Breaking Down Aris Water Solutions, Inc. (ARIS) Financial Health: Key Insights for Investors

You're looking at Aris Water Solutions, Inc. (ARIS) right now and the picture is complex, but the path forward is clear: the near-term story is all about the Western Midstream Partners, LP (WES) merger, which is valued at approximately $1.5 billion and expected to close in the fourth quarter of 2025. Honestly, that transaction is the biggest factor for investors, but it's built on a foundation of strong 2025 operational performance; for the first half of the year, the company delivered a combined revenue of $244.6 million and a net income of $30.1 million, showing their core Permian Basin water handling and recycling business is defintely resilient. Management's full-year guidance projects Adjusted EBITDA between $215 million and $235 million, plus a healthy Free Cash Flow of $75 million to $95 million, which is a 17% increase over 2024, so the financial health is solid, and the balance sheet is clean with a Q2 2025 leverage ratio of just 2.0X. The big question for you is how to play the spread between the current stock price and the merger value, especially since the analyst consensus is already a 'Buy' with a median price target of $25.00.

Revenue Analysis

You want to know where Aris Water Solutions, Inc. (ARIS) is making its money right now, and the takeaway is clear: the company is delivering strong, double-digit revenue growth in 2025, driven by a surge in its environmentally-focused services, but the primary revenue engine remains the core Produced Water Handling business.

For the first half of 2025 (H1 2025), Aris Water Solutions reported a total revenue of $244.6 million, marking a significant 20% year-over-year (YoY) increase. This growth is defintely a bright spot, showing that the demand for full-cycle water management solutions in the Permian Basin is still accelerating. Looking at the trailing twelve months (TTM) as of June 30, 2025, total revenue stood at $475.50 million, up 16.42% from the prior TTM period.

Breakdown of Primary Revenue Streams

Aris Water Solutions manages its operations through a single operating segment but generates revenue from two key streams: Produced Water Handling and Water Solutions. The Produced Water Handling stream is the biggest driver, focusing on gathering, transporting, and disposing of the water that comes up with oil and gas, often called 'produced water'. The Water Solutions segment focuses on the more sustainable side, providing water for drilling and completions, which often includes recycled water.

Here's the quick math on how the two segments are performing on a volume basis, which directly correlates to revenue:

• Produced Water Handling: Volumes grew 13% YoY in Q2 2025, hitting record levels.
• Water Solutions: Recycled water volumes grew a remarkable 35% YoY in Q2 2025, a clear sign of customer preference shifting toward sustainable options.

While the company doesn't break out the exact revenue percentage for each, we know the Produced Water Handling segment generates a higher revenue per barrel. In Q2 2025, Produced Water Handling Revenue/Barrel was $0.87, significantly higher than the Water Solutions Revenue/Barrel of $0.53. This difference confirms Produced Water Handling is the higher-margin, foundational business, even as the Water Solutions segment grows faster.

Significant Changes and Near-Term Outlook

The biggest change isn't in the operational volumes, but in the corporate structure: the announced definitive merger agreement with Western Midstream Partners, LP (WES). This $1.5 billion equity-and-cash transaction is expected to close in Q4 2025. This move fundamentally changes the long-term revenue profile, integrating Aris Water Solutions' water infrastructure into a larger midstream entity. It's a clear action that signals a shift from an independent growth story to a strategic component within a larger, more diversified portfolio.

What this estimate hides is the potential for non-recurring costs associated with the merger that could temporarily impact Q3 and Q4 2025 net income, but the underlying operational growth remains strong. You can dive deeper into the full picture of the company's valuation and strategic position in our full post: Breaking Down Aris Water Solutions, Inc. (ARIS) Financial Health: Key Insights for Investors.

Profitability Metrics

You're looking for a clear picture of Aris Water Solutions, Inc. (ARIS)'s earning power, and the 2025 figures show a company with strong gross efficiency but a net profit that is still relatively tight. The key is to look past the top-line revenue growth-which was up 23% year-over-year in Q2 2025-and focus on the margins that truly reflect operational health.

For the trailing twelve months (TTM) ending mid-2025, which gives us the best full-year proxy for the 2025 fiscal year, Aris Water Solutions, Inc. (ARIS) generated $476 million in revenue and $28.531 million in net income. This translates to a Net Profit Margin of about 6.00%, which is a solid result in the energy services space, but it's defintely not the whole story.

Here's the quick math on the core profitability ratios for Aris Water Solutions, Inc. (ARIS) based on TTM data closest to the 2025 fiscal year:

• Gross Profit Margin: 56.75%
• Operating Profit Margin: 23.95%
• Net Profit Margin: 6.00%

Margin Trends and Operational Efficiency

The trend in profitability is generally positive, which is a good sign of management's focus on cost control. Net Income for the first half of 2025 reached $30.1 million, compared to a much smaller figure in previous years, showing a clear upward trajectory. The company's focus on operational efficiency is what's driving this improvement, particularly within its Produced Water Handling segment.

A key metric here is the Adjusted Operating Margin per Barrel, which was $0.44 in Q1 2025. This per-unit pricing power and cost management are crucial in a volume-driven business like water management. The sustained margin improvement is directly credited to strategic moves like electrification and enhanced skim oil recoveries. This is how they keep the gross margin high.

What this estimate hides, however, is the impact of non-recurring items and interest expense. The large gap between the Operating Margin (23.95%) and the Net Profit Margin (6.00%) shows that financing costs (interest expense on debt) and taxes significantly compress the final profit. That's a capital-intensive business for you.

Industry Comparison: A Reality Check

When you compare Aris Water Solutions, Inc. (ARIS) to the broader 'Water Supply' industry (SIC 4941), the picture becomes more nuanced. While Aris Water Solutions, Inc. (ARIS) has a strong Gross Margin, its Net Profit Margin is substantially lower than the industry median, which points to its specific operating model within the oil and gas sector.

Look at the difference in the final profit ratio:

Aris Water Solutions, Inc. (ARIS) is competitive on the gross and operating levels, but the 11.9 percentage point difference in Net Profit Margin is a clear signal of higher leverage (debt) costs or higher depreciation/amortization expenses compared to the median utility company. You need to understand the Mission Statement, Vision, & Core Values of Aris Water Solutions, Inc. (ARIS) to appreciate their long-term infrastructure play, which is what drives that high fixed cost base.

Next Step: Review the company's latest 10-Q filing to isolate the exact interest expense and depreciation figures to quantify the impact on that Net Profit Margin.

Debt vs. Equity Structure

You need to know how Aris Water Solutions, Inc. (ARIS) funds its operations, and the short answer is: they have maintained a conservative balance, especially right before the acquisition. The company's financial strategy prioritized debt capacity for infrastructure growth but kept its leverage well below its own targets, a sign of financial discipline.

As of June 30, 2025, Aris Water Solutions, Inc.'s primary debt component was its long-term obligations, with Long-Term Debt, Net of Debt Issuance Costs, standing at approximately $490.5 million. Their net debt was around $445 million, and they had significant liquidity, with $347 million available under their revolving credit facility. That's a strong balance sheet for a capital-intensive business.

The company's approach to financing growth leans on a manageable debt load. This is best seen in the leverage ratio (Net Debt to Adjusted EBITDA), which was only 2.0X at the end of the second quarter of 2025. This is comfortably below their own target range of 2.5X to 3.5X, indicating a substantial cushion for taking on more debt or weathering a downturn. For a water infrastructure company, this is defintely a low-risk profile.

To put their debt in perspective against shareholder funding, we look at the debt-to-equity ratio. For a period near the end of the 2025 fiscal year, Aris Water Solutions, Inc.'s debt-to-equity ratio was approximately 0.60. This is exceptionally low when compared to the median for the broader U.S. Water Supply industry (SIC code 4941), which was around 1.60 in 2024. This low ratio means the company uses significantly more equity than debt to finance its assets, a less aggressive strategy than many of its peers.

The company was proactive in managing its debt maturity schedule in 2025. In March 2025, Aris Water Solutions, Inc. announced a conditional offering of $400 million in Senior Notes due 2030. The proceeds were earmarked to redeem the full amount of the outstanding 7.625% Senior Notes due 2026, effectively pushing a major maturity wall out by four years and securing long-term financing. This is smart treasury management.

However, the most significant recent development is the acquisition. On September 15, 2025, Western Midstream Partners L.P. (WES) completed its acquisition of Aris Water Solutions, Inc. This move fundamentally changed the outlook for the debt: S&P Global Ratings upgraded the company's credit rating to 'BBB-' from 'B+' on October 16, 2025, and then withdrew it, as Aris Water Solutions, Inc. is now considered a core entity of the investment-grade-rated WES. This means the former Aris Water Solutions, Inc. unsecured notes are now effectively backed by a much larger, higher-rated entity, a massive de-risking event for bondholders.

• Debt-to-Equity Ratio: Approximately 0.60, significantly lower than the industry median of 1.60.
• Long-Term Debt (Q2 2025): Approximately $490.5 million.
• 2025 Refinancing: Issued $400 million in Senior Notes due 2030 to redeem 2026 notes.
• Credit Rating: Upgraded to 'BBB-' in October 2025 post-acquisition.

For a deeper dive into the company's overall valuation and strategic positioning, read the full post at Breaking Down Aris Water Solutions, Inc. (ARIS) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You want to know if Aris Water Solutions, Inc. (ARIS) has the cash to cover its short-term bills, and the answer is a clear yes. The company maintains a strong liquidity profile, evidenced by healthy working capital and significant access to capital, which is defintely what you look for in an infrastructure play.

The most recent data shows Aris Water Solutions, Inc.'s liquidity positions are robust. The company's Current Ratio (current assets divided by current liabilities) stands at a strong 1.73x, and the Quick Ratio (a stricter measure excluding inventory) is a very solid 1.66x. For a capital-intensive business, anything consistently above 1.0x is good, but these figures show a significant cushion. Here's the quick math on the working capital from Q1 2025: Current Assets of $150.2 million easily covered Current Liabilities of $80.5 million. This excess working capital is a key financial strength.

Working Capital and Available Capital

The trend in working capital is stable, supported by predictable, long-term contracts in the Permian Basin. But the real strength is the available liquidity. As of June 30, 2025, Aris Water Solutions, Inc. reported a cash balance of approximately $57 million. Plus, they had an additional $347 million available under their revolving credit facility. This capital flexibility is crucial, especially since management has stated they can reduce capital spending by 25% to 30% if customer volumes slow down.

• Current Ratio: 1.73x (Strong short-term coverage).
• Quick Ratio: 1.66x (Excellent ability to cover liabilities without selling inventory).
• Total Available Liquidity (Cash + Revolver): Over $404 million as of Q2 2025.

Cash Flow Statement Overview

The cash flow statement for the first half of 2025 paints a picture of a business generating cash from operations while funding strategic growth. Over the last twelve months (LTM), the company generated substantial Net Cash Provided by Operating Activities of approximately $186.89 million. This operating cash flow is the engine of the business, covering capital expenditures and shareholder returns.

The cash flow breakdown for the first six months of 2025 shows how that cash was deployed:

The Investing Cash Flow reflects capital expenditures (CapEx) of over $40.8 million, a necessary investment for their water infrastructure business. Critically, the company's leverage ratio (Net Debt to Adjusted EBITDA) was a conservative 2.0X at the end of Q2 2025, well below their target range of 2.5X to 3.5X. This low leverage and high liquidity means they have plenty of room to fund future growth or manage a downturn. You can see how this aligns with their long-term strategy in their Mission Statement, Vision, & Core Values of Aris Water Solutions, Inc. (ARIS).

Potential Liquidity Concerns or Strengths

There are no immediate liquidity concerns. The company's conservative debt management, strong operating cash flow (LTM Free Cash Flow was $102.97 million), and a successful refinancing of senior notes in Q1 2025 all point to a very healthy financial footing. The primary strength is the structural nature of their business: long-term contracts with major operators in the Permian Basin provide a stable revenue base, which translates directly into reliable cash flow. The only near-term risk is the non-recurring costs associated with the announced acquisition by Western Midstream Partners, LP, which is expected to close in Q4 2025. Still, the overall financial position is strong enough to absorb that.

Valuation Analysis

The core takeaway for Aris Water Solutions, Inc. (ARIS) right now is that its valuation is less about organic growth and more about the definitive, near-term acquisition by Western Midstream Partners, LP (WES). The stock is effectively a spread trade until the Q4 2025 closing, so the consensus analyst rating is a pragmatic Hold based on 10 analysts, though 2 analysts still maintain a Buy rating.

The stock's valuation multiples, while important, are currently overshadowed by the announced equity-and-cash transaction valued at approximately $1.5 billion. Still, for a baseline understanding, we look at the 2025 fiscal year forecasts. The forward Price-to-Earnings (P/E) ratio is projected at 21.4x, which is a key metric for judging profitability against share price.

Here's the quick math on key valuation metrics based on 2025 estimates:

The Enterprise Value-to-EBITDA (EV/EBITDA) of 5.48x for 2025 is a solid figure for an environmental infrastructure company, reflecting the value of the entire firm (market cap plus debt, minus cash) against its core operational cash flow (Earnings Before Interest, Taxes, Depreciation, and Amortization). This defintely shows the infrastructure's underlying value. You can dig deeper into the ownership structure and why specific investors are involved by Exploring Aris Water Solutions, Inc. (ARIS) Investor Profile: Who's Buying and Why?.

Stock Performance and Analyst Outlook

The stock price trend over the last 12 months tells a story of significant volatility followed by stabilization due to the merger news. The 52-week range has been wide, from a low of $14.46 to a high of $33.95. After a massive surge of 182.61% in 2024, the price has seen a slight decline of 3.07% in 2025 as of November. The stock is trading near the analyst consensus price target of $26.50, which represents about a 12.3% upside from a recent price of $23.60.

The dividend profile is healthy and sustainable. For the 2025 fiscal year, the forecast dividend per share is $0.5618, giving a projected dividend yield of about 2.3%. The payout ratio-the percentage of net income paid out as dividends-is forecast at a comfortable 49.3% for 2025. This is a good sign that the dividend is covered by earnings, so it's not a strain on cash flow.

• 52-Week Price Range: $14.46 to $33.95.
• 2025 Dividend Yield: Projected at 2.3%.
• 2025 Payout Ratio: Forecast at 49.3%.
• Average Price Target: $26.50.

What this estimate hides is the certainty provided by the WES acquisition; the stock price will likely track the deal's terms and closing probability rather than the day-to-day fluctuations of the Permian Basin's produced water volumes. That's the real driver for the near-term.

Risk Factors

You're looking for the clear risks that defined Aris Water Solutions, Inc. (ARIS) in 2025, and the biggest one is already a done deal: the company was acquired by Western Midstream Partners, LP (WES) for approximately $1.5 billion in an equity-and-cash transaction announced in August 2025. This acquisition fundamentally changes the risk landscape for former ARIS shareholders, but we still need to look at the factors that drove the business before the sale, which are now integration risks for WES.

External Risks: Oil Prices and Regulatory Headwinds

The core external risk for Aris Water Solutions, Inc. always tied back to its customers' activity in the Permian Basin-specifically, the price of oil. While the company's long-term contracts covered about 80% of its 2025 revenue forecasts, a sustained low oil price environment could still force customers to cut their development plans, directly impacting the remaining 20% of spot volumes and future contract renewals. The CEO noted in Q1 2025 that they were Breaking Down Aris Water Solutions, Inc. (ARIS) Financial Health: Key Insights for Investors while monitoring potential volatility from macroeconomic factors and lower oil prices. Another major external factor is regulatory change, particularly around the disposal of produced water via underground injection (SWDs). New regulations, especially those driven by concerns over induced seismicity, could raise operational costs or limit disposal capacity, impacting the core Produced Water Handling segment.

• Oil Price Volatility: Affects customer drilling budgets and spot volume demand.
• Regulatory Risk: Changes to environmental rules, like those governing saltwater disposal, could increase compliance costs or restrict operations.
• Industry Competition: The water solutions industry is highly competitive, pressuring margins on new contracts.

Operational and Financial Risks

In the first half of 2025, Aris Water Solutions, Inc. demonstrated a strong financial profile, but two key areas always required vigilance: capital expenditure alignment and debt management. The company had net debt of approximately $445 million as of June 30, 2025, but its leverage ratio (net debt to Adjusted EBITDA) was a healthy 2.0X, well below its target range of 2.5X-3.5X. Still, operational risks are constant in the midstream sector. The potential for spills, leaks, or equipment failures means continuous investment is required. The company's mitigation strategy here was smart: they maintain the ability to flex down capital spending by 25% to 30% if customer volumes decrease, ensuring capital deployment aligns with actual customer activity levels.

Here's the quick math on their Q2 2025 financial strength before the acquisition news:

Strategic Risk: The Acquisition and Integration

The ultimate strategic risk for Aris Water Solutions, Inc. was not surviving as an independent entity, which materialized with the August 2025 acquisition by Western Midstream Partners, LP. For investors, the risk shifted from ARIS's standalone performance to the successful closing and integration of the deal. WES expects the transaction to be accretive to its 2026 Free Cash Flow and is targeting $40 million of estimated annualized cost synergies. The risk now is execution: if the integration of Aris's approximately 790 miles of produced-water pipeline and 1,800 MBbls/d of handling capacity into WES's system takes 14+ days longer than planned, the expected synergy savings could be delayed or missed. That's a classic integration risk.

To be fair, the company had already taken a key mitigation step in Q1 2025 by successfully refinancing its senior notes, achieving a lower coupon of 7.25% on the new $500 million notes due in 2030, defintely strengthening its balance sheet right before the sale.

Next Step: Review Western Midstream Partners, LP's (WES) Q4 2025 guidance for any updates on the Aris integration timeline and projected synergy realization.

Growth Opportunities

You're looking at Aris Water Solutions, Inc. (ARIS) right now and wondering if the growth story holds up, especially with the seismic shift of a major merger on the table. The short answer is yes, the growth is defintely baked in, but the near-term focus is less on organic expansion and more on integration. The company's core business delivered a solid first half of 2025, but the biggest driver is the pending acquisition by Western Midstream Partners, LP (WES).

The strategic move, valued at approximately $1.5 billion in an equity-and-cash transaction, is expected to close in the fourth quarter of 2025. This isn't just a sale; it's a validation of Aris's infrastructure and a clear path to scale within a larger, more diversified energy midstream player. It signals a major shift in how you should view the stock's future, moving from a pure-play water solutions provider to a component of a larger entity.

2025 Financial Trajectory and Projections

Before the merger closes, the company's standalone performance in 2025 shows robust operational strength, primarily driven by record volumes in the Permian Basin. For the second quarter of 2025, revenue hit $124.1 million, marking a 23% year-over-year increase. Here's the quick math on profitability: the full-year 2025 Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is guided to land between $215 million and $235 million. This is a strong, tangible increase that shows margin discipline is working.

Still, you need to watch the earnings per share (EPS) forecast. While analysts project EPS to grow to around $1.25 per share in the next full year, the Q2 2025 EPS of $0.19 missed consensus estimates. This highlights the volatility you get when you're deeply tied to the pace of oil and gas completion activity, so keep a close eye on customer capital expenditure plans.

Key Growth Drivers and Competitive Edge

Aris Water Solutions, Inc. has a clear competitive advantage that WES is buying into: its integrated infrastructure and long-term contracts. About 80% of the company's forecasted 2025 revenue is secured by long-term dedication contracts, some with an average tenor of 8 years, with premium operators like Chevron and ConocoPhillips. That's a rock-solid foundation.

The company's focus on sustainability is also a major growth engine. They're driving product innovations like developing facilities for mineral extraction, such as iodine, and expanding their beneficial reuse programs with their largest customers. Plus, they're actively expanding into new vertical markets, which is smart diversification. They recently acquired Crosstek to get a foothold in industrial water treatment, extending their services beyond the core oil and gas sector.

• Secure 80% of 2025 revenue via long-term contracts.
• Drive growth with 35% YoY increase in recycled water volumes.
• Expand into industrial water treatment with the Crosstek acquisition.
• Develop new revenue streams from mineral extraction like iodine.

Strategic Actions and What to Watch

The merger with WES is the single most important action for investors to track. It's a $1.5 billion bet on Aris's asset quality. Outside of that, the company continues to strategically expand its footprint, having acquired five water handling facilities and land in Reeves County, Texas, in 2025. This disciplined approach to capital deployment, even while preparing for a merger, shows management's commitment to asset quality.

What this estimate hides, however, is the potential for integration risk and the non-recurring costs associated with the WES transaction. The immediate action for you is to understand the terms of the merger and what the combined entity's capital allocation strategy will look like. For a deeper dive into the players involved in this story, you should read Exploring Aris Water Solutions, Inc. (ARIS) Investor Profile: Who's Buying and Why?