Eaton Corporation plc Q4 FY2025 earnings call

• Strong demand with Electrical Americas orders up 16% on a trailing twelve-month basis and backlog up 31% year over year; Aerospace orders up 11% TTM and backlog up 16% y/y. Data center orders accelerated approximately 200% versus Q4 2024. - Adjusted earnings per share were up 18% versus the prior year and segment margins of 24.9% hit the Q4 quarterly record. - Reaffirmed commitment to strategic capital allocation with $13 billion in announced investments in 2025, including acquisitions and intent to spin off mobility business. - Electrical Americas mega project backlog up 30% year over year to $3 trillion, with 866 projects, and data centers representing 54% of year-to-date announcements. - Negotiations in Electrical Americas up to nearly $10 billion in 2025. Plan to invest $1.5 billion to strategically expand capacity in Electrical Americas.

Electrical Americas segment: Organic sales growth of 15%, driven primarily by data centers (up about 40%) and strong growth in commercial and institutional. Operating margin of 29.8% was down 180 basis points versus the prior year largely driven by capacity ramp cost. Orders accelerated by 16% on a trailing twelve-month basis. Backlog year on year grew by over $3 billion or 31% to $13.2 billion. Electrical Global segment: Total growth of 10% included organic growth of 6%. Operating margin of 19.7% was up 200 basis points over the prior year. Orders climbed 6% on a rolling twelve-month basis. Backlog increased 19% from the prior year. Aerospace segment: Organic sales growth of 20% remained at a high level and resulted in quarterly record sales. Operating margin expanded by 120 basis points to 24.1%. On a rolling twelve-month basis, orders increased 11%. Book-to-bill for 1.1 on a rolling twelve-month basis. Backlog increase of 16% year over year and 3% sequentially. Vehicle segment: Declined by 13% on an organic basis, primarily driven by weaknesses in the North America truck and light vehicle markets. Margins are down 230 basis points year over year. E-mobility business: Revenue decreased 15% from 17% lower organic partially offset by 2% favorable FX. Operating profit was $10 million.

• 2026 total company revenue expected to be between 7% to 9% with strength in Electrical Americas at 10% at the midpoint. - Segment margins guidance range is 24.6% to 25%. - Adjusted EPS expected to be between $13 and $13.50, $13.25 at the midpoint, and up 10% from 2025. - Cash flow guidance $3.9 billion to $4.3 billion. - Q1 2026 organic growth 5% to 7% operating margins of 22.2% to 22.6%.

• Short-term cost pressures due to capacity expansion in Electrical Americas. - Market uncertainties affecting short cycle businesses.

Q: Andrew Obin asked about confidence in double-digit growth in data center markets in 2026 and beyond A: Paulo responded that the market has strong indicators like over 200% year-over-year order announcements, 11-year backlog, hyperscalers' CapEx plans, and Eaton's broad portfolio and investments including acquisitions Q: Andrew Obin followed up on recent market developments in liquid cooling A: Paulo discussed liquid cooling's fast growth, Boyd's acquisition, synergies with white space technology, and NVIDIA's announcement impact Q: Chris Snyder asked about the quarterly cadence of the 2026 EPS guide A: Paulo explained 2026 guidance is supported by backlog, segment margin expansion, tax rate differences, and Electrical Americas ramp impact Q: Chris Snyder followed up on capacity expansion challenges A: Paulo said capacity expansion is on plan with short-term headwinds due to order successes and confidence in long-term tailwind Q: Nigel Coe asked about Q1 Electrical Americas margin and portfolio growth outlook A: Paulo discussed margin impact from ramp, long-term plan targets, and upside from market growth and acquisitions Q: Nicole DeBlase asked about Q1 margin sequential drop and Electrical Americas non-data center verticals A: Paulo attributed margin drop to Electrical Americas ramp and discussed strong orders in utilities and aerospace Q: Deane Dray asked about data center order mix and 800-volt DC transition A: Paulo mentioned balanced customer mix, 50-50 cloud/AI order mix in 2025, and Eaton leading 800-volt DC transition with Resilient Power