The Southern Company (SO) Earnings

Management highlights

### Large Load and Data Center Growth - Southern Company's Southeast service territory sees sustained extraordinary economic development and power demand growth, driven primarily by data centers and other large industrial customers. In Q2 2026 alone, the firm added 6 gigawatts of newly contracted large load, bringing total contracted large load across electric subsidiaries to over 17 gigawatts scheduled to come online by the mid-2030s. - The prospective large load project pipeline remains well above 75 gigawatts, with 8 additional gigawatts in late-stage development, 3 gigawatts of which are expected to be finalized in the near term. - Georgia Power signed a 3.2 gigawatt, 25-year power contract with OpenAI for a site near Savannah, Georgia, with phased service starting in 2028, including 1 gigawatt of flexible demand response to support grid reliability during peak demand. This is the first time Southern Company has implemented demand response of this scale for a data center project. - Q2 2026 saw nearly $14 billion in announced local investment and over 3,000 new jobs across the service territory, the second highest quarterly investment level on record. ### Infrastructure Development and Planning - Southern Company has already secured regulatory approval for 10 gigawatts of new company-owned generation (including thermal, battery, and solar) and hundreds of miles of new transmission lines to meet growing demand. Multiple new generation projects are currently under construction, with several on track for completion in coming quarters. - Active requests for proposals (RFPs) for additional generation resources are ongoing at both Alabama Power and Georgia Power to meet capacity needs in the early 2030s. Any new generation built through these RFPs would represent substantial incremental capital investment above the firm's current base capital plan, which does not yet include these potential opportunities. - The firm's large load contracting framework is structured to protect existing customers and investors: contracts require minimum bills that cover 100% of incremental costs to serve, termination payment provisions, and high credit quality collateral requirements, delivering tangible savings to existing residential and small business customers. Retail base rates are already locked stable in Georgia and Alabama until 2029. ### Financial Position and Capital Planning - The firm maintains a proactive, shareholder-friendly equity strategy to support capital needs and meet its long-term credit target of 17% funds from operations (FFO) to debt by 2029. In Q2 2026, Southern Company sourced an additional $700 million in equity via its at-the-market (ATM) program with forward contracts settling at the firm's discretion through 2028. - Total projected remaining equity need through 2030 has been reduced to $1.1 billion following recent equity issuances. ### Stakeholder and Regulatory Position - Southern Company recently joined the National Ratepayer Protection Pledge, aligning with its existing commitment to rate stability and reliable service for all customers.

Guidance

- Q2 2026 adjusted EPS came in at $1.13 per share, 13 cents above management's prior estimate and 21 cents higher than Q2 2025. First half 2026 adjusted EPS is $2.46, above year-to-date expectations. - Management now projects full year 2026 adjusted earnings will come in near or at the top of the existing guidance range of $4.50 to $4.60 per share, representing an upward lean from prior neutral positioning. Q3 2026 adjusted EPS is estimated at $1.65 per share. - The firm remains confident in its long-term outlook and expects to deliver results toward the top half of its long-term earnings trajectory, with sustained momentum for growth well into the next decade. - Incremental new generation capacity from ongoing RFPs, if approved, would start construction in the late 2020s (around 2028) and come online in 2031-2032, with an estimated capital cost of ~$2 billion per gigawatt of new capacity.

Segment performance

Southern Company does not break out full formal segment-level revenue in this call, but the following performance details are provided: 1) State-regulated electric utilities (Alabama Power, Georgia Power, Mississippi Power): Drove overall strong results, with customer growth, increased sales, and higher AFUDC from construction projects. Weather-normalized retail electricity sales year-to-date 2026 were 2.3% higher than H1 2025, the highest growth in nearly 20 years. Residential added ~11,000 new customers in Q2, totaling 40,000 net new customers in the 12 months ending Q2. Weather-normalized commercial sales grew 7.4% in Q2 2026 vs Q2 2025, reaching 6% year-to-date growth. Data center usage was 55% higher year-over-year in Q2 and 49% higher year-to-date, with total system data center load now exceeding 1.2 gigawatts, up 500 megawatts from 2025. 2) Southern Company Gas: Contributed positively to year-over-year earnings improvement. 3) Southern Power: Supported overall results alongside regulated businesses, with opportunities to recontract expiring tolling agreements for hyperscale/ large load demand. 4) Complementary businesses (including Power Secure): Contributed positive earnings, with expanding distributed generation, backup generation, and bridge power markets.

Risks & headwinds

- Misinformation about data center projects on social media has created some political noise and localized pushback in parts of the Southeast, though management notes there is no statewide moratorium on data center development in Georgia or Alabama, and projects continue to move forward across the service territory. - Actual load ramp-up rates for new large data center projects can differ from initial projections, requiring close operational coordination with customers, though minimum bill contractual terms decouple revenue from near-term ramp variations. - All incremental generation investment is subject to regulatory review and approval by state public service commissions, so final capital upside depends on completing required regulatory processes and authorizations.

Analyst Q&A

• Q: Does the recent increase in contracted large load give Southern Company more regulatory optionality to extend rate stability for customers?

  A: Management confirmed the strong contracted pipeline provides greater long-term flexibility and confidence to deliver on earnings goals through the next decade. Alabama and Georgia already have extended rate stability in place, and the new load growth enhances optionality to continue this focus for customers. Georgia is already ~1 gigawatt over the recently approved capacity, so additional capacity will be processed through existing RFP frameworks. ---

• Q: How is Southern Company approaching opportunities to recontract Southern Power capacity as existing tolling agreements roll off, particularly for hyperscale demand?

  A: Management reports active conversations with creditworthy counterparties for recontracting expiring capacity, and these new contracts will cover both energy and capacity rather than just tolling. Upside pricing opportunities relative to original contract terms are expected, which will add long-term durability to the business plan. Disciplined, contract-first execution is still in place, with a full update on Southern Power opportunities expected later in 2026. ---

• Q: Is Southern Company interested in developing new nuclear capacity, potentially with government and hyperscaler cost/risk participation?

  A: Management notes new large-scale nuclear will be needed in the U.S. by the mid-2030s to meet growing demand, and Southern is working constructively with the current administration and other parties to advance new nuclear development. Southern itself will not be the next to build new nuclear, but is actively engaged in conversations with hyperscalers about their potential role in cost and risk sharing. ---

• Q: What is the collateral and credit structure for large load contracts like the OpenAI deal?

  A: All large load contracts follow four core protections: 25-year terms, minimum bills covering 100% of incremental cost, default provisions backed by collateral, and requirements to bring the overall credit position to at least A- equivalent. Collateral can include parent guarantees, lines of credit, or surety bonds, depending on counterparty credit quality. Total collateral across the entire 17 gigawatt contracted portfolio is ~$21 billion.