Vistra targets $6.8B–$7.6B adjusted EBITDA for 2026 as company advances major capacity deals and M&A

Earnings Call Insights: Vistra Corp. (VST) Q3 2025

MANAGEMENT VIEW

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CEO James Burke highlighted the quarter as "a transformational one for our company," citing the announcement of a landmark 20-year power purchase agreement at Comanche Peak, plans to develop two gas-fired units in West Texas, and the closing of a 2.6-gigawatt natural gas asset acquisition from Lotus Infrastructure Partners. Burke announced, "Combined with our results year-to-date, we are narrowing our guidance range for 2025 adjusted EBITDA to $5.7 billion to $5.9 billion, and our 2025 adjusted free cash flow before growth to $3.3 billion to $3.5 billion." He also introduced 2026 adjusted EBITDA guidance of $6.8 billion to $7.6 billion and adjusted free cash flow before growth of $3.925 billion to $4.725 billion, including contributions from the Lotus assets.

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Burke emphasized that excluding Lotus, the midpoint of 2026 adjusted EBITDA guidance is above the previously communicated midpoint, indicating "sustainable momentum across our business." The CEO described the 20-year Comanche Peak agreement as "a major milestone for our company, for our site and for Texas," ensuring continued operation of the plant through the 2050s.

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Burke noted ongoing customer count growth in the Texas retail market and maintained focus on capital allocation, stating, "Since implementing the capital return plan... we have returned over $6.7 billion to our shareholders through share repurchases and common stock dividends."

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CFO Kristopher Moldovan reported, "Vistra delivered $1.581 billion in adjusted EBITDA in the third quarter including $1.544 billion from Generation and $37 million from retail." He detailed that the Generation segment benefited from "average realized prices over $10 per megawatt hour higher compared to the same quarter last year," offsetting outages at Martin Lake and Moss Landing.

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Moldovan added, "We continue to expect to return at least $1.3 billion to our shareholders each year through share repurchases and common dividends," and noted the Board's authorization of an additional $1 billion in share repurchases through 2027.

OUTLOOK

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Vistra narrowed its 2025 adjusted EBITDA guidance to $5.7 billion to $5.9 billion and adjusted free cash flow before growth to $3.3 billion to $3.5 billion. For 2026, new guidance was introduced: adjusted EBITDA of $6.8 billion to $7.6 billion and adjusted free cash flow before growth of $3.925 billion to $4.725 billion. For 2027, the company introduced an adjusted EBITDA midpoint opportunity range of $7.4 billion to $7.8 billion.

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Burke indicated that excluding Lotus benefits, the 2026 midpoint is above prior projections, citing "clear sign of sustainable momentum across our business."

FINANCIAL RESULTS

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Vistra reported $1.581 billion in adjusted EBITDA for the third quarter, with $1.544 billion from Generation and $37 million from retail. Moldovan explained that higher realized prices and capacity revenue "more than offset the impacts of extended outages at Martin Lake Unit 1 and our battery facilities at Moss Landing."

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On capital allocation, the company has returned over $6.7 billion to shareholders since Q4 2021, with an expectation to return at least $2.9 billion more through share repurchases and dividends, including a new $1 billion repurchase authorization.

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Moldovan projected $10 billion in cash generation through year-end 2027, supported by a targeted EBITDA to free cash flow conversion rate of at least 60%.

Q&A

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Shahriar Pourreza, Wells Fargo: Asked about 2027 opportunities and improvement potential versus the midpoint. Burke responded, "There are a number of levers still to pull. Obviously, there is an open position... as you continue to see the markets strengthen, we have exposure to that for sure."

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Pourreza followed on the structure of contracting opportunities. Burke clarified, "All options are on the table from a customer standpoint, whether it's front of the meter, co-located, bridge power... customers are being creative because they want to work with stakeholders."

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Jeremy Tonet, JPMorgan: Inquired about quantifying adjusted free cash flow growth. Moldovan stated, "There are so many opportunities that we just think it's a disservice to try to put a growth rate on there... we'll continue to update the growth on likely on a -- at least on an annual basis."

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Tonet also asked about nuclear vs. gas contracting. Burke said, "The range of options from gas to nuclear... those options are on the table."

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Steven Fleishman, Wolfe Research: Questioned hedging strategy. Burke replied, "For a fleet this size... it's partly a reality of the hedging dynamic of a large fleet."

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William Appicelli, UBS: Asked about forward curves and new generation. Burke explained, "We're still bullish on where we think power prices could go just on supply and demand."

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David Arcaro, Morgan Stanley: Sought updates on data center contracting. Burke said, "The activity level is the highest that it's been."

SENTIMENT ANALYSIS

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Analysts asked probing questions regarding opportunity realization, hedging, and capital allocation, but tone remained neutral and constructive. Questions focused on execution, risk, and timing.

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Management maintained a confident yet measured tone in prepared remarks and Q&A, using phrases such as "we are confident in our forecast" and "we think there's upside in our business."

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Compared to the previous quarter, both management and analysts presented slightly increased confidence, with management more openly discussing upside levers and analysts focusing on execution timelines.

QUARTER-OVER-QUARTER COMPARISON

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The company narrowed its 2025 guidance range for adjusted EBITDA and introduced 2026 and 2027 guidance, compared to reaffirming 2025 guidance and raising the minimum 2026 midpoint in the previous quarter.

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Strategic focus shifted from anticipation of the Lotus transaction closing to integrating these assets and expanding development, especially around Comanche Peak and West Texas.

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Analyst questions continued to center on contracting, cash flow growth, and capital allocation, with a greater focus this quarter on execution of new power purchase agreements and realization of announced opportunities.

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Management’s tone showed greater comfort with long-term upside, discussing multiple levers and customer creativity, whereas the prior quarter emphasized caution pending deal closure.

RISKS AND CONCERNS

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Management identified gross margin variability, the impact of PJM capacity auctions, and execution risk on new projects and contracts as key challenges.

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Extended outages at Martin Lake and Moss Landing were cited as operational risks, though offset by higher realized prices.

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Large customer contracting timelines remain uncertain, with Burke stating, "The exact timing is hard to predict just because it's a complex contract, 2 parties need to reach agreement."

FINAL TAKEAWAY

Vistra’s third quarter marked significant progress on multiple fronts, including major capacity contracts, the closing of a large asset acquisition, and the launch of new development projects. Management sees continued momentum, with a strong outlook for 2026 and 2027, backed by a highly hedged position, diversified customer demand, and multiple pathways for long-term agreements. The team remains focused on disciplined capital allocation, operational execution, and capturing emerging growth opportunities in a structurally improving demand environment.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/vst/earnings/transcripts]

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