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. Since 2025, we returned $8.6 billion to shareholders against our commitment to return $10 billion+ through 2027. Given our strong first half performance, we're raising our guidance for the year for sales, EPS, and free cash flow. Cross-selling continues to outperform expectations with $110 million of opportunities booked and another $120 million in the pipeline, upward of 40% quarter-over-quarter, putting us ahead of the goal we set at our Investor Day.
Cost of poor quality improved 60 basis points year-over-year, while overall equipment effectiveness improved 140 basis points. While overall utilization remains a long-term opportunity, there are pockets in our manufacturing network today where capacity is constrained and short of demand. One example is our New Ulm facility, which produces cable accessories for electrical markets, a product that's facing high and increasing demand. As a result, the work center achieved record production levels in June, delivering $13 million of incremental revenue, or nearly 50 basis points at the SIBG level.
This move will increase agility, accelerate technology adoption, sharpen our focus on the capabilities that are most critical to driving growth and long-term value creation. This JV generates revenue of $800 million, growing at high single digits with margins above our company average. This is a clear example of how we're reshaping the portfolio towards higher growth, higher margin businesses, strengthening a priority vertical while keeping our capital allocation disciplined. We entered a strategic partnership with Microsoft, who become the first hyperscaler to deploy our patented Expanded Beam Optical, or EBO technology, in Azure data centers.
| Metric | Period | Current guidance |
|---|---|---|
| Organic sales growth | FY2026 | >3.5% |
| Adjusted EPS | FY2026 | $8.80-$8.95 (+9%-11% YoY, ~$0.27 midpoint raise) |
| Free cash flow | FY2026 | $4.7-$4.9B (+$100M; >100% conversion) |
| Oil-based inflation | FY2026 | $150M-$175M (offset dollar-for-dollar by Q2 price actions) |
| Price | FY2026 | ~1.5% for the year (~2% in H2) |
| Tax rate | FY2026 | ~20% |
| Consumer segment | H2 2026 | Flat to up slightly as retailer destock normalizes into back-to-school |
| Above-macro growth | FY2026 | ~$450M above macro |
| Metric | YoY | Note |
|---|---|---|
| Organic sales growth | +5.4% | Commercial-excellence execution plus increasing new-product contribution and strong order/backlog conversion; first-half organic growth of 3.3%. |
| Safety & Industrial (SIBG) | +8.2% organic | Double-digit growth across all four industrial businesses on reduced churn, stronger sales coverage, and cross-selling; safety up high single digits. |
| Transportation & Electronics (TEBG) | +5.9% organic | Backlog conversion and commercial execution; semis/aerospace/data center (~20% of sales) up double digits, offsetting flat auto and down low-single-digit consumer electronics. |
| Consumer | -2.1% organic | Late-June retailer inventory tightening more than offset healthy ~2.5% point-of-sale growth. |
| Adjusted operating margin | +40 bps to 24.9% | Business-group margins up 70 bps (volume plus broad-based productivity) partly offset by a 30-bp corporate headwind; a record margin. |
| Adjusted EPS | +11% to $2.40 | $0.16 of operating-profit growth plus $0.08 mainly from lower share count; $110M tariff/stranded-cost headwind absorbed. |
| GAAP EPS | +33% to $1.78 | Reflects transformation-action costs, PFAS-asset exit, and a gain from the change in value of 3M's Solventum ownership. |
| Free cash flow | $1.3B (107% conversion) | Strong earnings and working-capital management, including a seven-day inventory improvement. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Holding company to integrated operating company | Region/BU-siloed support functions | 3M is consolidating finance, HR, and customer service into a single global service-delivery model with an external partner using automation and AI, and pursuing a multi-year 'transformation' phase to simplify and standardize core processes and rationalize the factory/distribution network. | — |
| Innovation ('R&D factory') | Declining launch cadence pre-2024 | New-product launches inflected (92 in Q2, up 44%), on track to nearly triple versus three years ago and exceed 1,000 by 2027; cycle time down ~20%; five-year new-product sales ~$4 billion this year and vitality index rising to mid-teens (20% next year), with a pivot toward higher-value Class 4/5 products. | — |
| Data centers / EBO technology | Copper networking (TwinAx) presence | Microsoft became the first hyperscaler to qualify 3M's Expanded Beam Optical connectors for Azure (reducing install time ~85%); EBO revenue is ~$40-$50M today of a ~$1B TAM growing to ~$2B by 2028, with 3M doubling capacity and licensing a 44-player ecosystem to drive fiber-optic adoption. | — |
| Commercial excellence | High customer churn, weak sales execution | Sales-force effectiveness, pricing governance, and cross-selling ($110M booked, another $120M in pipeline, up ~40% sequentially) drove ~200 bps of attrition improvement (mostly in SIBG) and a growth-to-market multiple improving from roughly in-line to 2x. | — |
| Portfolio reshaping | — | The Madison Fire & Rescue acquisition into a majority-owned Scott SCBA JV ($800M revenue, high-single-digit growth, above-average margins, $700M cash received) exemplifies a shift toward higher-growth, higher-margin verticals while keeping capital allocation disciplined. | — |
| Margin trajectory | Gross margin in the low 40s | Adjusted operating margin up ~500 bps over two years to a record 24.9% and tracking ahead of the ~25% 2027 target; gross margin is in the mid-40s with a clear roadmap toward the high-40s via productivity, procurement, and transformation. | — |