Iberdrola - Q1 FY2026 Earnings Analysis

Performance Highlights

Iberdrola reported Q1 FY2026 Adjusted EBITDA of €4,067M, up 2.4% year-on-year, and Adjusted Net Profit of €1,865M, up 11.4%, comfortably beating the prior-year adjusted base of €1,674M. Excluding an adverse foreign-exchange impact of €99M, underlying profit growth reached 17%, underpinned by revenue of €12,018M that was broadly in-line with the prior year on a reported basis.

The Networks segment was the primary earnings engine, with Adjusted EBITDA rising 9% to €2,048M as the regulated asset base grew 8% to approximately €53Bn, led by double-digit RAB expansion in the UK following full ENW consolidation and the NECEC commissioning in the US in January 2026. Power and Customers EBITDA eased 3% to €2,022M, with strong UK wind production up 41% and offshore wind output up 42% group-wide only partially offsetting non-recurrent ancillary cost headwinds in Iberia and a tough US comparison distorted by a €550M non-cash past-cost recognition in Q1 2025.

Management Outlook and Forward Catalysts

Management upgraded FY2026 Adjusted Net Profit guidance to more than 8% growth excluding asset-rotation capital gains, up from the prior more-than-6% target, citing record hydro reserves in Spain, an additional 2.7GW of generation capacity expected on-stream before year-end, and full Neoenergia consolidation following the completed minority buyout. Pro-forma Adjusted Net Debt stands at €50.3Bn post-Mexico disposal and Neoenergia transaction, with FFO to Adjusted Net Debt improving 360 basis points year-on-year to 24.8%, consistent with the group's BBB+ credit rating ambition.

The central investor debate for Q2 centres on whether the Power and Customers recovery in Iberia and the US materialises as management expects, reversing the non-recurrent headwinds that dragged Q1 results, and whether the RIIO-T3 UK allowance of approximately £14Bn and new US rate cases can sustain the Networks growth trajectory against an appreciation in the Brazilian real and US dollar that cost €142M in EBITDA this quarter.