Total Revenue

16% decline " " " "

Total revenue fell 16% YoY in Q3 2025 ($6,052M vs. $7,231M), largely due to adjustments such as divestitures and foreign currency headwinds that offset the strong performance seen in the core Building Solutions segments; prior periods had higher overall revenue partly driven by a legacy portfolio that was reduced in the current period. " " " "

Building Solutions North America

39% increase " " "

Revenue surged 39% YoY to $4,042M, driven by robust organic growth in Applied HVAC & Controls along with a significant boost from order and backlog improvements (with orders up 4% and backlog rising 11% to $9.8B), which built on earlier moderate growth rates reported in previous periods. " " " " "

Building Solutions EMEA/LA

18% increase " " "

Revenue increased by 18% YoY from $1,081M to $1,273M, reflecting strong organic sales growth, higher pricing, and productivity improvements that built on earlier trends (notably, previous Q2 performance showing low-teen organic growth and margin expansion), while acquisitions also contributed modestly. " " " " "

Building Solutions Asia Pacific

28% increase " " "

Revenue grew 28% YoY from $575M to $737M, marking a turnaround from a 26% decline in Q2 2024; the recovery was driven by a 13% increase in organic sales with double-digit growth in Service and Systems, along with margin improvements (a 360 bp increase in EBITA margin), reversing the earlier weakness linked to China and foreign currency impacts. " " " " " "

Free Cash Flow Conversion and Capital Discipline

In Q1 2025, the discussion focused on achieving around 90% free cash flow conversion with restructuring cash headwinds and improvements in working capital fundamentals. " " " Q2 2025 emphasized raising full‐year guidance to approximately 100% with strong adjusted free cash flow generation and a commitment to returning 100% free cash flow to shareholders. " " " In Q4 2024, robust conversion at 96% and disciplined capital allocation—including returning cash to shareholders—was highlighted. " " "

In Q3 2025, the company reported nearly doubled adjusted free cash flow ($1.8 billion) with a $900 million year‐over‐year improvement. They now expect free cash flow conversion to exceed 100% and continue with disciplined capital allocation and selective CapEx management. " " " " "

The focus on free cash flow conversion remains consistent and positive, with improved numeric performance and maintained emphasis on capital discipline. There is an upward shift in sentiment with stronger guidance and execution.

Strong Backlog and Order Growth

Q1 2025 noted a record backlog growing 11% to $13.2 billion with orders up 16% across regions, while Q2 2025 reported orders increasing by 5% and a record backlog of about $14 billion. " " " Q4 2024 highlighted a 7% order growth with a record backlog of $13.1 billion and double-digit organic revenue growth. " " "

In Q3 2025, backlog grew 11% to a record $14.6 billion and orders increased by 2% overall; regional performance was mixed with strength in the Americas but softness in China, and continued customer engagement. " " "

Backlog growth remains robust and consistent, although order growth has moderated slightly in Q3 2025 because of regional softness. Overall sentiment is steady with a persistent focus on long‐term visibility through record backlogs.

Data Center Demand and Technological Differentiation

Q1 2025 highlighted strong double-digit growth in data center orders and revenue acceleration, with recognition as a top innovator and leader in thermal management. " " " Q2 2025 discussed healthy demand driven by differentiated products like the York Chiller and strong customer relationships. " " In Q4 2024, significant order growth driven by data center demand and clear technological differentiation were emphasized. " " "

In Q3 2025, data center demand is described as “very healthy” contributing about 10% of sales, with initiatives to cut lead times and further enhance competitiveness through innovation, AI-driven digitization, and an expanded patent portfolio. " " " "

The theme remains strong with continuous attention on technological innovation. The current period reinforces and perhaps slightly enhances the strategic role of data centers, maintaining a positive view on differentiation and growth in a key segment.

Operational Efficiency and Lean Transformation Initiatives (including SKU rationalization and cost improvement efforts)

In Q1 2025, the company detailed margin improvements through restructuring, with mentions of SKU rationalization and streamlining processes. " " " Q2 2025 emphasized applying lean transformation, end-to-end value stream mapping, and initiating SKU rationalization as well as cost takeout efforts. " " " " Q4 2024 focused on operational efficiency driving a 260 basis point margin expansion and discussed restructuring efforts for productivity gains. " " "

In Q3 2025, the discussion centers on embedding a new business system based on the 80/20 principle, lean methodologies, and digitization/AI. Initiatives include efforts to cut lead times, improve manufacturing capacity, streamline processes, and conduct a broader portfolio review. " " " "

The company continues to prioritize operational efficiency with an evolving integration of digital tools. The emphasis is consistent yet deepening as new systems are implemented to further accelerate cost reductions and improve overall productivity.

Tariff Impacts, Pricing Power, and Foreign Exchange Uncertainty

In Q1 2025, there were discussions of tariff uncertainty affecting margins and necessitating contractual adjustments, along with mention of FX pressures due to a strong dollar. " " " Q2 2025 focused on mitigating tariff impacts through local sourcing, dynamic pricing, and reaffirmed strong contractual pricing terms, with no FX commentary. " " " " Q4 2024 did not discuss tariffs or FX uncertainty but did highlight strong pricing power in certain segments. " "

In Q3 2025, the company noted that tariffs remain a headwind and that while they can recover most tariff costs through strategic sourcing and pricing adjustments, some markets still struggle to capture margin. There was no mention of foreign exchange uncertainty in Q3 2025. " "

Tariff challenges persist consistently, with a similar approach to leveraging pricing power in select markets. FX uncertainty is not raised in Q3 2025, suggesting a narrowed focus on managing tariff impacts over broader currency issues.

Capacity Constraints and Expansion Needs

Q1 2025 provided specific insights: North America is near full capacity, EMEA/LA is at capacity, whereas APAC still has available capacity. " Q2 2025 did not address capacity constraints, and Q4 2024 had no mention.

Q3 2025 addresses capacity through initiatives to reduce lead times—which will create additional manufacturing capacity—and highlights operational efficiencies intended to mitigate capacity constraints. " " "

There is a new emphasis in Q3 2025 on proactively addressing capacity constraints through process improvements, marking a shift from previous periods where capacity was described more as a current state rather than an area for active expansion.

Regional Market Dynamics and Geographic Divergence

Q1 2025 detailed robust regional performance with North America showing strong growth, alongside capacity challenges in EMEA/LA and significant rebounds in APAC. " " " " Q2 2025 provided detailed performance by region showing double-digit service growth in EMEA and Asia Pacific, with muted growth in North America. " Q4 2024 offered a granular breakdown of organic sales, orders, and margin improvements across North America, EMEA/LA, and Asia Pacific. " "

In Q3 2025, regional dynamics continue to be a focal point with the Americas growing orders by 5%, EMEA modest at 2%, and APAC experiencing a slight decline in orders (−1%) despite strong service growth; softness in China is noted, reflecting ongoing geographic divergence. " " "

The analysis remains consistent across periods with detailed regional segmentation. Q3 2025 continues the nuanced assessment of regional performance, with persistent challenges in China and a steady focus on aligning growth strategies regionally.

Leadership and Strategic Uncertainty (new CEO and strategic review)

Q1 2025 announced the new CEO, Joakim Weidemanis, with details on succession planning and a strategic review of the portfolio looking to simplify and focus on secular trends. " " " " Q2 2025 reiterated similar themes with the new CEO undertaking a fresh strategic review and emphasizing customer engagement. " " " " Q4 2024 featured updates on the succession process and transformation progress with a focus on portfolio simplification. " " "

In Q3 2025, leadership under the new CEO is actively engaged in a strategic review and implementing a new business system based on lean and digital principles. There is a clear focus on customer centricity, operational excellence, and refining the strategic portfolio. " " " "

The leadership transition and strategic review themes remain consistent. In Q3 2025 the focus is maintained and further operationalized with the rollout of new methodologies, indicating an evolving but stable strategic direction under new leadership.

Tax and Regulatory Environment Changes (rising effective tax rates)

Q4 2024 addressed rising effective tax rates—increasing from 11% to 12% in FY2025 with further anticipated pressure (up to 16-17% in FY2026) due to global tax reform, while earlier Q1 and Q2 2025 had little to no discussion on the topic. " "

Q3 2025 brings a detailed focus on a headwind of 400 to 500 basis points in the effective tax rate year-over-year in FY2026 due to the global minimum tax, although the cash tax rate is expected to remain modest. "

There is an emerging and more detailed emphasis on tax changes in Q3 2025 compared to the limited discussion in earlier periods, suggesting increased scrutiny of regulatory pressures and their impact on margins going forward.

Cybersecurity and IT Infrastructure Investment Pressures

In Q4 2024, cybersecurity investments were noted as part of maintaining robust IT infrastructure and managing stranded costs, while Q1 2025 briefly mentioned a past cyber incident affecting comparisons. Q2 2025 did not discuss this area. " "

Q3 2025 does not mention cybersecurity or IT infrastructure investment pressures at all.

Cybersecurity discussions have been scaled back in the current period, indicating a de-prioritization compared to the emphasis seen in Q4 2024. The focus appears to have shifted away from cybersecurity topics in Q3 2025.

Restructuring and Divestiture Costs (including stranded legacy assets)

Q1 2025 mentioned $250 million of restructuring cash impacting free cash flow conversion and the ongoing effort to mitigate stranded costs from divested businesses. " " " Q2 2025 did not offer detailed commentary, while Q4 2024 provided extensive details on a multiyear restructuring plan with expected cost savings of approximately $500 million and progress on the divestiture of its residential and light commercial business. " " " "

In Q3 2025, the restructuring program is reiterated with a $500 million initiative, elimination of stranded costs continuing, and progress on the divestiture of the residential and light commercial HVAC business to Bosch, with benefits mostly expected in FY2026. " " " "

The restructuring and divestiture theme remains persistent with continued efforts to reduce legacy costs. There is consistent progress and clarity on cost savings and divestiture benefits, reinforcing the positive trajectory despite ongoing challenges.