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Trane Technologies plc (TT)·Q3 2025 Earnings Summary

Executive Summary

  • Record enterprise bookings of $6.0B and adjusted EPS of $3.88 (+15% YoY); EPS beat consensus while revenue was slightly below street; margins expanded meaningfully (adjusted operating +170 bps; adjusted EBITDA +110 bps) . Consensus EPS was $3.78 vs actual $3.88*, revenue $5.78B vs actual $5.74B*, EBITDA $1.23B vs actual $1.25B* (EPS/EBITDA beat; revenue slight miss). Values retrieved from S&P Global.
  • FY25 guidance trimmed: reported revenue growth ~7% (from ~9%), organic ~6% (from ~8%); GAAP EPS $13.15–$13.25 (including $0.20 adjustments) and adjusted EPS $12.95–$13.05; Q4 adjusted EPS guided to $2.75–$2.85 .
  • Americas Commercial HVAC strength: ~30% bookings growth with applied solutions >100%; backlog $7.2B (+7% vs YE’24), pipeline robust, including NVIDIA AI thermal management reference design positioning TT in data center growth vectors .
  • Residential weakness (bookings ~-30%, revenues ~-20%) and timing shifts of commercial deliveries from Q4 into 2025 temper near-term revenue trajectory; company still expects 30%+ organic leverage in 2025 .
  • Capital allocation remains active: ~$2.8B deployed/committed YTD through Oct (dividends ~$840M, M&A ~$420M, buybacks ~$1.35B, debt retirement ~$150M) and a $0.94 quarterly dividend declared (annualized $3.76) .

What Went Well and What Went Wrong

What Went Well

  • Record Q3 bookings of $6.0B (+15%; +13% organic), led by Americas Commercial HVAC with ~30% bookings growth and applied solutions bookings up over 100% . “We delivered 15% adjusted EPS growth and achieved all-time-high quarterly bookings of $6 billion…” — Dave Regnery, CEO .
  • Margin expansion despite residential headwinds: adjusted operating margin +170 bps YoY to 20.6%; adjusted EBITDA margin +110 bps YoY to 21.8%; price realization and productivity more than offset inflation .
  • Data center/AI momentum: management emphasized the “AI revolution” driving demand; TT unveiled an industry-first gigawatt-scale NVIDIA AI thermal management reference design, enhancing data center positioning .

What Went Wrong

  • Residential HVAC down materially: Americas residential bookings ~-30% and revenues ~-20% in Q3; channel inventory normalization to continue into Q4/early 2026 .
  • EMEA margin compression: adjusted operating margin down ~80 bps and adjusted EBITDA margin down ~60 bps YoY due to M&A integration costs and reinvestment .
  • Guidance revision and revenue timing: FY25 revenue growth lowered (9%→~7%), GAAP EPS narrowed; ~$100M of Americas commercial HVAC deliveries moved from Q4 into 2025, and transport/Resi headwinds dampen Q4 revenue (organic ~3%) .

Financial Results

Consolidated P&L vs prior year and prior quarter

MetricQ3 2024Q2 2025Q3 2025
Net Revenues ($USD Millions)$5,441.2 $5,746.4 $5,742.5
GAAP Continuing EPS ($)$3.43 $3.87 $3.82
Adjusted Continuing EPS ($)$3.37 $3.88 $3.88
GAAP Operating Margin (%)18.8% 20.3% 20.3%
Adjusted Operating Margin (%)18.9% 20.3% 20.6%
Adjusted EBITDA Margin (%)20.7% 21.8% 21.8%

Segment breakdown – Q3 2025

SegmentNet Revenues ($USD Millions)Adjusted Operating Margin (%)Adjusted EBITDA Margin (%)
Americas$4,663.3 21.8% 23.1%
EMEA$749.6 19.7% 21.0%
Asia Pacific$329.6 22.5% 23.3%

KPIs across Q1–Q3 2025

KPIQ1 2025Q2 2025Q3 2025
Bookings ($USD Millions)$5,283 $5,626 $5,979
Enterprise Backlog ($USD Billions)$7.3 $7.1 $7.2
Free Cash Flow YTD ($USD Millions)$230 $841 $1,786
Working Capital / Revenue (%)3.8% 3.7% 3.9%
Commercial HVAC Book-to-Bill (All Regions)>100% >100% >100%

Estimate comparison (Q3 2025)

MetricConsensus*ActualSurprise
Primary EPS ($)3.783.88 Beat
Revenue ($USD Billions)5.785.74 Miss
EBITDA ($USD Billions)1.231.25 Beat

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Reported Revenue GrowthFY 2025~9% ~7% Lowered
Organic Revenue GrowthFY 2025~8% ~6% Lowered
GAAP Continuing EPS ($)FY 2025~$13.30 incl. $0.25 adjustments $13.15–$13.25 incl. $0.20 adjustments Lowered (narrowed)
Adjusted Continuing EPS ($)FY 2025~$13.05 $12.95–$13.05 Maintained/Lowered lower bound
Adjusted EPS ($)Q4 2025N/A$2.75–$2.85 New/Specified
Organic Revenue GrowthQ4 2025N/A~3%; ex-Residential ~7% New/Specified
Organic Leverage (%)FY 202525%+ framework historically~30%+ Raised
Dividend per Share ($)QuarterlyPrior $0.94 trend$0.94 (Dec 31, 2025 payable) Maintained

Earnings Call Themes & Trends

TopicQ1 2025Q2 2025Q3 2025Trend
AI/Data Center InitiativesElevated backlog, strong commercial HVAC bookings; no specific AI reference Applied orders +60%; complex projects pipeline CEO: “AI revolution” driving demand; NVIDIA gigawatt-scale thermal design launched Accelerating
Delivery Timing/Supply ChainBook-to-bill >100%; backlog build Backlog down ~$125M seq; timing mix shift ~$100M delivery timing moved from Q4’25→2025 Minor timing headwind
Pricing/InflationPrice realization positive Price/inflation spread positive Price ~3% in Q3; FY organic ~3% price / ~3% volume Stable/disciplined
Residential MarketsNormal operations, strong overall Emerging softness noted Bookings ~-30%, revenues ~-20%; destock through Q4/Q1 Weak
EMEA PerformanceMargins down due to reinvestment Adjusted EBITDA margin -200 bps Margins down; M&A integration costs; sequential improvement Improving sequentially
Transport (Americas)Normalizing End markets down; TT outperforms ACT: Q4 markets down >30%; TT revenues ~-10% expected Downcycle; outperformance
Services/Connected SoftwareStrong growth tailwind Durable growth 65k+ connected buildings; adding ~1/hour; agentic AI via BrainBox; accretive margins Structural tailwind
Tariffs/MacroFX/tariff risks in FLSFX/tariffs cited in FLS “Stay ahead of tariff and inflationary pressures” Managed risk

Management Commentary

  • “The demand for sustainable, resilient infrastructure has never been greater… the AI revolution and reshoring of industry are transforming how businesses operate… Our high-efficiency solutions help our customers save energy and reduce operational costs.” — Dave Regnery, CEO .
  • “Q3 was another strong quarter… record quarterly bookings of $6 billion… adjusted operating margin expansion, 15% adjusted EPS growth, and robust free cash flow.” — Dave Regnery .
  • “Our applied solutions bookings [were] more than doubling… Commercial HVAC revenue growth low teens in equipment and low double digits in services.” — Dave Regnery .
  • “Price for the quarter was a bit above 3%… full-year ~3% price and ~3% volume.” — Chris Kuehn, CFO .
  • “Our revised guidance anticipates ~6% organic revenue growth for the year… we expect Q4 adjusted EPS $2.75–$2.85.” — Chris Kuehn .

Q&A Highlights

  • Americas margins and services: Operating income margins ~22% in Q3; services margins higher than equipment and have room to expand; investment in training and connected tools continues .
  • Applied bookings and pipeline: Several large orders (> $100M) in data centers; pipeline “extremely robust”; most backlog shipping next ~15 months .
  • Residential destocking: Revenues ~-20% and bookings ~-30% in Q3; channel inventories expected to rebalance by year-end or Q1; price/mix favorable ~10% with ~5 pts each price and mix .
  • Operating leverage and cost control: Organic leverage raised to ~30%+ for FY25; discretionary and structural cost actions offset headwinds while maintaining reinvestment .
  • Data center capacity/tech: Chiller capacity expanded ~4x since 2023; quick-ship in core verticals; collaboration with NVIDIA on thermal reference design; liquid cooling partnerships (e.g., LiquidStack) .

Estimates Context

  • Q3 2025: EPS beat (3.88 vs 3.78*), revenue slight miss ($5.74B vs $5.78B*), EBITDA beat ($1.25B vs $1.23B*). Street likely raises EPS estimates modestly on margin performance while trimming top-line for residential/transport softness. Values retrieved from S&P Global.
  • Q4 2025: Consensus EPS ~$2.82*, revenue ~$5.10B* vs company guidance for Q4 organic revenue growth ~3% (ex-Residential ~7%) and adjusted EPS $2.75–$2.85 . Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin resilience and price discipline underpin EPS outperformance; expect continued premium execution even with softer residential and transport markets .
  • Commercial HVAC applied solutions and data centers remain powerful growth vectors; NVIDIA collaboration and expanded capacity position TT to capture AI-driven cooling demand .
  • Guidance reset de-risks near term; watch Q4 delivery timing and transport market trough—investors should focus on backlog quality, services mix, and FY26 setup .
  • Services and connected software (BrainBox AI) are structural margin and cash-flow tailwinds; subscription-like economics provide defensiveness and multiple expansion potential .
  • Americas outperformance continues; EMEA margins should improve as integration costs anniversary; Asia Pacific shows healthy momentum with China rebound .
  • Capital deployment remains shareholder-friendly (buybacks, dividend); ~$2.8B YTD deployed and $0.94 quarterly dividend supports total return .
  • Near-term trading: Expect stock to react positively to EPS/margin beat and AI narrative; any pressure from top-line miss/guidance trim could be bought given backlog and FY26 leverage .