Archrock (NYSE:AROC) reported what management repeatedly described as a “standout” 2025, highlighting strong earnings growth, high fleet utilization, and increased shareholder returns, while outlining a 2026 outlook supported by continued natural gas infrastructure demand and a largely committed contract backlog.
2025 results: strong earnings growth and higher capital returns
President and CEO Brad Childers said 2025 “leveraged a multi-year transformation of the business,” with adjusted EPS up 68% and adjusted EBITDA up 51% versus 2024. He noted the company delivered adjusted EBITDA above the midpoint of guidance after raising its outlook twice during the year.
Childers said Archrock returned $212 million to shareholders in 2025 through dividends and share repurchases, more than 70% higher year over year. The company increased its fourth-quarter dividend to $0.22 per share, which Aron said equates to $0.88 per share on an annualized basis, up 5% from the prior quarter and 16% from the year-ago period. Aron also reported fourth-quarter cash available for dividends of $189 million, resulting in dividend coverage of 4.9x on the increased dividend.
On buybacks, Childers said $117.7 million remained under the company’s share repurchase authorization at year-end. He added Archrock has returned more than $92 million to stockholders since the program began, including $70 million during 2025, at an average repurchase price of $22.72.
Contract operations: sustained high utilization and margin strength
Management highlighted sustained demand and profitability in contract operations. Childers said adjusted gross margins in contract operations exceeded 70% for the fifth consecutive quarter, and the company’s fleet has maintained utilization of 95% or higher for 11 straight quarters. Archrock exited the fourth quarter at 95.5% utilization.
Aron said fourth-quarter contract operations revenue was $327 million, consistent with the third quarter, with average operating horsepower down slightly sequentially due to asset sales and pricing “ticking up incrementally.” He reported contract operations adjusted gross margin of about 78% for the quarter, but noted the underlying operating gross profitability was 71.5% (up from 70% in the third quarter), excluding out-of-period tax settlements and credits. The $23 million prior-period tax benefit drove the difference between the underlying margin and the reported 78% level.
Childers also said “stop activity remains at historically low levels,” with equipment staying on location longer. Based on 2025 data, he said the average time an Archrock compressor remains on location is now 73 months, up 61% since 2021. For large horsepower units (1,500 horsepower or more), average time on location is 97 months, reflecting their use in midstream applications.
Aftermarket services: steady performance, selective growth
In aftermarket services (AMS), Aron said fourth-quarter revenue was $50 million, down from the third quarter due to typical seasonal softness, but higher than $40 million a year ago. Fourth-quarter AMS adjusted gross margin was 24% versus 23% in the third quarter and prior-year period.
Childers said AMS margins have remained “firmly above 20%” and above historical levels, driven by a focus on higher-quality work and disciplined cost management. In the Q&A, he said the company is intentionally selective about jobs and customers, and expects labor constraints to remain a limiting factor. He said AMS is unlikely to “grow in leaps and bounds,” with sharper growth expected on the contract operations side.
Fleet actions, growth CapEx, and 2026 EBITDA guidance
Childers said Archrock completed its second accretive acquisition in 18 months while also executing significant asset sales. He said the company sold 325,000 horsepower in 2025 for $192 million and redeployed capital into high-return new-build investments, contributing to 8% operating horsepower growth versus 2024.
At quarter-end, Childers said operating horsepower totaled 4.6 million. Sequentially, operating horsepower declined by about 80,000 due to asset sales outpacing new-build deliveries. Aron said 2025 included $47 million of net gains on asset sales, while management estimated those sales reduce 2026 adjusted EBITDA by about $18 million.
For 2026, Aron guided adjusted EBITDA of $865 million to $915 million (midpoint $890 million). He also described a “bridge” from 2025 to 2026 that includes a combined $98 million year-over-year impact from tax-related items and asset-sale-related factors. Among those, he said 2025 adjusted EBITDA included a $33 million benefit from sales and use tax audit settlements and credits.
On capital spending, Aron guided total 2026 capital expenditures of about $400 million to $445 million, including:
- Growth CapEx: $250 million to $275 million for new-build horsepower and repackaging
- Maintenance CapEx: $125 million to $135 million, up due to increased planned overhaul activity
- Other CapEx: $25 million to $35 million, primarily vehicles
In response to analyst questions, management said the growth CapEx plan should translate into about 170,000 horsepower of deliveries in 2026, with roughly 60% expected to start up in the first half of the year. Childers also said lead times for new equipment have extended, citing Caterpillar as the “gating item” for gas-drive equipment, with lead times of roughly 110 to 120 weeks and longer for larger horsepower. Even so, he said Archrock is “booked to meet” customer needs for 2026, with a 2026 backlog that is 85% contracted and units already booked for 2027.
Balance sheet: lower leverage and refinanced maturities
Aron said Archrock ended 2025 with $2.4 billion of total debt and $579 million of liquidity. Long-term debt declined $149 million sequentially in the fourth quarter, which he attributed to strong operating cash flow and support from asset sales.
He also outlined recent financing actions to extend maturities, including redeeming $300 million of 2027 notes at par in November and issuing an “upsized” $800 million eight-year bond in January priced at 6%. Aron said the company effectively pre-funded the redemption of its 2028 notes, which are callable at par in April 2026, and that after calling those notes, the nearest bond maturity would move to 2032.
At year-end, Aron reported a leverage ratio of 2.7x, down from 3.3x a year earlier. Management said it expects to operate below 3x in the near term, while maintaining a long-term leverage target range of 3.0x to 3.5x.
About Archrock (NYSE:AROC)
Archrock, Inc is a Houston‐based provider of natural gas compression services and equipment to the oil and gas industry in North America. Founded in 2004, the company supplies both short‐term rentals and long‐term contracts for compression solutions, serving upstream and midstream producers. Archrock’s offerings include engineered compression systems, aftermarket parts, maintenance and field services designed to optimize wellhead and pipeline operations.
The company’s core business activities focus on the design, manufacture, rental and sale of gas compression equipment.
