Description

American Water Works’ REAL Pressure Point Is Rising Costs Versus Rate Recovery

American Water reported a solid 2025 performance, with adjusted earnings of $5.64 per share compared with $5.18 per share in 2024, placing results near the upper end of management’s expectations and reflecting 8.9% earnings growth. Revenue benefited from authorized rate increases, recently completed acquisitions, and organic customer growth. At the same time, higher operating and financing costs remained a meaningful offset, as operations and maintenance expense rose on employee-related costs and purchased power, while depreciation and interest expense increased in line with the company’s expanding investment base. A central element of the investment case remains the company’s regulated capital program. American Water invested approximately $3.2 billion in 2025 and continues to target long-term regulated rate base growth of 8% to 9%. The capital program is spread across a broad set of lower-risk infrastructure projects, including pipe replacement, treatment facility upgrades, PFAS remediation, lead service line removal, and smart meter deployment.