Ingersoll Rand Inc. (IR) Earnings

Management highlights

- Overall Q2 2026 Performance • Total orders reached just over $2 billion, up 5% year-over-year, with 2% organic order growth; book-to-bill was 1.0x, impacted by delayed timing of several large long-cycle project orders. Short to medium cycle orders grew mid single digits organically. • Total revenue grew 9% year-over-year to ~$2 billion, with 4% organic revenue growth; all major regions delivered positive organic revenue growth. Aftermarket revenue represented 36% of total revenue, supporting portfolio resiliency. • Adjusted EBITDA was $520 million, up 2% year-over-year, for an adjusted EBITDA margin of 25.4% (down 160 basis points year-over-year). Margin decline was driven by inflationary pricing pressure (primarily in China), ongoing investments in new technology/commercial initiatives, and a one-time year-to-date true-up of management incentive compensation that is not expected to recur at the same magnitude in the second half. • Adjusted EPS was 86 cents, up 7% year-over-year. • Free cash flow was $269 million, up 28% year-over-year; the company ended the quarter with $3.8 billion in total available liquidity, leverage of 1.7x, and received a one-notch credit rating upgrade from Moody's to BAA1. The company returned $248 million to shareholders via dividends and share repurchases, and deployed $110 million to acquisitions in the quarter. • The company reached an agreement for an initial $187.5 million insurance recovery related to a 2025 claim from the ILC Dover transaction; $25 million was collected in Q2, with the remaining $162.5 million expected in 2026. This recovery is excluded from adjusted earnings and full-year free cash flow guidance, and is viewed as pure upside that strengthens capital allocation capacity. - M&A Activity • The company closed the acquisition of Lone Star Blowers (a U.S.-based blower manufacturer), which adds ~$50 million in annual revenue, expands core blower technology expertise, and grows aftermarket presence via an established service business and rental fleet. • The company signed an agreement to acquire Italy-based industrial filter manufacturer Phi Filtri, which expands filtration capabilities and strengthens aftermarket offerings. The transaction is expected to close in Q4 2026 and adds ~$30 million in annual revenue. • Both acquisitions align with the company's disciplined bolt-on M&A strategy focused on strengthening core technologies, expanding aftermarket recurring revenue, and maintaining disciplined valuation standards. There are 11 additional transactions under letter of intent, with a robust deal funnel of internally sourced proprietary opportunities. - ESG and Recognition • Ingersoll Rand joined the 2026 Fortune 500, a milestone reflecting the company's built scale, operational discipline, and growth momentum. The company also received multiple industry recognitions for sustainability leadership, workplace culture, and corporate citizenship, aligned with its purpose of delivering value to all stakeholders.

Guidance

- Full-year 2026 revenue guidance was raised to 4.5% to 6.5% year-over-year growth, 200 basis points higher at the midpoint than prior guidance. The updated guidance expects 1% to 3% organic growth, ~2.5% growth from completed M&A, and ~1% growth from favorable foreign exchange effects. The upward revision is driven by stronger-than-expected first half organic volume and healthy short/medium cycle demand trends. - Adjusted EBITDA guidance range is maintained at $2.13 billion to $2.19 billion. Expected sequential margin expansion in the second half is driven by first half pricing actions taking effect, non-recurrence of the Q2 incentive compensation true-up, and realization of productivity benefits from first half projects, which is consistent with normal seasonal patterns from prior years. - Adjusted EPS guidance range is maintained at $3.45 to $3.57, and management expects full-year results to land near the high end of this range. - Full-year free cash flow conversion is expected to remain ~95%. - All guidance ranges exclude potential benefits from expected AIPA tariff refunds in the second half of 2026, which are viewed as upside and will be added to guidance once amounts are materially received. - Early Q3 2026 update: Through the first four weeks of July, the company saw low double-digit organic order growth, driven by realization of delayed long-cycle orders across all major regions and continued strong short/medium cycle demand. Delayed long-cycle projects are largely expected to build 2027 backlog, given their typical 6-18 month project duration.

Segment performance

1. Industrial Technologies & Solutions (ITS): Total revenue grew ~9% year-over-year, with 4% organic revenue growth. Organic revenue growth was positive across all regions. Organic orders were approximately flat year-over-year, for a book-to-bill ratio of 1.0x. North American compressor organic orders grew high single digits, while global compressor orders grew low single digits; organic order growth was dragged down by delayed timing of large long-cycle blower/vacuum projects in Europe and ongoing project delays in the Middle East. Adjusted EBITDA was $435 million, with an adjusted EBITDA margin of 26.8%. Margin pressure came from challenges offsetting inflation with pricing (primarily in China) and ongoing commercial growth investments. ITS accounts for approximately 75% of total company adjusted EBITDA. 2. Precision and Science Technologies (PST): Orders grew 11% year-over-year, with 7% organic growth. Life Sciences delivered low double-digit organic order growth, while Precision Technologies delivered mid-single-digit organic order growth. Total revenue grew 8% year-over-year, with 4% organic growth, and both sub-segments delivered positive organic revenue growth in the quarter. Adjusted EBITDA increased 15% year-over-year to $135 million, and adjusted EBITDA margin expanded 200 basis points year-over-year to 31.5%, driven by strong operational execution and ongoing benefits from Ingersoll Rand's IRX operational improvement framework. PST accounts for approximately 25% of total company adjusted EBITDA.

Risks & headwinds

- Inflationary pressures are more difficult to offset with pricing in China, creating near-term transitory margin pressure in the region. - Long-cycle industrial projects have faced extended timing delays driven by customer decision elongation, EPC/engineering capacity constraints, and regional project delays in the Middle East, though management notes most delays are timing-related rather than order cancellations. - Current pricing pressure in China is tied to near-term industry overcapacity, which management views as transitory but creates near-term margin headwinds.

Analyst Q&A

• Q: Analyst asks for details on near-term demand momentum: regional dynamics, standout end markets, and whether current momentum can be sustained. /

  A: Management notes the Americas (50% of total revenue) is the strongest region, with high single-digit ITS order growth and healthy short-cycle indicators. EMEA (a third of revenue) had low double-digit organic order declines entirely driven by timing of delayed long-cycle blower/vacuum projects and Middle East delays; underlying core compressor orders are up in the region. Asia Pacific including China is growing, with strength in electronics and shipbuilding. Standout end markets include low double-digit biopharma growth in PST's Life Sciences segment, broad-based strength across power generation, electricity infrastructure, semiconductor air separation in ITS, and resilient general industrial/food and beverage in Europe. Momentum is broad-based and expected to continue.

• Q: Analyst asks if the upward organic revenue guidance revision is driven by price or volume, and where volume improvements are concentrated. /

  A: Management confirms the upward revision is almost entirely volume-driven, reflecting stronger-than-expected 4% full organic growth in Q2, particularly on the short and medium cycle side of the business. Volume improvements are concentrated in the Americas and China, while pricing actions taken in the first half are on track with prior guidance and will start to materialize in the second half as expected.

• Q: Analyst asks for clarification on July organic order growth, whether delayed long-cycle orders are building 2027 backlog, and whether ITS Q2 margin weakness was isolated to China. /

  A: Management confirms July organic orders grew low double digits. Most delayed long-cycle orders that booked in July have a 6-18 month duration, so they will primarily build 2027 backlog, with only limited revenue recognition in the back half of 2026. Q2 ITS margin weakness is almost entirely confined to China's transitory pricing pressure, plus planned investments in new growth technology, and not a broader issue across the segment.

• Q: Analyst asks to characterize current life sciences market momentum within PST, after a strong Q2 result despite cross-industry cross-currents. /

  A: Management confirms life sciences is seeing steady strong momentum, driven primarily by biopharma demand. Ingersoll Rand has significant exposure to growing GLP-1 drug manufacturing, and the company is investing to expand penetration in large-scale new biopharma facility construction, which will drive future growth starting in the second half of 2026 or 2027. The market remains stable with good durable growth prospects.

• Q: Analyst asks for drivers of the expected sequential second half margin expansion from the Q2 level, and how much is tied to prior pricing actions. /

  A: Management breaks margin expansion into three key drivers: ~one third from better price realization from first half 2026 pricing actions, ~one third from normalized corporate costs (the Q2 incentive compensation true-up will not repeat at the same magnitude), and the remaining third from normal course productivity benefits from first half actions (including material cost initiatives and 2025/early 2026 restructuring) that typically materialize in the back half of the year, especially as volume ramps into the fourth quarter.