Fervo Signed a Landmark Google Contract. The Stock Still Trades a Third Below Its IPO.

Fervo Energy (NASDAQ: FRVO) signed a 396 megawatt power purchase agreement with Alphabet‘s (NASDAQ: GOOG) Google, committing the hyperscaler to buy power from Cape Station in southwest Utah for a planned new data center. Shares jumped roughly 30% on the news Tuesday, then gave back 10.08% Wednesday to close near $17.76. Notably, that still leaves the stock about 34% below its May IPO price. The contract is not the problem. The discount rate is.

Key Points

• Fervo (FRVO) will supply Google with 396 MW from its Cape Station GeoCluster, expected online in 2028.
• Google holds an option through June 2030 to add roughly 600 MW, bringing the total to approximately 1 gigawatt.
• Fervo is permitted for up to 2 GW at Cape Station, and company executives have said the site’s heat could support roughly double that.
• At 4 GW, the single site would approximately double total U.S. geothermal generating capacity, per Department of Energy figures.
• FRVO carries a $5.24 billion market capitalization and trades in a 52-week range of $14.60 to $42.65 after pricing its IPO at $27.00 in May.

What Fervo actually sold

Enhanced geothermal systems, or EGS, drill deeper than conventional geothermal to reach heat where none is naturally accessible at the surface. Fervo builds these projects using a modular approach it calls GeoBlock, and Utah’s SB132 legislation lets the company deliver the power flexibly rather than under rigid utility structures.

Cape Station expands well beyond the project’s initial 100 MW phase. CEO and co-founder Tim Latimer framed the agreement as evidence that “EGS is ready to power the next generation of computing.” Michael Terrell, who heads advanced energy at Google, emphasized local economic benefit and the goal of driving enhanced geothermal costs down over time.

Importantly, this is not a first date. Google bought some of Fervo’s earliest electrons through the Project Red pilot in Nevada, which came online in 2023. The two signed a 115 MW agreement with NV Energy in June 2024 that pioneered the Clean Transition Tariff structure. Google also invested in Fervo’s final private funding round before the company went public.

Why the deal matters to Google

Google has spent years as one of the largest corporate clean energy buyers in the world, working toward net zero by 2030. However, AI has complicated that arithmetic. In April, Google contracted with data center developer Crusoe for 933 MW of natural gas power in Texas — a decision that added carbon to a balance sheet built on removing it.

Geothermal resolves the tension. It runs continuously, unlike wind and solar, which means it can serve a data center’s baseload without storage. Consequently, every gigawatt Fervo delivers is a gigawatt Google does not have to source from gas.

The part investors should focus on

Here is the disconnect worth writing down. Fervo priced its upsized IPO at $27.00 per share on May 12, selling 70 million shares for roughly $1.89 billion. The stock popped on debut, then surrendered those gains and more. Today it sits at $17.76 — down about 34% from the offer price — even after landing an anchor contract with the most sophisticated clean power buyer in technology.

That gap is not a demand signal. It is a financing signal.

Cape Station does not deliver power until 2028. A developer whose cash flows sit years out is valued almost entirely by the rate used to discount them, and that rate has been moving against the whole category. The 10-year Treasury yield recently touched its highest level since 2023, the 30-year sits near a two-decade high, and the selloff is global — Japanese 10-year yields cleared 3% for the first time since 1996, while UK and German yields reached levels last seen in 2007 and 2011 respectively. Meanwhile, New York Fed President John Williams signaled Wednesday that he is open to a rate hike at the September 15-16 meeting, with markets pricing roughly two-in-three odds.

Therefore, investors evaluating long-duration energy developers should separate two questions that look identical on a price chart. Is the offtake demand real? On this evidence, yes, and it is accelerating. Is the capital to build it getting more expensive? Also yes. Fervo just answered the first question emphatically and remains hostage to the second.