Executive Summary

Fortive delivered a clean Q3 2025 beat: revenue $1.03B (+2.3% reported, +1.9% core) and adjusted EPS $0.68, both above consensus; adjusted EBITDA rose 10% with margin expanding ~220 bps to 30.1% (consensus: Rev ~$1.007B*, EPS ~$0.57*).
Management raised FY25 adjusted EPS guidance to $2.63–$2.67 from $2.50–$2.60, citing Q3 outperformance and $1B of buybacks (21M shares, ~6% of diluted shares) executed in the quarter .
Segment performance was broadly positive: IOS grew 2.6% (core +2.2%) with adjusted EBITDA margin to 34.6%; AHS grew 1.9% (core +1.1%) with adjusted EBITDA margin to 28.1% .
Stock reaction catalysts: guidance raise, visible margin discipline with selective reinvestment, and accelerating recurring/software narrative (ServiceChannel AI release; strong radiation monitoring “Landauer”) alongside manageable tariff headwinds (~$0.01 EPS drag in Q3, minimal in Q4) .

What Went Well and What Went Wrong

What Went Well

Clear beat and margin expansion: Adjusted EPS $0.68 (+15.3% YoY) and adjusted EBITDA $309M (+10.4% YoY); margin expanded to 30.1% (+220 bps) on disciplined cost actions and operating leverage .
Capital allocation and guidance: Raised FY25 adjusted EPS to $2.63–$2.67 and executed $1B buybacks (21M shares, ~6% of diluted shares), positioning share count favorably .
Strategic narrative and innovation: “Fortive delivered solid results in our first quarter as a simpler, more focused company… ahead of our expectations across all key financial metrics” — CEO Olumide Soroye; highlights include ServiceChannel’s AI-powered release and Fluke’s solar ground fault locator, supporting recurring/software growth .

What Went Wrong

Tariff-related margin pressure: Adjusted gross margin was down ~60 bps YoY; direct tariff costs net of countermeasures were a ~$0.01 headwind to adjusted EPS in Q3 .
Europe softness: Western Europe deteriorated sequentially; management does not expect notable improvement through year-end .
Q3 gross margin within IOS declined ~90 bps (to ~65.7%) on tariffs; management plans reinvestment in Q4, and some Q3 benefits (capitalization/incentives) were one-time in nature .

Financial Results

Headline Results and Sequential Context

Metric	Q2 2025	Q3 2025	Q4 2025 (Est)
Revenue ($USD Millions)	$1,016	$1,027	$1,093*
Core Revenue Growth (%)	(0.7)%	+1.9%	N/A
Adjusted EBITDA ($USD Millions)	$288	$309	N/A
Adjusted EBITDA Margin (%)	28.4%	30.1%	N/A
GAAP Diluted EPS ($)	$0.33	$0.35	N/A
Adjusted Diluted EPS ($)	$0.58	$0.68	$0.8355*
GAAP Operating Cash Flow ($USD Millions)	$205	$295	N/A
Free Cash Flow ($USD Millions)	$180	$266	N/A

Note: Asterisked values are S&P Global consensus. Values retrieved from S&P Global.

Results vs. Wall Street Consensus (S&P Global)

Metric	Q2 2025	Q3 2025	Q4 2025 (Est)
Revenue – Consensus ($USD Millions)	$1,013*	$1,007*	$1,093*
Revenue – Actual ($USD Millions)	$1,016	$1,027	—
EPS – Consensus ($)	$0.5926*	$0.5691*	$0.8355*
EPS – Actual (Adjusted) ($)	$0.58	$0.68	—

Q3: Revenue beat (~$1,027M vs ~$1,007M) and EPS beat ($0.68 vs ~$0.57).
Q2: Revenue slight beat; EPS slight miss ($0.58 vs ~$0.593*).
Note: Asterisked values are S&P Global consensus. Values retrieved from S&P Global.

Segment Breakdown (Q3 2025 vs Q3 2024; Continuing Ops)

Segment	Q3 2024 Revenue ($M)	Q3 2025 Revenue ($M)	Reported/Core Growth	GAAP Operating Margin Q3 2024	GAAP Operating Margin Q3 2025	Adjusted EBITDA ($M) Q3 2024	Adjusted EBITDA ($M) Q3 2025	Adj. EBITDA Margin Q3 2024	Adj. EBITDA Margin Q3 2025
Intelligent Operating Solutions (IOS)	$681	$699	+2.6% / +2.2%	24.8%	25.9%	$227	$242	33.3%	34.6%
Advanced Healthcare Solutions (AHS)	$322	$328	+1.9% / +1.1%	11.4%	12.9%	$87	$92	26.9%	28.1%

Additional margin color: IOS adjusted gross margin declined ~90 bps YoY to ~65.7% on tariffs; AHS adjusted gross margin ~58.4% was similar YoY .

KPIs and Cash

KPI	Q3 2024	Q3 2025
GAAP Operating Cash Flow ($USD Millions)	$305	$295
Free Cash Flow ($USD Millions)	$283	$266
TTM GAAP Operating Cash Flow ($USD Millions)	$961	$1,019
TTM Free Cash Flow ($USD Millions)	$874	$922
Share Repurchases (Quarter)	—	$1,000M; 21M shares (~6% of diluted shares)
Average Diluted Shares (Q3) (Millions)	352.3	333.4

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Diluted EPS	FY 2025	$2.50–$2.60	$2.63–$2.67	Raised
Adjusted Effective Tax Rate	FY 2025	N/A	Mid-teens	Maintained (framework)
Adjusted Effective Tax Rate	Q4 2025	N/A	Single digits due to discrete items	New color
Tariffs Impact (net of countermeasures)	Q4 2025	N/A	Not expected to be material	Favorable
Core Revenue Growth	Q4 2025	N/A	Moderate; AHS ~in line with Q3; IOS very modest	Cautious
Net Interest Expense	Q4 2025	N/A	Sequential increase vs Q3	Higher
Capital Allocation	FY 2025+	Moratorium pre-spin	Balance buybacks and small bolt-ons; framework doesn’t require M&A	Strategic shift

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
AI/Technology initiatives	Not highlighted in Q1 PR	Not highlighted in Q2 PR	ServiceChannel SaaS R2 adds AI-powered work order insights; innovation studio launched; Fluke solar GFL tool	Increasing focus on AI-enabled software
Supply chain/logistics	N/A	N/A	Tariff cost pressures offset partly by pricing and supply chain countermeasures	Managing headwinds
Tariffs/Macro	FY25 guidance included net impact of tariffs	Demand uncertainty from trade policy; spin completed	~$0.01 EPS headwind in Q3; minimal expected in Q4	Stabilizing impact
Product performance (Fluke)	N/A	IOS resilient; flat revenue	Return to growth; strong NA POS, improving channel inventory; focus on data center/defense	Improving
Regional trends	N/A	N/A	NA strong; Western Europe weak; China mixed; India strong	NA strength, EU softness persists
Regulatory/Healthcare policy	N/A	Healthcare reimbursement/funding changes impacting AHS	Sequential improvement in AHS equipment/consumables demand; OBV Act context	Stabilizing/sequentially better
R&D execution/Capex	N/A	N/A	Some Q3 capitalization increased; selective reinvestment planned in Q4	Reinvesting growth oxygen
Recurring revenue	N/A	N/A	Recurring growth outpaced consolidated; ambition to raise % materially (Fluke attach, HaaS templates)	Structural mix shift to recurring

Management Commentary

“Fortive delivered solid results in our first quarter as a simpler, more focused company… ahead of our expectations across all key financial metrics… we executed $1 billion of share repurchases in the quarter.” — Olumide Soroye, CEO .
“Adjusted EBITDA was $309 million… margin expanded approximately 200 basis points to 30%… driven by operating leverage… and cost discipline.” — CFO commentary .
“We are raising our full year adjusted EPS guidance… reflecting adjusted EPS overperformance and the impact of buybacks.” — CFO .
“Our strategy to drive faster organic growth is built around innovation acceleration, commercial acceleration, and recurring customer value… ServiceChannel AI-powered release… Fluke GFL 1500 for solar.” — CEO .
“Share repurchases will be a big part of our capital allocation… focus on smaller bolt-on M&A; our value creation plan does not require M&A.” — Management .

Q&A Highlights

Margin trajectory and one-time items: Q3 benefited from increased software capitalization and incentive comp adjustments; OpEx to step up in Q4 as reinvestment resumes, while maintaining discipline .
Government shutdown exposure: Limited direct federal exposure; most government business is state/local; minimal impact on guidance .
Capital allocation: $1B buybacks driven by valuation and cash sources; future balanced approach with small bolt-ons, no transformational M&A .
Fluke demand signals: Return to growth, strong NA sell-through, improving channel inventory; focus on data centers, defense, India; increasing recurring attach .
AHS demand: Sequential improvement in capital equipment and consumables as reimbursement/funding visibility improved; software resilient .
Tax rate: Mid-teens through at least 2026; Q4 single-digit on discrete items .

Estimates Context

Q3 beat: Revenue $1,027M vs ~$1,007M*, adjusted EPS $0.68 vs ~$0.57* .
Q2 mixed: Revenue $1,016M vs ~$1,013M*, adjusted EPS $0.58 vs ~$0.593* .
Q4 preview: Consensus revenue ~$1,093M* and EPS ~$0.836*, with management calling for moderated core growth and higher net interest expense .
Note: Asterisked values are S&P Global consensus. Values retrieved from S&P Global.

Key Takeaways for Investors

Quality beat with margin expansion and FY25 guidance raised: supports near-term multiple confidence; watch reinvestment pacing in Q4 .
Capital deployment is now a core lever: $1B buyback reduces share count; expect continued balance between repurchases and disciplined bolt-ons .
Recurring/software flywheel strengthening: ServiceChannel AI features, strong AHS software, and recurring attach at Fluke point to mix improving resilience .
Tariff headwinds manageable: ~$0.01 EPS drag in Q3; minimal in Q4; pricing and supply chain actions offset .
Regional setup: North America remains strong; Western Europe soft; India a growth bright spot; plan assumptions are conservative for EU .
Near-term trading: Guidance raise plus buybacks are positive catalysts; watch Q4 OpEx step-up and interest expense; consensus Q4 expectations appear reasonable with cautious core growth .
Medium-term thesis: Fortive Accelerated execution, cost discipline, and capital allocation shift underpin the 2026–2027 framework (3–4% organic growth, 50–100 bps margin expansion, high single-digit+ adjusted EPS growth) .

Fortive Corp (FTV)·Q3 2025 Earnings Summary