Johnson Controls International NYSE: JCI reported stronger fiscal second-quarter results and raised its full-year earnings outlook, citing sustained demand for applied HVAC systems, data center projects and improving execution across the business.
Chief Executive Officer Joakim Weidemanis said demand for the company’s products, solutions and services “remains strong,” led by data centers, where customers require high-performance cooling systems that provide precise operating conditions and improved energy efficiency. He said the quarter showed Johnson Controls’ ability to convert that demand into growth, margin expansion and earnings performance.
Orders increased 30% in the quarter, following nearly 40% growth in the prior quarter. Revenue rose 6% organically, while adjusted EBIT margin expanded 310 basis points to 15.5%. Adjusted earnings per share were $1.19, up 45% year over year and above the company’s guidance. Backlog increased 26% to a record $20 billion.
“This quarter reinforces our ability to convert demand strength into consistent growth, margin expansion, and earnings performance,” Weidemanis said. “Given our strong start in the first half and the visibility we have across the business, we are raising our full year guidance.”
Data centers drive order growth
Chief Financial Officer Marc Vandiepenbeeck said orders were led by large data center activity, while demand across other key end markets remained stable. In the Americas, orders grew 40%, driven by nearly 60% growth in systems and supported by large-scale data center projects. EMEA orders increased 11%, led by data center-related projects, while APAC orders rose 4%, led by Southeast Asia.
Weidemanis said the company’s pipeline remains strong and is growing at a double-digit rate, though he noted Johnson Controls does not provide specific orders guidance. He also pointed to demand in other verticals, including pharma biologics and advanced manufacturing.
The company also announced the release of its second AI factory reference design guide, focused on air-cooled chiller architectures for gigawatt-scale AI factories. The release follows a water-cooled guide issued earlier this year. Weidemanis said the guides are intended to provide customers with repeatable design parameters across the data center thermal chain.
During the call, Weidemanis highlighted Johnson Controls’ YORK chillers and said the company’s differentiation comes from ownership of core subsystems, including compressors, variable speed drives, magnetic bearing compressors, heat exchangers and embedded intelligent controls. He said Johnson Controls holds more than 1,000 related patents across these areas.
Regional revenue and margin performance
Organic revenue increased 7% in the Americas, led by applied HVAC strength and solid double-digit growth in service. EMEA sales increased 1%, as systems growth offset disruption from Middle East conflicts and lower service volumes. APAC revenue rose 13%, led by more than 20% growth in applied HVAC.
Segment margins improved across all regions. Americas adjusted segment EBITA margin rose 100 basis points to 19.5%, driven by higher volume and price realization. EMEA margins expanded 370 basis points to 14.9%, reflecting productivity gains and improved leverage on higher revenue. APAC margins expanded 350 basis points to 19.8%, helped by higher volumes and productivity gains.
Vandiepenbeeck said the company ended the quarter with approximately $700 million of available cash and strong total liquidity. Net debt declined to 2 times, within Johnson Controls’ long-term target range.
Guidance raised after strong first half
For the fiscal third quarter, Johnson Controls expects organic sales growth of approximately 6%, operating leverage of approximately 45% and adjusted EPS of approximately $1.28.
For the full year, the company now expects organic sales growth of approximately 6% and operating leverage of approximately 50%. Johnson Controls raised its adjusted EPS guidance to approximately $4.85, representing about 30% growth and $0.30 above its original guidance at the start of the year. The company continues to expect adjusted free cash flow conversion of approximately 100%.
Vandiepenbeeck said about 70% of the company’s $20 billion backlog can be converted into revenue over the next 12 months. He said the remaining portion is affected in part by power electrical infrastructure constraints for some data center customers, which can push delivery commitments beyond 12 to 18 months. Weidemanis added that customers are placing orders earlier than they did a year ago because of those constraints.
Business system remains early but gaining traction
Management devoted significant time to Johnson Controls’ proprietary business system, which Weidemanis said is intended to improve execution through three pillars: simplify, accelerate and amplify. The approach includes 80/20 prioritization, lean methods and digital and AI tools.
Weidemanis said approximately 1,400 colleagues are actively engaged in the work, and about 1,000 leaders have been trained. The company has completed more than 150 Kaizens across roughly 20 priority areas. However, he emphasized that the program is still in its early stages and that meaningful profit-and-loss impact is expected to build over the next one to two years.
As one example, Weidemanis cited a service sales work stream in West Florida that redesigned the process for establishing service agreements after new chiller commissioning. He said the work reduced an individual customer process from weeks or days to hours and tripled service agreements immediately following new chiller startup commissioning.
Service softness, capacity and portfolio review discussed
In response to analyst questions, Weidemanis said service orders were softer than other parts of the business, particularly in security. He said the company has been reassessing the balance between price and volume in security service, which he described as less differentiated than applied HVAC service. Security service revenue declined in the quarter, but margins improved, according to Weidemanis.
On capacity, Weidemanis said Johnson Controls has sufficient capacity for the next 12 to 18 months, supported by factory investments made in prior years. Vandiepenbeeck noted that ramping new HVAC capacity in North America has created some short-term productivity inefficiencies as employees are trained and production processes mature.
Management also discussed the Middle East, where Johnson Controls has more than 2,500 employees. Weidemanis said the region represents about 2% to 3% of total company revenue and slightly more than 10% of EMEA revenue. About one-third of the Middle East business was delayed in the quarter because of conflict, and the company is not assuming a full return to normal in the current quarter.
Asked about portfolio strategy, Weidemanis said the company continues to review its portfolio with the goal of maximizing shareholder value. He compared the portfolio to a sports team, with applied businesses playing a more offensive growth role and other businesses contributing more to profitability and cash flow.
Weidemanis closed the call by thanking Johnson Controls’ 90,000 employees, including more than 40,000 field colleagues, and said the company is still early in its business system journey but encouraged by its momentum.
About Johnson Controls International NYSE: JCI
Johnson Controls International plc is a global diversified technology and multi‑industrial company that develops products, services and solutions for buildings and energy storage. The company's core focus is on improving building efficiency, safety and sustainability through a combination of HVAC equipment, building controls and automation, fire and security systems, and related services. Johnson Controls traces its roots to 1885, when inventor Warren S. Johnson developed an electric room thermostat; over its long history the company has expanded from controls into a broad set of building‑related technologies and, through corporate transactions, into a global provider of integrated building solutions.
Johnson Controls' product and service portfolio includes heating, ventilation and air‑conditioning equipment, chillers, air handlers and related mechanical systems, together with building automation and control platforms that monitor and manage energy use, indoor environmental quality and security.
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