In the evolving business landscape, utility firms are undergoing transformative digital changes. The purpose of this study is to examine the unexplored link between utility firms' digital transformation and performance, by utilizing unique data from Chinese listed utilities. Empirical findings show a positive correlation between digital transformation and enhanced performance, with financial constraints and environmental performance as identified mechanisms. The research enriches understanding of digital transformation's economic consequences, providing practical insights for implementation, especially for environmentally conscious firms. Considering textual analysis and sample size limitations, future studies could assess utility firms' digital transformation across diverse economies with a more thorough evaluation of a firm's level of digital transformation.