3M Q3 Earnings Call Highlights

Key Points

• Strong third-quarter performance: 3M delivered 3.3% organic sales growth, a 26.2% adjusted operating margin, $2.50 in adjusted EPS and $1.2 billion in free cash flow. Adjusted EPS rose 12% year over year, while orders grew at a high-single-digit rate and backlog increased by a high-teens percentage.
• Data-center business gains momentum: 3M expects data-center revenue of about $700 million in 2026 and issued Amazon a warrant for up to 3.2 million shares tied to potential sales milestones of $6 billion over seven years. The company is expanding optical-connectivity capacity through internal production and a manufacturing agreement with GSEO.
• Full-year outlook raised: 3M increased its 2026 adjusted EPS forecast to $9.10–$9.15, implying 11%–12% annual growth, while maintaining expectations for more than 3.5% organic growth. Management also expects about $4.8 billion in free cash flow and said 2027 margins could exceed its previous 25.4% target.

3M NYSE: MMM reported third-quarter results marked by organic sales growth, margin expansion, double-digit adjusted earnings growth and stronger order trends, while raising its full-year adjusted earnings outlook.

Chairman and Chief Executive Officer Bill Brown said the company generated 3.3% organic growth in the third quarter, an adjusted operating margin of 26.2%, adjusted earnings per share of $2.50 and free cash flow of $1.2 billion. Adjusted EPS increased 12% year over year, while operating margin rose 110 basis points.

The company returned $600 million to shareholders during the quarter, including $400 million in dividends and $200 million in share repurchases. Through the first nine months of 2026, 3M returned $4.4 billion to shareholders, including $3.2 billion of buybacks and $1.2 billion of dividends.

Growth and operational actions

Brown said 3M’s performance reflected initiatives aimed at improving sales-force effectiveness, product development, pricing, productivity and supply-chain execution. The company launched 87 new products in the quarter, up 24% from a year earlier, and said it remains on track to exceed 350 launches for the full year.

Year-to-date sales from products introduced within the past five years rose 34% from the prior year to nearly $3 billion, according to Brown. New-product vitality reached the mid-teens, compared with 11% in 2024.

The company also reported $140 million of cross-selling wins booked to date and an additional $120 million pipeline, exceeding its original three-year goal of $100 million. Brown said pricing actions fully offset material and oil-cost pressures.

Gross margin increased 230 basis points year over year, supported by procurement savings, improved asset utilization, lower downtime and quality improvements. Cost of poor quality improved by 40 basis points and overall equipment effectiveness improved by 20 basis points, Brown said.

3M has closed 16 manufacturing sites and distribution centers so far this year and plans action on 10 additional locations over the next 12 months. Brown said the actions should support additional gross-margin improvement beyond 2027.

Business-group performance

Chief Financial Officer Anurag Maheshwari said order trends grew at a high-single-digit rate in the third quarter, led by industrials, safety, data centers, semiconductors and aerospace. Backlog increased by a high-teens percentage from a year earlier.

• Safety and Industrial: Organic sales increased 7%, with double-digit growth in electrical markets as the division expanded data-center customer penetration. Safety, industrial adhesives, abrasives and industrial specialties collectively grew at a high-single-digit rate. Auto aftermarket sales rose in the mid-single digits.
• Transportation and Electronics: Sales rose 0.5%, as growth in semiconductors, aerospace, commercial branding and automotive outside consumer electronics was about 5%. Consumer electronics declined in the mid-teens, while auto was down in the mid-single digits on softer builds.
• Consumer: Sales were flat, improving sequentially. U.S. point-of-sale growth exceeded 2%, though inventory reductions at several major retailers caused U.S. sell-in to decline in the low single digits. International consumer sales grew in the mid-single digits.

Geographically, U.S. and Canada sales grew about 7%, while Latin America delivered high-single-digit growth. Europe expanded for a second consecutive quarter, and India posted another quarter of double-digit growth. China declined by a high-single-digit percentage, primarily due to weak consumer electronics demand.

Data-center strategy and Amazon agreement

Brown highlighted 3M’s Expanded Beam Optical, or EBO, technology, which uses a patented ferrule designed to enable faster installation, durability and higher-density optical connections in AI infrastructure. The company previously announced a deployment partnership with Microsoft and said it has been engaged in proof-of-concept work with five other global hyperscalers, including Amazon Web Services.

3M disclosed that it issued Amazon a warrant to purchase up to 3.2 million 3M shares, representing about 0.6% of common stock, contingent on $6 billion in cumulative sales of optical connectivity and other data-center products over seven years, along with other event-based milestones. Brown said there are no volume commitments under the arrangement and that 3M must earn the sales opportunity.

Brown said EBO revenue is expected to be about $40 million in 2026 and could double, or potentially exceed that level, next year. The company has doubled internal manufacturing capacity to more than 10 million ferrules annually. It also signed a contract manufacturing agreement with Genius Electronic Optical Company, or GSEO, and acquired a 4.7% stake in the supplier.

Brown said GSEO could provide manufacturing capacity at multiples of 3M’s internal output per month, helping the company meet potential demand. He added that supply diversity will remain important as hyperscalers evaluate the technology.

Separately, 3M said data-center revenue is expected to reach about $700 million this year, compared with roughly $550 million last year. That revenue includes electrical connections, optical connections, copper products and other products used inside and outside data centers.

Updated outlook

3M reaffirmed expectations for organic growth of more than 3.5% for 2026 and projected organic growth of just over 4% in the fourth quarter. Management cited order momentum, backlog levels and easier comparisons in the final quarter.

The company raised its adjusted EPS outlook to a range of $9.10 to $9.15, from a prior range of $8.95 to $9.10 on its updated reporting basis. The forecast implies annual adjusted earnings growth of 11% to 12%.

Maheshwari said 3M now expects oil-related inflation of $185 million for the year, compared with its prior estimate of $150 million to $175 million. The company expects pricing to fully offset the higher cost, although the pass-through is expected to dilute margin rate by about 20 basis points. Full-year adjusted operating margin is projected to be about 24.6%, while free cash flow is expected to be approximately $4.8 billion and the adjusted tax rate about 20%.

For 2027, 3M plans to provide formal guidance in January. Maheshwari said the company expects margin to exceed its Investor Day target of 25.4% on the updated basis, supported by volume growth, supply-chain productivity and transformation actions.

About 3M (NYSE:MMM)

3M is a diversified technology and manufacturing company headquartered in St. Paul, Minnesota. Founded in 1902 as Minnesota Mining and Manufacturing Company, it developed from a mining venture into a global enterprise known for applying materials science and engineering to a broad range of industrial, commercial and consumer applications.

The company develops and manufactures products including adhesives, abrasives, filtration systems, personal protective equipment, medical and dental supplies, electrical and electronic materials, automotive components, reflective materials and workplace safety solutions.

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