Overview
Since the Report − 14.7%
Revenue grew 21.0% year over year, EPS beat the estimate by 2.6%; the stock rose 5.6% in its first reaction.
- RevenueQ2
- $8.53B
- ▲ 21% YoY, Record
- EPSAdjusted
- $3.15
- Market Expectation $3.07
Verdict
BUYEaton posted a record quarter and raised its full-year outlook; the electricity bill of the AI data center boom is now plainly visible in its order book. The stock gained 5.6% on earnings day as $8.53B of sales and $3.15 of adjusted EPS both beat expectations while the electrical backlog grew 43% year over year. From here the question is whether the Electrical Americas capacity ramp converts into the 24.6-25.0% segment margin promised for the third quarter.
Close on Report DayJul 31
$450.65▲ 5.6%Report-Day Move
- Market Cap(Today)
- ≈ $149 B
- 1Y Return(At Report)
- + 16%
- P/E(At Today's Price · $12.36 · Trailing 12M)
- 31.1
- PEG(Company Guidance 2026)
- 2.64
- Net Margin(Trailing 12M)
- 12.8%
Earnings Summary
In 30 Seconds- Revenue rose 21% year over year to a record $8.53B, and adjusted EPS of $3.15 beat the $3.07 estimate by 2.6%.
- Full-year organic growth guidance rose from 9-11% to 11-13%, and adjusted EPS guidance was raised to $13.40-13.60.
- The stock rose 5.6% on earnings day as Electrical backlog grew 43% year over year and guidance moved higher.
The Numbers
Organic Growth
14%
Above the High End of Guidance
Data Center Revenue
▲ ~65%
Engine of Electrical Americas
Electrical Backlog
▲ 43%
Year Over Year
Segment Margin
23.1%
23.9% a Year Ago
Quarterly Revenue ($ Billion)
7.03
Q2 25 · $7.03 B
6.99
Q3 25 · $6.99 B · QoQ − 0.6%
7.06
Q4 25 · $7.06 B · QoQ + 1.0%
7.45
Q1 26 · $7.45 B · QoQ + 5.6%
8.53
Q2 26 · $8.53 B · QoQ + 14.5% · YoY + 21.4%
Organic 13.5-15.5%
Q3 26E · Organic 13.5-15.5% · QoQ − 1.3% · YoY + 20.5%
- Q2 25
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26E
Q3 2026 Company Guidance
- Q3 26 Adjusted EPS3.46 – 3.56 $3.46 $3.56 $
Midpoint $3.51 · Market Expectation $3.51In Line ✓
- Q3 26 Organic Growth13.5% – 15.5%13.5%15.5%
Midpoint 14.5% · 14% in Q2Accelerating 0.5 pt ▲
- Q3 26 Segment Margin24.6% – 25.0%24.6%25.0%24.6% – 25.0%
23.1% Actual in Q21.7 pt Expansion ▲
- FY26 Adjusted EPS13.4 – 13.6 $13.4 $13.6 $13.4 – 13.6 $
Midpoint $13.50 · 12% Above 2025Raised 1.7% ▲ · Prior 13.05-13.50
- FY26 Organic Growth11% – 13%11%13%
Prior Range 9-11%Raised 2.0 pts ▲
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 ±9.6% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Electrical Americas$3.95 BShare 46.3%▲ 17.9% YoY
- Electrical Global$2.52 BShare 29.5%▲ 43.6% YoY
Includes Boyd Thermal contribution
- Aerospace$1.22 BShare 14.3%▲ 13.1% YoY
- Mobility$841 MShare 9.9%▼ 0.5% YoY
To be separated via combination with Dana
Key Metrics
Operating Cash Flow
$1.13 B
▲ 22.8% YoYPress Release
Free Cash Flow
$874 M
▲ 22.1% YoYPress Release
Electrical Americas Margin
27.5%
Press Release
Electrical Global Margin
19.8%
Press Release
Aerospace Margin
22.8%
Press Release
Shares are computed over the segment total: $8.53 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“Eaton accelerated its momentum in the second quarter and delivered record sales and solid earnings from strong organic growth. Our focus on disciplined execution led to sequential margin expansion, especially in Electrical Americas.”
- Electrical Americas Capacity Ramp
- Data Center Backlog
- Portfolio Transformation Through Acquisitions
Summary and Review
Summary
Eaton reported its second quarter before the opening bell on July 31. Revenue of $8.53 billion was the highest in company history, up 21% year over year. The market expected $8.2 billion. Fourteen points of that growth was organic. Adjusted earnings per share hit a record $3.15, beating the $3.07 expectation. Trailing 12-month organic orders rose 41% in Electrical Americas and 33% in Electrical Global. The electrical backlog grew 43% and data center revenue was up roughly 65%.
The stock rose 5.6% on earnings day and kept climbing in the sessions that followed. The reaction was not driven by the quarter alone. Guidance was raised. Eaton lifted full-year organic growth guidance from 9-11% to 11-13%. Adjusted earnings per share guidance went from $13.05-$13.50 to $13.40-$13.60. Investors had been asking whether data center orders were actually converting into revenue. This quarter answered on the revenue line. The Electrical Americas margin also improved 190 basis points sequentially to 27.5%.
Our read is positive, but not unconditional. Every meaningful measure of the quarter beat expectations. Guidance was raised on two fronts at once. The structural story remains intact: power infrastructure running from the grid to the chip. Against that, the total segment margin slipped to 23.1% from 23.9% a year ago. GAAP EPS came in at $2.11. The $1.04 gap is largely amortization and integration costs. The stock has nearly caught up with the $471 average analyst target.
Full Review
Data center power drove the quarter.
Eaton's growth this quarter traces back to one place: data centers. The company said data center revenue was up roughly 65% year over year. That was the primary engine behind Electrical Americas' 18% organic growth. Electrical Americas sales hit a record $4.0 billion. AI data centers draw many times more electricity than conventional ones. Behind every rack sit transformers, switchgear, uninterruptible power supplies and distribution panels. Eaton is one of the main suppliers of that equipment. Over the past year it has pushed its footprint closer to the chip. The Boyd Thermal acquisition gave it a foothold in server cooling. It contributed 25 points to Electrical Global's total growth. CEO Paulo Ruiz framed the strategy as moving from strength in data centers to a portfolio that runs from the grid to the chip. This is no longer an anticipation story, but a line on the income statement.
The backlog is growing far faster than revenue.
If one line tells you where an industrial company is heading, it is the backlog. Eaton's electrical backlog grew 43% year over year. Electrical Americas was up 33% and Electrical Global up 103%. Trailing 12-month organic orders rose 41% in Electrical Americas, 33% in Electrical Global and 17% in Aerospace. The book-to-bill ratio was 1.2 companywide and 1.3 in Electrical Americas. For every dollar shipped, $1.20 to $1.30 of new orders came in. As long as that ratio stays above 1, revenue should keep growing. Management said the total U.S. data center project pipeline has reached 307 gigawatts. That equals 15 years of work at 2025 build rates, up from 12 years at the previous update. The caveat is clear: only one fifth of that pipeline converts into orders in the near term. The bulk lands in 2028 and beyond. The number is striking, but the timeline is long.
The margin story cuts both ways.
The headline says record, but margins were the quarter's most contested corner. The total segment margin came in at 23.1%. That is 10 basis points above the top end of company guidance. It is 80 basis points below the 23.9% posted a year earlier. By segment the picture is mixed. Electrical Americas improved 20 basis points to 27.5%. Aerospace gained 60 basis points to 22.8% and Mobility 90 to 13.0%. Electrical Global slipped 30 basis points to 19.8%. Boyd Thermal, not yet at full profitability, explains much of that. The real issue is what management promised for the second half. A 450-500 basis point recovery is expected: roughly 300 from price-cost normalization, 150-200 from productivity. Third-quarter segment margin guidance is 24.6-25.0%. That is a 150-190 basis point jump in one quarter, and an ambitious ask. Tariffs had a net impact of just $2.8 million, less than a penny of EPS.
GAAP earnings are lagging the adjusted number.
Adjusted earnings per share set a record at $3.15, while GAAP earnings per share came in at $2.11. The $1.04 gap is not trivial and not something investors should wave away. Most of it comes from acquisition-related intangible amortization and integration costs; the company has been acquiring aggressively, Boyd Thermal chief among them. The practical consequence shows up in the full-year outlook. Adjusted EPS guidance implies a 12% increase over 2025 at the midpoint. GAAP EPS guidance of $10.36-$10.56 is essentially flat, up just 0.1% at the midpoint. There is a visible wedge between operating performance and accounting profit. It is not a permanent problem, but it will take time to close while the acquisitions keep coming. Cash, by contrast, is strong: operating cash flow rose 23% to $1.1 billion and free cash flow rose 22% to $874 million. For more on these concepts, see our cash flow guide.
The price already reflects most of the good news.
The central tension this quarter is not the company's performance but the stock's price. ETN is up 16% over the past year, added 5.6% on earnings day and now trades around $450, just below its 52-week high. The average target across 27 analysts is $471, roughly 5% above today's price. After the print, Evercore ISI upgraded ETN to Outperform and raised its target from $453 to $502. BMO Capital went from $477 to $487. Targets are moving higher, but the price is chasing them. The forward price-to-earnings ratio sits near 30. Rich for a classic industrial, defensible for a data center infrastructure story. The risk: if the price has already discounted several years of growth, the next few good quarters may only hold the stock where it is. For the next quarter watch one line: whether the segment margin reaches the promised 24.6-25.0%. The logic is in our valuation guide.
Looking Ahead
Strengths and Risks
6 Strengths · 6 RisksStrengths
6- Record revenue of $8.53 billion, up 21% year over year with 14% organic growth, ahead of market expectation
- Electrical backlog up 43% year over yearBook-to-bill of 1.2 companywide and 1.3 in Electrical Americas
- Data center revenue up roughly 65% — AI capital spending showing up directly on the income statement
- Full-year guidance raised on two frontsOrganic growth to 11-13%, adjusted EPS to $13.40-$13.60
- Free cash flow up 22% to $874 million and operating cash flow up 23% to $1.1 billion
- Tariff impact in the quarter was a net $2.8 million, less than a penny of EPS
Risks
6- Total segment margin of 23.1% is 80 basis points below last year's 23.9%The margin recovery is not finished
- The promised 450-500 basis point second-half margin step-up is ambitiousThird-quarter guidance alone requires a 150-190 basis point jump
- GAAP EPS of $2.11 trails the adjusted figure by $1.04, and full-year GAAP guidance is essentially flat at the midpoint
- Only about one fifth of the 307 gigawatt data center pipeline converts to orders near termMost lands in 2028 and beyond
- Mobility contracted 2% organicallyThe automotive leg of the portfolio is not contributing to growth
- The stock sits near its 52-week high, about 5% from the average analyst target, on a forward price-to-earnings ratio near 30
What to Watch
6- Q3 2026 results, expected in early November 2026 — the real test is whether the promised 24.6-25.0% segment margin materializes
- Third-quarter adjusted EPS guidance of $3.46-$3.56; even the low end implies a clear step up from the second quarter
- Price-cost normalization in Electrical Americas, where management expects roughly 300 basis points of second-half benefit
- Boyd Thermal integration and its effect on the Electrical Global margin, currently 30 basis points lower year over year
- 2027 capital spending plans from the large cloud and AI companies — the next wave for Eaton's order book starts there
- Updates on the U.S. data center project pipeline through the rest of the year, and how much of the 307 gigawatts converts to orders
Upcoming Earnings
To Understand This