6.55 billion in revenues, suggesting year-over-year bottom-line growth 24.3% and top-line improvement of 10.2%.

CenterPoint Energy: It is likely to report 46 cents per share in earnings on $1.98 billion in revenues, suggesting year-over-year bottom-line growth of 48.4% and top-line improvement of 6.6%.

Bottom Line

The Utility sector's health appears moderately sound, though it might face some pain points, in the form of higher interest expense, which might have weighed on the sector’s bottom line. However, the rapidly growing electricity demand remains a clear positive, offering a stabilized growth prospect for utility ETFs, which offer heavy exposure to the prominent S&P500 utility companies, including PCG, FE and CNP.

These ETFs include the Utilities Select Sector SPDR Fund (XLU), Vanguard Utilities ETF (VPU), Fidelity MSCI Utilities Index ETF (FUTY), iShares U.S. Utilities ETF (IDU) and Virtus Reaves Utilities ETF (UTES).

They offer exposure to the sector's powerful long-term growth story, fueled by AI and electrification, while mitigating the specific risks associated with any single company's regulatory battles or project delays.

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This article originally published on Zacks Investment Research (zacks.com).

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