Contradictions Emerge on Hyperscaler Deal Timing, Demand Response, and Data Center Interconnection in Q3 2025 Earnings Call

Date of Call: None provided

Financials Results

• EPS: GAAP $2.97 per share; adjusted operating earnings $3.04 per share, $0.30 higher YOY

Guidance:

• Full-year stand-alone adjusted operating earnings narrowed to $9.05–$9.45 per share (2025).
• Combined-company guidance and modeling tools to be provided on/around the typical Q4 call in late February (post-Calpine close).
• Expect $14 billion of liquidity after Calpine close.
• Capital-allocation priorities: maintain strong balance sheet, target return-to-metrics by year-end 2027, deliver ≥10% annual dividend growth, pursue growth with double-digit unlevered returns, and $600M remaining buyback.

Business Commentary:

• Financial Performance and Earnings Growth:
• Constellation Energy Corporation reported GAAP earnings of $2.97 per share and adjusted operating earnings of $3.04 per share for Q3 2025, higher than the previous year.

• This growth was driven by fewer nuclear outage days and higher capacity revenues from the PJM capacity auction.

• Data Economy and Hyperscale Deals:

• The company reported progress in transactions with hyperscalers, indicating that deals are expected to be completed soon.

• This is attributed to increased maturity among hyperscalers in understanding the market, along with their need for large loads of energy.

• Nuclear Power and Capacity Factor:

• Constellation's nuclear fleet achieved a fleet-wide capacity factor of 96.8% for Q3 2025, significantly higher than the industry average.

• This high capacity factor is due to exceptional operational efficiency and reliability.

• Power Market Dynamics and Pricing:

• The company observed upward pressure on power prices, with notable strength in the outer years, indicating a tight supply-demand situation.
• This trend is attributed to the growing demand for power driven by data center expansion and fewer expected retirements of traditional power sources.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted strong operational performance: "GAAP $2.97 per share and adjusted operating earnings of $3.04," fleet-wide capacity factor of 96.8%, "market is hotter now than ever" for data-economy demand, and they narrowed full-year EPS guidance to $9.05–$9.45, signaling confidence.

Q&A:

• Question from Shahriar Pourreza (Wells Fargo): Are you still confident of announcing another hyperscaler deal by year-end or should we assume early next year? Will these deals be structured front-of-meter versus behind-the-meter? Are you seeing FOM and BTM pricing converge and how do gas deals compare to nuclear?
  Response: Focused on front-of-meter deals; expect hyperscaler transactions to close soon (likely before the next quarter call) with interconnection timing as the gating factor.

• Question from Steven Fleishman (Wolfe Research): Any read-through on potential delay in Calpine asset sale process? Anything we should read into it? And given many new entrants to power, how confident are you in capturing new customers?
  Response: No material delay concern; they're not rushing divestitures, will target the right assets post-regulatory approvals, and are confident they can capture customers given strong, growing data-center demand and Constellation's available offerings.

• Question from Jeremy Tonet (JPMorgan): Can you provide an update on Three Mile Island progress? Also, with recent energy price moves, do you see any impact on contract discussions?
  Response: Three Mile Island is progressing well with no new surprises; rising energy and capacity prices strengthen pricing expectations and improve the environment for asset sales and contracts.

• Question from Andrew Weinfeld (Scotiabank): Regarding Maryland, the 700 MW of natural gas capacity — where would those units come from and timing for redeployment? Separately, has federal activity changed your appetite for new nuclear and what would you need to move forward?
  Response: The 700 MW are lightly used units in the Midwest/New England that can be refurbished and relocated quickly; for new nuclear they need durable PPAs, clear deliverable cost/constructability and strong partners—management remains cautiously optimistic.

• Question from David Arcaro (Morgan Stanley): Update on demand response initiatives and data-center willingness to participate? Also, what's your view on retail margins in PJM?
  Response: Demand-response pipeline is strong — partnering with Grid Beyond to target ~1,000 MW via longer-tenor commercial deals; retail margins remain at the upper end of historical ranges.

• Question from Agnieszka Storozynski (Seaport): With a large generation portfolio (pro forma Calpine), are you uneasy about signing many of these units and about the visibility/quality of earnings? Are other announced deals comparable in firmness to yours?
  Response: Not uneasy — management believes they can execute and that their offers (including demand response and relocatable assets) outcompete others and provide strong visibility.

• Question from James West (Melius Research): How are you deciding which assets to lock into long-term PPAs versus keep for merchant exposure given data-economy demand?
  Response: They will continue pursuing long-term PPAs while monitoring scarcity value and may adjust pricing or pace as needed; not pausing long-term sales today.

• Question from Paul Zimbardo (Jefferies): Can you elaborate on opportunity for uprates/operates and interconnection (Limerick/LaSalle/Calvert Cliffs)? Will uprates be a priority over new builds?
  Response: They've identified ~900–1,000 MW of uprates (LaSalle, Limerick, Calvert Cliffs ~190 MW); uprates are high-return, low O&M investments, attractive and a near-term priority alongside other options.

Contradiction Point 1

Hyperscaler Deal Timing and Structure

It highlights inconsistencies in the company's expectation and commitment regarding the timing and structure of deals with hyperscalers, which are crucial for business growth and investor expectation.

Regarding hyperscale deals, do you still expect to announce another by year-end? Is the deal structured in front of the meter or behind the meter? - Shahriar Pourreza (Wells Fargo)

20251107-2025 Q3: We are focused exclusively on front-end meter deals. The interconnection process can be time-consuming, but we expect deals to be completed soon. We're optimistic about completing these transactions before the next earnings call. - [Joseph Dominguez](CEO)

How does pursuing more front-of-the-meter deals impact value creation and speed to market compared to behind-the-meter solutions, and are there any other considerations? - Jeremy Tonet (JPMorgan Securities)

2024Q3: Our foot is on the accelerator pressed all the way down on deals, whether they're front or behind the meter. We're pursuing both. - [Joseph Dominguez](CEO)

Contradiction Point 2

Demand Response Participation and Market Conditions

It demonstrates a shift in the company's outlook on the demand response market, which affects operational strategies and financial expectations.

Can you explain your demand response efforts and the data center initiative? - David Arcaro (Morgan Stanley)

20251107-2025 Q3: We're developing AI-enabled demand response, using commercial agreements to curtail during high-demand hours. This provides significant capacity and is progressing well. We expect it to look like a new nuclear plant in terms of capacity. - [Joseph Dominguez](CEO)

What was the demand response participation in the past auction, and what trends are expected? - Jeremy Bryan Tonet (JPMorgan Chase & Co, Research Division)

2025Q2: Demand response participation was limited in the past due to a low Electric Load Carrying Capacity (ELCC) for peak hours, causing financial disincentives. With the ELCC improvement, demand response will be more economically viable in future auctions, leading to increased participation. - [Joseph Dominguez](CEO)

Contradiction Point 3

Data Center Interconnection and Market Conditions

It highlights changes in the company's perspective on the interconnection timeline and market conditions for data centers, which can impact strategic decisions and investor expectations.

Are you still confident in announcing another hyperscale deal by year-end? Is the deal structured in front of or behind the meter? - Shahriar Pourreza (Wells Fargo)

20251107-2025 Q3: We are focused exclusively on front-end meter deals. The interconnection process can be time-consuming, but we expect deals to be completed soon. We're optimistic about completing these transactions before the next earnings call. - [Joseph Dominguez](CEO)

Can you provide details on the interconnection timeline for the pending data center deal and share the current trends in PJM interconnection timelines from utilities? - Steven Isaac Fleishman (Wolfe Research, LLC)

2025Q2: Specific interconnection timeline for the data center deal in question is not disclosed, but efforts are underway and expected to be completed by the end of the year. - [Joseph Dominguez](CEO)