Breaking Down Archrock, Inc. (AROC) Financial Health: Key Insights for Investors

You're looking at Archrock, Inc. (AROC) because the market is defintely rewarding companies tied to must-run energy infrastructure, but the question is whether their financial health justifies the recent run-up in the stock. Honestly, the third quarter of 2025 gave us a clear signal: the structural demand for natural gas compression is paying off, with the company reporting a strong $382.4 million in revenue and net income hitting $71.2 million. That's a powerful combination of top-line growth and bottom-line efficiency, plus their fleet utilization rate-the percentage of their equipment earning money-remained at a stellar 96%. Still, you need to map that against the full-year 2025 Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) guidance, which was raised to a range of $835 million to $850 million, and their substantial $2.6 billion in long-term debt. The growth is clear, driven by U.S. LNG (Liquefied Natural Gas) exports and the power needs of new AI data centers, but we need to see how they plan to service that debt and continue their shareholder returns-like the recent dividend increase to $0.21 per share-while managing a leverage ratio of 3.1x.

Revenue Analysis

You're looking for a clear picture of where Archrock, Inc. (AROC) makes its money, especially with the market shifts in 2025. The direct takeaway is this: Archrock's revenue is heavily concentrated in its core service contracts, and a major acquisition this year has accelerated its already strong growth trajectory.

For the trailing twelve months (TTM) ending September 30, 2025, Archrock, Inc. delivered a total revenue of approximately $1.44 billion, demonstrating a substantial year-over-year growth rate of 31.94%. That's a serious jump, significantly outpacing the broader US Oil & Gas Equipment & Services industry growth rate of around 5.46%.

Here's the quick math on their primary revenue sources-they operate in two distinct business segments:

• Contract Operations: This is the backbone, providing natural gas compression services, including design, ownership, installation, and maintenance of equipment. This segment represents the vast majority of their income.
• Aftermarket Services: This segment supports customers who own their own compression equipment, offering maintenance, overhaul, and reconfiguration work. It's a smaller, but still critical, revenue stream.

The third quarter of 2025 (Q3 2025) results, reported in October 2025, clearly show this concentration. Total Q3 2025 revenue was $382.4 million, a 30.9% increase from the same period in 2024.

The segment contributions for Q3 2025 tell the story:

The Contract Operations segment alone grew by 33% year-over-year in Q3 2025, hitting $326.3 million. That's the engine of the business.

What this estimate hides is the impact of strategic moves. The significant change in revenue streams for 2025 is the acquisition of Natural Gas Compression Systems, Inc. (NGCS) on May 1, 2025. This deal, plus the divestiture of some smaller, non-core assets, has materially boosted the Contract Operations revenue and total operating horsepower. It's a clear move to double down on their core, high-margin service business. For the full year 2025, management's guidance reflects this, anticipating Contract Operations revenue to be between $1.26 billion and $1.28 billion, with Aftermarket Services revenue expected to range from $205 million to $215 million.

The business is defintely focused on long-term, stable contracts with U.S. midstream customers, which provides revenue visibility but also links their fate to sustained natural gas demand. You can get a better sense of the long-term strategic focus here: Mission Statement, Vision, & Core Values of Archrock, Inc. (AROC).

Next step: Dig into the gross margins for each segment to confirm the profitability of the Contract Operations growth. Owner: Analyst Team: Calculate segment gross margin percentages for Q3 2025 by end of week.

Profitability Metrics

You're looking for a clear picture of Archrock, Inc. (AROC)'s ability to turn its natural gas compression services into real profit, and the data from 2025 is defintely compelling. The direct takeaway is that AROC is demonstrating significant margin expansion, with the core business driving a high-efficiency model that outpaces peers, but you need to watch the debt load that underpins this growth.

Archrock, Inc. is showing stellar profitability in the 2025 fiscal year, largely due to strong pricing and excellent cost management in its Contract Operations segment. For the third quarter of 2025, the company reported total revenue of $382.4 million, which translated into a net income of $71.2 million. This performance resulted in a Net Profit Margin of approximately 18.6% for the quarter, a sharp improvement from the prior year.

When we look at operational efficiency, the non-GAAP (Generally Accepted Accounting Principles) metrics often tell a clearer story for energy infrastructure. The Contract Operations segment-the company's primary revenue driver-achieved an Adjusted Gross Margin of 73% in Q3 2025, a substantial jump from 67% in the same quarter of 2024. This is a huge number that shows the pricing power and cost discipline in their core business. Here's the quick math on the operating proxy:

• Gross Profit Margin (Adjusted): The segment-level margin of 73% for Contract Operations shows superior cost management against revenue.
• Operating Profit Margin (Adjusted EBITDA Proxy): Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for Q3 2025 was $220.9 million on $382.4 million in revenue, giving an Adjusted EBITDA Margin of about 57.8%.
• Net Profit Margin: The Q3 2025 Net Profit Margin stands at 18.6%, with the trailing twelve months (TTM) Net Margin at 17.17%.

This margin expansion is a clear trend. Net profit margins have climbed from 13.1% last year to the current 18.3% (TTM), with analysts projecting further growth to around 22.3% over the next three years. This acceleration is driven by modernizing equipment and disciplined capital allocation, which you can read more about in the Mission Statement, Vision, & Core Values of Archrock, Inc. (AROC).

To be fair, Archrock, Inc. is outperforming many of its peers on a profitability basis. While the average price-to-earnings (P/E) ratio for the US Energy Services industry hovers around 15.0x, Archrock, Inc. trades at a slight premium, which is often justified by its superior margin profile and growth trajectory. The high Adjusted Gross Margin in the Contract Operations segment is particularly noteworthy, indicating that their long-term contracts and fleet utilization are locking in high-quality, predictable revenue streams. This is not just a cyclical bump; it's a structural improvement.

What this estimate hides is the impact of non-recurring items; for instance, the Q3 2025 net income included a non-cash long-lived and other asset impairment of $4.7 million, which slightly compressed the GAAP Net Income. Still, the strong underlying operational performance is undeniable. Your next step should be to compare these margin figures against the specific cost of capital to see how efficiently they are generating returns on invested capital.

Debt vs. Equity Structure

You're looking at Archrock, Inc.'s (AROC) balance sheet, and the first thing to understand is how much of their growth is funded by debt versus shareholder money. The direct takeaway is that Archrock is a capital-intensive business that uses debt aggressively, but its leverage is improving and sits within a tolerable range for its sector, especially when measured against earnings.

As of the third quarter of 2025, Archrock, Inc. reported total debt of approximately $2.6 billion, with long-term debt making up the vast majority at $2,559.9 million. This is a business built on owning and operating natural gas compression equipment, so a high debt load is not a surprise; you need significant capital expenditure (CapEx) to buy those big compressor units. Total equity, the shareholders' stake, stood at $1,422.3 million at the same time. That's a lot of equipment to finance.

Here's the quick math on the Debt-to-Equity (D/E) ratio: $2.6 billion in debt divided by $1.422 billion in equity gives us a D/E ratio of roughly 1.80. While this is higher than the broader Oil and Gas Midstream sector average of about 0.97 (as of early 2025), it's below the 2.0 to 2.5 ratio often considered the upper limit for capital-intensive industries. This suggests they are leveraging their balance sheet to fuel their fleet expansion, but they haven't stretched into the high-risk zone yet.

The company's management has been defintely focused on deleveraging, which is a good sign. Their leverage ratio (Total Debt to trailing 12-month Adjusted EBITDA) was 3.1x as of September 30, 2025, a solid improvement from 3.6x a year earlier. This trend is what matters most for debt serviceability, and it's better than the Midstream sector's average leverage of 3.7x at year-end 2024.

Archrock, Inc. uses a balanced approach, but debt is the primary growth engine. They did a significant debt-for-growth move in August 2024, closing a $700 million private offering of 6.625% senior notes due 2032. This was mainly to fund a portion of an acquisition and to tender for up to $200 million of existing senior unsecured notes due 2027, which is a smart way to manage their maturity wall. Plus, their commitment to shareholders is clear: they returned $159.1 million through dividends and share repurchases in the first three quarters of 2025. This mix shows confidence in their cash flow to both service debt and reward equity holders.

• Total Debt (Q3 2025): $2.6 billion
• Debt-to-Equity (D/E) Ratio: 1.80
• Leverage Ratio (Debt/EBITDA): 3.1x
• Credit Rating: 'BB-' (S&P Global Ratings)

To get a full picture of the company's financial standing, you should also look at their operational performance, which is detailed in Breaking Down Archrock, Inc. (AROC) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Archrock, Inc. (AROC) can cover its near-term bills and manage its long-term debt. The short answer is yes, its liquidity position is solid and has improved through the first three quarters of 2025, but the balance sheet still carries a significant debt load from its growth strategy.

The company's primary liquidity indicators-the Current Ratio and Quick Ratio-show a healthy ability to meet short-term obligations. As of September 30, 2025, Archrock's Current Ratio stood at a strong 1.81x, meaning it holds $1.81 in current assets for every dollar of current liabilities. Its Quick Ratio (or acid-test ratio), which strips out less-liquid inventory, was 1.30x. This is defintely a comfortable position, indicating that even without selling inventory, the company can cover its immediate debts easily. For context, a ratio above 1.0x is generally considered good.

Here's the quick math on Archrock's Q3 2025 liquidity:

• Current Ratio (Q3 2025): 1.81x
• Quick Ratio (Q3 2025): 1.30x
• Total Available Liquidity (as of 9/30/2025): $728 million
• Long-Term Debt (as of 9/30/2025): $2.6 billion

Working Capital and Cash Flow Trends

The trend in working capital (Current Assets minus Current Liabilities) is positive, which is a clear sign of business health. Total Current Assets increased from $233.12 million at the end of 2024 to $319.84 million by September 30, 2025. This growth outpaced the rise in Total Current Liabilities, resulting in a significant increase in net working capital to approximately $114.36 million. This expansion reflects the company's strong operational performance, particularly the growth in its Contract Operations revenue, which hit $326.3 million in Q3 2025.

The Cash Flow Statement confirms this operational strength, though it highlights the capital-intensive nature of the compression business. Net cash provided by operating activities (OCF) for the third quarter of 2025 was robust at $164,530 thousand. However, the company is in a heavy growth phase, which is visible in its cash flow from investing activities (ICF). Archrock is spending big on fleet expansion, which is why its cash and cash equivalents remain low, sitting at about $4.08 million as of Q3 2025. They are choosing to reinvest cash immediately for growth rather than hoarding it.

A look at the cash flow components reveals the capital allocation strategy:

The company's available liquidity, which includes its undrawn credit facility capacity, totaled $728 million at September 30, 2025. This is your true safety net. While the balance sheet shows a high long-term debt of $2.6 billion, the leverage ratio (Debt-to-Adjusted EBITDA) has improved to 3.1x from 3.6x a year prior. This deleveraging trend, fueled by high Adjusted EBITDA guidance of $835 million to $850 million for the full year 2025, is the key to managing that debt. You can read more about their growth strategy and principles here: Mission Statement, Vision, & Core Values of Archrock, Inc. (AROC).

Valuation Analysis

You want to know if Archrock, Inc. (AROC) is a value play or a pricey bet right now. The quick answer is that analysts see a clear runway for growth, giving the stock a consensus Buy rating with a significant upside, but the valuation metrics suggest it's trading at a premium to its book value. The market is pricing in the strong 2025 performance.

The average 12-month price target from analysts is around $31.50, which suggests an upside of over 28% from the recent stock price of approximately $24.63 as of early November 2025. This optimism is defintely grounded in the company's robust 2025 fiscal year results, including a raised Adjusted EBITDA guidance to a range of $835 million to $850 million. That's a strong signal.

Here's the quick math on Archrock's key valuation multiples based on the latest available 2025 data:

The trailing P/E of 16.02x looks reasonable for a company showing strong growth in the energy infrastructure sector, and the forward P/E of 13.88x suggests earnings growth is expected to continue. But, the Price-to-Book ratio is high at about 3.04x (calculated using the recent price of $24.63 and a book value per share of $8.10), meaning you're paying three times the value of the company's physical assets. This premium reflects Archrock's dominant market position and high utilization rate, which was a record 96% in the second quarter of 2025.

Over the last 12 months, the stock price has climbed by a solid 26.82%, moving from a 52-week low of $20.12 to a high of $30.44. This upward trend shows market confidence, but it also means the easy money has already been made. Still, the analyst consensus is overwhelmingly positive, with seven out of nine covering firms rating it a 'Buy' or 'Strong Buy.'

Archrock, Inc. also offers a meaningful dividend, which is a nice bonus for patient investors. The current annual dividend is $0.84 per share, translating to a dividend yield of about 3.49%. The dividend is well-covered by earnings, with an earnings payout ratio of approximately 53.2%. However, the cash payout ratio is high at 762.8%, which is a number you need to watch closely. What this high estimate hides is that the company has heavy capital expenditures (CapEx) typical of an infrastructure business, so while earnings cover the dividend, free cash flow is tighter.

Key takeaways on the dividend coverage:

• Annual Dividend: $0.84 per share.
• Dividend Yield: ~3.49%.
• Earnings Payout Ratio: 53.2% (Covered by earnings).
• Cash Payout Ratio: 762.8% (Tight on free cash flow due to high CapEx).

For a deeper dive into who is driving this demand, you should read Exploring Archrock, Inc. (AROC) Investor Profile: Who's Buying and Why?

Risk Factors

You're looking at Archrock, Inc. (AROC) because the natural gas compression business is a must-run service, and their recent financial performance has been stellar. But even with a raised 2025 Adjusted EBITDA guidance of $835 million to $850 million, every energy infrastructure company has real, near-term risks you need to map out. This isn't a growth stock; it's a stability play with specific vulnerabilities.

The biggest external risk is the one they can't control: the shifting U.S. energy landscape. Archrock, Inc. is heavily exposed to the U.S. midstream sector, and that concentration means swings in natural gas prices or commodity price volatility could quickly impact customer activity and contract renewals. Also, the regulatory environment is a constant headwind. Specifically, new climate-related and environmental, social and governance (ESG) risks could force expensive operational changes, especially around methane emissions, which is a major concern for investors now.

Operationally and financially, two risks jump out from the 2025 filings. First, the cost of doing business is rising. Here's the quick math: Selling, General, and Administrative (SG&A) expenses climbed to $37,207 in the first quarter of 2025, up from $31,665 in the same period last year. That's a clear signal of increased operating costs that management must contain to protect margins. Second, there's the debt load. While the company's leverage ratio improved to 3.1x as of September 30, 2025, they still carry $2.6 billion in long-term debt. This makes them vulnerable to interest rate increases, and honestly, it's why the Altman Z-Score, a measure of financial distress, was flagged at 0.74-that's in the distress zone, even with strong earnings. That's a serious number to watch.

Still, Archrock, Inc. has clear mitigation strategies in place. They intentionally focus on multi-year, fee-based contracts for their Contract Operations segment, which provides a resilient revenue floor against short-term price volatility. Their fleet utilization rate is exceptionally high at 96% as of the third quarter of 2025, which shows strong customer demand and operational efficiency. Plus, they are actively managing their balance sheet, evidenced by a robust dividend coverage of 3.7x in Q3 2025, and they are investing in cleaner technologies to get ahead of those environmental regulations. You can see their long-term focus here: Mission Statement, Vision, & Core Values of Archrock, Inc. (AROC).

Here is a summary of the key risks and mitigation efforts:

Your next step is to monitor the Q4 2025 earnings report for any changes to the full-year guidance and look for specific commentary on their integration of recent acquisitions, as that's a potential risk for increased costs.

Growth Opportunities

You need to know if Archrock, Inc. (AROC) can sustain its recent performance, and the short answer is yes: the company is positioned for continued, visible growth, mostly thanks to a strategic acquisition and unyielding demand for U.S. natural gas. The firm's raised full-year 2025 guidance reflects a structural upturn, underpinned by a massive infrastructure build-out that is defintely not slowing down.

Key Growth Drivers: LNG, AI, and Fleet Expansion

Archrock, Inc.'s growth story for 2025 is a concrete example of a well-executed strategy meeting strong market tailwinds. The most significant driver was the acquisition of Natural Gas Compression Systems (NGCS) on May 1, 2025, which immediately added 0.7 million horsepower (HP) of large-horsepower and electric compression assets to their fleet. This deal directly contributed to the company raising its full-year 2025 Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) guidance to a range of $835 million to $850 million as of the third quarter reporting.

But it's not just M&A (mergers and acquisitions). The demand side of the equation is incredibly strong, driven by two major market forces: the continued growth of U.S. Liquefied Natural Gas (LNG) exports and the emerging, massive power needs of AI-driven data centers. Contract Operations revenue, the core business, hit $326 million in Q3 2025, up 2% sequentially, showing that customers are still signing on for capacity. The fleet utilization rate is a record 96%, which tells you they are running at near-full capacity.

2025 Financial Projections and Capital Returns

The updated financial picture for 2025 shows a company prioritizing profitable growth and shareholder returns. Analysts expect the company to post a full-year 2025 Earnings Per Share (EPS) of approximately $1.00. Plus, the board is committed to returning capital, increasing the quarterly cash dividend to $0.21 per share in the third quarter of 2025-a 20% year-over-year increase. They also added $100 million to their share repurchase authorization, which is a clear signal of management's confidence in their stock's value.

Here's the quick math on the raised guidance:

Competitive Advantages and Strategic Initiatives

Archrock, Inc. holds a competitive edge through its operational scale and contract structure. The company maintains a substantial backlog of contract compression bookings that extends well into 2026, giving them excellent revenue visibility and stability that insulates them from short-term market volatility. Their Contract Operations segment consistently delivers high margins, hitting an adjusted gross margin percentage of approximately 70% for the third straight quarter in Q3 2025. That's a strong operational advantage.

Strategic growth is focused on a few clear actions:

• Maintain a target Debt-to-Adjusted EBITDA leverage ratio between 3.0x and 3.5x.
• Invest in newbuild horsepower, primarily in the Permian Basin, backed by long-term contracts.
• Expand the electric compression fleet, which aligns with customer decarbonization goals.
• Leverage the Aftermarket Services segment, which services customer-owned compressors and provides diversification.

To be fair, the company is still exposed to the cyclical nature of the oil and gas industry, but the long-term contracts and focus on stable midstream infrastructure mitigate a lot of that risk. If you want a deeper dive into the company's long-term vision, you can review the Mission Statement, Vision, & Core Values of Archrock, Inc. (AROC).