What Johnson Controls International (JCI) Said on Its Q4 Earnings Call

Key Points

• Strong fourth-quarter performance: Organic revenue rose 12%, adjusted EPS increased 32% to $1.66, and adjusted EBIT margin expanded to 18%. Orders surged 44%, driving record backlog growth of 43% to $23 billion, led by data centers and other mission-critical markets.
• Data-center opportunity is broadening: Beyond chillers, Johnson Controls is expanding into cooling distribution units, cold plates and modular data centers. Management said a pipeline exceeding $1 billion for CDU-related offerings provides significant additional growth potential.
• Optimistic fiscal 2027 outlook: The company expects 11%–12% organic revenue growth and adjusted EPS of $6.15–$6.30, representing roughly 21% midpoint growth. It plans to invest about $900 million in capital expenditures while launching a restructuring program targeting $600 million in annualized savings by fiscal 2029.

Johnson Controls International NYSE: JCI reported fiscal fourth-quarter results marked by double-digit organic revenue growth, expanding margins and a sharp increase in orders and backlog, as demand from data centers and other mission-critical markets continued to accelerate.

For the full fiscal year, Chief Executive Officer Joakim Weidemanis said the company exceeded both its initial outlook and its subsequently raised guidance. Organic revenue rose more than 8%, adjusted earnings per share increased 37%, and adjusted free-cash-flow conversion reached 103%.

“Fiscal 2026 was an important proof point” for the company’s operating framework, Weidemanis said, citing the company’s focus on thermal technology, field execution, manufacturing capacity and its internal business system.

Fourth-Quarter Growth and Record Backlog

In the fourth quarter, organic revenue increased 12%, led by double-digit growth in the Americas and Asia-Pacific, according to Chief Financial Officer Marc Vandiepenbeeck. Systems revenue grew 13%, supported by continued data-center demand, while service revenue increased 8%.

All three geographic regions posted adjusted segment EBITDA margin expansion. Americas margin rose 210 basis points to 22%, EMEA expanded 80 basis points to 16.4%, and APAC increased 110 basis points to 19%. Companywide adjusted EBIT margin expanded 300 basis points to 18%, while adjusted EPS rose 32% to $1.66.

Orders increased 44% during the quarter, driven by data centers as well as battery manufacturing, semiconductor manufacturing and research universities. Backlog grew 43% to a record $23 billion.

Vandiepenbeeck said Johnson Controls still expects to convert approximately 70% to 80% of its backlog into revenue over the following 12 months. While the company said it could technically deliver the full backlog during that period under unconstrained conditions, project timing can be affected by customers’ power and electrical-infrastructure limitations.

The company generated $3.2 billion in adjusted free cash flow for the full year and ended the year with $600 million in cash. Net debt declined to 1.8 times, below the company’s long-term target range. Johnson Controls returned $2.5 billion to shareholders through dividends and share repurchases.

Data-Center Strategy Broadens Beyond Chillers

Management said chillers remain the largest component of its data-center portfolio, but the company is expanding its addressable market through cooling distribution units, cold plates and modular data-center offerings.

Weidemanis said the company’s acquisition of a cold-plate business and its development of CDU offerings are beginning to contribute to growth. He added that only a small portion of a pipeline exceeding $1 billion for CDUs and related offerings has converted into orders so far, leaving additional potential opportunity.

The company is also working with Armada to build 500 megawatts of distributed edge-compute capacity in 2027. Vandiepenbeeck said Johnson Controls will record revenue related to the equipment and containerized modular data-center infrastructure, while Armada provides the software and distributed application layer.

Management said modular data centers offer a higher addressable market per megawatt than many other data-center applications because they can incorporate more of the company’s products and technologies.

Weidemanis said Johnson Controls has not seen a material shift away from chillers in data-center designs. While some installations may require fewer units over time, he said customers continue to design facilities with redundancy and peak operating conditions in mind. He also said the mix between air-cooled and water-cooled units has not changed materially recently.

Capital Spending and Restructuring Plans

Johnson Controls expects to invest approximately $900 million in capital expenditures during fiscal 2027. The investment will support manufacturing capacity, innovation, digital tools and artificial intelligence-enabled productivity improvements in field operations, management said.

Weidemanis said the company’s business system and lean-manufacturing efforts are helping it add capacity more efficiently. Without those productivity measures, he said the required capital investment would have been more than twice as high.

The company also announced a new restructuring program expected to generate approximately $600 million in gross annualized savings by fiscal 2029. Johnson Controls expects about $400 million in restructuring expense across fiscal 2027 and fiscal 2028.

The actions will focus mainly on portfolio areas outside its most technology-differentiated mission-critical businesses, including optimization of manufacturing and warehouse operations, streamlining support functions and moving accountability closer to customers.

Vandiepenbeeck said the prior restructuring program, launched following the divestiture of the company’s residential and light-commercial business, has progressed faster than expected. The company had anticipated $500 million in savings from approximately $400 million in costs, but now expects the savings run rate to be roughly $100 million to $150 million above the original target.

Fiscal 2027 Outlook

For the first quarter of fiscal 2027, Johnson Controls forecast organic revenue growth of 12% to 14%, operating leverage of 30% to 35%, and adjusted EPS of $1.15 to $1.20.

For the full year, the company expects organic revenue growth of 11% to 12%, operating leverage above 30%, and adjusted EPS of $6.15 to $6.30. At the midpoint, the EPS outlook represents 21% growth from fiscal 2026. Adjusted free-cash-flow conversion is projected at approximately 95% as capital spending rises.

Management expects to remain price-cost positive in fiscal 2027, though Vandiepenbeeck said inflation recovery does not necessarily generate the company’s typical gross-margin rate. The company also expects a slight improvement in the Middle East after a challenging fiscal 2026, though management noted continued uncertainty in the region.

Separately, Johnson Controls expects its global intrusion business sale to close near the end of the second quarter of fiscal 2027. The business generates annual revenue of roughly $500 million, and management expects the transaction to be slightly dilutive, by about $0.15 on an annualized basis after closing.

About Johnson Controls International (NYSE:JCI)

Johnson Controls International plc NYSE: JCI is a global provider of building technology, products and services. The company helps customers design, operate and maintain efficient, healthy and secure buildings through solutions for heating, ventilation and air conditioning, building automation, energy management, fire detection and suppression, and physical security.

Its portfolio includes building controls and digital management platforms, HVAC equipment, chillers, air-handling systems, fire and security technologies, and related services.

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