Archrock, Inc. Segments Disclosure
28. Segments
We manage our business segments primarily based on the type of product or service provided. We have two segments that we operate within the U.S.: contract operations and aftermarket services. Our contract operations segment primarily provides natural gas compression services to meet specific customer requirements. Our aftermarket services segment provides a full range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets.
Our CODM is our President & Chief Executive Officer. Our CODM evaluates the performance of our segments and allocates resources primarily based on adjusted gross margin, defined as revenue less cost of sales, exclusive of depreciation and amortization, which are key components of segment operations. Adjusted gross margin is the primary measure used by our CODM to evaluate segment performance because it focuses on the current performance of segment operations and excludes the impact of the prior historical costs of assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, our financing methods and income taxes. Our CODM considers adjusted gross margin forecast to actual results and period over period financial variances in conjunction with product and customer service metrics and market trends when assessing segment performance and deciding how to allocate resources.
Summarized financial information for our reporting segments is shown below:
| Contract | | Aftermarket | | |||||
(in thousands) | | Operations | | Services | | Total | |||
2025 |
| |
| |
| | |||
Revenue(1) | $ | 1,272,081 | $ | 217,737 | $ | 1,489,818 | |||
Cost of sales, exclusive of depreciation and amortization | 343,136 | 166,289 | 509,425 | ||||||
Adjusted gross margin |
| 928,945 |
| 51,448 |
| 980,393 | |||
2024 |
| |
| |
| | |||
Revenue(1) | $ | 980,405 | $ | 177,186 | $ | 1,157,591 | |||
Cost of sales, exclusive of depreciation and amortization | 323,052 | 135,449 | 458,501 | ||||||
Adjusted gross margin |
| 657,353 |
| 41,737 |
| 699,090 | |||
2023 |
| |
| |
| | |||
Revenue(1) | $ | 809,439 | $ | 180,898 | $ | 990,337 | |||
Cost of sales, exclusive of depreciation and amortization | 306,748 | 142,271 | 449,019 | ||||||
Adjusted gross margin |
| 502,691 |
| 38,627 |
| 541,318 | |||
The following table reconciles gross margin to adjusted gross margin, its most directly comparable to GAAP measure:
Year Ended December 31, | |||||||||
(in thousands) | 2025 | | 2024 | | 2023 | ||||
Total revenues | $ | 1,489,818 | $ | 1,157,591 | $ | 990,337 | |||
Cost of sales, exclusive of depreciation and amortization |
| (509,425) |
| (458,501) |
| (449,019) | |||
Depreciation and amortization |
| (256,761) |
| (193,194) |
| (166,241) | |||
Gross margin |
| 723,632 |
| 505,896 |
| 375,077 | |||
Depreciation and amortization | 256,761 | 193,194 | 166,241 | ||||||
Adjusted gross margin | $ | 980,393 | $ | 699,090 | $ | 541,318 | |||
The following table reconciles total adjusted gross margin to income before income taxes:
Year Ended December 31, | |||||||||
(in thousands) | 2025 | | 2024 | | 2023 | ||||
Adjusted gross margin | $ | 980,393 | $ | 699,090 | $ | 541,318 | |||
Less: |
| |
| |
| | |||
Selling, general and administrative |
| 147,806 |
| 139,121 |
| 116,639 | |||
Depreciation and amortization |
| 256,761 |
| 193,194 |
| 166,241 | |||
Long-lived and other asset impairment |
| 18,290 |
| 10,681 |
| 12,041 | |||
Restructuring charges | 1,605 | — | 1,775 | ||||||
Debt extinguishment loss | 890 | 3,181 | — | ||||||
Interest expense |
| 165,340 |
| 123,610 |
| 111,488 | |||
Transaction-related costs | 12,705 | 13,249 | — | ||||||
Gain on sale of assets, net | (47,081) | (17,887) | (10,199) | ||||||
Other expense, net |
| 439 |
| 1,561 |
| 1,086 | |||
Income before income taxes | $ | 423,638 | $ | 232,380 | $ | 142,247 | |||
The following table reconciles capital expenditures by segment to total capital expenditures:
Year Ended December 31, | |||||||||
(in thousands) | 2025 | | 2024 | | 2023 | ||||
Contract operations | $ | 489,960 | $ | 353,785 | $ | 294,315 | |||
Aftermarket services |
| 6,726 |
| 3,277 |
| 3,300 | |||
Segment capital expenditures |
| 496,686 |
| 357,062 |
| 297,615 | |||
Other (1) |
| 5,779 |
| 1,970 |
| 1,017 | |||
Total capital expenditures | $ | 502,465 | $ | 359,032 | $ | 298,632 | |||
The following table reconciles total assets by segment to total assets per the consolidated balance sheets:
| December 31, | |||||
(in thousands) | | 2025 | 2024 | |||
Contract operations assets | $ | 4,141,714 | $ | 3,677,056 | ||
Aftermarket services assets |
| 71,811 |
| 57,642 | ||
Segment assets | 4,213,525 | 3,734,698 | ||||
Other assets (1) | 127,911 | 81,639 | ||||
Assets of discontinued operations | 7,868 | 7,868 | ||||
Total assets | $ | 4,349,304 | $ | 3,824,205 | ||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 20, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 29, 2016 | |
About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.