Southern Company (SO Quick QuoteSO - Free Report) reported a 59% year-over-year increase in electricity usage by data centers during the third quarter of 2026, giving investors a clearer view of how large technology customers are affecting its core utility business. This increase reflects power being consumed, rather than merely demand anticipated under new contracts. As artificial intelligence (AI) and cloud computing expand, that distinction matters for assessing the timing of utility revenue growth.

The utility's Nov. 5 earnings materials showed data center usage rising 52% for the first nine months of 2026. Management attributed the trend primarily to accelerating electricity consumption as data center customers ramped up their operations. Across its service area, weather-normalized retail electricity sales grew 3.5% in the quarter and 2.7% year to date, with gains across residential, commercial and industrial customer classes.

Commercial electricity sales rose 7.3% on a weather-adjusted basis in the quarter compared with the same period in 2025, making that category a principal source of demand growth. Southern Company also reported approximately 15,000 new residential electric customers during the quarter. These figures suggest that the increase is not limited to data centers, though technology-related demand is a major driver within the commercial category.

Signed Contracts Point to a Larger Demand Pipeline

Southern Company ended the quarter with approximately 21 gigawatts of signed large-load contracts, according to its earnings presentation and call. Alabama Power and Georgia Power each added about 2 gigawatts of contracted load since the second quarter. Management also identified another 7 gigawatts of potential large-load business in late-stage discussions across Alabama, Georgia and Mississippi.

Contracted capacity should not be confused with electricity already delivered. Large projects can require years to reach full operating levels and prospective contracts may never be finalized. Still, the gap between signed commitments and current consumption gives investors a way to track how much additional demand could emerge as facilities begin operating or expand.

The company said its large-load agreements include minimum billing provisions intended to protect existing customers even when a new customer's actual power use is below expectations. Such provisions could make investment recovery less dependent on how quickly a particular data center ramps up. Investors will need to monitor how those contracts perform as electricity delivery and infrastructure costs increase.

Power Demand Adds to Investment Requirements

Serving major new customers also requires generation, transmission and fuel infrastructure. During the earnings call, chief financial officer David Poroch outlined approximately $4 billion of identified investment beyond the company's $81 billion base capital plan. That includes upgrades at existing natural gas facilities, nuclear capacity enhancements associated with a Google partnership and a natural gas pipeline expansion.

Southern Company said its five-year capital plan could potentially approach $100 billion if additional investment opportunities, including company-owned generation projects under consideration in Alabama and Georgia, advance and secure necessary regulatory approvals. That figure is a possibility, not an authorized spending commitment. Greater capital spending may eventually expand the company's regulated asset base, but it could also increase financing needs and pressure credit measures.

Management projected approximately $2 billion of remaining equity needs through 2030 after financing actions already completed. The company aims to reach a 17% funds-from-operations-to-debt ratio by 2029. Those objectives place financing discipline alongside electricity demand as an important measure of whether the growth strategy is delivering economic value.

Higher Earnings Bring a Test of Cost Control

Southern Company's third-quarter operating revenues reached approximately $8.8 billion, up 13% year over year. Reported earnings increased to $2 billion, or $1.77 per share, from $1.7 billion, or $1.55. Adjusted earnings per share, which exclude specified items, rose to $1.94 from $1.60.

The company attributed improved adjusted earnings partly to customer growth, higher usage, warmer weather and increased contribution from Southern Power. Higher operating expenses, taxes other than income taxes and additional shares outstanding offset some of those benefits. Because weather also contributed to the quarter's performance, investors should avoid treating the full earnings increase as a direct result of data center demand.

Management expects full-year 2026 adjusted earnings of approximately $4.70 per share, reflecting its fourth-quarter estimate of 30 cents and exceeding the upper end of the original $4.50-$4.60 guided range. It has also committed to holding base rates flat in Alabama and Georgia until at least 2029, pointing to benefits from large-customer growth. The durability of those benefits will depend on actual load additions, regulatory decisions, construction costs and the allocation of expenses between new and existing customers.

For investors, the next meaningful evidence will be continued growth in electricity delivered to data centers, progress converting the 21-gigawatt contract portfolio into usage and updates to the capital and financing outlook. Southern Company's demand figures show that new loads are already material. Whether they produce attractive returns without eroding customer affordability or balance-sheet strength remains the central question. Currently, SO carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other utilities are also positioning themselves to meet rising electricity demand. American Electric Power (AEP Quick QuoteAEP - Free Report) recently announced a $100 billion five-year capital plan and projected 84 gigawatts of incremental contracted load by 2031. To accommodate growing demand from data centers and other large electricity customers, American Electric Power is expanding its infrastructure investments. These developments position American Electric Power alongside Southern Company in addressing rising power requirements.

Dominion Energy (D Quick QuoteD - Free Report) is also responding to increasing electricity infrastructure needs in Virginia, a major data-center market. The growing concentration of data centers in the region underscores the importance of Dominion Energy's investments in power generation and grid reliability. For Dominion Energy, meeting rising electricity demand while managing infrastructure costs remains an important priority.

Meanwhile, Duke Energy (DUK Quick QuoteDUK - Free Report) is pursuing a generation expansion program targeting 16 gigawatts of additional capacity by 2031. Duke Energy is investing in generation and infrastructure to support customer growth, reliability and increasing electricity consumption. Like Southern Company, Duke Energy faces the challenge of balancing substantial capital requirements with customer affordability and long-term earnings growth.