PSEG sold less and kept much less. In the three months ended June 30, revenue fell 8.9% to $2.6 billion, while operating income dropped 43.6% to $461 million.
That is the filing’s blunt surface reading: a modest sales decline became a much larger earnings decline. Operating margin fell to 18.1% from 29.1%, and diluted EPS dropped to $0.67 from $1.17.
The sharper detail is where the pressure showed up. PSEG said higher prices in the PJM capacity market drove a large part of its cost increase, a reminder that a regulated utility can face a very unglamorous squeeze between the price of power and the price customers pay for it.
"The cost increases were in large part due to higher prices from the PJM capacity market (base residual auction)."
PSEG, 10-Q filed August 4, 2026
The company does not identify one reason for the revenue decline. It does identify a cost pressure that helps explain why profit contracted so much faster than sales: capacity-market prices rose for the 2025/2026 and later auction years, according to the filing.
Taxes and hedges added another layer of utility accounting to the result. PSEG said its effective tax rate fell in the three-month period because of the pretax earnings impact from mark-to-market changes on economic hedges.
"The decrease in PSEG’s effective tax rate for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was primarily driven by the pre-tax earnings impact of fluctuations in mark-to-market (MTM) on economic hedges."
PSEG, 10-Q filed August 4, 2026
That lower tax rate provided a counterweight, but it did not keep net income from falling 42.9%, to $334 million. The result is a business with less reported revenue, materially lower operating profitability, and earnings that also reflect hedge movements and utility-ratemaking effects.
Cash offers the filing’s second reading. Cash rose slightly to $192 million, while free-cash-flow margin improved 3.8 percentage points. Capital spending rose only 3.1% year over year, so cash conversion improved even as the income statement weakened.
The balance sheet adds a small unresolved wrinkle: accounts receivable climbed 12%, from $1.7 billion to $1.9 billion. PSEG does not disclose the cause in the supplied filing facts, so the cash-flow improvement cannot be reduced to a simple “profits fell, cash followed” story.
The market snapshot is similarly quiet rather than dramatic. PEG closed at $76.63 on August 3, down 0.1% that day, after a series of lower closes from $79.23 on July 27. That movement is descriptive, not an explanation of the filing.
PSEG’s next quarterly report will put a fresh number on operating cash flow, the disclosure that can show whether the period’s better cash conversion still sits alongside the lower margin. For now, the trade-off is plain: less revenue, much less profit, and better cash mechanics.
PSEG’s latest 10-Q shows a margin squeeze with improved cash conversion: utility math rarely travels in a straight line.