Executive Summary

Q1 2025 was solid with adjusted EPS of $0.65 (+27% y/y) on $5.218B revenue (-4% y/y); adjusted operating margin expanded 210 bps to 16.2%. Carrier raised FY25 adjusted EPS guidance to $3.00–$3.10 (from $2.95–$3.05) while keeping margin and FCF targets intact .
Results modestly beat S&P Global consensus on revenue ($5.218B vs $5.187B*) and EPS ($0.65 vs $0.584*), while EBITDA was below ($0.903B* actual vs $1.064B* estimate). Strength came from Climate Solutions Americas (Commercial and Residential each up ~20%), while Europe RLC and Americas Light Commercial were headwinds .
Orders rose high-single-digits; backlog increased ~10% y/y and >15% q/q, positioning the company for H2 acceleration; free cash flow improved to $420M. Management guided Q2 to ~$6B sales, ~100 bps margin expansion, and ~20% EPS growth, framing near-term catalysts alongside a raised FY EPS guide .
Tariff risk is being “fully mitigated” with ~$300M addressed via price (~1% incremental pricing), the remainder offset by sourcing/productivity actions—limiting downside to margins and sustaining the FY25 outlook .

What Went Well and What Went Wrong

What Went Well
- Climate Solutions Americas delivered broad-based strength: segment sales +9%, with Commercial and Residential each up ~20%; segment margin expanded 420 bps to 22.2% on productivity and mix .
- Orders/backlog momentum: total company orders up high-single-digits; backlog up ~10% y/y and >15% sequentially, supporting acceleration into the year; CEO: “We are increasing our full-year commitments as we proactively manage this dynamic environment.” .
- Free cash flow and capital deployment: $420M FCF on $483M CFO; returned $1.5B to shareholders (incl. $1.3B buybacks), and repaid $1.2B of debt in Q1, enhancing balance sheet flexibility .
What Went Wrong
- Europe Residential & Light Commercial remained soft: Climate Solutions Europe sales -10% (organic -7%); segment margin down 390 bps to 9.0% on lower volume/mix and investments despite synergy benefits .
- Americas Light Commercial reset: management cut LC outlook to down double-digits for FY after Q1 weakness and continued softness in Q2; channel demand and K-12 spending pauses weighed near term .
- EBITDA vs consensus: Q1 EBITDA of ~$0.903B* trailed S&P Global consensus ~$1.064B*, despite strong adjusted operating margin expansion; mix (divestiture headwind) and below-plan Asia residential weighed .

Financial Results

Quarterly performance (actuals)

Metric	Q1 2024	Q4 2024	Q1 2025
Revenue ($B)	$5.420	$5.148	$5.218
GAAP EPS (cont. ops)	$0.19	($0.05)	$0.47
Adjusted EPS (cont. ops)	$0.51	$0.54	$0.65
Operating Margin % (GAAP)	7.1%	15.0%	12.1%
Adjusted Operating Margin %	14.1%	13.2%	16.2%

Notes: y/y Q1 revenue -4% and adjusted EPS +27%; adjusted operating margin +210 bps y/y. q/q, adjusted EPS +20% and adjusted operating margin +300 bps vs Q4 .

Q1 2025: Actual vs S&P Global consensus

Metric	Consensus	Actual
Revenue ($B)	5.187*	5.218
Adjusted EPS ($)	0.584*	0.65
EBITDA ($B)	1.064*	0.903*

Values marked with * retrieved from S&P Global.

Segment performance

Segment Net Sales ($B)	Q1 2024	Q1 2025
Climate Solutions Americas (CSA)	$2.360	$2.572
Climate Solutions Europe (CSE)	$1.292	$1.169
CS Asia Pacific, Middle East & Africa (CSAME)	$0.884	$0.826
Climate Solutions Transportation (CST)	$0.884	$0.651

Segment Operating Margin %	Q1 2024	Q1 2025
CSA	18.0%	22.2%
CSE	12.9%	9.0%
CSAME	12.2%	14.6%
CST	12.8%	14.9%

Cash flow and balance sheet KPIs (Q1 yoy)

KPI	Q1 2024	Q1 2025
Cash from Operations ($B)	$0.040	$0.483
Capital Expenditures ($B)	$0.102	$0.063
Free Cash Flow ($B)	($0.064)	$0.420
Net Debt ($B)	$8.309 (12/31/24)	$9.486 (3/31/25)
Share Repurchases ($B)	—	$1.3 in Q1; +$0.32 in April
Dividends Paid ($B)	—	$0.20 in Q1
Debt Repaid ($B)	—	$1.2 in Q1

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales	FY 2025	$22.5–$23.0B; ~$(0.75)B CCR exit; organic up MSD; FX (1%); divestitures (3%)	~$23B; ~$(0.75)B CCR exit; organic up MSD; FX +1%; divestitures (3%)	Raised (top of range)
Adjusted Operating Margin	FY 2025	16.5%–17.0% (+~100 bps y/y)	16.5%–17.0% (+~100 bps y/y)	Maintained
Adjusted EPS	FY 2025	$2.95–$3.05 (+~15–20% y/y)	$3.00–$3.10 (+~17–21% y/y)	Raised
Free Cash Flow	FY 2025	$2.4–$2.6B	$2.4–$2.6B	Maintained
Q2 Outlook (sales)	Q2 2025	—	~$6B	New detail
Q2 Outlook (adj op margin)	Q2 2025	—	+~100 bps y/y	New detail
Q2 Outlook (adj EPS)	Q2 2025	—	~+20% y/y	New detail
Dividend	FY 2025 (current quarter)	—	$0.225/sh declared for May 22, 2025	Announced

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024 and Q4 2024)	Current Period (Q1 2025)	Trend
Data centers	Orders up >3x; big wins; aftermarket potential 5–10x installed base over time	On track to double DC to ~$1B in 2025; ~$250M Q1 deliveries; rolling out Quantum Leap and liquid cooling CDUs by YE	Strengthening; near-term revenue + long-term high-margin services
Tariffs and supply chain	Productivity/portfolio actions; US focus; cost controls	“Fully mitigating” current tariffs; ~$300M addressed via price (~1%); high USMCA compliance; dual sourcing, footprint optimization	Managed risk; neutral net impact in FY guide
Americas Residential	Double-digit growth; 454B transition; limited 410A predelivery	Q1 ~+20%; 75% mix 454B with ~10% mix-up; Q2 +15–20%; FY high-single to low-double-digit growth	Positive with strong mix/price; watch channel inventories
Americas Light Commercial	2024 improved vs plan; ESSER supportive into 2025–26	Cut FY outlook to down double digits; softness in SMB and K‑12 delays near term	Near-term headwind; modest H2 recovery expected
Europe (Viessmann & RLC)	Orders inflecting; subsidies pick up; FY down high teens in 2024	CSE sales -10% (organic -7%); Viessmann flat FY with better heat pump mix; aim mid-teens segment margins in coming years; 2025 low-teens for Viessmann	Stabilizing; mix shifts to heat pumps; margin rebuild in progress
Aftermarket/services	Double-digit “forever”; connected chillers scaling	Aftermarket +8% Q1; chiller attachment >60%; >50k connected chillers; building “mods/upgrades” flywheel	Durable double-digit vector with margin upside
AI/HEMS/Google	Utilities pilots planned; energy management	Google Cloud partnership to enhance grid resilience/AI analytics; HEMS expansion	Emerging ecosystem driver

Management Commentary

“Adjusted EPS grew 27% with adjusted operating margins expanding 210 basis points on 2% organic sales growth…orders were up high-single-digits, backlogs increased over 15% sequentially and about 10% year-over-year…We are increasing our full-year commitments” — David Gitlin, CEO .
“As reflected in our guidance, we are fully mitigating our tariff exposure through supply chain and productivity actions with the balance of about $300 million via price, which represents a little over 1% of additional pricing.” — David Gitlin, CEO .
“CSA had an outstanding quarter…Adjusted operating margins expanded 420 basis points…Light Commercial came in lower than expected, down around 35%…We are decreasing our guide for the full year down low double digits.” — Patrick Goris, CFO .
“We think [Viessmann] will be double digits [margin]; it will be closer to low teens for this year…our intention is to get [Europe] to mid-teens in the next couple of years.” — Patrick Goris, CFO .
“We had a very strong first quarter for data centers…on track for $1 billion [in 2025]…Quantum Leap…liquid cooling [CDUs] by year-end.” — David Gitlin, CEO .

Q&A Highlights

Tariffs: Remaining ~$300M gross impact to be offset via price; cost/productivity and supplier actions mitigated the rest; net neutral to FY guide .
CSA cadence: CSA margin ~22% in Q1; expected ~25% in Q2/Q3, lower in Q4; full-year around 22.5% as tariffs (price-cost neutrality) weigh ~50–60 bps .
Americas Resi: 454B mix ~75% in Q1 with ~10% mix-up; Q2 growth +15–20%; channel inventories a focus; FY high-single to low-double-digit growth .
Light Commercial: Outlook cut to down double-digits on SMB softness and delayed K‑12 funding; segment is ~5%+ of company sales, limiting top-line impact to ~50 bps .
Europe/Viessmann: FY flat revenue with better heat pump mix; heat pump subsidy applications in Germany surged to ~65k in Q1 vs ~9k last year; multi-year margin path to mid-teens .
Q2 setup: Sales ~$6B, ~100 bps adj margin expansion, ~20% adj EPS growth, supporting the FY25 raised EPS range .

Estimates Context

Q1 2025 vs S&P Global consensus: EPS $0.65 vs $0.584* (beat); revenue $5.218B vs $5.187B* (beat); EBITDA $0.903B* vs $1.064B* (miss). Mix tailwinds (CSA) and pricing/productivity supported EPS; EBITDA variance reflects divestiture headwinds and soft Asia residential. Values marked with * retrieved from S&P Global .

Key Takeaways for Investors

Raised FY25 adjusted EPS to $3.00–$3.10 on a strong Q1 print and tariff mitigation, with orders/backlog momentum underpinning H2 acceleration potential .
CSA strength (Commercial/Residential each ~+20%) and data center scale-up (on track to ~$1B in 2025) are key profit drivers; aftermarket/services remain a durable double‑digit growth vector with rising attachment/connected base .
Near-term watch items: Americas Light Commercial reset (down double-digits FY) and Europe RLC softness; management sees LC stabilization by H2 and Europe margins rebuilding to mid-teens over time .
Q2 guide implies continued momentum (sales ~$6B; +~100 bps margin; +~20% EPS), which, if delivered, can sustain estimate revisions and support multiple resilience .
Capital returns/optimization ongoing: ~$1.3B Q1 buybacks (+$0.32B in April), $1.2B debt repayment; quarterly dividend of $0.225 declared—balance sheet flexibility remains intact .
Tariff framework de-risked: net neutral assumption for FY with ~$300M priced-in and the rest offset via productivity/sourcing; limits downside to margins and protects the FY guide .