Eaton Q2 Earnings Call Highlights

Key Points

• Record Q2 performance: Eaton’s revenue rose 21% to $8.5 billion and adjusted EPS reached $3.15, with both results exceeding guidance. The company raised its 2026 outlook to 11%–13% organic growth and adjusted EPS of $13.40–$13.60.
• Electrical Americas drove momentum: Organic sales increased 18%, including approximately 65% growth in data center revenue. Strong orders, a 1.3 book-to-bill ratio and a $5 billion backlog increase support continued growth as Eaton invests more than $1 billion in capacity expansion.
• Data centers and acquisitions expand Eaton’s opportunity: Management cited substantial long-term U.S. data center demand and expects Boyd, which supplies liquid-cooling products, to generate $1.8 billion in full-year revenue. Eaton is using acquisitions such as Boyd, Fibrebond and Ultra PCS to strengthen its position in higher-growth infrastructure markets.

Eaton NYSE: ETN reported record second-quarter revenue and adjusted earnings as demand across its electrical businesses and aerospace segment remained strong, led by data center activity and capacity expansion in Electrical Americas.

Chief Executive Officer Paulo Ruiz said adjusted earnings per share reached $3.15, exceeding the company’s guidance midpoint by $0.10. Revenue rose 21% to a record $8.5 billion, including 14% organic growth and a seven-percentage-point contribution from acquisitions. Eaton reported a 23.1% margin for the quarter, with revenue growth and margins both above the high end of its guidance.

The company raised its full-year outlook, citing stronger-than-expected execution, accelerating orders and expanding backlog. Eaton now expects 2026 organic growth of 11% to 13%, up from its prior range of 9% to 11%, and adjusted EPS of $13.40 to $13.60, or $13.50 at the midpoint.

Electrical businesses lead growth

Electrical Americas organic sales grew 18% in the quarter, driven in part by approximately 65% growth in data center revenue, according to Chief Financial Officer Dave Foster. The segment also posted strong growth in machine OEM and commercial and institutional markets.

Electrical Americas operating margin was 27.5%, up 190 basis points from the first quarter. Foster said about 100 basis points of the sequential improvement came from price-cost effects, while the remaining 90 basis points reflected higher output as facilities expanded production.

Management said Eaton is investing more than $1 billion in capacity expansion across Electrical Americas and is bringing about two dozen projects online. Revenue per day has risen roughly 25% since the beginning of 2025, including an 8% sequential increase in the second quarter, Ruiz said.

Demand continued to outpace shipments. Electrical Americas recorded a 1.3 book-to-bill ratio, while orders increased 41% on a rolling 12-month basis. Ruiz said backlog in the segment increased by $5 billion since the beginning of 2025, including a sequential increase of $700 million.

For the second half, Foster said the company expects Electrical Americas margins to rise by 450 to 500 basis points compared with the first half. He attributed approximately 300 basis points of that expected increase to price-cost improvement and 150 to 200 basis points to output and productivity gains. Eaton said pricing actions were implemented in the second quarter and early third quarter.

Global electrical and aerospace results

Electrical Global revenue rose 44%, including 18% organic growth and a 25-point contribution from the Boyd acquisition. Organic growth was supported by data centers, utilities and machine OEM markets. Segment operating margin was 19.8%, down 30 basis points from the prior year but roughly one percentage point ahead of management’s expectations.

The company said orders in Electrical Global increased 33% on a rolling 12-month basis. Ruiz said each of the segment’s businesses—including Europe, Asia-Pacific and its Guides business—performed above expectations, with revenue up about 20% in Europe and Asia-Pacific and up high teens at Guides.

Eaton raised its full-year Electrical Global organic growth outlook by 450 basis points to a midpoint of 12%. Ruiz said management remained prudent in its outlook despite the segment’s second-quarter outperformance.

In Aerospace, organic sales increased 7%, producing record quarterly sales and a second-quarter record for segment profit. Commercial OEM and commercial aftermarket markets were particular sources of strength. The Ultra PCS acquisition added six points of growth and was accretive to Aerospace margins, Foster said. Aerospace operating margin expanded 60 basis points to 22.8%, while book-to-bill increased to 1.2.

Mobility organic sales declined 2%, though the decline was fully offset by favorable foreign exchange. Excluding Eaton’s intentional exit from a low-margin business, organic growth would have been slightly positive. Segment margins increased 90 basis points from the prior year.

Data center opportunity and acquisitions

Ruiz said Eaton continues to see unusually strong data center demand, noting that total U.S. data center backlog had reached 307 gigawatts, equal to roughly 15 years of backlog at 2025 build rates. He said only about 20% of that backlog is expected to convert in the near term, with most translating into deliveries in 2028 and beyond.

Management reiterated that Eaton’s data center content opportunity is approximately $3.4 million per megawatt. Ruiz said the company is positioning itself for a transition toward 800-volt direct-current architectures through its capabilities in medium-voltage solid-state transformers, DC breakers, power electronics, power quality, cooling and service.

The company also highlighted the performance of Boyd, which supplies liquid cooling products including cold plates and coolant distribution units. Eaton raised its full-year Boyd revenue forecast to $1.8 billion, of which $1.5 billion is expected to be included in Eaton’s 2026 results. Boyd generated $432 million in second-quarter revenue, which Ruiz said was 20% above its commitment and Eaton’s guidance for the period.

Ruiz said Eaton’s acquisitions of Fibrebond, Resilient Power, Ultra PCS and Boyd are intended to expand the company’s exposure to higher-growth, higher-margin markets. Fibrebond, in particular, provides capabilities in prefabricated and modular data center infrastructure, an area Ruiz said could benefit as customers seek to reduce reliance on on-site skilled labor.

Cash flow and tariff comment

Foster said operating cash flow increased 23% from the prior year to a second-quarter record. Eaton reaffirmed its full-year cash flow expectations.

During the question-and-answer session, Ruiz said the impact from IEEPA-related refunds in the second quarter was less than $3 million, or less than $0.01 per share. He said the impact of tariffs and refunds in the second half was immaterial and already embedded in the company’s guidance.

About Eaton (NYSE:ETN)

Eaton NYSE: ETN is a diversified power management company that designs, manufactures and distributes products and systems to manage electrical, hydraulic and mechanical power. The company's offerings are used to improve energy efficiency, reliability and safety across a wide range of applications, with core capabilities in electrical distribution and control, industrial hydraulics and aerospace systems.

Its product portfolio includes switchgear, circuit breakers, transformers, power distribution units, uninterruptible power supplies and surge protection devices for electrical infrastructure, along with hydraulic pumps, valves and filtration systems for industrial and mobile equipment.

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