PG&E: Earnings guidance holds; how much room could data-center expansion and the strategic review create?

Why does the strategic review remain central to the valuation?

There are no significant new details on PG&E’s strategic review, which continues to follow the framework introduced in September: evaluating legislative and regulatory, financing, corporate structure and capital allocation options, with the aim of unlocking constrained value and improving credit quality. Shareholder returns and structural changes remain at the options-evaluation stage.
JPMorgan maintained its Overweight rating, saying the relatively low valuation, the full 2027 earnings-per-share growth path and potential additional shareholder returns together support an attractive long-term risk-reward profile. However, the bank considers major reform passed in a special session before year-end a low-probability upside scenario, given the difficulty of reaching consensus during the regular session and the limited time remaining.

PG&E’s third-quarter adjusted earnings per share were $0.41, below JPMorgan’s forecast and the median market expectation of $0.42, as well as the $0.50 reported a year earlier, a decline of 18% year over year. According to the year-over-year drivers presented in the report, capital investment contributed 3 cents, offset by a 1-cent drag from the reallocation of funds and an 11-cent drag from timing and other factors.
JPMorgan attributed the shortfall relative to its forecast mainly to non-core timing and other items. The company maintained adjusted earnings-per-share guidance of $1.64–$1.66 for 2026 and $1.78–$1.82 for 2027; the midpoints of the two ranges correspond respectively to the bank’s and market expectations of $1.65 and $1.80. The weaker quarter has not changed the annual earnings path presented by the company.

As of September 2026, PG&E’s data-center project pipeline stood at 12.87 GW, up 160 MW from June and 5.62 GW from the end of 2025. The quarter-on-quarter change was concentrated in the application and preliminary engineering stage, which rose by 150 MW to 8.35 GW; the construction stage increased by 100 MW to 240 MW, showing that some projects are moving into construction.
Project maturity has not improved across the board: the final engineering stage remained at 3.88 GW, while the stage with signed interconnection construction agreements fell by 90 MW to 400 MW. The large pipeline remains mostly at an early stage, and its conversion into actual construction depends on projects continuing to advance through each stage.
The report indicates capital expenditure of $500 million–$1.6 billion per 1 GW, corresponding to a reduction in electricity bills of at least 1%. JPMorgan therefore values not only the additional demand for electricity but also the opportunity for investment that can supplement the capital plan while lowering electricity bills.

JPMorgan sees the proposed decision on recovery of costs from the Kincade and Dixie wildfires on 13 November as an important test of the AB 1054 protection mechanism. The company also expects a final decision soon on the interim general rate adjustment for 2027, with a final decision on the more comprehensive rate review expected in May 2027; cost recovery and rate arrangements are important conditions for the earnings path.
Wildfire prevention operating metrics have improved: year to date, only three ignition incidents have caused fires exceeding 10 acres, and only one building has been destroyed in high-fire-risk events; the weather-normalized ignition rate has fallen 74% compared with 2017. Another potential saving comes from the ten-year undergrounding plan, which will undergo an OIES review in June 2027; the report says the plan could avoid approximately $6 billion in vegetation management and operations and maintenance costs.