Iberdrola Sold 2026's Demand at 2025's Prices — and Raised Guidance Anyway

Networks now throw off 54% of EBITDA and the regulated asset base is compounding at 14%; a self-inflicted retail margin squeeze is the price of the electrification thesis actually working.

IBE.MC · Earnings Call · 2026-10-21

The upgrade is a grid story, not a growth story

Nine months into 2026, Iberdrola did what Iberdrola usually does: beat, upgrade, promise more. Reported net profit rose 10% to EUR 5,816 million and adjusted net profit 9% to EUR 5,141 million — 13% at constant currency — and Ignacio Galán lifted full-year guidance from the "more than 8%" he was still affirming in July to "more than 10%." He then extended the ambition: “we are targeting to maintain a 10% average growth rate in adjusted net profit over the next 5 years” — Jose Sanchez Galán, Chairman and CEO · 2026-10-21. Compare that with the July call, when the same man was “comfortable reaffirming our guidance for more than 8% growth in the net profit” — Ignacio Galán, Chairman and CEO · 2026-07-22 — and even hinting that "after summer, we can give even better news." He delivered on the hint. The engine is unmistakable. Adjusted EBITDA rose 7% on the back of networks up 15% to EUR 6,430 million, now 54% of the group total, with the regulated asset base at EUR 56 billion, up 14%. Transmission RAB is up 31% to EUR 17 billion; distribution up 8% to nearly EUR 40 billion; the U.K., U.S. and Brazil together are 83% of the total. Capital deployment is running at a record pace — EUR 10.1 billion in nine months, more than EUR 15.5 billion over twelve — with 62% of it going into wires.

we expect to increase our regulated base by around 60% up to 2030, reaching more than EUR 90 billion, driven by huge investment requirements
Jose Sanchez Galán, Chairman and CEO · 2026-10-21

That is the whole investment case in one sentence, and the drivers are new money rather than repriced old money: the U.K.'s RIIO-T3 kicking in from April, NECEC fully commissioned in January, new rates in New York and Connecticut, Brazilian tariff resets, and a step-change in the contribution from transmission that barely existed a few years ago. Leverage held at 3.4x net debt/EBITDA on EUR 54.6 billion of debt, comfortably BBB+, with the interim dividend up 8.7% to EUR 0.275.

The wrinkle: buying high, selling low

Strip out networks and the picture inverts. Power and customers EBITDA fell 2% to EUR 5,359 million; Iberia alone was down 4.6% to EUR 2.9 billion. The cause is the most interesting thing on this call, and it is a genuine company-specific margin story rather than sector boilerplate:

We have been selling at '25 prices, but procurement cost in this quarter has been much higher. We are already selling at higher prices, which will help to offset the increase in procurement costs.
Jose Armada, Chief Financial Officer (CFO) · 2026-10-21

The mechanism is almost poetic. Demand growth — the very thing Iberdrola has spent 25 years preaching — meant its own contracted renewable output was insufficient, forcing it to generate on gas or buy in the market at 2026 prices to honour 2025-priced retail contracts. Success became a cost. Little wonder procurement cost surged into the top ranks of this quarter's company keywords after barely registering in the prior twelve, alongside the persistent Iberian drag from an increase in ancillary services that management is formally appealing to the regulator. Trimming that exposure is now a stated priority — they will fight to have it treated as a fixed, regulated cost. Crucially, this is a timing problem with a dated cure: contracts renewed through late 2026 reprice into 2027, and Galán was explicit that the benefit "is expected to materialize from '27 onwards." The risk is that 2027 is now doing an enormous amount of work in the equity story.

Electrification: tailwind for the grid, tax on the retailer

Iberdrola's framing has subtly hardened. Data centres are no longer a growth opportunity to chase; they are demand to be facilitated. That posture is years old — in February the Chairman put it bluntly:

there are people who have been dreaming to become data centers builders. We are already data center facilitators.
Jose Sanchez Galán, Chairman and CEO · 2026-02-25

The number behind it has moved: from roughly 12 TWh of PPAs signed with hyperscalers a year ago (“we are already PPAs per annum more than 12,000 -- 12 terawatt hours” — Jose Sanchez Galán, Chairman and CEO · 2026-05-02) to nearly 14 TWh today, with three to four TWh added annually and more than half in the U.S. Here is the contrast worth holding onto. On the Know Trend tape, AI data center is a twelve-month advancer (+0.53, 41 names up versus 13 down) but a ninety-day disaster (-5.6%, 6 up versus 48 down) — the market has spent the autumn de-rating the builders. Iberdrola sits on the other side of that trade: it does not need AI capex to be a good business, only for data centres to plug in, which converts into rate-base additions its regulators pre-approve. The Spanish royal decree on data centre development was treated as a scheduling detail, not a threat. Policy is broadly cooperative. Spain's removal of the 7% generation tax (phased to 2028), the scrapping of the investment cap linked to GDP, and improved distribution incentives should take Spanish network capex to about EUR 1.2 billion in 2027, more than 50% above 2025. The U.K.'s new government zero-rated VAT on electricity and is pushing accelerated grid connections with up to 100bp of extra return for speed. The U.S. secured $2.2 billion of New York capex through May 2027, with Maine's rate case due to close in April 2027.

Finland, discipline, and the argument that vanished

The Caruna acquisition is progressing on script: EU antitrust cleared, FSR notification filed, Finnish FDI under review, closing early 2027. Management frames it as the template — a 1.5-million-customer Finnish distributor with 7% net profit growth expected for a decade, accretive from year one, funded by the roughly EUR 1 billion Mexican thermal capital gain now sitting in discontinued operations. Asked about further M&A, Galán was pointedly boring: "let's first complete Caruna" and integrate, then think. Finland, notably, is not a market he bought for its current grid but for its future one, with Google's EUR 15 billion data centre commitment cited as the proof point. What is quietly missing is more telling. For two consecutive calls — February and May — the Spanish blackout and Red Eléctrica were a set piece: “following the blackout Red Electrica has doubled the use of combined cycle plants” — Jose Sanchez Galán, Chairman and CEO · 2026-05-02, he argued, and those costs "should be recognized as regulated cost as it is already in other countries." That campaign has evaporated from the script. What remains is a technocratic aside on the proposed capacity market and the need for synchronous power — no adversary, no blame. The fight has been refiled as a regulatory process. So the read: Iberdrola is a company whose five-year story has quietly become arithmetic rather than narrative — a increasing contribution from pumped hydro, a RAB compounding toward EUR 90 billion, and a retail squeeze that management can date to the quarter it ends. Even the small slips are reassuringly mundane: the Chairman quoted fixed-rate debt at 70% early in his remarks and 78% minutes later. The delivery, as ever, was smoother than the detail.