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FY2026 Q2
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Emerson Electric Company earnings call
Buzzberg read
Backlog up 9% year-over-year supports second-half plans
Emerson reported a beat on margins/EPS despite Middle East conflict impact and China chemical weakness, and raised the bottom/midpoint of FY26 EPS guidance. Management highlighted strong orders in power and software, with T&M above 12%, while isolating the one-point top-line drag from the region conflict. The tone was cautiously confident, emphasizing the durable multi-year growth verticals. Underlying sales +0.5% in Q2, driven by 12% T&M strength and 22% growth verticals; Middle East conflict dragged sales by 1 point.
Buzzberg read Backlog up 9% year-over-year supports second-half plans Emerson reported a beat on margins/EPS despite Middle East conflict impact and China chemical weakness, and raised the bottom/midpoint of FY26 EPS guidance. Management highlighted strong orders in power and software, with T&M above 12%, while isolating the one-point top-line drag from the region conflict. The tone was cautiously confident, emphasizing the durable multi-year growth verticals. Underlying sales +0.5% in Q2, driven by 12% T&M strength and 22% growth verticals; Middle East conflict dragged sales by 1 point. Read full analysisCollapse analysis
Emerson reported a beat on margins/EPS despite Middle East conflict impact and China chemical weakness, and raised the bottom/midpoint of FY26 EPS guidance. Management highlighted strong orders in power and software, with T&M above 12%, while isolating the one-point top-line drag from the region conflict. The tone was cautiously confident, emphasizing the durable multi-year growth verticals. Underlying sales +0.5% in Q2, driven by 12% T&M strength and 22% growth verticals; Middle East conflict dragged sales by 1 point.
- Orders grew 5% with strong momentum in software/systems (18%) and power (41% Ovation orders); funnel grew to $11.2B.
- FY26 EPS guide raised to $6.45–$6.55; segment margin re-iterated at ~28%; FCF maintained at $3.5–$3.6B.
- China expectation down to mid-single-digit decline due to chemical overcapacity; U.S. to grow high-single digits.
Revenue$4.562B+5% QoQ
EPS$1.54+5% QoQ
Gross margin53.09%Reported
Operating margin19.75%Reported
6 grounded callouts
What matters now
The highest-signal changes from the call.
Growth Verticals
Power vertical orders up 41%, driven by ovation
Demand
Mid-single-digit order growth seen as sustainable
Show 3 more callouts
Macro
China weakness driven by overcapacity in chemicals
Margin/Sales
Initial rebuild opportunity in Middle East estimated at $100 million
Guidance
Test and measurement growth now expected low teens for 2026
Reported period
Actuals
| Metric | Reported | Change |
|---|---|---|
| Revenue | $4.562B | +5% QoQ |
| EPS | $1.54 | +5% QoQ |
| Gross margin | 53.09% | Reported |
| Operating margin | 19.75% | Reported |
| Free cash flow | $0.694B | +15% QoQ |
| Capex | $0.085B | Reported |
Forward-looking
Forward guidance
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| EPS | FY2026 | $6.45–$6.55 | $6.50 | Raised |
| EPS | FY2026 Q3 | $1.65–$1.70 | $1.67 | Guided |
| Free cash flow | FY2026 | $3.5B–$3.6B | $3.55B | Maintained |
| Operating margin | FY2026 | 28% | 28% | Maintained |
| RevenueTEST_AND_MEASUREMENT | FY2026 | 10%–13% | 11.5% | Raised |
| RevenueINTELLIGENT_DEVICES | FY2026 | 2% | 2% | Lowered |
| RevenueSAFETY_AND_PRODUCTIVITY | FY2026 | 2% | 2% | Guided |
| RevenueCONTROL_SYSTEMS_AND_SOFT | FY2026 Q3 | 5% | 5% | Guided |
| RevenueSOFTWARE_AND_SYSTEMS | FY2026 Q3 | 8% | 8% | Guided |
| Revenue | FY2026 | 3% | 3% | Lowered |
| Revenue | FY2026 Q3 | 5% | 5% | Guided |
| RevenueSOFTWARE_AND_SYSTEMS | FY2026 | 5% | 5% | Raised |
AI, capex & demand read
Management read
Measured
Management acknowledges Middle East disruptions and China softness but remains confident in second-half momentum and growth verticals, while carefully guiding expectations.
Management AI read
Management sees AI as a long-term differentiator embedded in their software and test offerings, citing customer interest and quotes, but expects no meaningful revenue impact until 2027 and beyond. They highlighted an AI-driven optimization deployment for Aramco and upcoming user conferences showcasing AI capabilities.
Investment and capacity
Management sees sustained secular investment in power, LNG, and other growth verticals, with the project funnel growing to $11.2 billion and significant capital being deployed in projects, particularly in power and LNG.
all 8 named companies below
Companiesreturns since call
Customers
Customers
Lal Karsanbhai
ExxonMobil's keynote participation signals its public endorsement-relationship with Emerson's AspenTech software, potentially supporting sales in the energy vertical.
Evidence
“Aspen Tech will hold their Optimize event with over 1,100 customers from 49 countries, including keynotes from ExxonMobil, TotalEnergies, and Exelon.”
Customers
Lal Karsanbhai
Encore (likely CenterPoint Energy) is modernizing the Texas grid with AspenTech's DGM, making Emerson a key software vendor for the state's ongoing infrastructure growth.
Evidence
“Emerson was selected by Encore, the largest electric delivery company in Texas, to enable the delivery of reliable power to more than 13 million residents.”
Customers
Lal Karsanbhai
NextDecade selected Emerson for the Rio Grande LNG expansion, securing a large project win for Emerson's instruments, valves, and analytical systems.
Evidence
“Emerson was chosen by next decade for the train four and five expansion to the Rio Grande LNG facility, which will add 12 million tons per annum in capacity.”
Partners
Partners
Lal Karsanbhai
NVIDIA's keynote at NI Connect signals a close partnership between Emerson and NVIDIA, possibly involving test and measurement or AI for industrial applications.
Evidence
“NI Connect will feature keynote addresses from prominent customers, including NVIDIA and Austin, with over 1,600 attendees from 38 countries.”
Partners
Lal Karsanbhai
Hiring Apple's general counsel to Emerson's board provides a technology/regulatory perspective, potentially influencing Emerson's software/AI strategy.
Evidence
“Jennifer Neustadt is the Senior Vice President and General Counsel of Apple.”
Partners
Lal Karsanbhai
Recent board member's tech background from Meta may guide Emerson on AI/software regulatory and strategic issues.
Evidence
“Prior to joining Apple in January 2026, Jennifer served as Chief Legal Officer at Meta.”
External signals
Supply-chain alpha · 4returns since call
The Middle East conflict cut Emerson's regional manufacturing output and field service; logistics through the Strait of Hormuz remain disrupted, but shipments are rerouting, improving conditions.
Evidence
“Over the longer term, there should be opportunity. But in this next six months, based on what we saw in the quarter... we felt it was prudent to bake that in and take the full year guide down by a point at the top line.”
Power vertical is a durable multi-year driver: orders up 41%, with $450M in project funnel wins, led by Encore and Rio Grande LNG, indicating strength in U.S. grid and LNG build-outs.
China weakness is blamed on chemical overcapacity; management expects China to decline mid-single digits for the year, but this is offset by strong U.S. growth.
Test & measurement momentum is driven by semis and aerospace/defense; despite transport weakness bouncing its bottom, double-digit growth is deemed sustainable.
Methodology & coverage
Management-only analysis. All 8 validated company mentions are shown. Reported actuals and forward guidance are kept separate. Public evidence is limited to eight short attributed quotes. AI-generated analysis can be incomplete or wrong; verify important claims against the original source.