Goldman Sachs has revised its stance on European utilities, increasing both demand-growth expectations and valuation multiples for the sector as structural drivers accelerate. The firm now models annual power demand growth of 1.5-2% through 2028 and has lifted its target valuation to about 16x P/E, reflecting what it describes as an earnings super-cycle tied to AI, electrification and concerns over energy security.
Key to Goldman's view is the potential scale of datacenter electricity consumption across Europe. The bank notes that AI and datacenters could account for up to 25% of the region's electricity use by 2035 - a dynamic it believes is underappreciated by the market and one that should underpin long-term demand for power and flexible generation.
Goldman singles out six utilities as its preferred ways to play this structural change. The firm assigns a buy rating to each and has raised price targets or adjusted valuation assumptions to reflect improved fundamentals and earnings sensitivity to rising power use.
- RWE - Goldman names the German integrated utility as its top pick among integrated players, raising its price target to c63.50. The bank points to improving FlexGen margins and a sizeable renewables pipeline as supporting steady EPS growth through 2030. Goldman views RWE as well positioned to benefit from both the energy security agenda and rising datacenter power demand across Europe.
- Solaria - As Goldman's highest-conviction pure renewable, the Spanish solar developer carries a buy rating and a revised price target of c25.50. Goldman forecasts the strongest projected EPS growth in its coverage universe for Solaria - a 38% compound annual growth rate through 2030 - driven by accelerated capacity additions and incremental earnings from battery storage. Despite the rapid EPS expansion, Solaria is projected to trade at just an 8x P/E multiple on 2030 earnings, making it the cheapest name in the peer group on that metric.
- Enel - The Italian utility remains a buy with a c12 price target. Goldman emphasizes Enel's broad exposure to the electrification buildout - spanning renewables, networks and retail across multiple geographies - and highlights a 9% average EPS CAGR across the group's identified electrification compounders as evidence of the earnings momentum the bank expects from the sector.
- PPC (Public Power Corp.) - For merchant power exposure, Goldman prefers the Greek utility, which the bank says has the highest near-term earnings sensitivity to rising wholesale power prices. Under Goldman's scenario analysis PPC could see a 16% uplift to net income in 2026 alone. The stock carries a buy rating and is portrayed as a direct beneficiary of power-price spikes related to Middle East-driven market stress and Greece's domestic electrification needs.
- Naturgy - Goldman views Naturgy as the more defensive option among its top picks, keeping a buy rating while increasing the price target to c30.50. The Spanish gas and power group benefits from improving FlexGen returns and a reliable dividend profile. Goldman notes that Naturgy trades at a discount to peers even as it posts steady earnings growth, making it an attractive, lower balance-sheet-risk way to participate in Europe's energy transition.
- Engie - The French diversified utility is Goldman's preferred large-cap pick, with a buy rating and an increased price target of c32.10. Goldman highlights Engie's exposure to flexible generation, renewables and infrastructure across several European markets and applies a 5% sector-relative premium to its valuation to reflect the group's scale and perceived earnings quality.
Across the picks Goldman emphasizes different exposures to the transition: integrated operators with renewables pipelines and flexible generation, pure-play renewables accelerating capacity and storage, merchant-exposed utilities sensitive to wholesale prices, and more defensive names with stable dividends and lower balance-sheet risk. The bank's adjustments to demand forecasts and valuation multiples underpin its buy convictions and revised targets.
Goldman's analysis rests on a set of forward-looking assumptions about electrification trends and datacenter demand that materially lift expected sector earnings. The firm sees these forces as combining to produce sustained EPS growth for the utilities it identifies as electrification compounders through the decade.
Bottom line - Goldman Sachs has raised its expectations for power demand growth and the sector's valuation, and has flagged six utilities it believes are best positioned to benefit from rising electricity consumption driven by AI, datacenters, and electrification more broadly. Each named company carries a buy rating in Goldman’s coverage and has seen its price target increased or its valuation treated more generously within the bank's models.