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Johnson Controls International plc (JCI)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 revenue was $6.44B (+3% YoY; +4% organic) and adjusted EPS was $1.26 (+14% YoY), with orders up 6% organically and Systems & Services backlog rising to $14.9B (+13% YoY). GAAP EPS from continuing ops was $0.42, reflecting $400M restructuring/impairment and ERP accelerated depreciation charges .
  • Regional mix skewed positive: Americas organic +3% with adjusted EBITA margin +50 bps to 19.9%; EMEA organic +9% with adjusted EBITA margin +30 bps to 15.6%; APAC organic -3% on China softness with margin -190 bps to 17.8% .
  • Cash generation remained strong: CFO of $968M; FCF $838M; adjusted FCF $710M; net debt/adj EBITDA at 2.4x; company executed a $5.0B ASR with initial 43.1M shares delivered and paid $243M in dividends during the quarter .
  • FY26 guidance initiated: mid-single-digit organic revenue growth, ~50% operating leverage, adjusted EPS ~$4.55, and ~100% adjusted FCF conversion; Q1 FY26 adjusted EPS ~$0.83 with ~3% organic growth and ~55% operating leverage .
  • Strategic catalysts: continued AI/data center momentum with launch of Coolant Distribution Unit (CDU) platform and strategic investment in two‑phase direct‑to‑chip liquid cooling (Accelsius), plus landmark Zurich district heating decarbonization project; management emphasized a proprietary business system to drive operating leverage and consistency -.

What Went Well and What Went Wrong

What Went Well

  • Record backlog and healthy order momentum: Q4 orders +6% organically; Systems & Services backlog $14.9B (+13% YoY); CEO: “record backlog of $15 billion, up 13%” .
  • Margin execution in Americas/EMEA: Americas adjusted segment EBITA margin rose 50 bps to 19.9%; EMEA adjusted segment EBITA margin up 30 bps to 15.6%, driven by productivity and operating leverage .
  • Operational upgrades and AI-enabled processes: “our team manufacturing key chillers in North America improved on-time delivery to over 95%… lead times… being cut in half”; “applying AI to the overall sales process” to increase customer-facing time and productivity .

What Went Wrong

  • APAC softness, China drag: APAC sales -3% organically with adjusted segment EBITA margin -190 bps to 17.8% on lower volumes and factory absorption pressure .
  • Elevated special charges: $400M restructuring/impairment, $102M ERP accelerated depreciation, and transformation costs lifted GAAP corporate expense; Q4 GAAP EPS $0.42 versus adjusted $1.26 .
  • Orders pressure in APAC: Q4 APAC orders -1% organically despite service growth, highlighting uneven regional demand .

Financial Results

Headline Metrics vs Prior Quarters (oldest → newest)

MetricQ2 FY25Q3 FY25Q4 FY25
Revenue ($B)$5.676 $6.052 $6.442
GAAP EPS (Cont. ops)$0.71 $0.94 $0.42
Adjusted EPS (Non-GAAP)$0.82 $1.05 $1.26
Orders Growth (Organic YoY)+5% +2% +6%
Systems & Services Backlog ($B)$14.0 $14.6 $14.9

Q4 FY25 Segment Performance

SegmentSales ($M)Organic Sales Growth YoYAdjusted Segment EBITA Margin %Orders Growth (Ex-FX/M&A)Backlog ($B)
Americas$4,325 +3% 19.9% +9% $10.6
EMEA$1,337 +9% 15.6% +3% $2.5
APAC$780 -3% 17.8% -1% $1.8

KPIs and Balance Sheet

KPIQ4 FY25
Cash from Operations ($M)$968
Free Cash Flow ($M)$838
Adjusted Free Cash Flow ($M)$710
Adjusted FCF Conversion (Quarter)89%
Net Debt / Adjusted EBITDA2.4x
Dividends Paid ($M)$243
Share Repurchase$5.0B ASR; 43.1M initial shares delivered

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Sales GrowthQ1 FY26N/A~3% New
Operating LeverageQ1 FY26N/A~55% New
Adjusted EPSQ1 FY26N/A~$0.83 New
Organic Sales GrowthFY26N/AMid-single digits New
Operating LeverageFY26N/A~50% New
Adjusted EPSFY26N/A~$4.55 New
Adjusted FCF ConversionFY26N/A~100% New
Adjusted EPSQ4 FY25$1.14–$1.17 (from Q3) Actual $1.26 Raised vs delivered (Beat)
Adjusted EPSFY25$3.65–$3.68 (from Q3) Actual $3.76 Raised vs delivered (Beat)
Dividend per ShareOngoingPrior $0.37/qtr$0.40/qtr (announced Sept. 10) Raised

Earnings Call Themes & Trends

TopicQ2 FY25 (Q-2)Q3 FY25 (Q-1)Q4 FY25 (Current)Trend
AI/Data center thermal solutionsGlobal Products adj margin +600 bps; Applied HVAC >20% ex-divestitures; backlog strength .Orders +9% in Americas supported by data centers .CDU launch; strategic investment in two‑phase liquid cooling; >95% on-time delivery and shorter lead times; strong hyperscaler interest .Improving
Backlog/OrdersBuilding Solutions backlog $14.0B (+12%) .Systems & Services backlog $14.6B (+11%) .Systems & Services backlog $14.9B (+13%); record ~$15B .Improving
Productivity/Operating leverageMargin expansion; business system concept emerging .Progress on productivity; segment margins improved .Business system “Simplify, Accelerate, Scale”; operating leverage targeted ~50% FY26; examples of AI, sales/plant efficiency - .Improving
Regional trends (China/APAC)APAC +13% organic in Q2 .APAC orders -8% (Q3), backlog +14% .APAC -3% organic; margin -190 bps on China volume .Worsening
Pricing/PortfolioPricing/delivery discipline supports margins .Raised FY25 EPS; continued portfolio work noted .Pricing discipline maintained; 10% of portfolio under strategic review continues .Stable
FCF/Working capitalRaised FY25 FCF conversion to ~100% .FCF momentum; >100% conversion guide .102% FY adjusted FCF conversion; focus shifting to inventory optimization for FCF .Improving

Management Commentary

  • “Adjusted EPS of $1.26 increased 14% year over year and exceeded the high end of our guidance range.” – CFO .
  • “Our proprietary business system… built on three pillars: Simplify (80/20), Accelerate (lean), Scale (digital and AI).” – CEO -.
  • “Improved on-time delivery to over 95% [at a key chiller plant]… lead times are on the way of being cut in half.” – CEO .
  • “Successfully launched our [CDU] offering… critical enablers of liquid cooling… receiving strong early interest from hyperscale customers.” – CEO .
  • “For the full year, we expect… adjusted EPS of approximately $4.55 per share… operating leverage ~50%… ~100% free cash flow conversion.” – CFO -.

Q&A Highlights

  • Operating leverage/margins: FY26 operating leverage “in the 50s or above,” with EMEA/APAC as main margin drivers; Americas contributes but at a more muted ramp vs FY25 .
  • Portfolio/M&A discipline: 10% of portfolio under review persists; acquisition pipeline “vibrant” with strict capital discipline and shareholder value focus .
  • Orders outlook: Pipeline healthy; management expects continued order growth despite tough comps, though they do not guide orders explicitly .
  • Free cash flow conversion: Near-term gains from receivables improved; next phase targets inventory reductions to sustain ~100% conversion .
  • Data center share/capacity: Management intent to “take share,” citing improved on-time delivery (>95%) and faster, market-leading lead times; end-to-end thermal roadmap (chillers, CDU, future liquid technologies) supports multi-year growth .

Estimates Context

  • We attempted to retrieve S&P Global consensus (EPS, revenue, EBITDA) for Q4 FY25 and forward periods; no data was returned by the tool at this time. As a result, Street consensus comparisons are unavailable in this recap. Our performance framing relies on company results vs. prior guidance and YoY/seq trends [GetEstimates—no data].
  • Notably, Q4 adjusted EPS ($1.26) exceeded the company’s prior Q4 guidance ($1.14–$1.17), and FY25 adjusted EPS ($3.76) exceeded the prior FY25 guidance ($3.65–$3.68) .

Key Takeaways for Investors

  • Strong operational quarter: revenue +3% (+4% organic) and adjusted EPS +14% YoY, with margin expansion in Americas/EMEA and record backlog; APAC/China remains a watchpoint - .
  • Clear FY26 setup: mid-single-digit organic growth, ~50% operating leverage, ~$4.55 adjusted EPS, ~100% FCF conversion signal confidence in backlog conversion and cost programs .
  • AI/data center structural tailwind: CDU launch, two‑phase liquid cooling investment, and improved plant OTD/lead times position JCI to capture higher content and accelerate share in high-density cooling .
  • Cash returns accelerating: $5B ASR underway (initial 43.1M shares delivered) and dividend raised to $0.40; net leverage at 2.4x provides flexibility .
  • Execution focus: Business system (80/20, lean, AI) driving sales productivity and manufacturing throughput; expect continued margin/FCF benefits, particularly from inventory optimization .
  • Risks: APAC/China volume and absorption, transformation-related costs, and macro/geopolitical factors; monitor Q1 FY26 delivery vs ~$0.83 EPS and ~3% organic growth guide .
  • Stock reaction catalysts: Data center win disclosures, EMEA/APAC margin progression, inventory turns/FCF beats, and clarity on portfolio actions could move the shares near term -.