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Segment Information | 9 Months Ended
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Sep. 30, 2025
Segment Information |
Segment Information | 17. Segment Information 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. The CODM of Archrock 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
Three months ended September 30, 2025 |  | ​ |  |  | ​ |  |  | ​ |
Revenue(1) | ​ | $ | 326,269 | ​ | $ | 56,161 | ​ | $ | 382,430
Cost of sales, exclusive of depreciation and amortization | ​ | ​ | 86,710 | ​ | ​ | 43,115 | ​ | ​ | 129,825
Adjusted gross margin | ​ |  | 239,559 | ​ |  | 13,046 | ​ |  | 252,605
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Three months ended September 30, 2024 | ​ |  |  | ​ |  |  | ​ |  |
Revenue(1) | ​ | $ | 245,420 | ​ | $ | 46,741 | ​ | $ | 292,161
Cost of sales, exclusive of depreciation and amortization | ​ | ​ | 79,810 | ​ | ​ | 34,395 | ​ | ​ | 114,205
Adjusted gross margin | ​ |  | 165,610 | ​ |  | 12,346 | ​ |  | 177,956
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nine months ended September 30, 2025 | ​ |  |  | ​ |  |  | ​ |  |
Revenue(1) | ​ | $ | 944,993 | ​ | $ | 167,752 | ​ | $ | 1,112,745
Cost of sales, exclusive of depreciation and amortization | ​ | ​ | 272,661 | ​ | ​ | 128,258 | ​ | ​ | 400,919
Adjusted gross margin | ​ |  | 672,332 | ​ |  | 39,494 | ​ |  | 711,826
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nine months ended September 30, 2024 | ​ |  |  | ​ |  |  | ​ |  |
Revenue(1) | ​ | $ | 693,939 | ​ | $ | 137,236 | ​ | $ | 831,175
Cost of sales, exclusive of depreciation and amortization | ​ | ​ | 236,831 | ​ | ​ | 104,553 | ​ | ​ | 341,384
Adjusted gross margin | ​ |  | 457,108 | ​ |  | 32,683 | ​ |  | 489,791
(1) | Segment revenue includes only sales to external customers.
The following table reconciles gross margin to adjusted gross margin:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Nine Months Ended
​ | ​ | September 30, | ​ | September 30,
(in thousands) |  | 2025 |  | 2024 |  | 2025 |  | 2024
Total revenues | ​ | $ | 382,430 | ​ | $ | 292,161 | ​ | $ | 1,112,745 | ​ | $ | 831,175
Cost of sales, exclusive of depreciation and amortization | ​ |  | (129,825) | ​ |  | (114,205) | ​ |  | (400,919) | ​ |  | (341,384)
Depreciation and amortization | ​ |  | (67,130) | ​ |  | (48,377) | ​ |  | (187,889) | ​ |  | (135,065)
Gross margin | ​ |  | 185,475 | ​ |  | 129,579 | ​ |  | 523,937 | ​ |  | 354,726
Depreciation and amortization | ​ | ​ | 67,130 | ​ | ​ | 48,377 | ​ | ​ | 187,889 | ​ | ​ | 135,065
Adjusted gross margin | ​ | $ | 252,605 | ​ | $ | 177,956 | ​ | $ | 711,826 | ​ | $ | 489,791
​ The following table reconciles total adjusted gross margin to income before income taxes: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended |  | Nine Months Ended
​ | ​ | September 30, | ​ | September 30,
(in thousands) |  | 2025 |  | 2024 |  | 2025 |  | 2024
Adjusted gross margin | ​ | $ | 252,605 | ​ | $ | 177,956 | ​ | $ | 711,826 | ​ | $ | 489,791
Less: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Selling, general and administrative | ​ |  | 37,676 | ​ |  | 34,059 | ​ |  | 111,127 | ​ |  | 96,887
Depreciation and amortization | ​ |  | 67,130 | ​ |  | 48,377 | ​ |  | 187,889 | ​ |  | 135,065
Long-lived and other asset impairment | ​ |  | 4,676 | ​ |  | 2,509 | ​ |  | 16,495 | ​ |  | 9,478
Restructuring charges | ​ | ​ | 688 | ​ | ​ | — | ​ | ​ | 1,497 | ​ | ​ | —
Debt extinguishment loss | ​ | ​ | — | ​ | ​ | 3,181 | ​ | ​ | — | ​ | ​ | 3,181
Interest expense | ​ |  | 43,661 | ​ |  | 30,179 | ​ |  | 123,113 | ​ |  | 85,372
Transaction-related costs | ​ | ​ | 1,767 | ​ | ​ | 9,220 | ​ | ​ | 11,829 | ​ | ​ | 11,002
Gain on sale of assets, net | ​ | ​ | (3,835) | ​ | ​ | (2,218) | ​ | ​ | (15,467) | ​ | ​ | (5,175)
Other expense (income), net | ​ |  | 3,984 | ​ |  | (304) | ​ |  | 459 | ​ |  | (37)
Income before income taxes | ​ | $ | 96,858 | ​ | $ | 52,953 | ​ | $ | 274,884 | ​ | $ | 154,018
​

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482810/280-10-50-21 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name 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