Snapshot
3M Co reported $6.13B of revenue in Q4 2025, up 2.0% year over year, with diluted EPS of $1.07 and an operating margin of 13.0%.
- Revenue
- $6.13B
- YoY growth
- +2.0%
- Diluted EPS
- $1.07
- Operating margin
- 13.0%
What management said
- •Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our investor relations website at 3M.com.
- •We delivered solid results in Q4, including organic growth of 2.2%, operating margin of 21.1%, earnings per share of $1.83, and free cash flow conversion of over 130%.
- •These results capped a strong year with organic sales growth exceeding 2%, outperforming the macro environment and accelerating from 1.2% organic growth in 2024 and negative growth in 2023.
- •This growth was underpinned by the strong commercial excellence foundation we've established and our focus on reinvigorating innovation.
- •Adjusted EPS grew double digits to $8.06, and free cash flow conversion was slightly above 100% for the year.
- •2025 was an important year for 3M, where we implemented fundamental changes in the company, building a foundation for our future growth through commercial excellence and innovation.
- •These new products are vital for our long-term growth and are already contributing to our top line.
- •Sales from products launched in the last five years were up 23% in the full year, exceeding our high teens target, and exited Q4 at 44%, giving us momentum into 2026.
- •OTIF ended the year above 90%, 300 basis points above the prior year and the best we've achieved in decades, and we sustained that rate for seven months in a row.
- •OEE, our asset utilization metric, ended the year at about 63%, up over 300 basis points across assets covering 70% of production volume.
- •Cost of poor quality also improved considerably last year and is now at 6% of cost of goods, down 100 basis points year on year.
- •Slide four is a chart we've used for the past few quarters connecting macro trends to our organic growth.
What went well
- •Q4 organic growth of 2.2% with operating margin of 21.1% (up 140 bps), EPS of $1.83 (up 9%, exceeding the top end of guidance) and free cash flow conversion over 130%.
- •Capped a strong full year: organic sales growth above 2% (accelerating from 1.2% in 2024 and negative in 2023), full-year adjusted operating margin of 23.4% (up 200 bps at the high end of guidance), and adjusted EPS up double digits (10%) to $8.06.
- •Launched 284 new products in 2025, up 68% versus 2024 and more than double 2023; five-year new product sales up 23% for the year and exited Q4 at 44%, with NPVI ending at 13%.
- •Operational excellence milestones: OTIF ended above 90% (300 bps above prior year, best in decades, sustained seven months); OEE ended at ~63% (up over 300 bps); cost of poor quality improved to 6% of COGS (down 100 bps).
- •Returned $4.8 billion to shareholders in 2025 ($1.6 billion dividends, $3.2 billion gross buybacks), progressing on the $10 billion multi-year commitment.
What went wrong
- •Consumer Q4 organic sales were down 2.2% as weaker consumer sentiment and sluggish U.S. retail traffic hurt discretionary categories, dropping full-year CBG to a 0.3% decline.
- •Roofing granules were weaker than expected, hitting a trough in Q4 from the slow housing market and weak consumer sentiment.
- •Auto remained soft, with commercial vehicles (within auto) down high teens in the quarter.
- •Q4 consumer margin was down 110 bps on promos and discounts offered to stimulate the business.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Organic sales growth | FY2026 | — | Approximately 3% | |
| Adjusted operating margin expansion | FY2026 | — | 70-80 basis points | |
| Earnings per share | FY2026 | — | $8.50-$8.70 | |
| Free cash flow conversion | FY2026 | — | Greater than 100% | |
| New product launches | FY2026 | 284 launched in 2025 | 350 expected | |
| Cost of poor quality | FY2026 | 6% of COGS (2025) | Target 5.4% (long-term less than 4%) | |
| Price | FY2026 | ~70 bps (2025) | About 80 basis points | |
| Market outgrowth | FY2026 | ~$150 million over macro (2025) | Over $300 million, roughly half NPI / half commercial excellence |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Q4 organic sales growth | 2.2% | Strength in Safety, Electronics and general industrial offsetting softness in Consumer, roofing granules and auto. |
| Q4 adjusted operating margin | Up 140 bps to 21.1% | $275 million benefit from volume growth, broad-based productivity and lower restructuring, partly offset by ~$50 million investments and ~$100 million tariff/stranded cost. |
| Q4 EPS | Up 9% to $1.83 | Strong operating performance ($0.17 contribution) partly offset by $0.02 of non-operational below-the-line items. |
| Full-year adjusted operating margin | Up 200 bps to 23.4% | $550 million of net productivity across supply chain and G&A plus $200 million volume, offset by ~$100 million of net headwinds. |
| SIBG Q4 organic sales | Up 3.8% (3.2% full year) | High-single-digit Safety growth, accelerating IATD and Abrasives, offsetting auto aftermarket and roofing granule weakness. |
| Consumer Q4 organic sales | Down 2.2% | Weaker consumer sentiment and sluggish U.S. retail traffic on discretionary categories. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Priority verticals | Defined a little north of 60% of the business | Growing on investment, with ~80% of R&D aligned to priority-vertical NPI; ~10% of company is commodity-like for potential exit over time. | |
| Footprint / transformation | Ended 2025 at ~108 factories | Down to ~100 after Precision Grinding & Finishing (seven factories); investments in 2026 to restructure network with 3-5 year paybacks, building margin runway beyond 25% by 2027. | |
| Tariffs | $0.20 gross impact in 2025 | Carryover ~$0.20 gross (mostly H1 2026) embedded in guidance; potential new Europe tariffs (~$30-$40 million in 2026) NOT yet included. | |
| Consumer Electronics mainstream push | Premium-focused (~70/30 to 80/20 premium/mainstream) | Expanding into mainstream (market is the opposite mix), gaining share via NPI especially in China/Asia OEMs; not margin-dilutive. | |
| China | Up mid-single digits in 2025 (double digits 2024) | Expected low to mid-single digits in 2026 as IPI softens ~2 points, still outperforming via hybrid local model. |
Q&A summary
On the pivot to priority verticals, how much is addition by subtraction versus investment-driven growth, and what percent of revenue is in that bucket?
Priority verticals are a little north of 60% and growing because of investment, with ~80% of R&D dollars aligned there. Over time the portfolio is structurally adjusted, with ~10% commodity-like businesses potentially coming out while pivoting organically and inorganically toward priority verticals.
How does 2026 start out given flat U.S. IPI, and did January begin soft?
Exit rate was solid across industrial, with acceleration from ~2% to 3.6% across TBG and SIBG H1 to H2. IPI is softening in U.S. and China, but industrial businesses should stay solid; watch areas are auto builds and consumer electronics. December consumer was up double digits and early January is looking okay; commercial excellence and NPI should drive continued macro outperformance.
Was there back-end loading in the 2026 guide, and should Consumer still be down early?
EPS growth is expected to be roughly equal between H1 and H2, with SIBG/TBG revenue over 3% in Q1; CBG is a watch item to play out over the year. Productivity is fairly even across the four quarters.
Does the 2026 tariff headwind include new potential Europe tariffs?
No. Guidance embeds only the ~$0.20 gross carryover (mostly H1). New potential Europe/Greenland tariffs (~$1 billion of trade flows, net exporter) could be ~$30-$40 million in 2026 if enacted but are not yet in guidance.
Will SIBG growth be stronger in H1 given easier comps plus self-help momentum?
There is good momentum and more launches in SIBG, but U.S. IPI is softer and roofing granules weakness (a Q4 trough) will likely drag into H1, providing some offset; broadly the directional view of continued strong SIBG performance is correct.