Utility stocks, which provide essential services such as electricity, natural gas, and water, have become increasingly attractive to investors. According to Deloitte’s 2026 Power and Utilities Industry Outlook, electricity demand in the United States rose significantly in 2025, driven primarily by industrial electrification and the growing reliance on artificial intelligence (AI) workloads. The report forecasts a 26% increase in peak demand by 2035. The anticipated growth in industrial electrification could add 25 gigawatts (GW) by 2030, while data center usage may increase to 176 GW, a fivefold rise from 2024 levels.
Despite the promising demand forecasts, the utility sector faces challenges. Although 93% of new capacity through July 2025 is expected to be renewable, supply expansion remains sluggish. A significant amount of capacity, approximately 2 terawatts, is currently constrained by interconnection issues. Additionally, a series of natural disasters in the first half of 2025 caused damages exceeding $1 billion, with three of these events resulting in losses greater than $5 billion. Consequently, residential retail prices are projected to rise by 4.5% from 2024.
In light of these developments, investors are keen to identify profitable utility stocks. Here are eight utility companies that have shown strong financial performance and are currently favored by hedge funds.
Top Utility Stocks to Consider
1. NextEra Energy, Inc. (NYSE:NEE)
– TTM Net Income as of December 30, 2025: $7.21 billion
– TTM Net Income Margin: 20.81%
– Number of Hedge Fund Holders: 72
NextEra Energy, Inc. has seen analysts at Jefferies raise its price target to $88 from $85 while maintaining a Hold rating. The firm anticipates an earnings growth rate of around 9% per year through 2032. This growth outlook outpaces the general consensus forecast of 7.6% during the same period. NextEra’s regulated utility, Florida Power & Light, serves as a cornerstone for its strong financial performance.
2. Duke Energy Corporation (NYSE:DUK)
– TTM Net Income as of December 30, 2025: $4.92 billion
– TTM Net Income Margin: 15.97%
– Number of Hedge Fund Holders: 62
Duke Energy has recently applied for an early site permit from the U.S. Nuclear Regulatory Commission, signaling its commitment to exploring new nuclear power opportunities. Analysts have adjusted their price targets downward, with UBS reducing it from $135 to $126. Nevertheless, the demand from data centers is expected to significantly impact Duke’s performance in 2026.
3. The Southern Company (NYSE:SO)
– TTM Net Income as of December 30, 2025: $4.46 billion
– TTM Net Income Margin: 15.42%
– Number of Hedge Fund Holders: 58
The Southern Company experienced a downgrade by Morgan Stanley, which revised its price objective from $97 to $81. The firm anticipates that utility share performance will be driven by data center growth and ongoing regulatory challenges.
4. American Electric Power Company, Inc. (NASDAQ:AEP)
– TTM Net Income as of December 30, 2025: $3.66 billion
– TTM Net Income Margin: 17.23%
– Number of Hedge Fund Holders: 56
American Electric Power has garnered attention for its diversified utility operations, which help mitigate risks associated with regulatory changes. Analysts have set its price target at $120, with expectations of an 8.8% annual growth rate in earnings through 2030.
5. American Water Works Company, Inc. (NYSE:AWK)
– TTM Net Income as of December 30, 2025: $1.11 billion
– TTM Net Income Margin: 21.93%
– Number of Hedge Fund Holders: 53
American Water Works recently acquired the Hopewell Borough water system for $6.4 million, enhancing its customer base and service capabilities. Analysts have adjusted their outlook, reducing the price target from $134 to $122.
6. Sempra (NYSE:SRE)
– TTM Net Income as of December 30, 2025: $2.11 billion
– TTM Net Income Margin: 15.75%
– Number of Hedge Fund Holders: 41
Sempra is navigating regulatory challenges with its subsidiary, San Diego Gas & Electric, which could result in a significant after-tax charge of $471 million. Despite this, analysts maintain a Neutral rating, underscoring the utility’s robust customer base.
7. Dominion Energy, Inc. (NYSE:D)
– TTM Net Income as of December 30, 2025: $2.61 billion
– TTM Net Income Margin: 16.79%
– Number of Hedge Fund Holders: 35
Dominion Energy faces a temporary halt on its Coastal Virginia Offshore Wind Project due to a federal directive. The company argues that this project is crucial for national security and energy reliability in Virginia, which has one of the fastest-growing energy demands in the U.S.
8. Ameren Corporation (NYSE:AEE)
– TTM Net Income as of December 30, 2025: $1.41 billion
– TTM Net Income Margin: 16.34%
– Number of Hedge Fund Holders: 34
Analysts have expressed cautious optimism for Ameren, noting its stable financial performance and growth potential. UBS has maintained a buy recommendation, albeit with a reduced price target of $115.
Investing in utility stocks can provide stability and potential growth amid increasing energy demands. As the sector adapts to regulatory shifts and evolving market conditions, the companies highlighted here represent promising opportunities for investors looking to enter or expand their holdings in the utility space.
