Devon Energy's quiet rise outshines Constellation's AI-fueled struggles

Two energy companies are drawing attention for very different reasons. Constellation Energy (CEG) remains a Wall Street favourite, linked to AI-driven demand for nuclear power. Yet its high valuation contrasts sharply with falling profits. Meanwhile, Devon Energy (DVN) is quietly strengthening its position with major deals and rising production, despite receiving far less media focus.

Constellation Energy's stock has dropped 18% since January, reflecting investor concerns. The company trades at 41 times trailing earnings, with a market cap near $109 billion. However, its full-year net income fell 38% to $2.3 billion. A recent 13% year-over-year revenue increase in Q4 did little to ease doubts about its stretched valuation.

Devon Energy's growth tells a different story. Since 2020, its oil output has more than doubled, climbing from 317,000 to over 700,000 barrels per day. This surge follows acquisitions like WPX Energy and RimRock, along with improved drilling in the Permian Basin. Pandemic-era price crashes and Texas regulations caused temporary setbacks, but production rebounded as oil prices recovered.

The company's financial strength is also clear. In 2025, Devon generated $3.1 billion in free cash flow—a sharp rise from prior years. Its market cap now sits at roughly $28.7 billion. Two major contracts will further boost its position: a 7-year deal to supply 65 million cubic feet of gas daily to an AI-powered plant from 2028, and a 10-year LNG export agreement for 50 million cubic feet per day, also starting in 2028.

Devon's planned merger with Coterra Energy (CTRA), set to close in Q2 2026, aims to cut $1 billion in annual pre-tax costs. Once finalised, shareholders will see a 31% dividend hike to $0.315 per share. A new $5 billion share buyback programme will also begin.

Constellation Energy's high valuation relies on future AI-driven demand, but its recent financial performance raises questions. Devon Energy, in contrast, has expanded production, secured long-term contracts, and planned a major merger. The company's growing cash flow and shareholder returns suggest a more stable outlook for now.