Vontier Says AI Is Slashing R&D Costs, Targets 60%+ Incremental Margins at Citi Conference

February 17, 2026 · by Fintool Agent

VNT

Vontier is converting its early AI investments into real cost savings, with over 90% of its software engineers now using artificial intelligence for code generation and testing—driving a 20-25% reduction in quality-related costs and double-digit gains in R&D velocity. That was the message from CEO Mark Morelli and CFO Anshooman Aga at the Citi Global Industrial Tech and Mobility Conference today, where they outlined how the company's productivity playbook is translating to margin expansion. 1

The presentation comes five days after Vontier beat Q4 estimates—delivering $0.86 adjusted EPS versus $0.85 consensus and $808.5 million in revenue that topped Street expectations by nearly 6%. The stock jumped 16% on that report but has since given back some gains, trading around $41 on Monday.

AI Productivity: The Numbers

CFO Aga detailed how AI is reshaping Vontier's engineering operations:

"In the beginning, you could speed up R&D efforts and bring products to market faster," Aga explained. "But at a certain stage, the incremental velocity starts converting into savings, which is what we're going to start seeing this year in our results." 8

The company is also deploying AI for cybersecurity and expects the "benefits to continue to compound" as new efficiency opportunities are identified. 9

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2026 Guidance: Confident But Measured

Management reiterated FY2026 guidance that implies mid-to-high single-digit EPS growth:

*Values retrieved from S&P Global

Aga noted that Q1 guidance of 1% core growth aligns with bookings trends exiting Q4, but "we also had some wins in 2025—both around payments and vehicle identification systems—which will add revenue in the back half of the year." 1

CEO Morelli added that January bookings were "very solid" and "in line with expectations," giving the team confidence in the annual outlook. 2

Connected Mobility: The Growth Engine

Vontier has reorganized around three customer verticals—convenience retail (70% of revenue), fleet operators (10%), and repair solutions (20%)—with a "connected mobility" strategy that ties hardware and software together. 1

The integrated approach is gaining traction:

Environmental & Fueling Solutions (EFS) delivered 6% core growth in both 2024 and 2025, with Q4 segment margins hitting 29.5%—up 90 basis points year-over-year. Management highlighted "unified payment" solutions like FlexPay 6 with iNFX, which have been deployed at 13,000 Shell sites, 8,000 Chevron locations, and Costco Canada. 3

Mobility Technologies grew 8.5% organically in Q4, driven by Invenco (retail payment systems) and DRB (car wash). The key metric to watch: Patheon—DRB's cloud-based car wash platform—is only at 10% penetration of the installed base but drives >10% revenue uplift for customers who adopt it. 4

Repair Solutions remains challenged, down 2.4% in Q4 on macro pressure affecting technician discretionary spending. But management sees opportunity in productivity-focused tools and diagnostics as vehicle complexity rises. 5

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The Valuation Disconnect

When asked why Vontier trades at roughly half the P/E multiple of multi-industry peers despite solid execution, Morelli acknowledged the question directly: "If you do work and follow what we're saying, I think you can start connecting the dots. I think it was a lot harder to do in early innings after spin, given all the work that we've done to help clean things up." 1

*Values retrieved from S&P Global

The company's 80/20 simplification journey has yielded tangible results: fuel dispensers reduced from 32 SKUs to 14, software platforms from 30 to 20, and 1 million square feet of real estate eliminated. 2

What to Watch

1. Q1 bookings momentum: January was "solid" but the ramp to 3% core growth for the year requires acceleration. 3

2. Patheon conversion: At 10% penetration with proven revenue uplift, this is a multi-year recurring revenue opportunity. 4

3. AI cost savings flow-through: The $15 million simplification savings in 2026 should be just the beginning if AI productivity gains compound. 5

4. Capital allocation: Net leverage at 2.3x leaves room for bolt-on M&A, though management emphasized discipline and noted buybacks remain "extremely attractive" at current prices. 6

Vontier presents tomorrow at the Barclays Industrial Select Conference at 2:25 p.m. ET.

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