What Carrier Global (CARR) Said on Its Q3 Earnings Call

Key Points

• Strong demand drove Carrier’s third quarter: Organic sales rose 15%, adjusted operating profit increased about 35%, and global orders climbed 35%, led by more than 60% growth in commercial orders. Data-center orders surged 300%, with backlog exceeding $8.5 billion.
• Residential and European markets improved: CSA residential sales increased more than 30%, while European heat-pump and air-conditioning sales each grew about 35%. Carrier also plans a Fort Worth facility that is expected to more than double its Americas capacity and add roughly 1,500 jobs.
• Costs remain a margin risk despite a higher outlook: Carrier expects approximately $800 million in full-year input-cost headwinds and is implementing price increases, including up to 10% across CSA. The company raised its 2026 revenue outlook to nearly $24 billion while maintaining adjusted EPS guidance of $2.85 to $2.90.

Carrier Global NYSE: CARR reported third-quarter results marked by strong organic growth, rising commercial HVAC demand and continued momentum in data-center cooling, while management highlighted margin pressure from tariffs, other input costs and supply-chain challenges.

Chief Executive Officer David Gitlin said organic sales rose 15% in the quarter, adjusted operating profit increased about 35%, and adjusted operating margin expanded 260 basis points. Adjusted earnings per share increased 30%, or about 15% excluding the impact of IEEPA refunds. Year-to-date free cash flow totaled $1.5 billion, including nearly $700 million generated during the third quarter.

Commercial and Data-Center Demand Drives Orders

Global orders increased 35% from a year earlier, led by a more than 60% increase in commercial orders. Data-center orders increased 300% during the quarter, and year-to-date data-center orders exceeded $3 billion, an increase of nearly 350%, according to Gitlin.

Carrier delivered more than $550 million of data-center sales in the third quarter and said it remains on track to reach its full-year commitment of $2 billion. The company’s backlog surpassed $8.5 billion, excluding minimum-volume commitments under long-term agreements.

Earlier in October, Carrier signed an agreement with a hyperscale customer worth more than $3 billion, with a significant portion covered by a minimum-volume commitment. Gitlin said the company is pursuing additional agreements with hyperscalers and large colocation customers across its chiller, cooling distribution unit, and building-management-system portfolio.

“Data center sales are margin accretive to our applied business,” Gitlin said. He added that non-data-center commercial orders also grew 20%, reflecting demand from industrial, hospitality, healthcare, pharmaceutical, semiconductor and other markets.

Carrier plans to expand capacity through a new advanced manufacturing and engineering site in Fort Worth, Texas. The facility is expected to add about 1,500 jobs, bring certain subassemblies and components in-house, and expand test-lab capacity. Customer deliveries are planned for late summer 2027. Gitlin said the site is intended to support both data-center demand and other commercial HVAC opportunities, and would effectively more than double the company’s Americas capacity.

Residential and European Markets Improve

Carrier said residential demand in its Climate Solutions Americas, or CSA, segment improved more than expected. The company now expects the U.S. residential market to total between 7.5 million and 8 million units this year, compared with its earlier expectation of fewer than 7 million units.

CSA residential sales rose more than 30% in the quarter, aided by the absence of destocking, while light-commercial sales increased by high single digits. Commercial sales in the segment grew more than 25%, driven by a substantial increase in data-center deliveries.

In Europe, residential and light-commercial sales rose 13%, while Carrier’s Climate Solutions Europe segment recorded 12% organic sales growth. Heat-pump and air-conditioning sales each increased about 35%, though boiler sales declined by high single digits. Gitlin said demand for heat pumps and air conditioning was particularly strong in Germany and across other European markets.

The company also addressed an impairment in its Climate Solutions Europe business. Gitlin said he was disappointed by the charge but remained confident in the strategic rationale for the acquisition, characterizing its timing as unfortunate. He said the business is seeing improving markets, strong demand for heat pumps and air conditioning, product launches, channel expansion and a growing commercial backlog.

Margins Face Input-Cost Pressure

Chief Financial Officer Patrick Goris said reported sales increased 12%, reflecting 15 percentage points of organic growth, partially offset by a 3-point headwind from the divestitures of Riello and NORESCO.

Carrier recorded an approximately $130 million benefit from IEEPA refunds during the quarter. While the refund helped third-quarter profitability, Goris said CSA margins excluding that benefit were below expectations because price realization was lower than anticipated, while input costs and supply-chain challenges increased.

Carrier expects roughly $800 million in full-year input-cost headwinds, with tariffs accounting for slightly less than half of that amount, according to Goris. Gitlin said the company saw sudden cost increases after tariffs took effect in April, along with rising costs for steel, copper, aluminum and freight.

The company has announced additional price increases, including actions of up to 10% across the CSA portfolio and an 8% residential price increase that takes effect later in the fourth quarter. Gitlin said Carrier is also deploying pricing tools that use artificial intelligence, pursuing productivity initiatives and seeking greater supply-chain resilience.

• CSA segment operating margin was 22.2% in the third quarter, aided by IEEPA refunds.
• Carrier now expects CSA full-year operating margin of about 19%.
• Management said it expects cost and pricing conditions to improve sequentially next year, though it does not anticipate an immediate margin “snapback” in the first or second quarter.

Updated 2026 Outlook

Carrier raised its 2026 sales outlook and now expects nearly $24 billion in full-year revenue, with organic sales growth of about 10%. The prior forecast called for a little more than $23 billion in sales.

The company maintained its outlook for adjusted operating profit, free cash flow and share repurchases, and reaffirmed adjusted EPS guidance of $2.85 to $2.90 for the year.

Looking toward 2027, management did not provide formal guidance but said it expects to enter the year with record backlog, accelerating commercial and data-center demand, improving short-cycle residential markets and growing aftermarket revenue. Gitlin said Carrier is targeting another year of double-digit EPS growth despite expecting inflationary pressures to carry over.

About Carrier Global (NYSE:CARR)

Carrier Global Corporation NYSE: CARR is a global provider of intelligent climate and energy solutions. The company develops and manufactures heating, ventilation and air-conditioning (HVAC) systems, refrigeration equipment, building automation technologies and related controls and services for residential, commercial and industrial customers.

Its offerings include air conditioners, heat pumps, furnaces, boilers, chillers, ventilation systems, refrigeration systems and building management solutions.

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