# How AES Corporation makes money

CXProWealth Business Lens · AES Corporation (AES) · Q2 FY2026

Read from the 10-Q for the period 2026-04-01 to 2026-06-30, filed 2026-08-04 with the SEC (accession 0000874761-26-000144): https://www.sec.gov/Archives/edgar/data/874761/000087476126000144/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $3.4B (+17.0% on the year)
- Operating income: — (operating margin —)
- Net income: $426.0M (net margin 12.4%)
- Gross margin: 20.2%
- Free cash flow: -$597.0M (-17.4% of revenue)
- Cash conversion (operating cash flow / net income): 2.46x
- Capital expenditure: 48.0% of revenue

## Where the money goes (Q2 FY2026)

- Electric Transmission → Total Revenue: $995.0M
- Electricity, Generation → Total Revenue: $2.4B
- Total Revenue → Cost of Product and Service Sold: $2.7B
- Total Revenue → Operating margin: $692.0M
- Operating margin → Asset impairment reversals (expense): $30.0M
- Operating margin → Other expense: $27.0M
- Operating margin → Foreign currency transaction gains (losses): $52.0M
- Operating margin → Loss on extinguishment of debt: $6.0M
- Operating margin → Interest expense: $368.0M
- Operating margin → General and administrative expenses: $62.0M
- Operating margin → Income from continuing operations before taxes and equity in earnings of affiliates: $147.0M
- Gain on disposal and sale of business interests → Income from continuing operations before taxes and equity in earnings of affiliates: $209.0M
- Interest income → Income from continuing operations before taxes and equity in earnings of affiliates: $65.0M
- Other income → Income from continuing operations before taxes and equity in earnings of affiliates: $28.0M
- Income from continuing operations before taxes and equity in earnings of affiliates → Net equity in losses of affiliates: $34.0M
- Income from continuing operations before taxes and equity in earnings of affiliates → Income tax benefit (expense): $28.0M
- Income from continuing operations before taxes and equity in earnings of affiliates → Net income (loss): $387.0M
- Net income (loss) → Net income (loss) attributable to the aes corporation: $387.0M
- Less: Net loss attributable to noncontrolling interests and redeemable stock of subsidiaries → Net income (loss) attributable to the aes corporation: $39.0M

## Where the revenue comes from

### Products and services (Condensed Consolidated Statements of Operations)

| Member | Value | Share |
|---|---:|---:|
| Electricity, Generation | $2.4B | 70.9% |
| Electric Transmission | $995.0M | 29.1% |

The members sum to total revenue.

### Segments (Revenue (Details))

| Member | Value | Share |
|---|---:|---:|
| Energy Infrastructure | $1.5B | 43.7% |
| Utilities | $1.0B | 29.7% |
| Renewables | $939.0M | 27.4% |
| New Energy Technologies | $0 | 0.0% |
| Corporate Other And Other Eliminations | -$31.0M | -0.9% |

The members sum to total revenue.

### ConsolidationItems (Segments - Financial Information by Segment (Details))

| Member | Value | Share |
|---|---:|---:|
| Operating Segments | $3.5B | 100.9% |
| Intersegment Eliminations | -$70.0M | -2.0% |

The members do not sum to total revenue.

## Key insights

### Markets, not new contracts, widened the margin

Operating margin jumped 52.8%, and the filing credits mostly derivatives, development fees and spot prices, items that do not arrive on a schedule.

Operating margin, which AES defines as revenue less cost of sales, was $692M against $453M a year earlier: 20.2% of revenue against 15.9%. Revenue rose 19.9% while cost of sales rose 13.7%. Non-regulated sales, the generation side, grew 26.3% to $2.43B, while regulated utility sales grew 6.7% to $995M. _(from the filing)_
The filing attributes most of the gain to the Renewables segment, from favourable U.S. energy derivatives and U.S. development services, and to Energy Infrastructure, from higher spot energy and capacity sales and prices, chiefly in Argentina. In Colombia, El Niño lifted spot prices. Against this, the Maritza power purchase agreement in Bulgaria expired, cutting contract sales, and depreciation rose. _(from the filing)_
The new fleet did less of the work this time. In explaining net income attributable to AES, the filing lists lower contributions from renewables projects placed in service among the offsets, and it says capitalised interest fell because fewer projects are under construction. _(from the filing)_
Analysis: mark-to-market derivative gains, development fees and weather-driven spot prices can fade or reverse. For a 20.2% margin to hold, contracted margin from plants placed in service would need to grow into the space these items fill now. _(analysis)_

### Interest still takes more than half the plant profit

The wider margin cut interest's share from 77.7% a year earlier, but lenders remain the first claim on what the plants earn.

Interest expense was $368M against operating margin of $692M, or 53.2%. A year earlier it was $352M against $453M, or 77.7%. Interest income of $65M offsets a small part. Operating margin is already measured after depreciation, which AES includes in cost of sales. _(from the filing)_
The filing says interest expense rose because of higher debt balances and lower capitalised interest at Renewables, with fewer projects under construction, and a higher average rate and debt balance at the Parent Company, partly offset by lower debt at Energy Infrastructure. In its words, 'We rely mainly on long-term debt obligations to fund our construction activities.' _(from the filing)_
Analysis: this is the trade-off of a debt-funded build. When a project is finished, its interest stops being capitalised and starts being expensed just as its revenue begins. The share improves only if new plants earn more than their financing costs, so it is best read across several quarters, not from one strong period. _(analysis)_

### The build still spends more cash than it brings in

Capital spending ran well ahead of operating cash flow, leaving free cash flow of minus $597M, wider than a year earlier.

Capital expenditure was $1.64B this quarter against operating cash flow of $1.05B, or 1.57 times. Free cash flow was minus $597M, or -17.4% of revenue. In the same quarter a year earlier, capex was $1.33B against operating cash flow of $976M, and free cash flow was minus $356M. _(from the filing)_
Over the last three fiscal years capex was $7.72B, $7.39B and $5.93B, against operating cash flow of $3.03B, $2.75B and $4.31B. The gap narrowed in the latest year, when free cash flow was minus $1.62B against minus $4.64B the year before. _(from the filing)_
The filing lists debt financings, operating cash flow and supplier financing arrangements as the main sources of cash in the first half. It treats cash received from transferring tax credits as an operating inflow, so part of operating cash flow depends on the tax credit rules. _(from the filing)_
Analysis: operating cash flow covering capex would be the sign that the build has started to fund itself. Until then, growth depends on lenders, tax partners and buyers for stakes, and while the merger is pending, new debt needs the buyer's consent. _(analysis)_

### Stake sales matched half of the bottom line

Gains on disposals, a lower tax bill and the absence of last year's lease losses turned a loss into $426M of profit.

Gain on disposal and sale of business interests was $209M against $70M a year earlier, mainly from selling part of the Fluence stake. That equals 49.1% of the $426M net income attributable to AES, though the gain is measured before tax and net income after it. _(from the filing)_
Two other lines also moved sharply. Other expense fell to $27M from $295M, because a year earlier AES booked losses on the start of sales-type leases at AES Clean Energy. Income tax was $28M, 6.2% of pre-tax income of $449M, against $167M, or 428% of $39M, a year earlier. The filing ties the low rate to investment tax credits and the Fluence sell-down. _(from the filing)_
One item went the other way. Asset impairment was a $30M expense, against a $154M reversal a year earlier that came from reclassifying the Mong Duong plant in Vietnam. _(from the filing)_
Analysis: net income attributable to AES swung from a $95M loss to a $426M profit, but much of that swing sits below operating margin, in items that do not repeat on a schedule. Operating margin and cash flow give a steadier reading of the business this quarter than net income does. _(analysis)_

## For members

Signed-in members read, on the page: the investor's and the founder's views of AES Corporation (its fundamentals against its peers, where the profit is made, how the model works, where every $100 of revenue goes against the industry, the path to scale), its performance over time with every line as filed, and the edge and the risks. Membership is free.

## Member research

Signed-in members read, on the page: what AES Corporation's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- AES Corporation 10-Q for the period to 2026-06-30: https://www.sec.gov/Archives/edgar/data/874761/000087476126000144/ (2026-08-04)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-03 · as of 2026-11-03