Infrastructure Outlook 2026

2025 Retrospective

Global listed infrastructure delivered another year of double‑digit returns in 2025. Utilities led performance, with AI‑driven data center demand boosting U.S. growth and grid investments supporting European peers. Transportation stocks followed closely, lifted by resilient airport passenger volumes and strong pricing for managed lane toll roads.

Midstream energy and communications underperformed. Commodity price weakness weighed on midstream companies, as investors remained cautious amid oversupplied crude oil markets and uncertain demand. Wireless towers posted the weakest results: near‑term fundamentals were solid but concerns about customer consolidation overshadowed performance.

2026 Outlook

In our view, infrastructure fundamentals are robust and the growth outlook is as strong as we have seen in the 21-year history of our strategy. Infrastructure offers opportunities for resilient growth that we believe are difficult to duplicate elsewhere in the market. While AI drew the most attention again this year, other secular drivers such as asset renewal, energy security, decarbonization, and data growth are fueling durable investment cycles. We believe these themes support long‑term opportunities across sectors, reinforcing infrastructure’s potential for sustained growth and stability.

Additionally, infrastructure valuations remain attractive. The chart below demonstrates infrastructure companies trading at a discount to the broader market heading into 2026.

Utilities

The outlook for utilities in 2026 is highly constructive. After nearly two decades of muted load growth, U.S. power demand has inflected upward, driven by AI-enabled data center expansion, onshoring, and electrification. This surge is fueling incremental generation investment, transmission upgrades, and grid hardening, prompting utilities to raise long-term earnings targets. Earnings growth is projected well above historical norms, yet valuations remain aligned with long-term averages—an attractive contrast to the broader market, which is trading at premiums.

European utilities are also benefiting from rising demand, renewable proliferation, and replacement of aging infrastructure. Regulators in Germany, Spain, and the U.K. have endorsed long-term investment plans with significantly higher capital expenditures. With improving GDP, electrification, and AI-related demand, power generation needs in Europe are expected to grow, though not as rapidly as in the U.S. While wind and solar remain important, Europe is shifting toward a pragmatic “all of the above” approach, which may temper some net-zero targets but also broaden the investment opportunity.

Valuations in Europe sit above historical averages but remain relatively inexpensive compared to U.S. peers. Earnings and dividend momentum are the strongest in over two decades, supported by an incrementally stable political backdrop. We believe the best risk/return opportunities are within integrated utilities, which combine regulated grid growth with rising generation demand, and U.K. water utilities, which secured regulatory approval of multiyear investment programs at reasonable returns. Balance sheet strength remains critical, and most European operators have maintained or improved leverage metrics, positioning the sector for sustained performance.

Transportation

We hold a somewhat cautious outlook for broader transportation in 2026 due to uneven growth across end-markets, but we see pockets of opportunity to exploit with security selection. Toll roads, airports, and railroads with strong competitive advantages and unique tailwinds remain positioned to grow revenue and earnings despite macro uncertainty. We continue to target opportunities where cost initiatives, pricing power, and new projects can drive returns above and beyond sector growth levels.

Global toll road volumes remain resilient, with North American managed lanes sustaining double-digit revenue growth due to strong pricing. French toll roads should deliver mid-single-digit EBITDA and cash flow growth, though equity values face pressure as concession expirations approach, creating reinvestment risk. Greece stands out as an attractive infrastructure market, supported by privatization efforts and strong, vertically integrated operators.

Railroads in North America face muted volume prospects, with freight markets still in recession and weak demand across housing and manufacturing. While M&A has yet to create value, the Union Pacific–Norfolk Southern merger could shift dynamics in 2026. We favor operators focused on margin improvement through efficiency rather than volume growth.

Airports remain a bright spot, with resilient travel demand and several valuations still below pre-pandemic averages. Non-regulated revenue streams such as retail and real estate continue to expand. Regulatory reviews at three airports in 2026 may trigger stock volatility, but we generally view such selloffs as buying opportunities given the importance of unregulated segments to overall valuations.

Midstream energy

We remain cautious on the broader energy sector over the near term given macro uncertainty, geopolitics, and oversupplied crude oil markets. However, midstream assets appear relatively insulated and well-positioned for long-term investors.

Oil prices hover near breakeven, discouraging non-dedicated investor participation until production clarity emerges in 2026. Weak pricing has reduced rig counts, raising the likelihood of lower output next year. Recent sector weakness may already reflect this, creating potential entry points for investors focused on value and yield.

By contrast, domestic natural gas fundamentals are constructive, supported by rising LNG exports and power demand. Rig counts continue to climb, though investor positioning poses risks as capital flows favor gas over oil, widening valuation gaps. A disruption to AI-driven momentum in the markets could pressure gas infrastructure names.

Midstream companies remain resilient: production is high, free cash flow is strong, balance sheets are healthy, and yields are attractive. While trade and geopolitical volatility persist, falling oil prices could prompt midstream operators to shift from growth capex toward maximizing free cash flow, strengthening balance sheets and enabling buybacks.

Communications

Wireless data traffic continues to grow, though tower revenue growth has moderated between technology cycles and amid operator consolidation. U.S. tower activity should remain steady with mid-single-digit growth, but uncertainty surrounds one customer who sold significant spectrum holdings to larger competitors, thereby abandoning plans for a nationwide network. Further complicating the matter, a legal dispute has emerged over unpaid tower rent, though we anticipate the towers’ strong contractual position will prevail.

Across Europe, consolidation among mobile network operators is a key focus, particularly in markets such as Italy and France. While short-term churn is likely as networks combine, stronger wireless operators should ultimately support greater investment. European towers benefit from durable contracts, but 5G rollout lags the U.S. due to weaker pricing power and balance sheets. Longer term, a smaller number of healthier operators should drive more network spending and revenue growth for tower companies.

Conclusion

Overall, we are optimistic regarding the risk-adjusted growth potential for global listed infrastructure in the next 12 months. Megatrends such as AI-driven power demand and decarbonization continue to provide strong tailwinds for the asset class, while valuations remain attractive.