On August 7, Kodiak Gas Services (NYSE:KGS) held its second-quarter 2026 earnings call, and the numbers backed up the excitement. Revenue climbed 21% year-over-year to $391 million, while adjusted EBITDA hit a company record of $217 million, up 22% from a year earlier. Adjusted net income landed at $54 million, or $0.55 per diluted share. Management used the call to lay out how Kodiak plans to turn a compression business already running near full capacity into a much bigger power infrastructure company by 2030.
Bull Case: Compression Runs Near Full Capacity
Kodiak’s core contract compression business kept climbing. The company ended the quarter with 4.4 million revenue-generating horsepower and fleet utilization of 98.2%, and it priced that equipment at $23.80 per horsepower, a 4.5% increase from a year ago. Compression infrastructure adjusted gross margin reached 70% for a second straight quarter, up 170 basis points year-over-year, even as the company absorbed higher lube oil costs tied to the war in Iran. Kodiak has already locked in large horsepower compressor packages for 2027 through 2029 and is roughly 50% contracted for next year’s deliveries, giving it unusual visibility into future revenue.
The bigger story is power. Kodiak signed a multiyear turbine supply deal with Baker Hughes for 1 gigawatt of capacity by 2030, with an option to grow that to 1.8 gigawatts, and it has secured about 1.8 gigawatts of power generation overall toward its 2-gigawatt target. The current power fleet is about 90% utilized, and the company executed a limited notice to proceed on a West Texas data center project tied to a hyperscaler, invoicing an initial deposit while it negotiates a long-term contract to begin supplying power in early 2027. Total capital spending among the top four hyperscalers rose roughly 80% year over year in the quarter, a demand backdrop Kodiak is positioning to serve.
Bear Case: The Power Bet Still Costs Money
Power infrastructure remains far less profitable than compression for now. The segment generated $33 million in revenue with an adjusted gross margin of 65%, well below compression’s 70%, and building it out is expensive: Kodiak estimates roughly $1.2 million per megawatt before balance of plant costs. Power infrastructure growth capital spending alone was $134 million in the quarter. Net debt stood at about $2.6 billion at quarter-end, and while an $836 million equity raise in May pushed leverage down to 3.1 times, a company-record low, that debt load will grow as gigawatt-scale turbine and power projects come online through 2030. The West Texas data center deal, still under negotiation, also underscores how much of Kodiak’s power growth depends on locking in long-term contracts with a small number of hyperscale counterparties.
Funds Are Adding, Skeptics Persist
Hedge fund ownership of Kodiak rose from 34 funds to 38 in the most recent quarter, which points to growing institutional conviction. Short interest sits at 9.48% of float, a level that suggests a real bear camp still exists. The stock trades at a forward P/E of 30.40 as of August 17, pricing in substantial growth from the power buildout. That combination shows a market that likes the story but has not fully settled on how much of it to pay for.
Two Businesses, One Balance Sheet
Kodiak heads into the back half of 2026 with a compression business firing at record margins and a power business still finding its footing. Management raised full-year guidance for adjusted EBITDA to $830 million to $860 million and discretionary cash flow to $570 million to $600 million, a vote of confidence in the current run rate. The open question is whether the turbine agreements and hyperscaler pipeline convert into signed, high-margin power contracts fast enough to justify the capital already committed to reaching 2 gigawatts by 2030.
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