Archrock's second quarter was a study in contrasts. The contract operations engine ran another lap of disciplined growth - revenue up 3%, adjusted gross margin up 6%, with average operating horsepower climbing year over year even as spot utilization softened to 94.4%. The aftermarket services business collapsed by a third on the absence of a one-time overhauled-engine sale that flattered the year-ago quarter, dragging total reported revenue down to $371.2 million from $383.2 million. Net income still rose 5% to $66.7 million, and adjusted EBITDA held essentially flat at $212.6 million versus $212.7 million - a far better result than the headline suggested. The quiet part, and the part that will frame the rest of the year, is on the balance sheet: management refinanced the entire $800 million of 6.250% 2028 senior notes with new 6.000% 2034 paper in January, redeemed the old notes at par in April using the credit facility, and ended the quarter with a leverage ratio of 2.6x - down from 3.3x a year ago, and the lowest the company has carried since the late 2010s.
Each of the two engines had its own story. Contract operations delivered 71% adjusted gross margin (up roughly 100 basis points year over year), with revenue growth driven by higher rates, the third month of NGCS Acquisition contributions, and net horsepower additions. The fleet ended the quarter at 4.5 million operating horsepower, with 94.4% spot utilization and a multi-year contract for an additional 665,000 horsepower signed with an existing strategic customer. Aftermarket services ran at a 24% adjusted gross margin, down 35% in revenue on a confluence of one-time prior-year sales and softer customer demand for major maintenance - the kind of timing that will reverse, but not as quickly as the sell-side wants to believe. Balance sheet is the under-appreciated story. The 2028-to-2034 refinancing extends the duration of the capital stack by six years, swaps 25 basis points of coupon, and the Q2 cash interest expense of $37.0 million is already running 11% below the year-ago quarter. Dividend coverage is 3.1x cash available for dividend; leverage is 2.6x; the share-repurchase authorization has $113.2 million of dry powder.
The other under-appreciated item is the multi-year growth capex guide - $1.4 billion to $1.6 billion cumulatively from 2027 through 2030, on top of the 2026 growth-capex range of $250 million to $275 million. That is a deliberate signal that management is positioning for higher utilization through the back half of the decade as LNG export capacity and power-demand growth pull on natural gas infrastructure. The thesis is simple: a high-margin, contract-locked compression fleet tied to U.S. natural gas midstream is being refinanced, levered down, and reloaded with growth capital. The stock trades at roughly 9x forward EV/EBITDA, with a 2.7% dividend yield, and the second-derivative story - more growth capex → more horsepower → more adjusted EBITDA - has yet to be priced. The bear case is that the aftermarket weakness isn't cyclical but structural, and the 2026 EBITDA guide of $865 million to $885 million (tightened from $865-$915 million this quarter) bakes in nothing more than the high-90s utilization the company already prints.