U.S. utility capital expenditure and electrical equipment: Utility capex remains a powerful electrification tailwind, led by generation and transmission investment

Overview

This is Bernstein’s 2Q26 update to its U.S. utility-capex monitor, assessing near- and long-term spending trends and their implications for electrical-equipment manufacturers and contractors. The central conclusion is that capex momentum remains strong and increasingly generation-led, though execution delays and ratepayer-affordability concerns may constrain the near-term narrative.

Core views

Utility capex grew 22% year on year in 2Q26, but the result was 9 percentage points below normal seasonal patterns and down 2% quarter on quarter. Bernstein notes that the 1Q comparison was unusually difficult because first-quarter spending had been well above seasonal norms. Consensus expects 3Q capex growth of 35% year on year, versus historical seasonal growth of 5%, while 4Q estimates sit below seasonality; Bernstein therefore sees potential upside to the Street’s 23% full-year growth expectation. Expectations for 2026 growth have eased from 25% in 1Q to 23%, broadly similar to 2025, which the report attributes to spending being pushed out amid construction, regulatory, permitting and related delays. The delayed-spend interpretation is supported by 2027 expectations rising by 4 percentage points since the start of the year to 11% year-on-year growth. Longer-term utility plans continued to rise, though less dramatically than in the prior quarter. Multi-year capex budgets were 22% higher year on year in 2Q, versus 24% in 1Q, and utilities raised plans by 1.4%, or $17.6 billion, in the quarter—roughly in line with historical patterns. Most incremental spending was directed to generation, including approximately $7 billion of additional 2027-30 generation investment at NextEra. Bernstein expects multi-year generation spending to grow 49% year on year and transmission spending 18%, while distribution growth remains 10%. Relative to 1Q, generation expectations increased by 4 percentage points and transmission by 1 point, while distribution was unchanged. This spending mix matters because generation and transmission are taking share from distribution: distribution has lost 5 percentage points of capex share since 2024, while generation gained 6 points of multi-year-plan share versus two years ago. For 2026, utilities are expected to grow capex most rapidly in generation, up 36% year on year, and transmission, up 25%; distribution is expected to grow 14%, a marked re-acceleration from 6% last year. Aggregate 2026 capex growth is described as about three times the industry’s historical 8% pace. The report links this higher capital intensity to growing electricity demand: Edison Electric Institute expects investor-owned utilities to invest $1.4 trillion during 2026-30, equal to the amount invested over the preceding decade. Grid Strategies data show the five-year national peak-demand forecast CAGR rose from 0.8% to 3.7% between 2022 and 2025, while utility integrated resource plans lifted projected load growth through 2035 to 2.0% from 1.9%. Consensus utility capital intensity is expected to rise from 54% in 2026 to 56% in 2027. Data centers and other large loads are the principal source of demand growth. Bernstein’s tracker reached 775 GW of cumulative utility large-load capacity in 2Q, up 7% from 726 GW in 1Q and equal to 57% of current U.S. generation capacity. The largest quarterly increase came from Sempra’s Oncor interconnection queue, which reached 298 GW from 289 GW. Numerous utility updates point to a substantial pipeline: AEP highlighted 69 GW of contracted load by 2030, up from 63 GW in the prior quarter; FirstEnergy’s contracted data-center pipeline rose 50% quarter on quarter to 6.4 GW; Dominion’s contracted data-center capacity reached roughly 54 GW, up 5.3 GW from 1Q; and PPL’s Pennsylvania pipeline reached about 32 GW, with signed agreements at 31.8 GW and more than 6.5 GW under construction. The report stresses that load opportunities are not automatically capex outcomes. Utilities are increasingly framing large-load agreements, minimum bills, collateral, take-or-pay structures and customer-specific tariffs as mechanisms to prevent new demand from raising existing customers’ bills. Examples include AEP’s forecast of up to $16 billion of customer cost offsets from executed take-or-pay agreements, DTE’s estimated $300 million annual affordability benefit from the Oracle data center once fully ramped and approximately $1.7 billion of lifetime benefit from Google, and CMS’s indication that 1 GW of new load could reduce customer rate CAGR by about 2% while requiring $2-5 billion of incremental capital. Bernstein notes that, with mid-term elections approaching, mentions of “affordability” on utility calls have exceeded mentions of “data center” this year. This creates a near-term overhang even as utilities representing 80% of U.S. delivered power pledge to protect ratepayers. For electrical-equipment and infrastructure providers, Bernstein argues that the capex mix is especially supportive of generation-exposed names. Generation accounted for 58% of intended-spend increases in 4Q, 80% in 1Q and 99% in 2Q; the report therefore identifies GEV, ENR and PWR as more favorably positioned than distribution-exposed names, with transmission investment expected to follow new generation builds. Within U.S. machinery, Bernstein rates Eaton and Hubbell Outperform and Quanta Services Market-Perform, citing attractive multi-year end-market growth, data-center bottlenecks, high equipment and labor demand, and healthy backlogs. It also rates Vertiv, nVent and GE Vernova Outperform.

Analysis framework

Bernstein aggregates quarterly utility capex, consensus estimates, company capital plans and management commentary, then compares actual spending with seasonal patterns and prior-quarter forecasts. It separates spend into generation, transmission and distribution, tracks plan revisions and large-load pipelines, and maps the resulting demand outlook to the utility-capex exposure of covered electrical-equipment and contractor businesses.

Methodology notes

• Industry AnalysisSupply-demand framework

  Utility capex and large-load demand tracking

  The report combines utility spending plans with demand indicators such as data-center pipelines to assess how rising power needs translate into investment in generation, transmission and distribution.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Utility capex exposure by electrical-equipment and contractor business

  Bernstein links utility investment categories to the revenue outlook for suppliers and contractors, emphasizing that generation and subsequent transmission investment should benefit companies with relevant exposure.

• Industry AnalysisVolume-price decomposition

  Capex growth by spending category

  The analysis breaks aggregate capital expenditure into generation, transmission and distribution to identify which investment categories are driving growth and shifting the sector’s spending mix.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Eaton (ETN)

  Covered electrical-equipment company positioned to benefit from electrification and utility-capex growth.

  Strengths

  Bernstein cites attractive multi-year end-market growth, data-center demand, persistent bottlenecks and healthy backlogs.

  Comparison

  Rated Outperform; target price $534.

  Risks

  Utility capex delays and affordability-related constraints could defer spending.

• Hubbell (HUBB)

  Covered electrical-equipment company with utility-capex exposure.

  Strengths

  Bernstein cites attractive multi-year end-market growth, high equipment and labor demand, and healthy backlogs.

  Comparison

  Rated Outperform; target price $584.

  Risks

  Utility capex delays and affordability-related constraints could defer spending.

• Quanta Services (PWR)

  Covered contractor expected to benefit from generation and follow-on transmission investment.

  Strengths

  The report identifies PWR among generation-exposed names positioned for utility spending increases.

  Comparison

  Rated Market-Perform; target price $748.

  Risks

  Construction, regulatory and permitting delays may push out project spending.

• Vertiv (VRT)

  Covered electrical-equipment company benefiting from data-center and electrification demand.

  Strengths

  Bernstein identifies persistent data-center bottlenecks, high demand for equipment and labor, and healthy backlogs.

  Comparison

  Rated Outperform; target price $368.

• nVent (NVT)

  Covered electrical-equipment company benefiting from utility-capex and electrification tailwinds.

  Strengths

  The report sees attractive multi-year end-market growth and supportive data-center demand.

  Comparison

  Rated Outperform; target price $229.

• GE Vernova (GEV)

  Covered generation-exposed company identified as especially aligned with the utility capex mix.

  Strengths

  Generation has driven the majority of utility spending-intention increases for three consecutive quarters.

  Comparison

  Rated Outperform; target price $1,298.

  Risks

  Generation-project execution, permitting and affordability pressures could delay demand conversion.

Key data

• 2Q26 utility capex growth22% Y/Y9 percentage points below seasonal and down 2% quarter on quarter.
• 3Q26 consensus utility capex growth35% Y/YVersus 5% historical seasonal growth.
• 2026 full-year utility capex growth expectation23% Y/YDown from 25% in 1Q; Bernstein sees potential upside because 4Q estimates are below seasonal.
• 2Q26 multi-year capex-plan increase$17.6B / 1.4% Q/QPlans were 22% higher year on year, with incremental spending concentrated in generation.
• 2026 capex growth by categoryGeneration 36%; transmission 25%; distribution 14%Distribution re-accelerates from 6% growth last year.
• Large-load pipeline775 GWUp from 726 GW in 1Q and equivalent to 57% of current U.S. generation capacity.
• IOU investment forecast$1.4T in 2026-30Equal to the investment made over the prior 10 years, according to Edison Electric Institute.

Impact & implications

Bernstein concludes that the direction and composition of utility investment favor companies exposed to generation, transmission equipment and infrastructure work. The opportunity is underpinned by accelerating large-load demand, but its realization depends on construction, permitting, regulatory approvals, financing and contractual structures that keep ratepayer bills affordable.

Risks

• Construction, regulatory, permitting and related execution delays may push utility spending into later periods.
• Ratepayer-affordability concerns and associated political or regulatory pressure may constrain data-center-related investment.
• Future data-center opportunities depend on utilities’ ability to develop required generation and transmission resources and secure financing on acceptable terms.

What to watch

• Whether 3Q utility capex reaches the consensus 35% year-on-year growth forecast and whether below-seasonal 4Q estimates are revised higher.
• Further generation and transmission capex-plan revisions, particularly following data-center and other large-load commitments.
• Conversion of utility large-load pipelines into signed agreements, approved tariffs, interconnection milestones and construction.
• Utility disclosures on affordability protections, customer bill effects and regulatory approvals for large-load projects.