Archrock, Inc. (AROC) Income Statement

The 28.7% YoY growth in the TTM period masks a sharp sequential deceleration, with 2026Q2 revenue of $371.2M falling 3.1% YoY and 0.7% QoQ. This follows a peak growth rate of 41.6% in 2025Q2, indicating that the pricing and utilization tailwinds from the Permian-driven demand surge are fading. Investors should monitor whether this is a temporary pause or the start of a cyclical downturn, especially as the latest quarter's revenue run-rate ($1.48B annualized) trails the TTM figure.

The wide quarterly swings in gross margin—ranging from 47.5% to 66.1%—suggest that COGS is not purely variable but subject to timing of maintenance and overhaul costs, particularly in the Aftermarket Services segment. The 2026Q1 dip to 47.5% appears anomalous given the surrounding quarters, possibly due to a spike in repair expenses or a change in revenue mix. Despite this volatility, the TTM gross margin of approximately 58% remains above the peer USAC's 38.5%, indicating Archrock's pricing power and efficient cost recovery.

The operating income volatility—from $18.0M in 2025Q3 to $200.9M in 2025Q2—is far greater than revenue swings, underscoring the high fixed-cost structure of the compression fleet. The 2025Q3 collapse to a 4.7% operating margin appears to be an outlier, possibly due to one-time charges or asset write-downs, but it demonstrates how sensitive operating income is to utilization and cost spikes. The recent 2026Q2 operating margin of 25.0% is below the 2025 average of ~40%, suggesting that SG&A and other costs are not scaling down with revenue, which may pressure future profitability if growth continues to slow.

The cost structure reveals that COGS is the primary driver of margin volatility, with the 2026Q1 spike to $196.1M (52.5% of revenue) representing a significant deviation from the typical ~35-40% range. This could be due to higher maintenance costs or a change in revenue mix toward lower-margin aftermarket services. SG&A has remained relatively stable in absolute terms, but as a percentage of revenue it has crept up from ~11% in 2024 to ~12-13% in 2026, suggesting that overhead is not being fully leveraged as growth slows. Management's expense discipline will be critical to protect margins if revenue growth continues to decelerate.

The 2025Q2 quarter stands out as the inflection point, with operating income of $200.9M and a 52.4% operating margin, likely driven by peak utilization and pricing power in the Permian. This was followed by a dramatic collapse in 2025Q3 to a 4.7% operating margin, which may have been a one-off event but marked the beginning of a downward trend in margins and growth. The subsequent quarters have shown lower operating margins (25-35%) and decelerating revenue growth, suggesting that the company may have passed its cyclical peak. The lasting impact is that the market's expectations may still be anchored to the 2025Q2 performance, making the recent EPS miss and guidance cut more concerning.