Archrock Miss Q2 Earnings & Revenues Estimates on AMS Weakness

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.

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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