Q2 2026 Eaton Corp PLC Earnings Call

July 31, 2026

Speaker #1: Thank you for standing by and welcome to Eaton's second quarter 2026 earnings results conference call. At this time, all participants are in listen-only mode.

Operator: Thank you for standing by, and welcome to Eaton Q2 2026 Earnings Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press star one one again. We ask that you please limit yourself to one question each. As a reminder, today's program is being recorded. Now I would like to introduce your host for today's program, Yan Jin, Senior Vice President of Investor Relations. Please go ahead.

Speaker #1: be a question-and-answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

Speaker #1: We ask that you please limit yourself to one question each. As a reminder, today's program is being recorded, and now I'd like to introduce your host for today's program, Yan Jin, Senior Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Hey, good morning. Thank you all for joining us for Eaton's second quarter 2026 earnings call. With me today are Paulo Ruiz, Chief Executive Officer, and Dave Foster, Executive Vice President and Chief Financial Officer.

Yan Jin: Hey, good morning. Thank you all for joining us for Eaton Q2 2026 earnings call. With me today are Paulo Ruiz, Chief Executive Officer, and Dave Foster, Executive Vice President and Chief Financial Officer. Our agenda today includes opening remarks by Paulo. He will turn it over to Dave, who will highlight the company's performance in the second quarter. As we have done in our past calls, we'll be taking questions at the end of Paulo's closing commentary. The press release and the presentation we'll go through today, including reconciliations to non-GAAP measures, have been posted on our website. A replay of this webcast will be accessible on our website after the call. Before we begin, I would like to remind our comments today will include forward-looking statements with respect to revenue, earnings, and other matters.

Speaker #2: Our agenda today includes operating remarks by Paulo, then he will turn it over to Dave, who will highlight the company's performance in the second quarter.

Speaker #2: As we have done in our past calls, we'll be taking questions at the end of Paulo's closing commentary. The price release and the presentation will go through today, including reconciliations to non-gap measures.

Speaker #2: Have been posted on our website, and a replay of this webcast will be accessible on our website after the call. Before we begin, I would like to remind our comments today will include forward-looking statements.

Speaker #2: With respect to revenue earnings and other matters, our actual results may differ materially from our forecasted projections, due to a wide range of are described in our recent SEC findings.

Yan Jin: Our actual results may differ materially from our forecasted projections due to a wide range of risks and uncertainties that are described in our recent SEC filings. With that, I'll turn it over to Paulo.

Speaker #2: With that, I'll turn it over to Paulo.

Paulo Ruiz: Hey, thanks, Yan. Thanks everyone for joining us. Starting on page three, I'm happy to share the strong Q2 results driven by improved execution. Adjusted EPS of $3.15 exceeded guidance by $0.10 at the midpoint, reflecting strong operating performance by our teams. We posted record revenue of $8.5 billion with 21% total revenue growth, 14% organic growth, and 23.1% margins, all better than the high end of our guidance. Americas continues to execute well through its capacity ramps, delivering 18% organic growth and 190 basis points of margin expansion over prior quarter, all stronger than expected and very encouraging. We also continue to see unprecedented demand. Our total company book-to-bill remains strong at 1.2, with the Americas book-to-bill expanding to 1.3 and Aerospace to 1.2. While demand is broad-based across end markets, you can see here that data center orders and revenue remain robust.

Speaker #3: Hey, thanks, Yan. And thanks, everyone, for joining us. Starting on page 3, I'm happy to share this strong second quarter results driven by improved execution.

Speaker #3: Adjusted EPS of $3.15 exceeded guidance by 10 cents at the midpoint, reflecting strong operating performance by our teams. We posted record revenue of $8.5 billion with 21% total revenue growth, 14% organic growth, and 23.1% margins.

Speaker #3: All better than the high end of our guidance. America's continues to execute well, through its capacity ramp, delivering 18% organic growth and 190 base points of margin expansion over prior quarter.

Speaker #3: All stronger than expected, and very encouraging. We also continue to see unprecedented demand. Our total company book-to-bill remains strong at $1.2, with America's book-to-bill expanding to $1.3, and aerospace to $1.2.

Speaker #3: While demand is broad-based across end markets, you can see here that data center orders and revenue remain robust. Overall, accelerating orders and growing backlogs are clear proof points that our customer focus end-to-end solutions are winning in the market.

Paulo Ruiz: Overall, accelerating orders and growing backlogs are clear proof points that our customer-focused end-to-end solutions are winning in the market. This strong H1 gives us confidence to raise our guidance again. Organic growth by 200 basis points to a midpoint of 12%, and our adjusted EPS midpoint by $0.22 to $13.15 for the year. Dave and I will dive further into Q2 and the 2026 outlook. First, let's move to slide four. Okay. A year ago, we began our journey to show what a new focused Eaton could deliver through our bold strategy to lead, invest, and execute for growth. The progress is real and is gathering pace, and I have strong confidence where we are going. We are leading with a stronger team and a sharper enterprise mindset.

Speaker #3: This strong first half of the year gives us confidence to raise our guidance again, organic growth by 200 base points to a midpoint of 12%, and our adjusted EPS midpoint by 22 cents to $13.50 for the year.

Speaker #3: Dave and I will dive further into Q2 and the 2026 outlook, but first, let's move to slide 4. Okay, a year ago, we began our journey to show what a new focus Eaton could deliver through our bold strategy to lead, invest, and execute for growth.

Speaker #3: The progress is real, and it's gathering pace. I have strong confidence in where we are going. We are leading with a stronger team and a sharper enterprise mindset.

Speaker #3: We're investing with discipline in the portfolio and capabilities that will define our future. And we are executing for growth through operational discipline, across every part of this company.

Paulo Ruiz: We're investing with discipline in the portfolio and capabilities that will define our future. We are executing for growth through operational discipline across every part of this company. Today, we will provide an update on our strong progress and share how our focus on culture is helping us grow faster, serve our customers better, and win for investors for years to come. Moving to slide five. Enabling this unprecedented demand is our ability to execute, which rests on the work we are doing to evolve and strengthen our culture. Leading for growth through an evolved way of working is how we deliver results at scale. Together, the combination of our growth strategy, market dynamics, and culture is how we will win.

Speaker #3: Today, we will provide an update on our strong progress and share how our focus on culture is helping us grow faster. Serve our customers better, and win for investors for years to come.

Speaker #3: Moving to Slide 5, enabling this unprecedented demand is our ability to execute, which rests on the work we are doing to evolve and strengthen our culture.

Speaker #3: Leading for growth through an evolved way of working is how we deliver results at scale. Together, the combination of our growth strategy, market dynamics, and culture is how we will win.

Speaker #3: Thinking big, we are transforming a leadership position we had in grey space for data centers into an unparalleled portfolio from grid to chip, and leading the conversion to direct current applications.

Paulo Ruiz: Thinking big, we are transforming a leadership position we have in gray space for data centers into an unparalleled portfolio from grid to chip, and leading the conversion to direct current applications. Through thinking big, we've positioned Eaton's portfolio ahead of secular demand, focusing on serving high margin and high growth end markets. By acting boldly, we've prioritized what matters and led decisively, making the bold calls to acquire companies like Fibrebond, Resilient Power, Ultra PCS, and Boyd that are delivering higher growth and accretive margins to their respective segments. We made the necessary hard calls, like separating our Mobility business to align our capital to the highest return, highest growth opportunities. We also continue to invest organically with conviction, making Eaton a stronger partner to our customers. We win together.

Speaker #3: Through thinking big, we've positioned Eaton's portfolio ahead of secular demand, focusing on serving high-margin and high-growth end markets. By acting boldly, we've prioritized what matters and led decisively.

Speaker #3: Making the bold calls to acquire companies like FiberBond, Resilient Power, Ultra PCS, and Boyd, which are delivering higher growth and accretive margins to their respective segments.

Speaker #3: And we made the necessary hard calls, like separating our Mobility business, to align our capital to the highest-return, highest-growth opportunities. We also continue to invest organically with conviction, making Eaton a stronger partner to our customers.

Speaker #3: We win together. As one Eaton, we are pushing decision-making and leadership closer to where the action is, to the customer, the engineering and sales teams, the plant and service teams.

Paulo Ruiz: As one Eaton, we are pushing decision-making and leadership closer to where the action is, to the customer, the engineering and sales teams, the plant and service teams. We are scaling our advantage by fostering a culture of humility, courage, and learning, putting problems and opportunities on the table fast and solving for them as one unified team. This is not just about our executive leadership. It is about empowering 100,000 people to win together. We are transforming Eaton to win by being leaner, more agile, more customer-centric, more competitive, and more innovative. We see this culture internally every day, and you see this culture reflected in our numbers. Moving to slide six. We are already seeing how this mindset and discipline translates into real results. We've said before that 2026 is Eaton's year of execution, and we are making solid progress in Electrical Americas.

Speaker #3: And we are scaling our advantage by fostering a culture of humility, courage, and learning—putting problems and opportunities on the table fast, and solving for them as one unified team.

Speaker #3: This is not just about our executive leadership. It is about empowering 100,000 people to win together. We are transforming Eaton to win by being leaner, more agile, more customer-centric, more competitive, and more innovative.

Speaker #3: We see this culture internally every day, and you see this culture reflected in our numbers. Moving to slide 6, we are already seeing how this mindset and discipline translate into real results.

Speaker #3: We've said before that 2026 is Eaton's year of execution, and we are making solid progress in Latin America. Scaling capacity to turn demand into revenue remains the clear priority in the business.

Paulo Ruiz: Scaling capacity to turn demand into revenue remains the clear priority in the business. As you know, we are investing more than $1 billion in capacity expansion and bringing online two dozen projects across Electrical Americas. As these facilities ramp, we see clear momentum in revenues per day. We are delivering roughly 25% growth in revenue per day since the start of 2025, up 16% in a year, and another impressive 8% in Q2 over Q1. Q1 to Q2 represented the largest quarterly ramp in production output in our financial model, and we over-deliver on it. It is behind us. We remain laser-focused for H2 of the year. Demonstrating such strong execution milestones give us even more confidence as we step up in H2. Importantly, we are realizing margin improvements from our execute for growth strategy in Americas.

Speaker #3: As you know, we are investing more than $1 billion in capacity expansion and bringing online 2,000 projects across the Latin Americas. As this facility's ramp, we see clear momentum in revenues per day.

Speaker #3: We are delivering roughly 25% growth in revenue per day since the start of 2025, up 16% in a year, and another impressive 8% in Q2 over Q1.

Speaker #3: Q1 to Q2 represented the largest quarterly ramp in production output in our financial model. And we over-delivered on it. It is behind us. We remain laser-focused for the second half of the year.

Speaker #3: Demonstrating such strong execution milestones gives us even more confidence as we step up in the second half. Importantly, we are realizing margin improvements from our execute-for-growth strategy in the Americas.

Speaker #3: Margins improved 190 basis points quarter over quarter, and we'll improve further in the second half of the year. Meanwhile, even after 18% organic growth, backlog continues to expand due to strong demand and winning projects at a record pace.

Paulo Ruiz: Margins improved 190 basis points quarter-over-quarter and will improve further in H2 of the year. Meanwhile, even after 18% organic growth, backlog continues to expand due to strong demand and winning projects at record pace. Altogether, higher shipments, improving margins, and backlog driving extended visibility demonstrate our execute for growth strategy is working and give us confidence in H2 and beyond. I want to thank our Electrical Americas and all the supporting teams for the tremendous work they are doing. Now I'll hand over to Dave, who will cover our financials.

Speaker #3: Altogether, higher shipments improving margins and backlog driving extended visibility demonstrate that our execute-for-growth strategy is working, and give us confidence in the second half and beyond.

Speaker #3: I want to thank our Latin Americas team and all the supporting teams for the tremendous work they are doing. And now, I'll hand over to Dave, who will cover our financials.

Speaker #1: Thanks, Paulo. I'll start by providing a brief summary of our strong Q2 results on page 7. Total revenue grew by 21%, with a strong contribution of 7 points from acquisitions.

Dave Foster: Thanks, Paulo. I'll start by providing a brief summary of our strong Q2 results on page seven. Total revenue grew by 21%, with a strong contribution of 7 points from acquisitions. Each acquisition is at or above our expectations for growth and margins. Organic growth for the quarter was 14%, driven by the strength in Electrical Americas and Electrical Global. Excluding Mobility, our organic growth would have been 16%. Adjusted EPS of $3.15 exceeded our original expectations and was a Q2 record. Adjusted EPS for H1 of $5.96 was also a H1 record. We generated a strong $0.25 segment profit beat versus our guidance that was partially offset by $0.15 from a higher tax rate. We also posted Q2 record cash flow, with operating cash flow up 23% over prior year. Now let's move to the segment details On slide eight, we highlight our Electrical Americas segment.

Speaker #1: Each acquisition is at or above our expectations for growth and margins. Organic growth for the quarter was 14%, driven by the strengthened Electrical Americas and Electrical Global.

Speaker #1: Excluding Mobility, our organic growth would have been 16%. Adjusted EPS of $3.15 exceeded our original expectations and was a Q2 record. Adjusted EPS for the first half of $5.96 was also a first-half record.

Speaker #1: We generated a strong $0.25 segment profit versus our guidance, which was partially offset by $0.15 from a higher tax rate. We also posted Q2 record cash flow, with operating cash flow up 23% over the prior year.

Speaker #1: Now, let's move to the segment details. On slide 8, we highlight our electrical Americas segment, organic sales, growth accelerated 18%, driven primarily by strengthened data centers up about 65%, along with strong growth in machine OEM and commercial and institutional.

Dave Foster: Organic sales growth accelerated to 18%, driven primarily by strength in data centers up about 65%, along with strong growth in machine OEM and commercial and institutional. We are pleased with our better than expected margins of 27.5%, 190 basis points higher than Q1. Again, a reflection of our execute for growth strategy starting to work. From a year-over-year perspective, the majority of the margin decline was driven by temporary negative price cost. With the pricing actions taken in Q2 and early Q3, we are confident this will return to a roughly neutral impact in H2. Meanwhile, demand is accelerating. Our negotiations pipeline was up 60% year to date over prior year, translating to record orders up 41% on a rolling 12-month basis, and a book-to-bill increasing to 1.3. This is solid progress and gives us even more confidence to execute on our commitments for 2026.

Speaker #1: We are pleased with our better-than-expected margins of 27.5%, 190 basis points higher than Q1, again, a reflection of our execute-for-growth strategy starting to work.

Speaker #1: From a year-over-year perspective, the majority of the margin decline was driven by temporary negative price/cost. With the pricing actions taken in Q2 and early Q3, we are confident this will return to a roughly neutral impact in the second half.

Speaker #1: Meanwhile, demand is accelerating. Our negotiations pipeline was up 60% year-to-date over the prior year, translating to record orders up 41% on a rolling 12-month basis, and a book-to-bill increasing to 1.3.

Speaker #1: This is solid progress and gives us even more confidence to execute on our commitments for 2026. Now, I will summarize the strong results for our Electrical Global segment.

Dave Foster: Now I will summarize the strong results for our Electrical Global segment. Total growth of 44% included organic growth of 18% from strength in data center, utility, and machine OEM, along with 25% attributed to the Boyd acquisition. We are very pleased with Boyd's performance and the strong growth ahead of us in the liquid cooling market. Operating margin of 19.8% was down 30 basis points over prior year, but about a point higher than we had expected for the quarter. We have also pulled in our planned general price increase from Q4 to Q3, which gives us even more confidence in our full year guidance. As you can see on the chart, demand in Global increased, driven by our accelerating order growth up 33% on a rolling 12-month basis, with broad end market momentum and exceptional strength in data center demand.

Speaker #1: Total growth of 44%, including organic growth of 18% from strengthened data center utility and machine OEM, along with 25% attributed to the Boyd acquisition.

Speaker #1: We are very pleased with Boyd's performance and the strong growth ahead of us in the liquid cooling market. Operating margin of 19.8% was down 30 basis points over prior year, but about a point higher than we had expected for the quarter.

Speaker #1: We have also pulled in our planned general price increase from Q4 to Q3, which gives us even more confidence in our full-year guidance. As you can see on the chart, demand in Global increased, driven by our accelerating order growth up 33% on a rolling 12-month basis, with broad-in-market momentum and exceptional strength in data center demand.

Speaker #1: This reinforces a powerful growth trajectory ahead in this segment. Before moving to our industrial businesses, I'd like to briefly recap the combined electrical segment's performance.

Dave Foster: This reinforces a powerful growth trajectory ahead in this segment. Before moving to our industrial businesses, I'd like to briefly recap the combined electrical segments performance. For Q2, we posted organic growth of 18% and total growth of 27%, a great second quarter. Segment margins were 24.5%, 110 basis points higher than Q1. On a rolling 12-month basis, orders accelerated up 38%, and our book-to-bill ratio for our electrical sector was 1.2. Our backlog for our total electrical business increased 43% over prior year. Page 10 highlights our Aerospace segment's performance for the quarter. Organic sales growth of 7% remained at a high level and resulted in record quarterly sales and Q2 record segment profit, with particular strength in commercial OEM, along with strength in commercial aftermarket. The Ultra PCS acquisition is performing to our expectations. It added 6 points of growth and is accretive to aerospace margins.

Speaker #1: For Q2, we posted organic growth of 18% and total growth of 27%. A great second quarter. Segment margins were 24.5%, 10 basis points higher than Q1.

Speaker #1: On a rolling 12-month basis, orders accelerated up 38%, and our book-to-bill ratio for our electrical sector was 1.2. Our backlog for our total electrical business increased 43% over prior year.

Speaker #1: Page 10 highlights our Aerospace segment's performance for the quarter. Organic sales growth of 7% remained at a high level and resulted in record quarterly sales and Q2 record segment profit.

Speaker #1: With particular strength in commercial OEM, along with strength in commercial aftermarket. The ultra-PCS acquisition is performing to our expectations. It added 6 points of growth and is a creative to aerospace aerospace operating margin expanded by 60 basis points to 22.8%.

Dave Foster: Total aerospace operating margin expanded by 60 basis points to 22.8%. Demand remains strong in aerospace, with robust orders driving backlog expansion and book-to-bill increasing to 1.2. While we make progress in our electrical businesses, aerospace continues to see strong demand now and into this foreseeable future, resulting in higher sales growth with attractive margins. Moving to our Mobility segment on page 11. In the quarter, the business declined by 2% organically, which was fully offset by positive foreign exchange impact. Excluding the impact of the intentional exit of the low-margin business that I mentioned in our prior earnings call, organic growth would have been slightly positive. Meanwhile, margins increased 90 basis points year-over-year. Now I will turn it back to Paulo to discuss our updated guidance and close out the presentation.

Speaker #1: Demand remained strong in aerospace, with robust orders driving backlog expansion, and book-to-bill increasing to 1.2. While we make progress in our electrical businesses, aerospace continues to see strong demand now and into this foreseeable future, resulting in higher sales growth with attractive margins.

Speaker #1: Moving to our mobility segment on page 11. In the quarter, the business declined by 2% organically, which was fully offset by positive foreign exchange impact.

Speaker #1: Excluding the impact of the intentional exit of the low-margin business that I mentioned in our prior earnings call, organic growth would have been slightly positive.

Speaker #1: Meanwhile, margins increased 90 basis points year-over-year. Now, I will turn it back to Paulo to discuss our updated guidance and close out the presentation.

Speaker #2: Thanks, Dave. Page 12 includes our end-market growth assumptions. We've raised our expectation for the MOEM market to solid growth on the chart. We shared last quarter that demand in the data center and distributed IT market continues to grow even faster than we estimated in our initial guidance.

Paulo Ruiz: Thanks, Dave. Page 12 includes our end market growth assumptions. We've raised our expectation for the OEM market to solid growth on the chart. I shared last quarter that demand in the data center and distributed IT market continues to grow even faster than we estimated in our initial guidance. Today, it's even stronger than we expected three months ago. Total US data center backlog has grown to 307 gigawatts, or 15 years of backlog at 2025 build rates, up from 12 years in our last update. Only roughly 20% of this backlog converts near term. The majority will translate to 2028 and beyond deliveries. A very nice tailwind for Eaton for years to come. We also continue to expect durable strength in many of the remaining electrical markets and in aerospace. All in, we estimate our total addressable market will grow about 10% this year.

Speaker #2: And today, it's even stronger than we expected three months ago. Total US data center backlog has grown to 307 gigawatts, or 15 years of backlog at 2025 build rates, up from 12 years in our last update.

Speaker #2: Only roughly 20% of this backlog converts in the near term. The majority translates to 2028 and beyond deliveries—a very nice tailwind for Eaton for years to come.

Speaker #2: We also continue to expect durable strength in many of the remaining electrical markets and in aerospace. All in, we estimate our total addressable market will grow about 10% this year.

Speaker #2: These many paths for sustainable growth give us confidence to deliver continued differentiated growth in 2026 and beyond. Now, moving to page 13, we summarize our updated 2026 organic growth and margin guidance.

Paulo Ruiz: These many paths for sustainable growth give us confidence to deliver continued differentiated growth in 2026 and beyond. Moving to page 13, we summarize our updated 2026 organic growth and margin guidance. Following another strong quarter, we now expect total organic growth to be between 11% and 13%, up 200 basis points at the midpoint from the prior 9% to 11% range. This increase is driven by strength in Electrical Americas, up 200 basis points to a midpoint of 15% growth, and Electrical Global up 450 basis points to a midpoint of 12% growth. Our margin progress is encouraging and provides the confidence to reaffirm our segment margin guidance ranges. On the next page, we have the balance of our guidance for 2026 and Q3. For 2026, we are raising our adjusted EPS guide. We now expect full-year EPS to be between $13.40 and $13.60, $13.50 at the midpoint.

Speaker #2: Following another strong quarter, we now expect total organic growth to be between 11 and 13%, up 200 base points at the midpoint from the prior 9 to 11% range.

Speaker #2: This increase is driven by strength in electrical Americas up 200 base points to a midpoint of 15% growth, and electrical Global up 450 base points to a midpoint of 12% growth.

Speaker #2: Our margin progress is encouraging, and provides the confidence to reaffirm our segment margin guidance ranges. On the next page, we have the balance of our guidance for 2026 and Q3.

Speaker #2: For 2026, we are raising our adjusted EPS guidance. We now expect full-year EPS to be between $13.40 and $13.60, with $13.50 at the midpoint. We are reaffirming our cash flow expectations for the year.

Paulo Ruiz: We are reaffirming our cash flow expectations for the year. We have also provided guidance for Q3 on this page. As a reminder, we also provide supplemental guidance, which includes raising Boyd's full-year revenues to $1.8 billion, of which $1.5 billion will be in Eaton's books for the year. Continuous strength across end markets, combined with our record backlog, provides strong visibility into our outlook for the year. With the industry best-positioned portfolio, strong end market demand, and significant secular tailwinds, we are confidently entering the back half of 2026 and very well positioned to extend our momentum into 2027. To wrap up on page 15, these results reinforce what we've been saying for some time. First, our "Lead, Invest, and Execute for Growth" strategy is working and is gathering pace. We are transforming our portfolio and evolving our culture.

Speaker #2: We have also provided guidance for Q3 on this page. As a reminder, we also provide supplemental guidance, which includes raising Boyd's full-year revenues to $1.8 billion, of which $1.5 billion will be in Eaton's books for the year.

Speaker #2: Continued strength across end markets, combined with our record backlog, provides strong visibility into our outlook for the year. With the industry's best-positioned portfolio, strong end-market demand, and significant secular tailwinds, we are confidently entering the back half of 2026 and are very well positioned to extend our momentum into 2027.

Speaker #2: To wrap up on page 15, these results reinforce what we've been saying for some time. First, our "lead, invest, and execute for growth" strategy is working, and is gathering pace.

Speaker #2: We are transforming our portfolio and evolving our culture. We are positioning the company to capture strong demand, to accelerate growth, and to beat our own short- and long-term commitments.

Paulo Ruiz: We are positioning the company to capture strong demand to accelerate growth and beat our own short and long-term commitments so we can deliver meaningful value creation for our shareholders. Second, execution continues to be a difference-maker. Our teams are doing a great job increasing capacity, serving customers, and turning demand into shipments and earnings. We are making real progress and there's still plenty of runway ahead of us, all while we continue to innovate, scale acquisitions, and reshape the portfolio to achieve higher growth with higher margins for better earnings consistency. Third, we continue to see very strong customer demand. Orders, backlog, and our project pipeline all give us confidence that the opportunities in front of us remain significant, and we are winning because customers value our technology, our solutions, and our ability to deliver.

Speaker #2: So we can deliver meaningful value creation for our shareholders. Second, execution continues to be a difference maker. Our teams are doing a great job increasing capacity, serving customers, and turning demand into shipments and earnings.

Speaker #2: We are making real progress, and there's still plenty of runway ahead of us. All while we continue to innovate, scale acquisitions, and reshape the portfolio to achieve higher growth with higher margins, for better earnings consistency.

Speaker #2: Third, we continue to see very strong customer demand. Orders, backlog, and our project pipeline all give us confidence that the opportunities in front of us remain significant, and we are winning because customers value our technology, our solutions, and our ability to deliver.

Speaker #2: And finally, when you put it all together—strong demand, improving execution, higher shipments, and growing earnings—we feel confident in both the near-term outlook and the long-term commitment we've laid out.

Paulo Ruiz: Finally, when you put it all together, strong demand, improving execution, higher shipments, and growing earnings, we feel confident in both the near-term outlook and the long-term commitments we've laid out. That's reflected in the guidance increase we are announcing today and our confidence in delivering on our 2026 and 2030 commitments. We are remaining focused, staying close to customers, innovating with speed, leading and investing in growth, and executing with high discipline. I believe the best is still ahead of us. We'll open the floor to your questions.

Speaker #2: That's reflected in the guidance increase we are announcing today and in our confidence in delivering on our 2026 and 2030 commitments. We are remaining focused, staying close to customers, innovating with speed, leading and investing in growth, and executing with high discipline.

Speaker #2: I believe the best is still ahead of us. Now, we'll open the floor to your questions.

Speaker #1: Hey, thanks, Paulo. Moving to the Q&A, we ask you, please limit your opportunity just one question per person. We appreciate your cooperation so we can comment it as many participants as possible today.

Yan Jin: Hey, thanks, Paulo. Moving to the Q&A, we ask you, please limit your opportunity to just one question per person. We appreciate your cooperation so we can accommodate as many participants as possible today. With that, I will turn it over to the operator for instructions.

Speaker #1: With that, I will turn it over to the operator for instructions.

Operator: Certainly. Ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. We ask that, once again, that you please limit yourself to one question each. Our first question comes to the line of Deane Dray from RBC. Your question, please.

Speaker #3: Gentlemen, if you do have a question at this time, please press *11 on your telephone. And we ask, once again, that you please limit yourself to one question each.

Speaker #3: Our first question comes from the line of Dean Drain from RBC. Your question, please.

Speaker #4: Thank you. Good morning, everyone.

Deane Dray: Thank you. Good morning, everyone.

Speaker #5: Good morning.

Paulo Ruiz: Good morning.

Speaker #6: Good morning, Dean.

Yan Jin: Good morning, Deane.

Speaker #4: Hey, we're seeing continued strong growth in data center. I mean, really, that's what we were expecting. That's really good execution by the team. But I'd like to put the spotlight, if I could, on your other non-data center electrical businesses—the end-markets there.

Deane Dray: Hey, we're seeing continued strong growth in data center. Really, that's what we were expecting. That's really good execution on the team. I'd like to put the spotlight, if I could, on your other non-data center electrical businesses, the end markets there. Can you take us through the growth that you're seeing and what that means for the H2? Thanks.

Speaker #4: Can you take us through the growth that you're seeing and what that means for the second half? Thanks.

Speaker #5: Sure. Dean, hey, I'll answer your question, but let me make a couple of comments first. Thanks for the question, by the way. But I want to make a comment on you for a moment, to recognize your strong career.

Paulo Ruiz: Sure, Deane. Hey, I'll answer your question, let me make a couple of comments first. Thanks for the question, by the way. I want to make a comment on you for a moment, to recognize your strong career. After 30 years and plus in the industry, 12 years at RBC, you're stepping into a very well-deserved retirement, and we couldn't let this call pass without recognizing that. Our huge congrats from this team on behalf of the complete Eaton team. Truly remarkable career, and I hope you turn this next chapter into something fun with your family, well-deserved rest. Please know that we are very grateful for all the candor, your tough questions, your right questions over the years, and also your support. Thank you very much. It was a pleasure working with you. You cannot see, but the team here is all nodding.

Speaker #5: So, after over 30 years in the industry, including 12 years at RBC, you're stepping into a very well-deserved retirement. We couldn't let this call pass without recognizing that.

Speaker #5: So our huge congrats from this team, on behalf of the complete Eaton team. Truly remarkable career. And I hope you turn this next chapter into something fun with your family, well-deserved rest, and please note that we are very grateful for all the candor, your tough questions, your right questions over the years, and also your support.

Speaker #5: So, thank you very much. It was a pleasure working with you. You cannot see, but the team here is all nodding. So thank you, Dean, and congratulations once again.

Paulo Ruiz: Thank you, Deane, congratulations once again. Now to your question. We expect a lot of questions on data centers, thanks for asking us a question which allow us to talk about the other parts of the portfolio. I'm going to just make a comment on data centers because it's important. What we have ahead of us in terms of demand is still very incredible. It's enormous growth opportunity. Just think about this 300 gigawatts of announcements versus the 50 gigawatts that was built over decades that's going to be online by the end of this year. It's six times what this industry built ever is going to be built in the next years to come. It's an incredible opportunity. I don't want this to go unnoticed.

Speaker #5: Now, to your question. We expect a lot of questions on data centers, so thanks for asking us a question which allows us to talk about the other parts of the portfolio.

Speaker #5: So I'm going to just make a comment on data centers because it's important. What we have ahead of us in terms of demand is still very incredible.

Speaker #5: It's an enormous growth opportunity. Just think about this: 300 gigawatts of announced projects versus the 50 gigawatts that were built over decades— that's going to be online by the end of this year.

Speaker #5: Six times what this industry built ever is going to be built in the next years to come. So it's an incredible opportunity. I don't want this to go unnoticed.

Speaker #5: But the beauty of our strategy and, frankly, about our portfolio is that we are anchored in deep secular trends that are even broader than data centers, right?

Paulo Ruiz: The beauty of our strategy, and frankly, about our portfolio, is that we are anchored in deep secular trends that are even broader than data centers, right? We have other meaningful growth opportunities beyond data centers. Your question was around electrical. I am going to answer around electrical, but we also have a strong Aerospace business. As you look beyond data centers in electrical, you see that there we realize strong growth across most of our electrical end markets in the quarter, including double-digit organic revenue in commercial and institutional, which is still a very important market for us. Machine OEM recovering really strongly, also double digits, and also distributed IT recovering really nicely, also double digits. That was revenues. In terms of orders, it is even more encouraging. Orders are accelerating broadly again with growth in all of our end markets.

Speaker #5: So, we have other meaningful growth opportunities beyond data centers. Your question was around Electrical—going to answer around Electrical—but we also have a strong Aerospace business.

Speaker #5: As you look beyond data centers in electrical, you see that we realize strong growth across most of our electrical end markets in the quarter.

Speaker #5: Including double-digit organic revenue in commercial and institutional, which is still a very important market for us. Machine OEM recovering really strongly, also double-digit, and also distributed IT recovering really nicely, also double-digit.

Speaker #5: So that was revenues. In terms of orders, it's even more encouraging. Orders are accelerating broadly, again. We've growth in all of our end markets.

Speaker #5: I'm going to give you some highlights here. Our total electrical orders increased me to high teams for commercial institutional. Utility industrial and even residential, which is a market that is not as strong as you guys know.

Paulo Ruiz: I am going to give you some highlights here. Our total electrical orders increased mid to high teens for commercial, institutional, utility, industrial, and even residential, which is a market that is not as strong as you guys know. The machine OEM market rebounded even faster with orders in the mid-thirties. Very strong all 12 trading months conclusion. I just want to say to this team and everyone and our investors that we are anchored on the secular trends beyond data center. We have many paths to growth, and we remain committed to data center, so end markets are really strong. Thanks and congratulations again, Deane.

Speaker #5: And the machine OEM market rebounded even faster, with orders in the mid-30s. So, very strong all 12 trading months. In conclusion, I just want to say to this team, to everyone, and to our investors that we are anchored on these secular trends beyond data center.

Speaker #5: We have many paths to growth, and we remain committed to data centers. So our end markets are really strong. Thanks, and congratulations again, Dean.

Deane Dray: Thank you, Paulo.

Speaker #1: Thank you, Paulo.

Speaker #5: And just—hey, Dean, all the best to you, man. Before we go to the second question, go ahead.

Paulo Ruiz: Hey, Deane, all the best to you, man.

Deane Dray: Appreciate it.

Paulo Ruiz: Before we go to the second question. Go ahead.

Speaker #4: No, I'm going to keep to the one question. No follow-up. I just appreciate all the support you and your team have provided me, and I wish you all continued success.

Deane Dray: No, I'm going to keep to the one question. No follow-up. I just appreciate all the support you and your team have provided me, and I wish you all continued success. Thank you.

Speaker #4: Thank you.

Speaker #5: Same to you. Take care. All the best. Hey, before we move to the second question, operator, I just want to recognize that our IR team received a number of inbound calls regarding the IEPA refund.

Paulo Ruiz: Same to you. Take care. All the best. Hey, before we move to the second question, operator, I just want to recognize that our IR team received a number of inbound calls regarding the IEEPA refunds. In respect to all of you and in order to make this call a bit more fluid, I'd rather address that upfront and clear the air. I want to say that our impact in Q2 from the IEEPA refunds is less than $30 million. It's less than $0.01 of EPS, right? It's a clearly operational beat. When Dave talked about $0.25 beat, it's truly operational. I just want to make that very clear. The impact of the tariffs for the H2 is immaterial, the refunds, and is already embedded in the guidance.

Speaker #5: So in respect to all of you and in order to make this call a bit more fluid, I'd rather address that upfront and clear the air.

Speaker #5: So I want to say that our impact in Q2 from the IEPA refunds is less than $30 million. So it's less than 1 cent of EPS, bit when they've talked about 25 cent beat.

Speaker #5: It's truly operational. I just want to make that very clear. And then the impact of the tariffs for the second half is immaterial, the refunds, and is already embedded in the guidance.

Speaker #5: I just want to clear the air on that because I think we had multiple calls into Yan and his team.

Paulo Ruiz: I just want to clear the air on that because I think we had multiple calls into Yan and his team.

Speaker #3: Thank you. And our next question comes from the line of Andrew Oben from Bank of America. Your question, please.

Operator: Thank you. Our next question comes from the line of Andrew Obin from Bank of America. Your question, please.

Speaker #5: Yes, good morning. Hey, Andrew. Yeah, thank you for the IEPA data point. I will go to data centers. So, lots of questions on Boyd.

Andrew Obin: Yes, good morning.

Paulo Ruiz: Hey, Andrew.

Andrew Obin: Yeah, thank you for the IEEPA data point. I will go to data centers. Lots of questions on Boyd. You raised your full year guidance for Boyd revenues. The business appears to perform well. Can you remind us how you look at Boyd's competitive advantages compared to competitors, and maybe also talk about Boyd's cadence between Q3 and Q4? Thank you.

Speaker #5: You raised your full-year guidance for Boyd revenues. The business appears to perform well. Can you remind us how you look at Boyd's competitive advantages compared to competitors and maybe also talk about Boyd's cadence between 3Q and 4Q?

Speaker #5: Thank you. Thank you. Thanks for the question. I think it's important that I highlight we are very, very excited to have Boyd as part of our portfolio.

Paulo Ruiz: Thank you. Thanks for the question. I think it's important that I highlight we are very excited to have Boyd as part of our portfolio. We are really happy with the acquisition. They're performing really well. Why are we so happy? Not only I see this business as a winning business with this leadership position in cooling, but also as you're going to see in a minute through my comments, they're also a high performer financially. The third thing that I love about this business is that it gives a lot of early strategic read into the chip development that will determine the future of the data center. It's a very strong business, but also very strategic, and it performs well financially. Nothing not to like here.

Speaker #5: We are really happy with the acquisition; they're performing really, really well. Why are we so happy? Not only do I see this business as a winning business with this leadership position, but also, as you're going to see in a minute through my comments, they are also high-performing financially.

Speaker #5: And the third thing that I love about this business is that it gives a lot of early strategic read into the chip development that will determine the future of the data center.

Speaker #5: So it's a very strong business, but also very strategic and performs well financially. So, nothing not to like here. As I said last quarter—and I want to get back to it—many questions on cooling over time.

Paulo Ruiz: As I said last quarter, and I want to get back to it, many questions on cooling over time. I truly believe the investor community evolved in their thinking the last months, and most understand its growth potential and how strategic it is. I don't want to spend much time there. Now, looking at the cooling business we have today, we are glad to say Boyd is part of us now. We are very confident they're going to deliver on this raised forecast for the full year, $1.8 billion. It is certainly a huge jump from last year, $1.1 billion, but we believe this team can deliver, and I will be shocked if they cannot over-deliver on this number, to be honest. Now, if you look at Q2, they delivered $432 million in revenue, which was 20% above their commitment and our Q2 guidance. Very strong performance.

Speaker #5: I truly believe the investor community evolved in their thinking the last months. And most understand its growth potential and how strategic it is. So I don't want to spend much time there.

Speaker #5: Now, looking at the cooling business we have today, we are glad to say Boyd is part of us now. We are very confident they're going to deliver on this raised forecast for the full year, $1.8 billion.

Speaker #5: It is certainly a huge jump from last year—1.1. But we believe this team can deliver, and I will be shocked if they cannot over-deliver on this number, to be honest.

Speaker #5: Now, if you look at Q2, they delivered $432 million in revenue, which was 20% above their commitment and our Q2 guidance. So, very, very strong performance.

Speaker #5: So, in the short term, we know we are in a very good position. I guess your question, Andrew, was more about how can we be sure they will continue to win?

Paulo Ruiz: In the short term, we know we are in a very good position. I guess your question, Andrew, was more how can we be sure they will continue to win? What is their competitive advantage? That's what I understood from your question, at least. If I'm to address that, I would start by saying that I believe they're going to continue to win because they are the partner, the design partner for broad-based chip providers. They are always in their roadmaps and gives them a first look and a first chance to bid, which I think is fascinating. If you look at their size and scale for liquid cooling, they are the market leaders for liquid cooling, if you think about the cold plates and the CDUs. This team has proven over time they can scale reliably and with high quality.

Speaker #5: What is their competitive advantage? That's what I understood from your question, at least. So, if I'm to address that, I would start by saying that I believe they're going to continue to win because they are the design partner for broad-based chip providers.

Speaker #5: They are always in their roadmaps and gives them a first look and a first chance to bid, which I think is fascinating. If you look at their size, and scale for liquid cooling, they are the market leaders.

Speaker #5: For liquid cooling, if you think about the cold plates and the CDUs, this team has proven over time they can scale—reliably and with high quality.

Speaker #5: So I think this is really important for most data center players. If you compare to other companies, they are rather small, so there are question marks as to whether they can scale with the same quality and efficiency. Some are actually showing some quality issues from the get-go.

Paulo Ruiz: I think this is really important for most data center players. If you compare to other companies, they are rather small, so there are question marks of whether they can scale with the same quality and efficiency. Some are actually showing some quality issues from the get-go. I think they're going to win out on quality and the capacity to ramp. I must say, you guys probably remember when we announced the deal, they cut their teeth, they developed their pedigree in Aerospace. It is very, very stringent conditions technically, where failure is not an option. They bring that DNA to the data center environment. I think it's a winning formula. I also believe they have a deep breadth of products and systems. It's a very well-balanced portfolio. They have, as I said multiple times, the deepest engineering team and experience.

Speaker #5: So I think they're going to win out on some quality and the capacity to ramp. I must say, and I guess you guys probably remember when we announced the deal, they cut their teeth.

Speaker #5: They developed their pedigree in aerospace. So it is very, very stringent conditions, technically, where failure is not an option. So they bring that DNA to the data center environment.

Speaker #5: So I think it's a winning formula. I also believe they have a deep breadth of products and systems. It's a very well-balanced portfolio.

Speaker #5: And they have, as I said multiple times, the deepest engineering team and experience. So, whatever comes next, they're going to be able to lead the market.

Paulo Ruiz: Whatever comes next, they're going to be able to lead the market. That's what I think makes all the difference. Now let's start talking about the way we are integrating them to the rest of the portfolio, which is also very important. They provide us this to chip part that so we can say now we have the full portfolio from grid to chip. A couple words on integration, because some of you might be interested in how the integration is going. I would say it's going really, really well. Our approach to it is that we are accelerating their development. At the same time, we are protecting, we are learning from it, and we are augmenting what made this company great, which is their superior engineering, once again, their manufacturing quality at increased scale. We are really taking good care of it.

Speaker #5: So that's what I think makes all the difference. Now, I'll start talking about the way we are integrating them into the rest of the portfolio, which is also very important.

Speaker #5: They provide us this two-chip part that so we can say now we have the full portfolio from grid to chip. And a couple of words on integration because some of you might be interested in how the integration is going.

Speaker #5: I would say it's going really, really well. Our approach to it is that we are accelerating their development. At the same time, we are protecting, we are learning from it, and we are augmenting what made this company great.

Speaker #5: Which is their superior engineering once again, their manufacturing quality, and increased scale. So we are really taking good care of it. So I think it's a high-performance team that leads a high successful business.

Paulo Ruiz: I think it's a high-performance team that leads a high successful business, and we're just making them better as we continue to invest. Beyond cooling, the other thing that not many people realize, but it's really important, the strategic importance to have the seat on the table with the chip manufacturers, once again, will bring benefits to our power, but also software business. In summary, I think our customers validate our strategy. I am extremely happy to have Boyd in our portfolio, and we are all very confident they're going to deliver on the growth plan.

Speaker #5: And we are just making them better as we continue to invest. So beyond cooling, the other thing that not many people realize, but is really important, is the strategic importance of having a seat at the table with the chip manufacturers once again.

Speaker #5: We'll bring benefits to our power, but also to a softer business. So in summary, I think our customers validate our strategy. I am extremely happy to have Boyd in our portfolio.

Speaker #5: And we are all very confident they're going to deliver on the growth plan. Thank you.

Andrew Obin: Thank you.

Speaker #2: Thank you. And our next. Comes from the line of Chris Schneider from Morgan Stanley. Your question, please.

Operator: Thank you. Our next

Paulo Ruiz: Thanks, Andrew

Operator: comes from the line of Chris Snyder from Morgan Stanley. Your question, please.

Speaker #5: Thank you. I wanted to ask about Electrical Global organic growth, which was the biggest upside surprise in our model, at least. So, you guys, I guess, reported high-teens organic growth, versus high-single-digit expectations.

Chris Snyder: Thank you. I wanted to ask on Electrical Global organic growth, which was the biggest upside surprise in our model, at least. You guys had, I guess, high teens organic versus high singles expectations. Just kind of wondering, what drove that level of upside and organic inflection. Is it the legacy business getting better? Is data center coming to market? Are you starting to see maybe revenue synergies or tailwinds from the contribution of Boyd? Just what are you seeing there, and what gives you confidence. It seems like the guide is saying it's going to hold double digits into the back half. Just any color there would be great. Thank you.

Speaker #5: So just kind of wondering, what drove that level of upside and organic inflection? Is it the legacy business getting better? Is data center coming to market?

Speaker #5: Are you starting to see maybe revenue synergies or tailwinds from the contribution of Boyd? So just, what are you seeing there? And what gives you confidence in, it seems like you guys are saying it's going to hold double digits into the back half?

Speaker #5: So just any color there would be great. Thank you. Thanks, Chris. I'll give you two reads. I'll first talk about individual businesses. Then I'm also going to give you a read into the end market.

Paulo Ruiz: Thanks, Chris. I'll give you two reads. I first talk about the individual businesses, then I'm also going to give you a read into the end market so you have a complete view on how the segment is behaving and performing. I would lead by saying that in Q2, I'm very pleased to say that all businesses, our EMEA, our APAC, and our Guides businesses all performed meaningfully ahead of organic growth expectations. All did really, really well. If I go individually, revenues were up 20% in both EMEA and APAC, and they were up high teens in Guides. You see the 18% combined segment organically. Very strong performance by all, and we are very pleased. If you cut this by end market, we are getting a lot of traction in data center.

Speaker #5: So you have a complete view on how the segment is behaving and performing. So I would lead by saying that in Q2—and I'm very pleased to say this—all businesses, our EMEA, APAC, and our ESSG businesses, all performed meaningfully ahead of organic growth expectations.

Speaker #5: All did really, really well. So if I go individually, revenues were up 20% in both EMEA and APAC, and they were up high teens in the U.S.

Speaker #5: So you see the 18% combined segment organically. So very strong performance by all. And we are very pleased. If you cut this by end market, we are getting a lot of traction in data center.

Speaker #5: So organic revenues were up 65%, and much, much faster than the underlying market that is growing at 23%. So definitely gaining momentum, gaining share.

Paulo Ruiz: Organic revenues were up 65% and much, much faster than the underlying market that is growing at 23%. Definitely gaining momentum, gaining shares. If you look also the traditional markets we had for this segment, like in machine OEM, are also up more than 20%. It's a strong data center story, but not only a data center story. OEMs were up 20%, utilities were up low teens, and so was commercial institution, also low teens. The comment I want to make, and I hope you get this very clearly, growth was broad in terms of different geographies or different businesses. Every business did well, but it's also broad in terms of end markets. The conclusion, this was a look back view, of course. If you look towards the future, orders were up 33% on a 12-month basis.

Speaker #5: And if you look also at the traditional markets we had for this segment, like in machine OEM, are also up more than 20%. So, it's a strong data center story, but not only a data center story.

Speaker #5: So OEMs were up 20%. Utilities were up low teens, and so was commercial/institutional, also low teens. So the comment I want to make—and I hope you get this very clearly—is that growth was broad.

Speaker #5: In terms of different geographies or different businesses, every business did well. But it's also broad in terms of end markets. And the conclusion, this was a look back view, of course.

Speaker #5: If you look towards the future, orders were up 33% on a 12-month basis. The total backlog, as you can see in the chart, is up 103%.

Paulo Ruiz: The total backlog, as you could see in the chart, is up 103%. There is a contribution of Boyd in that, of course, but even if you take the Boyd contribution out, the organic backlog is up 54%. Very, very strong performance by the team. That's what gave us this confidence, Chris, to raise our guidance from 7.5% to 12%. We believe this team can deliver. I think I also going to talk about execution for a moment here, because this is an integral part of our strategy. We said in multiple events and calls that it's well known that the APAC team is a center of excellence for us in terms of operation, high performance team competing in a very tough market. I think there's no surprise there.

Speaker #5: There is a contribution of Boyd in that, of course. But even if you take the Boyd contribution out, the organic backlog is up 54%.

Speaker #5: So very, very strong performance by the team. So that's what gave us this confidence, Chris, to raise our guidance from 7.5 to 12%. We believe this team can deliver.

Speaker #5: And I think I'm also going to talk about execution for a moment here, because this is an integral part of our strategy. We've said in multiple events and calls that it's well known the APAC team is a center of excellence for us in terms of operations—a high-performance team competing in a very tough market.

Speaker #5: I think there's no surprise there. I would like to shed some light and recognize the EMEA team on this call because their turnaround in the last 18 months is really, really remarkable.

Paulo Ruiz: I would like to shed some light and recognize the EMEA team in this call because their turnaround in the last 18 months is really remarkable. Their organic growth of 20%, and they keep expanding margins, gaining share and momentum. It's really a great performance. Here you see our three pillars of a strategy implemented at speed and at scale as we move forward. Just connecting the dots here a little bit, to the question before from Andrew Obin on Boyd, let's not forget that Boyd joined that group now. It's the new elite player who joined the Electrical Global segment. They keep winning. I talked about their performance, so I'm not going to repeat that. Just think about the moment where they start joining their organic growth rate. It's going to be great moment for this business as well.

Speaker #5: So their organic growth of 20% and they keep expanding margins. Gaining share and momentum, it's really great performance. So here you see our three pillars of a strategy implemented.

Speaker #5: At speed and at scale, as we move forward. And just connecting the dots here a little bit to the previous question from Andrew Oben on Boyd, let's not forget that Boyd joined that group now.

Speaker #5: So, it's the new elite player who joined the Electrical Global segment. They keep winning. I talked about their performance, so I'm not going to repeat that.

Speaker #5: So just think about the moment when they start combining their organic growth rates. It's going to be a great moment for this business as well.

Speaker #5: So we'll continue to deliver good news, I guess, as EMEA, APAC, and guys keep delivering. And we're looking forward to Boyd joining the organic growth in 2027.

Paulo Ruiz: We'll continue to deliver good news, I guess, as EMEA, APAC, and guys keep delivering, and we're looking forward to Boyd to join the organic growth in 2027. It's going to be a good moment for us. Thank you.

Speaker #5: It's going to be a good moment for us. Thank you. Yeah, thank you.

Chris Snyder: Yeah. Thank you.

Speaker #2: Thank you. And our next question comes from the line of Scott Davis with Helio Research. Your question, please.

Operator: Thank you. Our next question comes from the line of Scott Davis from Melius Research. Your question, please.

Speaker #6: Hey, good morning, guys. Morning. Oh, Dave, Jan. Congrats.

Scott Davis: Hey, good morning, guys. Morning, Paulo, Dave, Yan.

Paulo Ruiz: Morning, Scott.

Speaker #5: Morning, Chris.

Scott Davis: On the approved quarter. Hey, Paulo, I think you just crossed a year as CEO. Any reflections? Maybe you can talk through some of the ups and downs and how it makes you think about the business going forward.

Speaker #6: Approved quarter. Hey Paulo, I think you just crossed a year as CEO. Any reflections? Maybe you can talk through some of the ups and downs and how it makes you think about the business going forward?

Speaker #5: Oh, thank you for the question. I appreciate the strategic angle to it. I really appreciate that. The team has accomplished a lot, Scott. So my answer is going to be a bit long because I need to pay justice to what the team has just did, okay?

Paulo Ruiz: Thank you for the question. I appreciate the strategic angle to it. Really appreciate that. The team has accomplished a lot, Scott, so my answer's going to be a bit long because I need to pay justice to what the team has just did. Okay? I had the benefit to be announced months before I took over, so we could think about the strategy a little bit in advance and hit the day one, really, as one team moving forward, which was great. I give credit to Craig and the board for allowing me to do so. As you know, we've developed this strategy having three pillars, and you should ask yourself, why did we include growth into each one of those pillars?

Speaker #5: So I had the benefit of being announced months before I took over. So we could think about the strategy a little bit in advance and hit day one really as one team moving forward, which was great.

Speaker #5: I give credit to Craig and the board for allowing me to do so. So, as you know, we developed this strategy having three pillars.

Speaker #5: And you should ask yourself, why did we include growth into each one of those pillars? We look back as a team, I would say this, even before I started as CEO, a quarter before.

Paulo Ruiz: We look back as a team, I would say this, even before I started CEO, a quarter before, and we looked at all the things we loved about the company, all the things we wanted to keep that made Eaton great. At the same time, we looked forward at the growth opportunity ahead of us, and we concluded that what brought us here would not necessarily be enough for us to double the size of the company moving forward. For perspective, if you look at our history here, it took us 100+ years, 112 years, to hit $20 billion in top line when we acquired Cooper. The following decade, you guys know as well, we didn't grow much. We just grew $1 billion the top line. What we did do as a team, we started reshaping the portfolio.

Speaker #5: And we looked at all the things we loved about the company, all the things we wanted to keep that made Eaton great. At the same time, we looked forward at the growth opportunity ahead of us.

Speaker #5: And we concluded that what brought us here would not necessarily be enough for us to double the size of the company moving forward. So for perspective, if you look at our history here, it took us 100-plus years, 112 years, to hit $20 billion in top line when we acquired Cooper.

Speaker #5: Then, the following decade, as you guys know as well, we didn't grow much—we just grew $1 billion on the top line. But what we did do as a team is we started reshaping the portfolio, with divested hydraulics, etc.

Paulo Ruiz: We divested hydraulics, et cetera, and we definitely increased margins in that period. We became this premium company with premium valuation, and we are proud of that. If you start looking at the last three years, including our guidance today, from 2024 beyond is where the line actually bends for us. It's an inflection point in terms of growth. If you look at the three years, beginning of 2024 to end of 2026, including our renewed guidance, we will add $10 billion to the top line. In three years, we're going to do 10 times what we did in the last decade, the prior decade. That's what we are getting the company prepared for. I believe this is only the beginning, to be honest.

Speaker #5: And we definitely increased margins in that period. So we became this premium company with premium valuation. And we are proud of it. Now, if you start looking at the last three years, including our guidance today, from 24 beyond is where the line actually bends for us.

Speaker #5: It's an inflection point in terms of growth. So if you look at this three years, beginning of 24 to end of 26, including our renewed guidance, we will add 10 billion dollars to the top line.

Speaker #5: So, in three years, we're going to do 10 times what we did in the last decade—the prior decade. That's what we are getting the company prepared for.

Speaker #5: So, I believe this is only the beginning, to be honest. The opportunity we have now as a company is actually to add much more to our top line and bottom line.

Paulo Ruiz: The opportunity now we have as a company is actually to add much more to our top line and bottom line, not in 100 years, not in 10, but in the next four, until 2030. That's the spirit. I'm going to give you a bit of a hint on the performance of each one of the pillars. First of all, why lead for growth? What we are trying to achieve here, it's about culture, it's about strong values we want to keep, and it's also about improving speed and customer centricity. Over time, why this was required. Over time, we moved to a more of a hybrid go-to-market model. In the past, we were just primarily a distribution model. Now we have strong distribution and strong direct accounts, and the team needed help in getting there.

Speaker #5: Not in 100 years, not in 10, but in the next four, until 2030. So that's the spirit. I'm going to give you a bit of a hint on the performance of each one of the pillars.

Speaker #5: First of all, why lead for growth? What are you trying to achieve here? It's about culture. It's about strong values we want to keep.

Speaker #5: And it's also about improving speed and customer centricity. So over time—why was this required? Over time, we moved to more of a hybrid go-to-market model in the past.

Speaker #5: We were just primarily a distribution model. Now, we have strong distribution and strong direct accounts. And the team needed help in getting there, so we actually put a program together to provide coaching to our leaders.

Paulo Ruiz: We put actually a program together to provide coaching to our leaders, and we involved over 1,000 people in the organization. Four different levels of organization are supported by this program. We also recognized, I did recognize it in my own team, my executive team, we need to set the tone from the top and lead by example. We looked at strengthening my executive team for faster results. We are building a more focused and integrated team with higher collaboration, not only internally, but also with our customers. Under invest, another 1 minute on invest. Here, the idea is to focus on the structure transformation of our portfolio. I still believe that story is not fully appreciated by the market, but every quarter we're going to be working to prove that we are transforming the company here.

Speaker #5: And we involved over 1,000 people in the organization—so four different levels of organization are supported by this program. And we also recognized—I did recognize it in my own team, the executive team—we needed to set the tone from the top and lead by example.

Speaker #5: So we looked at strength in my executive team for faster results. So we are building a more focused and integrated team. We've hired for collaboration—not only internally, but also with our customers.

Speaker #5: Under invest, another one minute on invest. Here, the idea is to focus on the structured transformation of our portfolio. I still believe that story is not fully appreciated by the market.

Speaker #5: But every quarter, we're going to be working to prove that we are transforming the company here. So within the first year, we deployed capital to acquire businesses.

Paulo Ruiz: Within the first year, we deployed capital to acquire businesses, and the idea was to accelerate both growth and margins. Just a reminder, we acquired Fibrebond on the models for data centers, Resilient Power, which is the medium voltage solid state transformers for 800 volt DC. We also acquired Boyd. Now we can actually say we have the complete portfolio going from the utility all the way down to the chip. That happened really fast, and I'm proud of the team. Let's not forget, we also acquired Ultra PCS, which is a great leader in technology in defense systems. We're also proud of it. We continue to refine our portfolio, including the task call once again on the Reverse Morris Trust to move away from the automotive sector. All those are required measures.

Speaker #5: And the idea was to accelerate both growth and margins. Just a reminder, we acquired fiber bond on the models for data centers, resilient power, which is the medium-voltage solid-state transformers for 800-volt DC.

Speaker #5: We also acquired Boyd, so now we can actually say we have the complete portfolio, going from the utility all the way down to the chip.

Speaker #5: So, that happened really fast, and I'm proud of the team. Let's not forget, we also acquired Ultra PCS, which is a great leader in technology in defense systems.

Speaker #5: So we are also proud of it. We continue to refine our portfolio, including the task called, once again, on the reverse mortgage trust to move away from the automotive sector.

Speaker #5: All those are required measures. And let's not forget the part of invest for growth is also an organic investment. We're ramping several facilities, as you guys know.

Paulo Ruiz: Let's not forget that part of invest for growth is also on organic investments. We're ramping several facilities, as you guys know, and most of the pain now is behind us, happened in Q4 and Q1. We start to see the plant delivering better volume, better output. Going forward, what to expect here is more productivity out of the plants and the learning curve is getting every time easier as we move forward. Top line should grow faster with less bottlenecks. Just to conclude on execution, we know we have pockets of excellence in the company. I talked about APAC being a center of excellence before. We still have room to improve in operations in all high-margin businesses, Electrical Americas, Europe, and Aerospace, that give us hope. We are focusing on that can bring us a lot of self-help for the future.

Speaker #5: And most of the paying now is behind us. It happened in Q4 and Q1. So we start to see the plans delivering better volume, better output.

Speaker #5: Going forward, what to expect here is more productivity out of the plants. And the learning curve is getting easier every time as we move forward.

Speaker #5: So, top lines should grow faster, with fewer bottlenecks. And just to conclude on execution, we know we have pockets of excellence in the company.

Speaker #5: I talked about APAC being a center of excellence before. We still have room to improve—in operations, in all high-margin businesses: Electrical Americas, Europe, and Aerospace.

Speaker #5: And that gives us hope. We are focusing on that, and that can bring us a lot of self-help for the future. So, all in all, having this new leadership team and portfolio in hand, I want to say we are now fully focused on executing for growth.

Paulo Ruiz: All in all, having this new leadership team and portfolio in hand, I want to say we are now fully focused on executing for growth. I want to say that give us this full confidence for the year, but also 2027 and our 2030 commitment. I want to stop here. I know it was long, but the team has done a lot. I'm thankful and I'm proud of this team for what we achieved together in the first year, I would say I'm very confident in that the best years for Eaton are still ahead of us. Thanks for allowing me to talk about it.

Speaker #5: And I want to say that this gives us full confidence for the year, but also for 2027 and our 2030 commitment. So I want to stop here.

Speaker #5: I know it was long, but the team has done a lot. I'm thankful, and I'm proud of this team for what we achieved together in the first year.

Speaker #5: And I would say I'm very, very confident that the best years for Eaton are still ahead of us. Thanks for allowing me to talk about it.

Speaker #3: Oh, best of luck in year two, Paulo. I'll pass it on. Thank you.

Scott Davis: Best of luck in year two, Paulo. I'll pass it on. Thank you.

Speaker #5: Thank you.

Paulo Ruiz: Thank you.

Speaker #1: Thank you. And our next question comes from Nigel Koch at Wolfe Research. Your question, please.

Operator: Thank you. Our next question comes from the line of Nigel Coe from Wolfe Research. Your question, please.

Speaker #5: Great. I think this is going to be a short answer. Before I ask my question, can I just clarify? I know you don't want to talk about tariffs, Paulo, but I heard $30 million—the transcript's got $30 million.

Nigel Coe: Great. I think this is going to be a shorter answer. Before I ask my question, can I just clarify, I know you don't want to talk about tariffs, Paulo, I heard $30 million. The transcripts got $30 million. I think you meant to say three. Is that correct?

Speaker #5: I think you meant to say three. Is that correct?

Paulo Ruiz: $3 million.

Speaker #6: Three million. Less than three million.

Nigel Coe: $3 million. Okay.

Paulo Ruiz: Less than 3 million.

Speaker #5: Okay.

Nigel Coe: Okay.

Paulo Ruiz: 2.8, if you want to be precise.

Speaker #6: 2.8, if you want to be precise.

Nigel Coe: Okay. 2.8. That's perfect. Okay. Thank you. I just want to double-click on the Electrical Americas margin ramp in H2. You talked about better price. I just want to really understand how much this is coming from better price versus cost, and then what benefit you're seeing from factory productivity, lead times, et cetera. Thanks.

Speaker #5: Okay, 2.8. That's perfect. Thank you. I just want to double-click on the Electrical Americas margin ramp in the back half of the year.

Speaker #5: And you talked about better price. So I just want to really understand how much is coming from better price versus cost. And then, what benefit do you see from factory productivity, lead times, etc.?

Speaker #5: Thanks.

Paulo Ruiz: Thanks for the question. I will kick it off to give the big picture, and then I will not steal Dave's thunder. He's ready to go on the bridge. I'm not going to steal his thunder. I just want to remind everyone that something that is really important. First of all, we know this is top of mind. Rest assured, we spend a lot of time on this as a team. We're really focused. We know what we need to do. I will start with that. The demand, once again, is fantastic. We cannot talk about margin progress without understanding how much capacity we are adding, and how we are growing this business. I would say this, I don't need to go back to every detail, but you see the orders keep growing our backlog.

Speaker #6: Thanks for the question. I will kick it off to give the big picture, and then I’ll not steal Dave’s thunder—he’s ready to go on the bridge.

Speaker #6: So, I'm not going to steal his standard. I just want to remind everyone that this is really important. First of all, we know this is top of mind.

Speaker #6: Rest assured, we spend a lot of time on this as a team. We're really focused. We know what we need to do. So I will start with that.

Speaker #6: And the demand, once again, is fantastic. We cannot talk about margin progress without understanding how much capacity we are adding, and how we are growing this business.

Speaker #6: I would say this: I don't need to go back to every detail, but you see the orders keep growing, or the backlog, only in Electrical Americas.

Paulo Ruiz: The Electrical Americas, we add $55 billion since beginning of last year, and only sequentially is another $700 million. Although the organic growth accelerates to 18%, we keep growing backlog. That needs to be taken into consideration as we look for the H2 and the future of that business. The other thing I want to say, if you pull all these elements together, the acquisitions we made, how we are reshaping our execution model, our leadership model, I truly believe we are in the precipice of what I call a new growth cycle for the whole company, and especially here for Electrical Americas, and we're getting ready for it. I think what was really important for us was to realize that the bulk of the disruption we expected to happen, and we told you so, happened in Q4 and Q1.

Speaker #6: We added $5 billion since the beginning of last year, and only sequentially, that's another $700 million. So, although the organic growth accelerates to 18%, we keep growing backlog.

Speaker #6: So, that needs to be taken into consideration as we look for the second half and the future of that business. The other thing I want to say: if you pull all these elements together—the acquisitions we made, how we are reshaping our execution model, our leadership model—I truly believe we are on the precipice of what I call a new growth cycle for the whole company.

Speaker #6: And especially here for Electrical Americas. And we're getting ready for it. I think what was really important for us was to realize that the bulk of the disruption we expected to happen.

Speaker #6: And we told you so—it happened in Q4 and Q1; Q4 last year and Q1 this year for the ramp. I would say by now, and I want to mention this before Dave goes through the ramp, the expansions are going well and progressing better than planned now in Q2.

Paulo Ruiz: Q4 last year and Q1 this year for the ramp. I would say by now, and I want this before Dave goes to the ramp, the expansions are going well and progressing better than planned. Now in Q2, we start to get speed on this. I want to say once again, we cleared the biggest hurdle we had in terms of sequential order revenue per day growth, which was the sequential Q1 to Q2. That was the strongest hurdle we had to clear, and we did that successfully. I want to say no one is taking a victory lap here. The whole team stays absolutely laser-focused to meet the commitments. We meet as a team every week, and my executive team is working to support the Electrical Americas group to achieve that. Dave is going to give you the sequential walk.

Speaker #6: We're starting to gain momentum on this. And I want to say once again, we cleared the biggest hurdle we had in terms of sequential order revenue per day growth, which was the sequential Q1 to Q2.

Speaker #6: So that was the strongest hurdle we had to clear, and we did that successfully. So I want to say, no one is taking a victory lap here.

Speaker #6: The whole team stays absolutely laser-focused to meet the commitments. We meet as a team every week, and my executive team is working to support the Electrical Americas group to achieve that.

Speaker #6: So, Dave is going to give you the sequential walk. I don't want to steal your thunder, Dave. All right, so we'll start out with the first quarter and the second quarter sequential.

Paulo Ruiz: I don't want to steal your thunder, Dave.

Dave Foster: All right. We'll start out with the Q1 to Q2 sequential. We're up almost 190 basis points. About 100 points of that was price cost, and the other 90 points was pure output as we got to scale that Paulo just talked about. We look at H1 versus H2, some of you like to look at it that way. We'll be up 450 to 500 basis points. 300 basis points will come from price cost relationship. All of our pricing actions have either been implemented in Q2 or early August, and then we'll get about 150 to 200 basis points from output and productivity. If you look at Q2 to Q3, which is a 250 basis point improvement, 150 basis points is price cost and 100 basis points is output and productivity.

Speaker #6: So we're up almost 190 basis points. About 100 basis points of that was price-cost, and the other 90 basis points was pure output as we got to scale that Paulo just talked about.

Speaker #6: If we look at H1 versus H2—some of you like to look at it that way—we'll be up 450 to 500 basis points.

Speaker #6: Three hundred basis points will come from price-cost relationship. All of our pricing actions have either been implemented in Q2 or early August. And then we'll get about 150 to 200 basis points from output and productivity.

Speaker #6: So then, if you look at Q2 to Q3, which is a 250 basis point improvement, 150 basis points is price-cost, and 100 basis points is output and productivity.

Speaker #6: Again, the difference from Q1 to Q2 compared to Q2 to Q3 is not only do we get the scale, but to Paulo's point earlier, we're starting to see productivity in those factories as our workers get more experience.

Dave Foster: The difference maybe from Q1 to Q2 compared to Q2 to Q3 is not only do we get the scale, but to Paulo's point earlier, we're starting to see productivity in those factories as our workers get more experience. If you look at the sequential from Q3 to Q4, again, it's a 200 to 250 basis point improvement. 150 basis points is price cost and 50 to 100 is output and productivity. We're on the right trajectory. We finished Q2 really strong. I have early reads on July as of this morning. Again, it's an improvement from what we saw in Q2. I'm feeling very confident about our exit rate for 2026, and we're still committed to our 32% margin by 2030.

Speaker #6: And then, if you look at the sequential from Q3 to Q4, again, it's a 200 to 250 basis point improvement. 150 basis points is price-cost.

Speaker #6: And 50 to 100 is output and productivity. So we're on the right trajectory. We finished Q2 really strong. I have early reads on July as of this morning.

Speaker #6: Again, it's an improvement from what we saw in the second quarter. So I'm feeling very confident about our exit rate for 2026, and we're still committed to our 32% margin by 2030.

Speaker #3: Hey, thanks, Dave. That's brilliant. Thanks.

Paulo Ruiz: Okay, thanks, Dave. That's brilliant. Thanks.

Nigel Coe: Okay, thanks, Dave. That's brilliant. Thanks.

Speaker #1: Thank you. And our next question comes from the line of Jeffrey Sprake from Vertical Research Partners. Your question, please.

Operator: Thank you. Our next question comes from the line of Jeffrey Sprague from Vertical Research Partners. Your question please.

Speaker #7: Thank you. Good morning. I was going to ask about 800, but given that answer, how's it going? I was going to ask about 800 volt.

Jeffrey Sprague: Thank you. Good morning. I was going to ask about 800 volt DC.

Paulo Ruiz: Hi, Jeff.

Jeffrey Sprague: Given that answer, Hi, how's it going? I was going to ask about 800 volt, but I think I want to come back to the ramp. I appreciate all that color. It looks like your guide, for Electrical Americas actually assumes relatively flat sequential revenues, Q2 to Q3 to Q4. That lift in margins tied to price cost and output, sounds like that requires higher revenue, right? You're going to have more revenue coming through on price, and you're going to have more factory output supporting the margin improvement. Is there any kind of mutual exclusivity between revenue and margin here as we think about that bridge? Perhaps you're still just being a little bit cautious on the ramp in terms of what you gave us today.

Speaker #7: But I think I want to come back to the ramp. I appreciate all that color. It looks like your guide, right, for Electrical Americas, actually assumes relatively flat sequential revenues, right, Q2 to Q3 to Q4.

Speaker #7: So that lift in margins is tied to price-cost and output, right? It sounds like that requires higher revenue, right? You're going to have more revenue coming through on price.

Speaker #7: And you're going to have more factory output supporting the margin improvement. So is there any kind of mutual exclusivity between revenue and margin here as we think about that bridge?

Speaker #7: Perhaps you're still just being a little bit cautious on the ramp, in terms of what you gave us here today.

Speaker #6: Yeah, some of it, to be quite honest, is when you look at the difference between Q2 and Q3, we're going to be doing it on regular time versus overtime, as an example.

Dave Foster: Yeah, some of it, to be quite honest, is when you look at the difference between Q2 and Q3, we're going to be doing it on regular time versus overtime, as an example. We're going to have less premium costs involved because we're already ramped. The biggest ramp was from Q1 to Q2. Again, I talked about it, we have more experienced operators. The manufacturing engineers are making cost out improvements. If you look from Q3 to Q4, we have productivity investments we've made as well in our capital spending that will drive cost out as we move forward. It's your normal improvements as you go through and get more comfortable with the product you're making at these plants and we're seeing it in our numbers already in July.

Speaker #6: We're going to have less premium cost involved because we're already ramped. The biggest ramp was from Q1 to Q2. And again, I talked about it.

Speaker #6: We have more experienced operators. The manufacturing engineers are making cost-out improvements. And then if you look from Q3 to Q4, we have productivity investments.

Speaker #6: We've made improvements as well in our capital spending that will drive costs out as we move forward. So, it's your normal improvements as you go through and get more comfortable with the product you're making at these plants.

Speaker #6: And we're seeing it in our numbers already in July.

Speaker #7: And also, price to price-cost is going to normalize.

Paulo Ruiz: Also price cost is going to normalize.

Jeffrey Sprague: Yeah. More with price coming up than cost going down, I guess, right? I mean, you're taking cost actions, but you're going to have more actual price going through the system in H2.

Speaker #6: Yeah.

Speaker #7: Yeah, more with price coming up than cost going down, I guess, right? I mean, you're taking cost actions, but you're going to have more actual price going through the system.

Speaker #7: In the back half. And it's more than just general price increases; we're also doing discrete price increases as we need to. We kind of commented on that in the prior earnings call.

Dave Foster: Absolutely.

Paulo Ruiz: Yes.

Dave Foster: It's more than just general price increases. We're also doing discrete price increases as we need to. We kind of commented on that in the prior earnings call.

Jeffrey Sprague: Yep, absolutely. Okay, I'll leave it there in the interest of time. I appreciate it. Thank you.

Speaker #7: Yep, absolutely. Okay, I'll leave it there in the interest of time. I appreciate it. Thank you.

Jeffrey Sprague: Yep, absolutely. Okay, I'll leave it there in the interest of time. I appreciate it. Thank you.

Speaker #5: Thank you.

Paulo Ruiz: Thank you.

Speaker #1: Thank you. And our next question comes from the line of Nicole DeBlaise from Deutsche Bank. Your question, please.

Operator: Thank you. Our next question comes from the line of Nicole DeBlase from Deutsche Bank. Your question please.

Speaker #8: Yeah. Thanks. Good morning, guys.

Nicole DeBlase: Yeah, thanks. Good morning, guys.

Speaker #5: Hey, Nicole.

Paulo Ruiz: Hey, Nicole.

Speaker #8: Hi there. I wanted to ask about Electrical Global. Organic growth there was much stronger, I think, than you guys had expected. Curious what really drove the upside.

Nicole DeBlase: Hi there. I wanted to ask about Electrical Global. Organic growth there was much stronger, I think, than you guys had expected. Curious what really drove the upside. Thinking about how you're framing the rest of the year, you've got full year up 11% to 13%. I know that's up from prior, but it does embed a pretty kind of a material decel in H2. Was there any sort of pull forward of demand or could that maybe be a bit of conservatism? Thank you.

Speaker #8: And then thinking about how you're framing the rest of the year, you've got a full year up 11 to 13. I know that's up from prior, but it does embed a pretty—it's kind of a material...

Speaker #8: Do you see sales in the back half? Was there any sort of pull-forward of demand, or could that maybe be a bit of conservatism?

Speaker #8: Thank you.

Paulo Ruiz: Can you repeat the last part of your commentary? It was a.

Speaker #5: Can you repeat the last part of your commentary? It was a bit vivid for me.

Nicole DeBlase: Yes

Paulo Ruiz: Faded for me.

Speaker #8: Yeah, sure. So, just the implied second half within EG organic comes down a little bit relative to Q2. Just curious if that could be some conservatism, or if there was any sort of pull-forward of demand.

Nicole DeBlase: Sure, yeah. Just the implied H2 within EG Organic comes down a little bit relative to Q2. Just curious if that could be some conservatism or if there was any sort of pull forward of demand.

Speaker #5: Yeah, we are very prudent here. But we just raised 450 basis points, so we are still prudent in our guidance. But it's still a large, large upside.

Paulo Ruiz: Yeah, we are very prudent here, but we just raised 450 basis points, so we are still prudent in our guidance, but it's still a large upside, not only for Electrical Global, Nicole, but if you look at our trajectory. Start with the big picture for the company. We started the year saying we'll grow 8%, and the last earnings call we said we'd grow 10%, now we said 12%. The same is true for Americas, right? We started, I think it was 10% and then 13%, and now it's 15%. We want to continue that trajectory, keep improving and keep proving that we can do more. There's no downside here. We keep pushing as hard as we can.

Speaker #5: Not only for Electrical Global, Nicole, but if you look at our trajectory, start with the big picture for the company. We started the year saying we'll grow 8%.

Speaker #5: And on the last earnings call, we said we'd grow 10%. Now we said 12%. And then the same is true for Americas, right? We started, I think it was 10%, and then 13%.

Speaker #5: And now it's 15. So we want to continue that trajectory, keep improving, and keep proving that we can do more. There's no downside here.

Speaker #5: We keep pushing as hard as we can.

Speaker #1: Thank you. And our next question comes from the line of Andy Camp-Lewis from Citi. Your question, please.

Operator: Thank you. Our next question comes from the line of Andy Kaplowitz from Citi. Your question, please.

Speaker #9: Good morning, everyone.

Andy Kaplowitz: Good morning, everyone.

Speaker #5: Hi.

Paulo Ruiz: Hi.

Andy Kaplowitz: Paulo, now that Boyd is part of the portfolio and you've had several quarters of very high data center orders, maybe you can update us on what you're thinking for content per megawatt in data centers. Is $3.4 million the right number to think about now? You gave us last quarter your view on Eaton's positioning for 800 VDC. Has your confidence been improving that when the dust settles on the transition that you feel good about Eaton's ultimate content, at least in that three four range?

Speaker #9: Hello. Another BU is part of the portfolio, and you've had several quarters of very high data center orders. Maybe you can update us on what you're thinking for content per megawatt in data centers.

Speaker #9: Is $3.4 million the right number to think about now? And you gave us last quarter your view on Ian's positioning for 800 VDC. Has your confidence been improving that, when the dust settles on that transition, you feel good about Ian's ultimate content, at least in that $3.4 million range?

Speaker #5: Thanks. So, I would answer the question directly. The $3.4 million is the right number to think about. So, for your modeling, that is the right one.

Paulo Ruiz: Thanks. I would answer your question directly. The $3.4 million is the right number to think about it. For your modeling, it's the right one. You asked about the 800 volt trajectory. Let me make a couple of comments. I think there is a lot. As we travel, we talk to investors and analysts around this. Last quarter, I talked about why this matters to data center operators. I just want to remind everyone, what our customers want to do ultimately is to improve tokens per megawatt, so improve the efficiency of the data centers. This transition to 800 volt DC helps quite a big deal. 5% is huge for a gigawatt site. There's a huge impact, in my opinion. I hear a number of different opinions in the market. I believe this is going to happen, and customers are going to get what they want.

Speaker #5: You asked about the 800-vote trajectory. Let me make a couple of comments. I think there is a lot, as we travel, we talk to investors and analysts around this.

Speaker #5: Last quarter, I talked about why this matters to data center operators. I just want to remind everyone that what our customers ultimately want to do is improve tokens per megawatt.

Speaker #5: So, improve the efficiency of the data centers. And this transition to 800-volt DC helps quite a big deal. Five percent is huge for a gigawatt site.

Speaker #5: So, there's a huge impact, in my opinion. I hear a number of different opinions in the market, but I believe this is going to happen.

Speaker #5: And customers are going to get what they want, right? When there's so much money involved, this is going to happen. So the core of your question was the dollars per megawatt.

Paulo Ruiz: Right? When there's so much money involved, this is going to happen. The core of your question was the dollars per megawatt, and you talked about this transition. Everyone thinks about the solid-state transformer. Medium-voltage solid-state transformer is a very important element of that transition, and we are clearly ahead in terms of technology after the acquisition of Resilient Power last year, and we are speeding up their development. We know we are ahead. That's the feedback we get from hyperscalers and multi-tenants, and also chip manufacturers. There are more elements to this transition, so it's broader, and we are working every element of this transition. The first thing I want to say, of course, the medium-voltage solid-state transformer is a key element of it.

Speaker #5: And you talked about this transition. Everyone thinks about the solid-state transformer—medium voltage solid-state transformer is a very important element of that transition. And we are clearly ahead.

Speaker #5: In terms of technology, after the acquisition of Resilient Power last year, we are speeding up their development. So we know we are ahead. That's the feedback we get from hyperscalers and multi-tenants, and also chip manufacturers.

Speaker #5: But there are more elements to this transition, so it's broader. And we are working every element of this transition. So the first thing I want to say, of course, is that the medium-voltage solid-state transformer is a key element of it.

Speaker #5: But you also need to have, in order to be a great player in this new world, core DC breaker technology.

Paulo Ruiz: You also need to have, in order to be a great player in this new world, you need to have core DC breaker technology. You need to know how to break that circuit, right? Otherwise, you're not a reliable partner to the data center operators. You need to have the transformers, you need to have breaker technology. The third build block for me is around power electronics and power quality. Think about UPS capabilities that we also are a leader in the marketplace. The fourth big element of this transition, in my opinion, is cooling. You need to have cooling because it becomes even more important. Here I'm talking about both cold plates and CDUs.

Speaker #5: You need to know how to break that circuit, right? Otherwise, you're not a reliable partner to the data center operators. So, you need to have the transformers.

Speaker #5: You need to have breaker technology. The third building block for me is around power electronics and power quality. So think about UPS capabilities, where we also are a leader in the marketplace.

Speaker #5: And the fourth big element of this transition, in my opinion, is cooling. You need to have cooling because it becomes even more important, and here I'm talking about both cold plates and CDUs.

Speaker #5: So in order to win in this new era, in my opinion, you need to have those four technical blocks very strongly, be a leader, and be able to supply that to your customers.

Paulo Ruiz: In order to win in this new era, in my opinion, you need to have those four technical blocks very strongly, be a leader, be able to supply that to your customers. Even when you get all of them, you still need to clear another hurdle, which is to have the service available. Having a strong service network that can show up in a site in an hour, not in days, is also required. It's not for everyone. It is not for every company. Again, it's my personal opinion and my team coincides with this opinion here, is that if you're a company who'll be missing one or many blocks of these four, they'll have a really hard time convincing their competitors to sell to them so they can package the solution.

Speaker #5: And even when you get all of them, you still need to clear another hurdle, which is to have the service available. So, having a strong service network that can show up on-site in an hour—not in days—is also required.

Speaker #5: So, it's not for everyone. It is not for every company. And again, it's my personal opinion—and my team coincides in this opinion here—that if you're a company, you may be missing one or many blocks of these four.

Speaker #5: They'll have a really hard time convincing their competitors to sell to them so they can package the solution. So that's why I want you to understand, yes, there are dollars per megawatt.

Paulo Ruiz: That's why I want you to understand, yes, there is dollars per megawatt, but being able to offer the complete spectrum here will be also differentiated performance API for the future.

Speaker #5: But being able to offer the complete spectrum here will also be a differentiated performance KPI for the future.

Speaker #9: Appreciate all the color, Paolo.

Andy Kaplowitz: Appreciate all the color, Paulo.

Speaker #5: Thank you.

Paulo Ruiz: Thank you. Thanks, Andy.

Speaker #3: Thanks, Andy.

Speaker #1: Thank you. And our next question comes from the line of Chad Dillard from Bernstein. Your question, please.

Operator: Thank you. Our next question comes from the line of Chad Dillard from Bernstein. Your question, please.

Chad Dillard: Hey, good morning, everyone. I was hoping we could spend some time on prefab and modularization. Could you talk through what share of your RFPs are for prefab and modular? How does that change your competitive positioning? Third, what does it mean for the adoption of this approach as we think towards 800-volt architecture?

Speaker #9: Hey, good morning, everyone. I was hoping we could spend some time on prefab and modularization. Could you talk through what share of your RFPs are for prefab and modular?

Speaker #9: And then, how does that change your competitive positioning? And then third, what does it mean for the adoption of this approach as we think towards 800V architecture?

Speaker #5: Great, great question. So, there is a clear trend. If you think about one of the bottlenecks in the industry, which is the availability of electricians, plumbers, etc., there is a scarcity of people to work on a stick build.

Paulo Ruiz: Great. Great question. There is a clear trend if you think about one of the bottlenecks in the industry, which is to have availability of electricians, plumbers, et cetera. There is scarcity of people to work on a stick build. There is a push towards more modular solutions. This is exactly why we last year decided to make the acquisition of Fibrebond. We saw them as a strong market leader in building those models. They are packaging things we know pretty well, which is our equipment, our UPSs, our switchgear, et cetera. There is a very good connection there. I love that actually you asked this question after we talked about the 800-volt conversion. When you simplify the architecture, you even increase the opportunities of using modular solutions here.

Speaker #5: So, there is a push towards more modular solutions. This is exactly why, last year, we decided to make the acquisition of Fiberbond. We saw them as a strong market leader in building those models.

Speaker #5: And their packaging things, we know pretty well, which is our equipment—our UPSs, our switchgear, etc. So there is a very good connection there.

Speaker #5: I just talked—I actually loved that you asked this question after we talked about the 800-volt conversion. When you simplify the architecture, you even increase the opportunities of using modular solutions here.

Speaker #5: I just want to highlight a couple of things, because I got many questions recently about this and about complexity, etc. It is a different skill set than working in a manufacturing site.

Paulo Ruiz: I just want to highlight a couple of things because I got many questions recently about this and complexity, et cetera. It is a different skill set than working in a manufacturing site. That needs to be dealt by professional people, professional engineers, professional project managers. That's exactly why we acquired the competence of Fibrebond, and we are scaling them up. They are very strong already in gray space, as you guys know. As we migrate into the white space with 800 volt DC, we can also tap on their capability and also cut other partnerships to win in that space. We're going to do this. We're going to do this responsibly, we're going to do this effectively, and we're going to do what our customers want of us, basically.

Speaker #5: So, that needs to be dealt with by professional people—professional engineers, professional project managers. That's exactly why we acquired the competence of Fiberbond, and we are scaling them up.

Speaker #5: They are already very strong in the gray space, as you guys know. And as we migrate into the white space with the 800-volt DC, we can also tap into their capability and form other partnerships to win in that space.

Speaker #5: So we're going to do this. We're going to do this responsibly. We're going to do this effectively. And we're going to do what our customers want of us, basically.

Speaker #9: Great. Thank you.

Chad Dillard: Great. Thank you.

Speaker #1: Thank you. And our next question comes from the line of Jeff Hammond from KeyBank. Your question, please.

Operator: Thank you. Our next question comes from the line of Jeff Hammond from KeyBank. Your question, please.

Speaker #5: Hey, good morning, guys.

Jeff Hammond: Hey, good morning, guys.

Paulo Ruiz: Hey, Jeff. Hi, Jeff.

Paulo Ruiz: Hey, Jeff.

Speaker #8: Hey, Jeff. Hey, Jeff.

Dave Foster: Hi, Jeff.

Speaker #5: Thanks for the color on the bridge. That was very helpful. Just to ask, as you expand your capacity and bring it online, do you get more productive?

Jeff Hammond: Thanks for the color on the bridge. That was very helpful. Just to ask, as you expand, your capacity comes online, you get more productive, I'm just wondering what you're seeing on lead times for some of your longer lead time items. As you get more productive, and your lead times are maybe better in line relative to your competitors, what's your line of sight where you start to get more of your fair share, as these lead times get better and these plants come on? Thanks.

Speaker #5: I'm just wondering what you're seeing on lead times for some of your longer lead-time items. And then, as you get more productive, are your lead times maybe better in line relative to your competitors?

Speaker #5: What's your line of sight where you start to get more of your fair share as these lead times get better and these plants come on?

Speaker #5: Thanks.

Speaker #8: Yeah, very great question. So lead time is important to our customers, especially in a fast-moving market like this. We are working on that. We're constantly working on that.

Paulo Ruiz: Very great question. Lead time is important for our customers, especially in a fast-moving market like this. We are working on that. We constantly work on that. If you see our growth, especially in data centers, where lead times are even more important, we grew 65%. I asked the team to look back, and I think we completed, in total, eight consecutive quarters of growth beyond 35% in data centers, which is fascinating. Just as a reminder to all of you, when we shared the 2030 commitments for growth, we only baked 17% of the data center growth in our model. We are clearly ahead of that, moving towards 2030. My point, I'm going to get back to your lead time question a second. We cannot be winning at that pace with that progress if we're not competitive.

Speaker #8: If you see our growth, especially in data centers, where lead times are even more important, we grew 65%. And I asked the team to look back.

Speaker #8: And I think we completed, in total, eight consecutive quarters of growth beyond 35% in data centers, which is fascinating. And just as a reminder to all of you, when we shared the 2030 commitments for growth, we only baked 17% of the data center growth into our model.

Speaker #8: So we are clearly ahead of that, moving towards 2030. So, my point—I'm going to get back to your lead time question in a second.

Speaker #8: We cannot be winning at that pace, with that progress, if we're not competitive. So, I want to lead with that first. Having said this, we believe we can and should improve.

Paulo Ruiz: I want to lead with that first. Having said this, we believe we can and should improve, and we know the product lines where our lead times are extended. We are ramping capacity, not only in the factories, but we're ramping engineering support, and we're going to knock them down time by time and time again. Thank you.

Speaker #8: And we know the product lines where our lead times are extended. We are ramping capacity not only in the factories, but we're also ramping engineering support.

Speaker #8: And we're going to knock them down, time by time and time again. Thank you.

Speaker #9: Thanks. Yeah, go.

Jeff Hammond: Thanks.

Paulo Ruiz: Can I go?

Dave Foster: Yeah, go.

Speaker #8: Okay, just thanks everyone. It was a very intense and productive call. I just want to conclude with my closing remarks. First of all, once again, Dean, congrats man.

Paulo Ruiz: Okay. Thanks, everyone. It was a very intense and productive call. I just want to conclude with my closing remarks. First of all, once again, Deane, congrats, man. Well-deserved retirement. Many thanks to all of you for your interest in Eaton, for all your analysis and your questions. I want to say, once again, thanks to the Eaton team. I know I've been fair, but hard with all of you. You guys are responding exceptionally well. I'm pleased with the progress, knowing that we are committed to continue to improve. This is really important. I would say our strategy is working. I hope you can appreciate that. It's gathering pace. Our markets are strong and durable. We accelerate organic growth, keep moving our backlogs up, and we're going to benefit from the strength of this market for years to come, right? If you think about all the announced projects.

Speaker #8: Well deserved retirement. Many thanks to all of you for your interest in Eaton, for all your analysis and your questions. I want to say once again, thanks to the Eaton team.

Speaker #8: I know I've been hard—fair, but hard—with all of you. You guys are responding exceptionally well. I'm pleased with the progress, knowing that we are committed to continue to improve.

Speaker #8: So, this is really important. So, I would say our strategy is working. I hope you can appreciate that. It's gathering pace. Our markets are strong and durable.

Speaker #8: We accelerate organic growth and keep moving our backlogs up. We're going to benefit from the strength of this market for years to come, right?

Speaker #8: If you think about all the announced projects, we also took this size of portfolio moves to structurally transform the company. And I believe—I truly believe—that new Eaton is taking shape as we speak.

Paulo Ruiz: We also took decisive portfolio moves to structurally transform the company. I truly believe that new Eaton is taking shape as we speak towards higher growth and higher margins. We have this unique grid-to-chip capability. All in all, a much stronger team and a stronger portfolio. Execution continues to improve, especially with Electrical Americas improvements. We're going to keep moving margins up as we progress. Consequently, I would just remind you that we could print a very strong operational beat in Q2, which gave us confidence to raise our guidance once again for the year. Thanks for your interest. Great afternoon to all. Thank you.

Speaker #8: Towards higher growth and higher margins. We have these unique grid-to-chip capabilities. So, all in all, a much stronger team and a stronger portfolio. And execution continues to improve, especially with Electrical Americas' improvements.

Speaker #8: We're going to keep moving margins up as we progress. And consequently, I would just remind you that we could print a very strong operational beginning Q2, which gave us confidence to raise our guidance once again for the year.

Speaker #8: Thank you for your interest. Have a great afternoon, everyone. Thank you.

Speaker #9: Thanks, guys.

Dave Foster: Thanks, guys.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Q2 2026 Eaton Corp PLC Earnings Call

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