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ROCKWELL AUTOMATION, INC (ROK)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered a clean beat versus consensus: revenue $2.144B vs $2.068B estimate and adjusted EPS $2.82 vs $2.67 estimate; diluted EPS was $2.60. Management raised FY25 adjusted EPS guidance to $9.80–$10.20 and diluted EPS to $8.89–$9.29 . Revenue/EPS estimates from S&P Global: $2.068B and $2.669*, respectively; actuals $2.144B and $2.82 [Q3 2025]*.
  • Segment mix improved: Software & Control sales +23% YoY with margin 31.6%, offsetting softness in Lifecycle Services (-6% YoY, margin 13.3%). Total segment operating margin expanded to 21.2% (+40 bps YoY) on productivity, pricing and mix .
  • Book-to-bill held ~1.0 and ARR +7% YoY; operating cash flow $527M and free cash flow $489M (FCF conversion 153%), underscoring strong cash generation .
  • FY25 outlook tightened and improved at the midpoint (reported sales ~$8.2B, organic growth -2% to +1%; FX now ~0%). CFO guided corporate & other ~$155M, net interest ~$140M, ETR ~17%, and reiterated ~20% segment margin for FY25 .
  • Stock-relevant catalysts: raised EPS guidance, visible margin expansion trajectory, $2B multi-year investment program (plants, digital infrastructure, talent) to drive next-horizon operating margin targets; potential tariff-related demand timing noted (possible 2–3 pts Q3 pull-ins) .

What Went Well and What Went Wrong

What Went Well

  • Pricing, productivity and mix expansion drove margin leverage; total segment margin 21.2% (vs 20.8% YoY). CEO: “strong execution and significant progress toward our long-term margin expansion goals… investing over $2 billion… majority… capital investment in the United States” .
  • Software & Control strength: sales $629M (+23% YoY), margin 31.6% (+800 bps YoY). CFO: “incrementals… mid-40s with strong volume” .
  • Cash generation: operating cash flow $527M, FCF $489M, FCF conversion 153% in Q3. CFO: “Free cash flow… $251M higher than prior year” .

What Went Wrong

  • Lifecycle Services softness: sales -6% YoY to $547M; margin down 600 bps YoY to 13.3% on lower volume and higher compensation; customers delaying larger capital projects amid trade/policy uncertainty .
  • ARR growth below internal expectations: ARR +7% YoY as double-digit cloud-native growth was offset by weakness in recurring services (cybersecurity delays) .
  • Compensation and FX headwinds: higher compensation (normalized incentives) and transactional FX (Mexico, Poland) pressured EPS by ~$0.15 in the quarter .

Financial Results

Consolidated metrics

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$2,051 $1,881 $2,001 $2,144
Diluted EPS ($)$2.02 $1.61 $2.22 $2.60
Adjusted EPS ($)$2.71 $1.83 $2.45 $2.82
Gross Margin (%)38.8% 38.4% 40.5% 40.9%
SG&A as % of Sales24.4% 25.3% 23.4% 23.2%
Pre-tax Margin (%)12.4% 11.3% 14.9% 16.0%
Total Segment Op Margin (%)20.8% 17.1% 20.4% 21.2%

Consensus vs Actual (Q3 FY25)

MetricConsensusActual
Revenue ($USD Millions)$2,068.36*$2,144
Primary EPS ($)$2.669*$2.82
EBITDA ($USD Millions)$457.35*$459

Values retrieved from S&P Global*

Segment breakdown

SegmentSales ($USD Millions) Q3 2024Sales Q2 2025Sales Q3 2025Op Margin Q3 2024Op Margin Q2 2025Op Margin Q3 2025
Intelligent Devices$957 $896 $968 20.2% 17.7% 18.8%
Software & Control$513 $568 $629 23.6% 30.1% 31.6%
Lifecycle Services$581 $537 $547 19.3% 16.6% 13.3%

KPIs and Cash

KPIQ3 2024Q1 2025Q2 2025Q3 2025
Book-to-bill (Total Co.)~1.0 ~1.0 ~1.0 ~1.0
ARR YoY Growth+7% +11% +8% +7%
Operating Cash Flow ($MM)$279 $364 $199 $527
Free Cash Flow ($MM)$238 $293 $171 $489
FCF Conversion (%)77% 140% 61% 153%
Share Repurchases (shares/$)—~0.4M / $99M ~0.5M / $129M ~0.5M / $123M
Dividend per share———$1.31 declared (payable Sept 10, 2025)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Reported sales midpointFY25~$8.1B ~$8.2B Raised
Reported sales growthFY25(-4.5)% to +1.5% (-2)% to +1% Raised
Organic sales growthFY25(-4)% to +2% (-2)% to +1% Raised
Currency translationFY25~(-0.5)% ~0% Raised
Diluted EPSFY25$8.23–$9.23 $8.89–$9.29 Raised
Adjusted EPSFY25$9.20–$10.20 $9.80–$10.20 Raised at midpoint
Segment operating marginFY25~20% (commentary) ~20% (unchanged) Maintained
Corporate & other expenseFY25N/A~$155M New detail
Net interest expenseFY25N/A~$140M New detail
Avg diluted sharesFY25N/A~113M New detail
Effective tax rate (ETR)FY25~17% ~17% Maintained
DividendNext paymentN/A$1.31/share (Sept 10, 2025 payable) Maintained/affirmed

Management indicated FY25 FCF conversion ~100% and reiterated tariff impact mitigation via resiliency actions and pricing; FX now a ~$0.10 EPS headwind for FY25 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY25, Q2 FY25)Current Period (Q3 FY25)Trend
AI/technology initiativesEmphasis on software and digital; steady R&D at ~6% of sales “AI-first business system,” software-defined automation; wins in Pharma MES, predictive maintenance (Guardian AI, DataMosaics) Increasing focus/visibility
Supply chain/operational excellenceCost reduction and margin expansion programs delivering early benefits Structural savings $360M achieved over 5 quarters; program operationalized into core Program matured/embedded
Tariffs/macroTariffs could impact; mitigation via pricing and supply chain actions Price realization ~3 pts YoY; ~1 pt tariff-based price; EPS-neutral; possible 2–3 pts Q3 pull-ins Controlled impact; demand timing
Product performance (Logic)Software & Control resilient in Q1/Q2 Logic sales up >30% YoY; SaaS +10% YoY Strengthening
Regional trendsNorth America strongest region; orders improving North America best region; book-to-bill ~1; selective greenfield/brownfield wins Stable to improving
Regulatory/taxETR ~17% guidance; ROIC declines vs prior year Pillar Two may raise ETR +2–3 pts in FY26; limited benefit from new U.S. tax bill FY26 headwind ahead
R&D executionCompany R&D at 6% of revenue Maintained ~6% target Consistent
Lifecycle ServicesQ1 strength; Q2/Q3 softer on project delays Book-to-bill 1.06; delays persist; margin 13.3% Mixed; backlog healthy

Management Commentary

  • Blake Moret (CEO): “We returned to year-over-year sales growth… investing over $2 billion in our plants, digital infrastructure and talent… The United States will be the largest beneficiary… primarily CapEx” .
  • Moret on demand/pipeline: “Projects… seeing delays, but not cancellations… we expect a higher intake of orders related to new U.S. capacity in FY25 and up again in FY26” .
  • Christian Rothe (CFO): “Adjusted EPS of $2.82 was above our expectations… price realization strong… we saw excellent execution on cost reduction and margin expansion actions” .
  • CFO on tariff/pricing: “EPS impact… mitigated… ~one point of our sales growth in Q3 was attributable to tariff-based pricing… possible that pull-ins accounted for at most two to three points” .
  • CEO on Intelligent Devices margin path: committed to 22–24% corridor; levers include direct material cost reductions, long-tail SKU pricing, configured-to-order recovery, ClearPath profitability improvements .

Q&A Highlights

  • $2B multi-year internal investment program is “solidly on offense,” primarily CapEx with ROI-based hurdles, aimed at expanding margins beyond the 23.5% segment margin target introduced in 2023 .
  • Pricing/outlook: Full-year price realization now 2%+, with ~1 pt tariff-based price in Q3; organization continues to find opportunities into next year .
  • Demand timing: Some product-level pull-forwards in Q3; backlog flattish; lifecycle book-to-bill >1; broader project delays tied to trade/policy uncertainty .
  • Compensation normalization: FY25 compensation (merit + bonus) ~$230M; next year expected to be fairly normalized as well .
  • FY26 tax headwind: Pillar Two could add 2–3 pts to ETR, an EPS headwind; U.S. tax bill benefits limited for Rockwell .

Estimates Context

  • Q3 FY25 results beat consensus: revenue $2.144B vs $2.068B*, adjusted/primary EPS $2.82 vs $2.669*; EBITDA $459M vs $457M*. Management raised FY25 EPS ranges and tightened sales outlook at a higher midpoint .
  • Next quarter (Q4 FY25) consensus as of S&P Global: revenue $2.206B*, EPS $2.939*; management guides low single-digit sequential sales growth in Q4 with margins similar to Q3 (mix headwind vs leverage) .

Values retrieved from S&P Global*

Key Takeaways for Investors

  • Beat-and-raise quarter: Broad-based execution with pricing/productivity driving margin expansion and stronger cash conversion; guidance raised for both diluted and adjusted EPS .
  • Mix tailwinds from Software & Control (Logic strength, SaaS growth) offset Lifecycle project delays; segment margin profile increasingly levered to software/hardware controls .
  • Tariff dynamics largely EPS-neutral; be mindful of timing shifts (possible 2–3 pts Q3 pull-ins) and FX transactional headwinds; still favorable price/cost backdrop .
  • Structural margin story intact: $360M cost savings achieved, program embedded into core; $2B internal investment should extend margin runway beyond 23.5% medium-term target .
  • Cash return: OCF/FCF strong; active buybacks (~0.5M shares in Q3) and dividend declared ($1.31 payable Sept 10) support total shareholder return .
  • Watch FY26 ETR: OECD Pillar Two likely +2–3 pts to ETR, an EPS headwind; management intends to offset via price and continued productivity .
  • Near-term setup: Q4 guided up low single digits sequentially with similar margins; discrete/hybrid end markets improving; greenfield and brownfield wins in U.S. capacity are a medium-term demand tailwind .