Overview
Since the Report + 3.5%
Revenue grew 9.0% year over year, EPS beat the estimate by 0.2%; the stock fell 5.9% in its first reaction.
- RevenueQ2
- $9.29B
- ▲ 9% YoY · Record
- EPSAdjusted
- $4.50
- ▲ 10% YoY · Record
Verdict
HOLDRevenue beat expectations, but the profit and guidance measures came in only level with them, and the adjusted operating margin slipped 60 basis points. The stock fell roughly 6% on earnings day because the capital budget grew faster than profit and the record $11.1B backlog adds nothing to today's revenue. From here the question is what comes out of the strategic review of the U.S. home care business dragging the margin down.
Close on Report DayJul 31
$490.11▼ 5.9%Report-Day Move
- Market Cap(Today)
- ≈ $234 B
- 1Y Return(At Report)
- + 4%
- P/E(At Today's Price · $17.24 · Trailing 12M)
- 29.4
- PEG(Company Guidance 2026)
- 3.63
- Net Margin(Trailing 12M)
- 20.4%
Earnings Summary
In 30 Seconds- Revenue rose 9% year over year to a record $9.29B, while adjusted EPS of $4.50 beat estimates by just 0.2%.
- Adjusted operating margin narrowed 60 basis points to 29.5%, while 2026 capital spending guidance rose to $5.5-6.0B.
- The stock fell 5.9% on earnings day on margin contraction and a capital budget growing faster than earnings.
The Numbers
Adjusted Operating Margin
29.5%
▼ 60 Bps (30.1% a Year Ago)
Project Backlog
$11.1B
Record Sale-of-Gas: $8.1B
Electronics Growth
18%
Fastest-Growing End Market
2026 Capex Guidance
$5.5-6.0B
▲ From $5.0 – 5.5B
Quarterly Revenue ($ Billion)
8.50
Q2 25 · $8.50 B
8.62
Q3 25 · $8.62 B · QoQ + 1.4%
8.76
Q4 25 · $8.76 B · QoQ + 1.7%
8.78
Q1 26 · $8.78 B · QoQ + 0.2%
9.29
Q2 26 · $9.29 B · QoQ + 5.8% · YoY + 9.3%
- Q2 25
- Q3 25
- Q4 25
- Q1 26
- Q2 26
Q3 2026 Company Guidance
- Q3 26 Adjusted EPS4.45 – 4.55 $4.45 $4.55 $4.45 – 4.55 $
Midpoint $4.50 · Market Expectation $4.59Midpoint 2% Below Estimate ▼
- Q3 26 EPS Growth6% – 8%6%8%
▲ 10% in Q2Slowing 3.0 pts ▼
- FY26 Adjusted EPS17.7 – 17.9 $17.7 $17.9 $17.7 – 17.9 $
Midpoint $17.80 · Market Expectation $17.93Midpoint 0.7% Below Estimate ▼
- FY26 EPS Growth8% – 9%8%9%
Excluding FX · 1% FX TailwindIn Line With Algorithm ✓
- FY26 Capital Expenditure5.5 – 6.0 billion5.5 billion6.0 billion
Prior Range $5.0-5.5BRevised Up 9.5% ▲
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±16% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Americas$4.08 BShare 44.0%▲ 7.1% YoY
- Europe, Middle East & Africa$2.30 BShare 24.8%▲ 6.5% YoY
- Asia Pacific$1.87 BShare 20.1%▲ 13.0% YoY
- Engineering$625 MShare 6.7%▲ 13.4% YoY
- Other$408 MShare 4.4%▲ 29.5% YoY
Businesses outside the reported regions
Key Metrics
Operating Cash Flow
$2.27 B
▲ 3.0% YoYPress Release
Free Cash Flow
$833 M
Press Release
Capital Expenditures
$1.44 B
Press Release
Cash Returned to Shareholders
$1.59 B
Press Release
Return on Capital
23.5%
Press Release
Engineering Order Intake
$871 M
Press Release
Shares are computed over the segment total: $9.29 B. Source: 10-Q.
Metrics come only from the company's own filings; each one names the document it was taken from.
“Linde employees delivered another solid quarter, generating record sales and EPS while maintaining industry-leading profitability with 29.5% operating margin and 23.5% return on capital.”
- Record Project Backlog
- Dissatisfaction with Margin Performance
- US Home Care Strategic Review
Summary and Review
Summary
Linde reported the second quarter on July 31, before the open. One of the three measures is open, two are in line. Revenue reached $9.29 billion, up 9% and above expectations; no published revenue estimate exists, so no ratio can be given. The profit measure is in line: adjusted EPS of $4.50 was 0.2% above expectation. The guidance measure is in line too: the Q3 midpoint sits 1.96% below estimate, the full-year midpoint 0.7% below.
Despite the records, the stock fell 5.9% to $478.70. Some $14 billion of market value went in one session. Not one number but three, arriving together. First, the margin: Linde's valuation premium rests on a steadily expanding margin, and this quarter it reversed. Second, capital intensity: the 2026 capex plan was raised 9.5% while the midpoint of the profit outlook barely moved. Third, Lincare: the U.S. home care business carries more than $30 million of quarterly margin pressure.
We score the quarter 56 with a hold view. The measure table points to that band: one open, two in line. We sit low inside it: the margin is contracting, return on capital slipped to 23.5%, and Lincare remains an open wound. We do not sit at the bottom because the backlog hit a record $11.1 billion, the sale-of-gas portion jumping from $7.1 billion to $8.1 billion. This is not a bad quarter; it is an expensive one.
Full Review
Beneath the record headline sits ordinary volume.
Read on its own, 9% revenue growth looks strong; broken into pieces it calms down. Of the year-over-year gain, 2 points came from volume, 2 from price and mix, 1 from passing energy costs through to customers, 2 from currency and 1 from acquisitions. In other words, the amount of gas Linde actually sold rose just 2% from a year ago. The regional split tells the same story. The Americas grew 7% to $4.1 billion, Asia-Pacific 13% to $1.9 billion and EMEA 7% to $2.3 billion. Much of the fast Asian number came from equipment sales to electronics customers, not underlying gas demand. Management repeated that its full-year outlook assumes no economic recovery. The one bright spot in manufacturing is aerospace, more than a third of manufacturing growth by itself. Industrial gas demand is the economy's real pulse, and it is still beating slowly.
The margin story turned the wrong way.
The adjusted operating margin of 29.5% sits below last year's 30.1%. Even after stripping out the dilutive effect of cost pass-through, roughly 30 basis points of genuine erosion remains. It has three sources. First, Lincare. The U.S. home care business is under more than $30 million of quarterly pressure from reimbursement changes and cost inflation. Second, mix. Equipment and hard goods sales to electronics customers grow fast but carry lower margins than gas. The faster they grow, the more they drag the average down. Third, helium. Middle East supply disruptions distorted both pricing and cost. Management now sees normalization slipping into early 2027, with margin recovery spread over two to three quarters. Regionally, EMEA was the standout at 35.7%; the Americas slipped 50 basis points to 31.2%, Asia-Pacific ran at 28.4% and Engineering at 16.0%. The level is still best in class — the problem is the direction.
Electronics and the AI backlog are the real story.
Electronics remained Linde's fastest-growing end market, up 18%, and the engine is AI hardware. Advanced chip manufacturing consumes ultra-high-purity nitrogen, oxygen and argon continuously at enormous scale. Those gases arrive by pipeline from plants built next door to the fab. A customer won once becomes a decade-long contract. On earnings day Linde announced a $1 billion investment in Phoenix, Arizona. Under a long-term agreement with one of the world's largest chipmakers, two new SPECTRA air separation units join the three already on site. Alongside it sits roughly $800 million of additional capacity in Taiwan. That single award took the sale-of-gas backlog from $7.1 billion to a record $8.1 billion. Electronics now makes up about 22% of that backlog, roughly $1.78 billion. The total backlog is $11.1 billion. The backlog takes two to three years to build and another year to ramp; it adds nothing to the quarter just reported.
Capital intensity is rising while returns edge lower.
Quarterly capital expenditure rose 14% year over year to $1.44 billion. Of that, $780 million was project capital, a line that grew 27% on its own. The full-year capex plan was raised from $5.0-$5.5 billion to $5.5-$6.0 billion. At the same time, return on capital eased to 23.5%, below a year ago. The combination explains the share price reaction. Linde has for years been priced as a company that spends capital sparingly. Cash flow echoes the point: operating cash flow rose just 3% to $2.3 billion. Shareholder returns were not cut: $1.7 billion of buybacks and $1.4 billion of dividends in the first half. The question to track is clean: will today's roughly $6 billion of spending push the margin back up in 2028-2029? For the next quarter watch one line: whether the adjusted operating margin turns up from 29.5%. Our cash flow guide and valuation guide help here.
Looking Ahead
Strengths and Risks
6 Strengths · 6 RisksStrengths
6- A record quarter$9.29 billion of revenue and $4.50 of adjusted earnings per share, both the highest in company history.
- Project backlog hit a record $11.1 billion, with the sale-of-gas portion jumping from $7.1 billion to $8.1 billion in a single quarter.
- The electronics end market grew 18% year over year and now accounts for roughly 22% of the sale-of-gas backlog.
- Long-term supply agreements worth $1 billion in Arizona and roughly $800 million in TaiwanThe on-site pipeline model delivers decade-long revenue visibility.
- A 29.5% adjusted operating margin and 23.5% return on capital remain among the best in the industry.
- The bottom of the full-year outlook was raised to a $17.70-$17.90 range, implying 8-9% growth.
Risks
6- The adjusted operating margin fell 60 basis points from a year ago, and Linde's valuation premium rests precisely on a steadily expanding margin.
- Volume growth was only 2%Much of the revenue gain came from price, currency and cost pass-through.
- Lincare, the U.S. home care business, is carrying more than $30 million of quarterly pressure and its strategic future is unresolved.
- The 2026 capex plan was lifted 9.5% while the midpoint of the profit outlook barely moved, putting free cash flow under pressure.
- Normalization of Middle East-driven helium supply problems has slipped to early 2027.
- Industrial demand in Europe and China is still weakThe outlook assumes no economic recovery at all, which limits the room for upside surprise.
What to Watch
6- Late October 2026 - third-quarter results; company guidance calls for $4.45-$4.55 a share, or 6-8% growth.
- Second half of 2026 - more than 20 projects are scheduled to start up, representing roughly $1.3 billion of investment coming on stream.
- Coming quarters - the strategic review of Lincare continues, with a sale or separation decision possible within the year.
- Early 2027 - management's expected timing for helium market normalization, with margin recovery spread over the next two to three quarters.
- Late 2026 and beyond - construction timelines for the new air separation units in Phoenix, Arizona and in Taiwan, worth roughly $1.8 billion combined.
- February 2027 - fourth-quarter and full-year results plus the 2027 outlook; management says its 8-12% annual earnings growth algorithm holds even without an improving economy.
Upcoming Earnings
To Understand This