Alliant Energy's Strategic Data Center Growth: A Catalyst for Long-Term Earnings Expansion

Alliant Energy's strategic pivot toward data center infrastructure has positioned it as a key player in the energy transition, with a 2–4 gigawatt (GW) pipeline of contracted demand driving a re-rating of its long-term earnings potential. While near-term execution risks-such as rising capital expenditures and operational costs-have led to a Q3 2025 earnings miss, the company's alignment with regulatory tailwinds and high-margin load growth suggests a durable path to 7–8%+ compound annual growth in 2027–2029. This analysis dissects the interplay of risks and opportunities, emphasizing how Alliant Energy's infrastructure investments and regulatory clarity could unlock value for shareholders.

Data Center Demand: A High-Margin Growth Engine

Alliant Energy's contracted data center demand has surged to 3 GW, a 50% increase from prior levels, driven by agreements with hyperscalers like QTS and Google, according to the company's Q3 2025 results and 2026 guidance. This load growth is projected to elevate peak energy demand by 50% by 2030, necessitating a 17% increase in capital expenditures to $13.4 billion for 2026–2029, as reported in the Q3 2025 results and 2026 guidance. While this raises short-term financial pressure, the economics of data center service agreements-characterized by long-term, fixed-price contracts-offer stable, inflation-protected cash flows. For context, the company's 2025 ongoing earnings guidance of $3.17–$3.23 per share reflects a 23.3% year-to-date increase in earnings, underscoring the resilience of its core business, as reported in the Q3 2025 results and 2026 guidance.

The 2–4 GW pipeline further amplifies this potential. With projects already under construction in Cedar Rapids, Iowa, and Beaver Dam, Wisconsin, Alliant Energy is leveraging state-level incentives and tax credits to accelerate infrastructure deployment, as detailed in the Q2 2025 slides. These projects, supported by Energy Supply Agreements (ESAs) and Individual Customer Rate (ICR) approvals, are expected to contribute to a 9–10% compound annual growth rate (CAGR) in electric sales from 2025 to 2030, as noted in the Q2 2025 slides. This trajectory outpaces traditional utility growth rates and positions Alliant Energy as a beneficiary of the digital infrastructure boom.

Regulatory Tailwinds and Execution Risks

Alliant Energy's growth is underpinned by regulatory alignment. State regulators in Iowa and Wisconsin have approved rate mechanisms to recover costs associated with data center infrastructure, ensuring that capital investments translate into ratebase expansion. For example, the QTS Madison 900-megawatt agreement includes provisions for cost recovery, mitigating the risk of stranded investments, according to the Q3 2025 results and 2026 guidance. This regulatory clarity is critical, as data center projects require upfront infrastructure spending before revenue realization.

However, near-term risks persist. The Q3 2025 earnings report revealed a U.S. GAAP EPS of $1.09, down from $1.15 in the same period in 2024, due to higher operational and maintenance expenses linked to planned maintenance and new energy resource additions, as reported in the Q3 2025 results and 2026 guidance. While these costs are temporary, they highlight the challenge of balancing capital allocation between growth projects and operational efficiency. Additionally, the 17% increase in capital expenditures could strain liquidity if project timelines slip or cost overruns occur.

Valuation and Long-Term Outlook

Despite these risks, Alliant Energy's stock remains attractively valued. The company's 2026 earnings guidance of $3.36–$3.46 per share implies a 6.6% increase over 2025, with a dividend target of $2.14 per share (a 5.4% hike) signaling confidence in cash flow sustainability, as reported in the Q3 2025 results and 2026 guidance. Analysts project that the 2–4 GW pipeline could drive earnings per share growth of 7–8% annually from 2027 onward, assuming regulatory and construction timelines hold, according to the Q3 2025 results and 2026 guidance. This aligns with broader industry trends, as data centers account for 6% of U.S. electricity demand and are expected to grow at a 15% CAGR through 2030, as reported in the Q3 2025 results and 2026 guidance.

The stock's resilience-despite the Q3 miss-further underscores investor confidence. Shares have traded within a 12-month range of $58–$68, with a current price of $64.50 reflecting a forward P/E of 18.5x, below the utility sector average of 21x, according to the Q3 2025 results and 2026 guidance. This discount may narrow as data center contributions to earnings become more pronounced.

Conclusion

Alliant Energy's data center strategy exemplifies the intersection of regulatory foresight and infrastructure demand. While near-term execution risks-such as rising costs and project complexity-pose challenges, the company's 2–4 GW pipeline and high-margin load growth create a durable earnings foundation. For investors, the key question is not whether Alliant Energy can grow, but whether it can execute its capital plan efficiently. Given its regulatory tailwinds and disciplined approach to capital allocation, the answer appears increasingly affirmative.