How Semiconductor Growth Supports Pinnacle West’s 2026 Outlook Amid Market Disruptions

Bottom line: semiconductor-driven Arizona growth is supporting (not changing) Pinnacle West’s Q1 2026 guidance

In the Q1 2026 earnings discussion, Pinnacle West/APS frames Arizona’s rapid economic expansion—specifically including semiconductor and advanced-manufacturing buildouts—as reinforcing customer demand and the need for grid investment. Management explicitly says they are “off to a solid start in 2026” delivering first quarter earnings that support the financial guidance provided in February ¹. They also state they are not changing annual sales growth guidance of 4% to 6% at this point ². Taken together, Arizona’s semiconductor investment appears to be influencing guidance primarily through its effect on load growth, customer additions, and ongoing capital/infrastructure requirements, rather than triggering an immediate upward or downward revision of Q1 2026 guidance.

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1) Arizona’s semiconductor investment is increasing the load outlook that underpins sales growth guidance

Pinnacle West highlights that Arizona’s “diverse economy continues to expand” and that the state is a leader in semiconductor and advanced manufacturing ¹. Management further links this to TSMC’s accelerated expansion, describing:

• TSMC’s second fab being completed and expecting to begin volume production of 3-nanometer chips in the second half of next year ¹
• Construction underway for additional TSMC facilities with expected online timing by 2029 ¹

While the excerpt does not provide a direct quarter-by-quarter kW/MW forecast, it does connect the semiconductor buildout to operational planning and demand growth:

• Management says momentum extends beyond TSMC with increased semiconductor supply-chain activity and local footprint expansion ¹
• They describe engineering and equipment suppliers scaling operations across the Valley ¹

This demand environment is reflected in APS’s reported customer and sales performance for Q1:

• Customer growth for the quarter was 2.2%, near the high end of annual guidance ³
• Weather-normalized sales growth was 9.4%, driven by C&I growth of 14.6% ³
• They note Q1 sales growth was almost 7.5% (with adjustments), and that it was “driven by the continued ramp-up of our extra-high load factor customers” ⁴

Implication for Q1 2026 guidance: Semiconductor-driven regional expansion is functioning as a demand tailwind that supports the existing 2026 sales growth outlook. Management states it is a “strong start” and that the Q1 results support guidance provided in February, with annual sales growth guidance unchanged at 4% to 6% ¹².

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2) The guidance is tied to an investment requirement—management expects grid expansion to keep pace with semiconductor-led growth

Pinnacle West positions its infrastructure program as necessary to serve Arizona’s growth:

• They state their focus remains on grid resilience and on investing in infrastructure and technology to serve customers safely and efficiently ¹
• They say they are executing their plan including grid expansion to serve Arizona’s rapid growth ⁵

On the specific “semiconductor-capacity” angle, Pinnacle West explicitly connects customer growth to transmission investment:

• Management says the trend of customer and sales growth reinforces their need for investments in their system to ensure reliable service ²
• In Q1, they identify transmission revenue as a benefit (16¢), reflecting “heightened transmission investments to support our growing customer base” and expectation of a strong benefit throughout the year, in line with annual guidance ³

They also quantify the scale-up of transmission spending historically:

• Transmission CapEx has increased dramatically—management says over five years they “doubled and then doubled again” annual transmission CapEx ⁶
• They describe this as producing a “step function upward” in results over time as projects come into service, facilitated by formula-rate recovery that reduces lag ⁶

Implication for Q1 2026 guidance: Semiconductor-led demand growth increases the probability that transmission/infrastructure benefits show up over time, reinforcing the current guidance framework rather than forcing an immediate revision. The company’s guidance posture remains stable: they report Q1 results that support February guidance, and they do not change the core sales growth range ¹².

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3) Management treats semiconductor momentum as continuing runway, but it does not prompt a near-term change to guidance assumptions

Pinnacle West acknowledges that the semiconductor ramp is multi-year:

• TSMC’s volume production timeline (3-nanometer chips) is described as starting in the second half of next year, with additional facilities expected by 2029 ¹

Management also frames the power-demand runway as driven by customers already committed:

• They emphasize long-term sales growth is “driven by the customers that are committed today,” referencing about 4.5 gigawatts of committed extra-high load factor growth ⁴
• They describe a “large backlog of customers in our queue” and note that as they work the capital plan and ability to serve customers, they will look for opportunities to invest and enable growth beyond the base plan ⁴

But they still present a stable near-term planning range:

• Management says they are comfortable with 5%–7% long-term and 4%–6% for this year ⁴
• And they reiterate not changing annual sales growth guidance of 4% to 6% ²

Implication for Q1 2026 guidance: Even though semiconductor expansion supports demand expectations, management’s guidance for 2026 (and the Q1 guidance being supported by Q1 results) remains unchanged, suggesting semiconductor investment is being treated as reinforcement to the existing outlook rather than a basis for immediate reforecasting ¹²⁴.

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4) What could matter for guidance beyond demand: regulatory lag, affordability, and investment recovery

The guidance effect is not purely “more load = higher earnings.” Management highlights a balancing act:

• They are working on reducing regulatory lag through their pending rate case to improve investment recovery while ensuring affordability ⁵
• They say capital investment opportunity is informed by narrowing regulatory lag and potential bilateral contracting with large-load customers, including front-end funding to reduce external funding needs ⁷

These elements help explain why management can acknowledge strong growth momentum (including semiconductor investment) while still keeping guidance unchanged—because the earnings translation depends on regulatory recovery mechanics, cost structures, and financing.

Q1 also shows cost and earnings components that management continues to monitor:

• O&M decreased year-over-year due to lower planned outage expenses and reduction of Commission-required energy efficiency programs ²
• Interest expense increased due to higher debt balances from issuances ²
• Depreciation and amortization increased slightly due to additional plant in service, partially offset by retirement of Cholla ²

Implication for Q1 2026 guidance: Semiconductor investment influences demand and the need for capital, but Q1 guidance sensitivity likely remains constrained by how quickly/fully the company can recover those investments through regulatory mechanisms and capital structure. The company’s current message is that Q1 performance supports existing guidance rather than forcing revisions ¹⁵².

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Conclusion

Arizona’s economic and semiconductor buildout is expected to influence Pinnacle West’s (APS’s) Q1 2026 guidance primarily by:

1. Supporting stronger customer and sales growth (including C&I strength and “extra-high load factor” ramp) that underpins the unchanged 2026 sales growth range (4%–6%) ²⁴³.
2. Reinforcing the need for transmission and grid investments to serve that load, with Q1 showing transmission-related benefits and an expectation of similar benefit trajectory in line with annual guidance ³⁶.
3. Providing a multi-year demand runway, but management explicitly treats it as reinforcement to already-committed load and existing guidance ranges—so guidance is not revised in the Q1 2026 discussion ¹²⁴.

Overall, management’s stance is that Arizona’s semiconductor momentum is a tailwind that helps explain why Q1 results are consistent with and support the company’s existing guidance—rather than a catalyst for changing it immediately ¹².