Archrock, Inc.

What they do

Archrock designs, owns, installs, operates and maintains a fleet of natural gas compression equipment that it contracts to energy customers across the U.S. It also sells aftermarket operations, maintenance, overhaul, reconfiguration and parts services to customers that own their own compression equipment. The company reports in two segments: contract operations and aftermarket services. Compression supports production, gathering, processing, transportation and storage of natural gas, with 60% of the operating fleet used in gathering and processing and 40% in gas lift applications.

Revenue drivers

• Contract Operations — The dominant segment, generating $329.3 million of second quarter 2026 revenue (up 3% year over year) by renting owned compression horsepower under contract and charging for ongoing service. Adjusted gross margin was $234.6 million in the quarter, or 71% of segment revenue.
• Aftermarket Services — A smaller segment providing operations, maintenance, overhaul and reconfiguration work plus parts and components sales to customers that own compression equipment. Second quarter 2026 segment revenue was not fully disclosed in the excerpt but is the remainder of the $371.2 million total quarterly revenue.
• Fleet utilization and horsepower under contract — Revenue scales with average operating horsepower, which was 4.514 million in second quarter 2026 versus 4.467 million a year earlier, and with utilization, which was 94% average and spot in the quarter.
• Long-term customer contracts — The company signed a long-term agreement with an existing strategic customer covering approximately 665,000 horsepower for an eight-year base term with a two-year extension option, adding contracted revenue backlog.

Recent performance

Second quarter 2026 revenue was $371.2 million, down from $383.2 million in second quarter 2025, while net income rose to $66.7 million ($0.38 per diluted share) from $63.4 million ($0.36). Adjusted EBITDA was essentially flat at $212.6 million versus $212.7 million. Contract operations revenue rose 3% to $329.3 million, but total operating horsepower fell to 4.5 million from 4.7 million after the sale of about 165,000 non-strategic operating horsepower and the year-over-year figures reflect the Flowco disposition and other portfolio moves. The quarter included a $4.9 million non-cash long-lived asset impairment and a $0.7 million debt extinguishment gain from redeeming the 2028 notes. Full-year 2025 revenue was $1.49 billion with net income of $322.3 million and operating cash flow of $622.1 million.

Strategy

Management is focused on midstream natural gas compression tied to long-term LNG export and power demand growth, and describes the compression market as structurally tight. The company reaffirmed 2026 growth capital expenditures of $250 million to $275 million and introduced multi-year growth capital guidance of $1.4 billion to $1.6 billion cumulatively for 2027 through 2030. It is shifting its debt profile, having issued $800 million of 6.0% senior notes due 2034 in January 2026 and redeemed all $800 million of 6.250% senior notes due 2028 on April 1, 2026 using its credit facility. It has raised the dividend repeatedly, including a second quarter 2026 dividend of $0.23 per share (about 10% higher year over year) with 3.1x dividend coverage, and reduced leverage to 2.6x as of June 30, 2026 from 3.3x a year earlier. Capital allocation is described as disciplined and returns-based, including sales of non-strategic horsepower such as the Flowco disposition.

Risks

• Inflation and tariffs — Archrock states elevated inflation raises its labor, parts and lube oil costs and that it may be unable to pass those costs to customers, while new tariffs could raise imported steel and materials costs and disrupt supply chains.
• Customer credit and demand — The company notes inflation can hurt customers' financing costs, cash flows and profitability, which could reduce demand for compression services and impair its ability to collect receivables.
• Public health crises — The 10-K risk factors state pandemics or other public health crises could materially and adversely affect demand for Archrock's services, financial condition, results of operations and cash flows.
• Cost and timing pressure on guidance — Management tightened full-year 2026 Adjusted EBITDA guidance to $865 million to $885 million from $865 million to $915 million, citing near-term costs including lube oil and timing impacts.

Outlook

Management reiterated that the compression market outlook is highly constructive, citing durable natural gas demand and a structurally tight compression market, and reaffirmed 2026 growth capital expenditure guidance of $250 million to $275 million. Full-year 2026 Adjusted EBITDA guidance was narrowed to $865 million to $885 million, which management attributed to near-term costs, including lube oil and timing, rather than any change in demand fundamentals. The company introduced multi-year growth capital guidance of $1.4 billion to $1.6 billion cumulatively from 2027 through 2030 and continues to point to LNG export and power demand as long-term drivers.