Snapshot
Fortive Corp reported None of revenue in Q4 2025, with diluted EPS of $0.58.
- Revenue
- (not disclosed)
- YoY growth
- —
- Diluted EPS
- $0.58
- Operating margin
- —
What management said
- •Our statements on period-to-period increases or decreases refer to year-over-year comparisons unless otherwise specified, and our results and outlook discussed today are on a continuing operations basis.
- •In Q4, we delivered Core Growth of just over 3%, Adjusted EBITDA growth of 8%, and Adjusted EPS growth of about 13%.
- •We were pleased to see another quarter of growth acceleration in the business, knowing that we have even more growth upside ahead of us.
- •Second, our strong Q4 earnings performance resulted in full-year Adjusted EPS of $2.71, exceeding the high end of our guidance range of $2.63-$2.67.
- •Third, we continue to deploy capital in accordance with our disciplined approach, anchored in optimizing shareholder returns over the medium to long term.
- •Finally, as we turn our focus to 2026, we are initiating full-year 2026 Adjusted EPS guidance of $2.90-$3, representing approximately 9% year-over-year growth at the midpoint.
- •Before we turn to our Q4 results, I'd like to highlight the progress we've made on each of the three Fortive accelerated pillars, beginning with our focus on driving faster, profitable organic growth.
- •In terms of innovation acceleration, this quarter, we continued to accelerate new product introduction velocity, including offerings aimed at high-growth verticals.
- •Industrial Scientific's expanded commercial coverage drove acceleration in EMEA, and our investment in a broader sales team for Fluke and ASP in India directly contributed to strong growth in the region.
- •We also made progress in advancing the recurring elements of our portfolio, enhancing customer engagement, and strengthening the durability of our revenue streams.
- •In Q4, recurring revenue again grew faster than consolidated revenue, driven by continued strength in Fluke's maintenance software and deeply embedded data, as well as AI-enhanced software capabilities across IOS and AHS segments.
- •Moving to the second pillar, disciplined capital allocation is an integral component of our Fortive Acceleration strategy.
What went well
- •Q4 delivered Core Growth of just over 3%, Adjusted EBITDA growth of 8%, and Adjusted EPS growth of about 13%, marking a second consecutive quarter of double-digit EPS growth ahead of expectations.
- •Full-year Adjusted EPS of $2.71 exceeded the high end of the guidance range of $2.63-$2.67 and grew just over 12% year-over-year.
- •Adjusted EBITDA margin expanded approximately 100 basis points to nearly 32%, driven by operating leverage, organizational streamlining, and corporate cost discipline.
- •The company executed an additional $265 million of share repurchases in Q4, bringing total second-half repurchases to $1.3 billion, equal to roughly 8% of diluted shares outstanding.
- •Fluke delivered another strong quarter with order growth, full-year book-to-bill above 1, double-digit ARR growth in recurring revenue, and strength in data center and defense end markets.
- •Full-year free cash flow was about $930 million with free cash flow conversion on adjusted net income nicely north of 100%.
What went wrong
- •Adjusted Gross Margin fell about 150 basis points year-over-year to roughly 63%, driven by product mix, the net effect of tariffs and countermeasures, and targeted growth investments in AHS.
- •The Advanced Healthcare Solutions segment continued to be pressured by reimbursement and funding policy changes that deferred U.S. hospital capital expenditures, with AHS adjusted gross margin down to 56% from roughly 58% a year earlier.
- •Government demand for procurement and estimating solutions remained pressured compared with the strong post-COVID growth, though it is beginning to stabilize.
- •AHS core revenue growth was modest at 1.6%, with Q4 Adjusted EBITDA margin at 26% reflecting growth investments.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Full-year Adjusted EPS | FY2026 | — | $2.90-$3.00 per share (~9% YoY growth at midpoint) | Initiated |
| Adjusted EBITDA margin expansion | FY2026 (and 2026-2027 framework) | — | 50-100 basis points | Reaffirmed framework |
| FX tailwind to revenue | Q1 2026 | — | ~300 basis points | New |
| Diluted shares outstanding | FY2026 plan | — | ~315 million | New |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total revenue | +4.5% reported / +3% core ($1.1B) | Return of volume growth and solid performance across all regions, with both price (~2%) and volume (~1%). |
| Intelligent Operating Solutions (IOS) revenue | +5% reported / +4% core | Strong FBS-driven execution at Fluke, plus growth in facility and asset lifecycle software and gas detection; results ahead of expectations. |
| IOS Adjusted EBITDA | +8% to $288M | Operating leverage and reduced costs from flattening segment structures, partly offset by targeted growth investments. |
| Advanced Healthcare Solutions (AHS) revenue | +3% reported / +1.6% core ($353M) | Deferral of U.S. hospital capital expenditures, partly offset by improving demand trends and solid software growth. |
| Adjusted EPS | +13% to $0.90 | Growth in Adjusted EBITDA and positive year-over-year impact of share repurchases, partly offset by modestly higher tax expense. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Fortive Accelerated Strategy (three pillars) | Launched as New Fortive in July 2025 | Diligently executing across all three pillars with early signs of working | rising |
| Recurring revenue and software durability | Discussed in prior quarter (Q3) | Recurring revenue grew faster than consolidated revenue; strong ARR, gross and net dollar retention | rising |
| AI and Agentic AI in software | Examples cited on Q3 call (Provation) | Seen as a growth accelerator; ServiceChannel Q4 release added AI-enabled enhancements | rising |
| Disciplined capital allocation / share repurchases | Began in second half 2025 | $1.3B repurchased in H2, ~26M shares (~8% of diluted); continuing into 2026 | steady |
| Bolt-on M&A | Two small deals closed in H2 2025 | Prioritizing small accretive bolt-ons; higher bar for software assets; not required for success | steady |
| AHS / hospital capital expenditure pressure | Worst in Q2 2025 | Improved progressively in Q3 and Q4; demand getting better by the week | declining |
Q&A summary
Deane Dray (RBC) asked for color on Fluke short-cycle demand and traction with new products.
Soroye said POS trends were broadly consistent with recent quarters, North America strongest, with improvements in EMEA and LATAM and steady APAC; order growth continued, full-year book-to-bill finished above 1, channel inventory outside the U.S. improved, and recurring revenue grew double-digit ARR.
Deane Dray (RBC) asked about price contribution in the quarter and the guidance assumption.
Okerstrom said price was about 2% and volume about 1% in the quarter, and 2026 is broadly in line, noting 2025 had a price tailwind from tariff countermeasures; he declined to give specific price-cost detail but reiterated the 50-100 bps EBITDA margin expansion commitment.
Julian Mitchell (Barclays) asked whether AHS margin pressure from reinvestment was multi-year or localized to late 2025.
Soroye said it was very localized to Q4, reflecting deliberate strategic investments in customers, sales and marketing, and R&D; the segment retains strong gross margins and the general trend should be margin improvement.
Nigel Coe (Wolfe) asked about AI concerns for the software businesses and whether it is a good time to buy software assets.
Soroye said their mission-critical enterprise software is sticky with deep workflow integration and proprietary data, and AI is a meaningful accelerator with strong customer pull for Agentic/Gen AI; the bar for acquiring software assets has risen, and they are focused on small bolt-ons rather than hunting software assets.
Scott Davis (Melius) asked why the $2.90-$3.00 EPS range is so tight and how the team plans to guide going forward.
Okerstrom attributed it to business durability, improved forecasting, and 2025 decisions, noting share repurchases give roughly a 600 bps tailwind to EPS net of interest, good command of the cost structure, and the recurring revenue profile.
Scott Graham (Seaport) asked why ASP has been weak given it is more of a consumables business than capital.
Soroye clarified that consumables, services, and software in AHS continued to grow steadily, but capital equipment, where revenue is recognized in-quarter, was the source of pressure across Q2-Q4; it improved progressively from a Q2 low and is getting better by the week as hospital customers remain cautious on healthcare policy.