Energy Transfer Taps the AI Power Boom

Key Points

• Energy Transfer's decision to abandon its Louisiana LNG export terminal and redirect capital to pipelines coincided with sharply higher revenue, net income, and cash flow.
• The partnership raised its distribution for the 19th consecutive quarter to 34 cents, yielding roughly 6.6%, while analysts maintain a consensus Moderate Buy rating.
• Despite strong results tied partly to AI data center demand, investors face risks from $68.4 billion in debt, heavy ongoing spending, and an upcoming Texas Stock Exchange listing move.

Nearly a year ago, Energy Transfer NYSE: ET announced a change in strategy that might have looked like a retreat. Today, it looks a lot less like one.

The diversified midstream energy partnership has seen its distributable cash flow soar, its earnings jump, revenue rise 79%, and its dividend yield hit above 6%.

The new strategy has worked. Investors, however, need a closer look before jumping in to ride the good news.

A Strategic Shift Pays Off

In December 2025, after 12 years of extended effort, Energy Transfer announced it was killing the project that was supposed to define its next decade. It would no longer pursue a major liquefied natural gas (LNG) export terminal in Louisiana. Instead, the company said, it would redirect capital toward its pipeline backlog.

For its most recent quarter, reported Aug. 4, the move clearly paid off. The limited partnership announced that revenue cleared consensus by a wide margin as it rose to $34.3 billion compared with $19.2 billion a year ago. Net income nearly doubled to $2.03 billion from $1.09 billion a year ago.

On an adjusted basis, EBITDA came in at roughly $5.07 billion, up sharply from $3.87 billion a year earlier. Net income per common unit hit 59 cents, blowing past the 39 cents that analysts had modeled.

Overall, quarterly results were remarkable as the company said volumes nearly across the board set records during the three months, with NGL transportation up 13%, NGL exports 25% higher, and crude oil transportation up 4%.

Confident in the trend, management raised full-year adjusted EBITDA guidance to a range of $18.8 billion to $19.1 billion, and analysts have since raised their own earnings estimates for the year in response.

Cash Flow Fuels a Growing Payout

Beyond the impressive cumulative results and more important to unitholders, distributable cash flow attributable to partners rose to approximately $2.6 billion from $1.96 billion.

For unitholders, the payout remains the central attraction. In July, the partnership raised its quarterly cash distribution for the 19th consecutive time, to 34 cents. At the recent unit price, that works out to a yield of roughly 6.6%, and management has committed to 3% to 5% annual distribution growth.

AI Data Centers Drive New Demand

While the company does not break out specific figures, some of the additional growth has clearly come from the rise of artificial intelligence and data centers.

Earlier this year, the company began supplying natural gas to the first of three Oracle NYSE: ORCL data centers and signed an agreement to do the same at a large AI hyperscale campus in central Texas. A third agreement, with CloudBurst, was reached in February to supply an AI-focused data center in Texas.

Just as notable, the company said existing customers are coming back to enlarge commitments they already made.

Analysts See More Upside

Analysts have been impressed. Among the 17 analysts following the company, Energy Transfer is rated a consensus Moderate Buy.

Fourteen of the analysts have placed a Buy rating on the units, with two of those labeling it a Strong Buy. Three others recommend Hold.

With the units already up roughly 24% year-to-date, the consensus 12-month price target is $24.36, implying healthy upside. The highest price target is $26, while the lowest is $22, representing little disagreement where the units might be headed from their current price of $20.50.

Debt and Spending Add Risk

Even with the recent positive news, though, there are risks and shifts that prospective unitholders should know.

The balance sheet shows roughly $68.4 billion of debt as of June 30. That’s manageable, but spending is not slowing. Management has said it expects to keep spending $5 billion or more annually on organic growth projects through 2029.

That’s probably fine as long as American electricity and gas demand keeps climbing, which is likely. Still, if the AI-driven power demand behind some of these new projects arrives more slowly than promised, the debt will still be there.

Investors Face Structural Changes

Two structural quirks also matter for investors. Energy Transfer is a master limited partnership, so buyers own units rather than shares and receive a Schedule K-1. For some, that can complicate tax filings and might create complications inside retirement accounts.

Separately, the partnership is also moving its primary listing to the Texas Stock Exchange in October, the first major company of its size to leave the New York Stock Exchange for that venue. The potential impact on liquidity and index eligibility is untested.

Growth Depends on the AI Boom

Even enticed by a full Buy rating, prospective investors are well-advised to understand what they would be buying.

In essence, investors are helping underwrite a large multiyear construction program, a heavy debt load, and a demand thesis tied to growing electricity demand and artificial intelligence. That is not necessarily a bad bet, as it proved in the second quarter. But it’s also not necessarily predictable.

The anticipated growth in electricity demand, the future of AI data center buildouts, and the company’s position in a competitive field are where Energy Transfer's bets mostly lie. Then again, management did walk away from the Louisiana project and delivered the company where it is today.