US Utilities: 2026 Q3
Utilities Valuations Turn More Attractive As Stocks Plateau And Earnings Grow
Utilities stocks are barely holding onto positive returns this year, trailing the broader market by a wide margin. Rising interest rates and inflation are weighing on investor sentiment for the first time in years—without a significant reversal in the fourth quarter, the sector's two-year run of market-beating performance looks set to end.
Despite this, we view US utilities as fairly valued, with sectorwide earnings expected to grow 6%-8% annually for at least the next three years—growth that should help offset pressure from higher rates. The primary risk to this outlook is uncertainty around data center demand, which underpins much of the market's current growth expectations.
These shifts mean investors must now weigh utilities more on earnings growth potential, particularly from data center-driven electricity demand growth and grid infrastructure investments, rather than yield. Get the full breakdown of sector valuations, growth drivers, and top stock picks in our Utilities Industry Q3 2026 report.
