Snapshot
Rockwell Automation, Inc reported $2.24B of revenue in Q2 2026, up 11.9% year over year, with diluted EPS of $3.10 and an operating margin of 20.9%.
- Revenue
- $2.24B
- YoY growth
- +11.9%
- Diluted EPS
- $3.10
- Operating margin
- 20.9%
What management said
- •Our actual results may differ materially due to a wide range of risks and uncertainties described in our earnings release and SEC filings.
- •Rockwell delivered especially strong operating performance this quarter, with sales, margins, and EPS all coming in above our expectations.
- •Double-digit year-over-year growth in orders, sales, and earnings reflects our strong market position led by North America and the team's continued focus and execution in a dynamic global environment.
- •We saw an improvement in customer demand across a broader range of industries in Q2, such as e-commerce, warehouse automation, data center, semiconductor, and energy.
- •Persistent trade volatility and geopolitical uncertainty continued to delay large capital investments in other industries, including automotive and consumer packaged goods.
- •We're doing a good job of managing cost increases in areas affected by tariffs, demand for memory, and fuel.
- •Q2 sales were above our expectations, with organic sales growing 9% year-over-year.
- •Reported sales were up 12%, with favorable currency contributing 3 points of growth.
- •Intelligent Devices organic sales were up 9% versus prior year, with strong growth in our motion, I/O, and safety and sensing businesses.
- •In our Software & Control segment, organic sales were up 17% year-over-year and well above our expectations, driven by continued double-digit sales growth of Logix, especially in North America.
- •Our Logix growth was broad-based in the quarter, and we saw a particularly strong performance with our data center customers, where we continue to see increasing demand for our industrial-grade controllers.
- •Christian and I will cover the expected impact on full year fiscal 2026 financials later on the call.
What went well
- •Rockwell delivered especially strong operating performance in Q2 fiscal 2026, with sales, margins, and EPS all coming in above expectations and double-digit year-over-year growth in orders, sales, and earnings.
- •Organic sales grew 9% year-over-year (reported sales up 12% including 3 points of favorable currency), led by North America where organic sales rose 10%.
- •Software & Control organic sales were up 17% with Logix growing over 20%, and the data center business saw sales more than double year-over-year.
- •Enterprise operating margin reached 22.5% and adjusted EPS of $3.30 was up more than 30% year-over-year, driven by higher volume, positive price cost, favorable mix, and productivity.
- •Gross margins expanded 160 basis points to more than 50%, and free cash flow of $275 million was $104 million above the prior year.
- •The company raised both its full-year revenue guidance (to 5%-9%) and adjusted EPS guidance (to $12.50-$13.10), and now expects full-year incremental margins above 50%.
What went wrong
- •Lifecycle Services organic sales were down 1% versus prior year, with customers deferring larger projects and prioritizing smaller productivity and modernization investments, and recurring services growth slowed as customers temporarily delayed and reprioritized spend.
- •Persistent trade volatility and geopolitical uncertainty continued to delay large capital investments in automotive and consumer packaged goods.
- •Management expects inflationary costs to step up in the second half across memory, transportation, components, and general supplier inflation, with memory alone now representing a double-digit million-dollar headwind, leading to expected sequential margin pressure in the back half.
- •The conflict in the Middle East paused some near-term customer activity, mainly in Lifecycle Services.
- •The adjusted effective tax rate of 20.6% was slightly higher than expected.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Reported/organic sales growth | FY2026 | ~4% (midpoint) | 5%-9% (7% midpoint) | up 3 points at midpoint |
| Reported sales | FY2026 | $8.8B (midpoint) | $8.9B (midpoint) | +$100M (+$200M organic, -$100M Sensia) |
| Adjusted EPS | FY2026 | $11.80 (midpoint) | $12.50-$13.10 ($12.80 midpoint) | +$1.00 at midpoint |
| Total price | FY2026 | 200 bps | 250 bps (150 underlying + 100 tariff) | +50 bps, all underlying |
| Incremental margin | FY2026 | ~40% | above 50% | raised above 50% |
| Adjusted ETR | FY2026 | 19.5% | 19.5% | unchanged |
| Adjusted EPS | Q3 FY2026 | — | up ~$0.05 sequentially; up mid-to-high teens YoY | — |
| Share repurchases | FY2026 | — | ~$850M | — |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Organic sales | +9% | broad-based demand improvement led by North America |
| Software & Control organic sales | +17% | continued double-digit Logix growth, especially North America and data center |
| Intelligent Devices organic sales | +9% | strong growth in motion, I/O, and safety and sensing businesses |
| Lifecycle Services organic sales | -1% | customers deferring larger projects, prioritizing smaller modernization scope |
| Data center sales | more than doubled | customers prioritizing speed to capacity, resilience, and energy optimization |
| Discrete industries sales | mid-teens | better-than-expected automotive, e-com/warehouse, and semiconductor |
| E-commerce and warehouse automation sales | +30%+ | customers prioritizing upgrades and retrofits over new greenfield builds |
| Adjusted EPS | +30%+ ($3.30) | higher volume, positive price cost, favorable mix, productivity |
| Enterprise operating margin | +350 bps (22.5%) | volume growth, positive price cost, favorable mix, partly offset by higher comp |
| Annual recurring revenue | +6%+ | high-single-digit software ARR growth, mid-single-digit recurring services |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Data center demand | low single digits of revenue, growing | sales more than doubled YoY, one of strongest end markets | accelerating |
| Tariffs and price-cost | minimal net tariff impact, pricing to recover costs | managing tariff/memory/fuel cost increases; pricing to fully recover tariff costs | intensifying cost pressure, managed to earnings neutrality |
| Large-project CapEx unlock | delays, customers prioritizing productivity/modernization | broadening unlock in semicon, energy, e-com/warehouse, data center; automotive and CPG still delayed | improving but uneven |
| Productivity and incremental margins | ~40% incrementals guided for FY2026 | above 50% incrementals; productivity program expanding | improving |
| Sensia JV | dissolution planned | dissolution complete (April 1); lowers reported revenue, raises Lifecycle/Rockwell margin, EPS neutral | executed |
| Book-to-bill | around 1.0 historical corridor | slightly above historical average (Lifecycle 1.07); corridor 0.95-1.1 | improving |
Q&A summary
Scott Davis (Melius): Can you size the data center market given it is doubling?
Management said data center is still a modest low-single-digit share of base revenue and they update vertical percentages only annually, so they will reassess at year-end. The business comes from three areas: power distribution (CUBIC technology), replacing commercial controls with industrial Logix PLCs, and drives/HVAC for chillers.
Andy Kaplowitz (Citi): Are you seeing a real unlock in larger CapEx-intensive end markets, and could core incrementals run structurally higher than the long-term algorithm?
Blake said there is enough broadening of capital spending in e-commerce/warehouse, data center, semiconductor, and energy to note it, but not a wholesale unlock in automotive and CPG. Christian credited strong productivity and volume leverage for ~50% FY2026 incrementals but reaffirmed the 35% through-cycle flow-through target, to be revisited only under the broader growth algorithm.
Julian Mitchell (Barclays): Why does the second-half enterprise operating margin guide imply margins below the 22.5% just delivered?
Christian cited second-half inflationary pressures (memory, raw commodities, supplier inflation) plus additional spending, and noted Q2 was an exceptionally strong quarter where volume, disciplined spend, and price realization all converged; a typical fourth-quarter mix shift toward Lifecycle and engineered lineups is also detrimental sequentially.
Julian Mitchell (Barclays): Was there any surge in orders or pull-forward, and color on Logix?
Blake said they monitor distributor inventories and survey machine builders, and saw no pull-forwards or advanced orders in the quarter, viewing demand as natural. Logix grew over 20%, with continued strength and data center conversions.
Chris Snyder (Morgan Stanley): Confirm the book-to-bill and have customer conversations on reshoring shifted?
Blake confirmed the normal book-to-bill corridor of 0.95-1.1, with Q2 slightly above it and the first half within it; full year is expected within the corridor. Sentiment is positive with excitement about U.S. manufacturing, though uncertainty persists in CPG and automotive. Christian added that Q4 book-to-bill is commonly below 1 due to higher shipments.
Andrew Buscaglia (BNP Paribas): What drove the near-35% Software & Control margin and is it a high-water mark?
Blake attributed it to strong Logix trending above the 31%-34% midterm corridor, volume, productivity, and profitable Plex software, with software ARR up high single digits. Christian urged prudence given second-half inflation (memory) and returning engineering/development and project spend, noting Q2 spending discipline was unusually strong.