Archrock Miss Q2 Earnings & Revenues Estimates on AMS Weakness

AROC's Q2 earnings and revenues lag estimates as it faces pressure from weaker AMS, though strong contract operations and higher margins provide support.

Zacks Equity Research

3 min read

Archrock, Inc. AROC reported second-quarter 2026 adjusted earnings of 38 cents per share, down 2.6% from 39 cents per share a year earlier. The bottom line missed the Zacks Consensus Estimate of 46 cents by 17.4%.

Revenues of $371.2 million declined 3.1% from $383.2 million a year ago. The top line missed the consensus mark of $390.4 million by 4.9%.

The weak quarterly results were primarily due to softness in aftermarket services (AMS), which offset solid contract operations performance.

Period-end horsepower utilization remained high at 94.4%, while contract operations adjusted gross margin percentage improved from the year-ago period.

Archrock, Inc. Price, Consensus and EPS Surprise

Archrock, Inc. price-consensus-eps-surprise-chart | Archrock, Inc. Quote

AROC's Contract Operations Remain Resilient

Contract operations revenues rose 3.4% to $329.3 million from $318.3 million. The increase reflected higher rates, an additional month of contribution from the NGCS acquisition and revenues from horsepower additions, partly offset by active horsepower sales used to high-grade the fleet.

Contract operations adjusted gross margin increased 5.6% to $234.6 million, while the adjusted gross margin percentage rose to 71% from 70%. Total operating horsepower ended the quarter at 4.5 million compared with 4.7 million a year earlier, with the decline largely driven by the sale of approximately 165,000 non-strategic operating horsepower.

Archrock's Aftermarket Services Lose Momentum

Aftermarket services revenues fell 35.2% to $42 million from $64.8 million in the second quarter of 2025. The decline was due to lower parts sales, the absence of non-recurring overhauled-engine sales that benefited the prior-year quarter and reduced demand for major maintenance activity.

The adjusted gross margin for the segment declined 33.6% to $9.9 million from $14.9 million. However, the adjusted gross margin percentage improved to 24% from 23%, reflecting disciplined execution and a focus on higher-quality, higher-margin work.

AROC's Margin Gains Offset Some Cost Pressure

Total adjusted gross margin increased to $244.5 million from $237.1 million a year ago. The adjusted gross margin percentage expanded to 66% from 62%, helped by the stronger profitability of contract operations and the improved margin rate in aftermarket services.

Selling, general and administrative expenses rose 9.4% to $39.6 million from $36.2 million. Higher long-term incentive compensation, primarily driven by the stock price increase, was a key factor. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) remained flat at $212.6 million compared with $212.7 million in the prior-year quarter.

Archrock Generates Solid Cash Flow

Net cash provided by operating activities was $160.8 million in the quarter. The adjusted free cash flow totaled $67 million, while adjusted free cash flow after dividends was $28.4 million. The total capital expenditure was$98.0 million.

AROC Raises Dividend

The board raised the quarterly dividend around 10% to 23 cents per share from 21 cents a year earlier. Dividend coverage was 3.1X, supporting the company's continued emphasis on shareholder returns alongside growth investment.

Archrock Maintains Balance Sheet Flexibility

As of June 30, 2026, AROC’s long-term debt was $2.35 billion, while the leverage ratio improved to 2.6X from 3.3X a year ago. Available liquidity totaled $631 million at the quarter-end.

During the quarter, Archrock redeemed $800 million of 6.25% senior notes due 2028 using borrowings under its revolving credit facility. The company ended June with $113.2 million in remaining share repurchase authorization and did not repurchase shares during the quarter.

AROC Tightens 2026 EBITDA Guidance

Archrock tightened its 2026 adjusted EBITDA guidance to $865-$885 million from $865-$915 million. The revision reflects higher contract compression make-ready costs, anticipated second-half lube oil cost pressure, softer aftermarket services demand and higher selling, general and administrative costs tied to long-term incentive compensation.

The company maintained 2026 growth capital spending guidance of $250-$275 million and expects the total capital expenditure between $400 million and $445 million. Archrock introduced cumulative growth capital guidance of $1.4-$1.6 billion for 2027-2030, aimed at adding 1 million horsepower to meet expected demand. The company signed an eight-year agreement with a strategic customer covering approximately 665,000 horsepower, with a two-year extension option.

AROC’s Zacks Rank & Stocks to Consider

Archrock currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the energy sector are PBF Energy Inc. PBF, Valero Energy Corporation VLO and Cactus, Inc. WHD. PBF sports a Zacks Rank #1 (Strong Buy), and VLO and WHD carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks Rank #1 stocks here.

PBF reported second-quarter 2026 adjusted earnings of $6.22 per share, surpassing the Zacks Consensus Estimate of $4.05.

As of June 30, 2026, PBF had total debt of $1.75 billion, and cash and cash equivalents of $894.1 million.

Valero reported second-quarter 2026 adjusted earnings of $12.54 per share, which beat the Zacks Consensus Estimate of $9.87.

As of June 30, 2026, VLO had total debt of $9.10 billion, and cash and cash equivalents of $7.87 billion.

Cactus reported second-quarter 2026 adjusted earnings of 93 cents per share, surpassing the Zacks Consensus Estimate of 71 cents.

As of June 30, 2026, WHD had cash and cash equivalents of $365 million.

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