Kinder Morgan, Inc. (KMI) Income Statement

The sequential acceleration from 3.6% in Q2 2024 to 10.8% in Q2 2026 indicates a strengthening demand environment, particularly for natural gas transport to LNG terminals and power generation for AI data centers. This growth appears durable given the take-or-pay contract structure and the scarcity of new pipeline capacity, though investors should monitor whether volume growth can sustain this pace into H2 2026.

The wide gross margin swings (32.7% to 68.6%) likely stem from the CO2 segment's commodity-linked production costs and the timing of pass-through expenses, rather than a structural change in pricing power. The stability of operating margin around 28-30% suggests that the fee-based pipeline business provides a reliable earnings base, but the gross margin volatility warrants attention as it may obscure underlying cost trends.

The modest absolute increase in SG&A (from $179M to $192M) against a 25% revenue increase demonstrates that KMI is scaling its fixed overhead efficiently. This operating leverage, combined with high fixed-cost infrastructure, suggests that incremental volumes drop through to operating income at a high rate, though investors should monitor whether inflationary pressures on O&M eventually erode this advantage.

The dramatic swings in COGS (from $1.4B to $2.8B) indicate that a portion of KMI's cost structure is variable and tied to commodity prices, likely in the CO2 segment's enhanced oil recovery operations. While the pipeline segments benefit from stable fee-based revenue, the CO2 segment introduces earnings volatility that investors should monitor, especially if crude prices decline. Management's expense discipline appears solid, with SG&A remaining flat, but the COGS variability is a key cost risk.