With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

America's Most Innovative Companies

Industries included in the sector are electrical equipment and industrial machinery.

Fortune Sector Leaders: Industrials

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

With business in over 100 countries, the company supplies industrial sectors with automation technology for their manufacturing lines.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-452-Rockwell Automation

Milwaukee-based Rockwell is an industrial automation company that integrates information technology with manufacturing infrastructure.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Sector

Culture rank

Process rank

Product rank

Years on list

Previous rank

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Q3 2026

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Get insights into Rockwell Automation including business profile, stock information, news, and rankings from Fortune.

Rockwell Automation (ROK): Company Profile, Stock Price, News, Rankings

legacy

Rockwell Automation

rockwell automation

Thank you for holding, and welcome to Rockwell Automation's Quarterly Conference Call. I need to remind everybody that today's conference call is being recorded. Later in the call, we will open up the lines for questions. At this time, I would like to turn the call over to Eidhana Zellner, Head of Investor Relations and Market Strategy. Ms. Zellner, please go ahead.

Thank you, Julianne. Good morning, and thank you for joining us for Rockwell Automation's third quarter fiscal twenty twenty five earnings release conference call. With me today is Blake Moret, our Chairman and CEO and Christian Roethe, our CFO. Our results were released earlier this morning, and the press release and charts have been posted to our website. Both the press release and charts include, and our call today will reference, non GAAP measures.

Both the press release and charts include reconciliations of these non GAAP measures. A webcast of this call will be available on our website for replay for the next thirty days. For your convenience, a transcript of our prepared remarks will also be available on our website at the conclusion of today's call. Before we get started, I need to remind you that our comments will include statements related to the expected future results of our company and are therefore forward looking statements. Our actual results may differ materially from our projections due to a wide range of risks and uncertainties that are described in our earnings release and detailed in all our SEC filings. So with that, I'll hand it over to Blake.

Thanks, Aijana, and good morning, everyone. Thank you for joining us today. Before we turn to our third quarter results on Slide three, I'll make a couple of initial comments. Rockwell had another good quarter as we returned to year over year sales growth. We had a diverse set of strategic wins in the quarter across discrete, hybrid and process industry segments.

I'll highlight some of these in a few minutes. We're also making good progress on our journey to the segment margin goals we introduced at our November. This is largely due to very good progress on our enterprise wide productivity programs even as more of the year over year savings shifts from the initial SG and A reductions to direct material cost and indirect services cost savings and operational efficiencies. We have already achieved our full year goal of $250,000,000 in year over year productivity, a quarter earlier than we anticipated and I'm proud of how our organization has operationalized our ambitious productivity and continuous improvement targets. Price cost also remains favorable, including the net impact from tariffs, which was minimal in the quarter.

Importantly, we intend to take bold steps to continue our progress. Over the next five years, we will invest over $2,000,000,000 in plants, digital infrastructure and talent to grow share, build resilience and expand margins. The United States will be the largest beneficiary of these investments, which are primarily CapEx. These investments will complement our robust productivity programs to drive our global growth and margin expansion goals. We'll go into more detail on the scope and milestones tied to these investments in November, but it will include thoughtful implementation of automation to drive plan efficiency, talent to fuel our highest return offerings and an AI first business system to provide unmatched employee, partner and customer experiences.

This is right in the wheelhouse of our expertise and we'll be taking you and customers along with us on this journey. It's an exciting time to be a part of the Rockwell Automation story. Turning to our third quarter results on slide three. While most customers continue to prioritize their spending on the productivity and efficiency of existing capacity, some are advancing their strategic plans for larger CapEx projects, including greenfields. Similar to last quarter, our total company book to bill was about one point zero with year over year orders growth in The Americas, EMEA and Asia.

Q3 sales were above our expectations. Reported sales were up 5% and our organic sales were up over 4% year over year with currency contributing less than a point of growth in the quarter. Similar to last quarter, product sales were better than some of the longer cycle businesses, which tend to be more capital intensive. It's likely there were some customer pull ins in the quarter and we'll talk more about that in a minute. Annual recurring revenue grew 7% in the quarter below our expectations.

Double digit growth in our cloud native software business was offset by relative weakness in recurring services, mainly driven by delays in cybersecurity investments. From a business segment standpoint, our Intelligent Devices organic sales were up 1% versus prior year with double digit growth in products more than offsetting the year over year decline in our longer cycle configured to order business. We leveraged our differentiated intelligent devices portfolio to secure some new capacity wins both in greenfield and brownfield applications. One of these wins was with Freshpet, a leading pet food manufacturer who's looking to expand their fresh food production capacity with a new processing plant in Ennis, Texas. Freshpet chose Rockwell for our standardized designs, product interoperability and a differentiated motor control center offering to help accelerate time to market at this greenfield.

Another strategic MCC win in the quarter was also in the food and beverage space with Encobrasa Industries, a Brazilian soybean processing and biodiesel manufacturing company that is expanding in The United States. Rockwell was selected as Encobras' official automation partner for their new state of the art facility in Central Illinois. ClearPath sales were up double digits, but continue to be affected by CapEx delays in automotive. We're making good progress in integrating the auto AMR platform with our overall roadmap for autonomous operations and improved profitability even in a period of subdued customer CapEx investment. Software and Control organic sales grew 22% year over year driven by strong growth in our hardware business.

Logic sales were up over 30% versus prior year and up low double digits sequentially. Our SaaS business grew 10% year over year with strategic wins across Plex and Fix. One of our important software wins in Q3 was with Beam Therapeutics, a leader in manufacturing of cell and gene therapies. FactoryTalk PharmaSuite MES software will help this customer automate their production process and ensure quality control as they continue to expand their commercial operations in this fast growing vertical. Another competitive win in the quarter was with Hancock Iron Ore.

We are excited to be partnering with HIO as they take the next step in their digital journey. Working closely with our Calypso team, this customer is adopting our advanced AI driven predictive maintenance solutions like Guardian AI and DataMosaics to enhance reliability and performance across their operations. This engagement is a testament to the strength of the ongoing relationship and our mutual focus on building the future of mining together through co innovation. Lifecycle Services organic sales declined 6% versus prior year, but were largely in line with our expectations given the difficult year over year comparison. Book to bill in this segment was 1.06 and was above one point zero across all the contributing businesses.

As we expected, customers continued to delay larger capital projects in Q3 waiting for more clarity and certainty around the impact of trade and policy on their input cost and volume. Rockwell segment margin of 21.2% and adjusted EPS of $2.82 were both above our expectations, mainly due to higher volume and strong execution on our cost reduction and margin expansion actions. Let's move to slide four to review key highlights of our Q3 industry performance. Our discrete sales grew 10% versus prior year, driven by growth in automotive and e commerce and warehouse automation. While most of our automotive customers continue to delay their capital investments, we had a large number of wins in the quarter.

One of these brownfield projects in Q3 was to help Hyundai Motor Group expand their hybrid electric vehicle production in Georgia as they transition from EV only to a multi energy production model, which addresses evolving consumer demand. Another important automotive win this quarter was with Lucid Motors, who chose our FactoryTalk MES for their state of the art greenfield facility in The Kingdom Of Saudi Arabia. E commerce and warehouse automation sales were up 30% year over year with continued strength across all customer segments. In addition to our core automation offering, we're seeing more interest in autonomous material movement as our customers realize the benefits of our auto platform. Whether it is basic station to station movement or handling complex payloads, Rockwell is uniquely positioned to help scale AMR fleets to the operational needs of our customers and integrate with the rest of their automation.

Moving to our hybrid industries. Sales in this segment increased high single digits versus prior year with good growth across Food and Beverage, Home and Personal Care and Life Sciences. I already talked about some of our strategic wins in Food and Bev earlier on the call. We continue to see strong year over year and sequential growth at our packaging OEMs as they continue to invest in their next generation machines for both food and beverage and HPC end users. Sales in our Life Sciences vertical were up high single digits in Q3.

While tariff uncertainty has caused a number of end user project delays, we continue to build a strong pipeline of projects with both machine builders and end users. Our strong software and digital services capabilities continue to differentiate us in the fast growing GLP-one space. This quarter Rockwell was selected by Thermo Fisher to help accelerate production of GLP-one injectables for new capacity expansion by cutting their MES implementation timeline in half. Turning to Process Industries, our sales in this segment were down low single digits. From a broader process standpoint, energy, chemicals, mining and metals are all facing pressure from weak global demand and volatile commodity prices, which is hampering their ability to invest.

With that said, each end market is selectively redirecting capital to their high strategic priorities including meeting their sustainability and modernization goals. In Energy, we do have both the technical portfolio and market access to participate in an all of the above strategy to meet accelerating capacity needs. And we had examples of both traditional fossil fuel and renewables wins in the quarter. One of these wins was with a global energy technology company where our PlantPAx process control solution was chosen for their hydroelectric project in India as part of the country's push for energy security through reliable and renewable electricity. We also secured an important oil and gas win with a leading Middle Eastern national oil company who chose our Sensia joint venture for the region's most strategic automation and cybersecurity upgrade project with significant recurring revenue potential.

Moving to Slide five and our Q3 organic regional sales. Once again, North America was our best performing region in the quarter and we expect it to be our strongest region for the full fiscal year 2025. Let's now turn to Slide six to review our fiscal twenty twenty five outlook. To be sure, we continue to operate in a volatile environment. It's good to have The U.

S. Tax bill in place, continued low unemployment and to see some progress on tariff negotiations. However, U. S. Trade policy with some important countries remains uncertain and geopolitical risk remains elevated.

Accordingly, our top line outlook for the second half of this fiscal year is largely unchanged with a slight increase to our prior guide due to tariff related price increases and favorable currency. We do see a modest shift forward in the calendarization of our sales between our fiscal third and fourth quarters. Given the continued trade uncertainty, we think some customers have pulled forward orders from Q4 to Q3 in order to mitigate risk and secure critical components. We now expect our reported and organic sales growth for the year to be in the positive one percent to negative 2% range. The midpoint of our guide assumes low single digit sequential sales growth in Q4.

We expect our annual recurring revenue to grow high single digits this year. We continue to expect our full year segment margin to be about 20% and we are increasing our adjusted EPS outlook to be $10 at the midpoint. We continue to expect free cash flow conversion of 100% in fiscal twenty twenty five. I'll now turn it over to Christian to give more detail on our Q3 and financial outlook for fiscal twenty twenty five. Christian?

Thank you, Blake. Good morning, everyone. I'll start on slide seven, third quarter key financial information. Third quarter reported sales were up 5% versus prior year with minimal impact from currency. About three points of our organic growth came from price.

While price cost was favorable, about one point of our price realization was from tariff based pricing, which was neutral to EPS. Benefits from cost reduction and margin expansion actions and price realization more than offset higher compensation. Adjusted EPS of $2.82 was above our expectations primarily due to the beat on the sales line as well as segment operating margin. Adjusted effective tax rate for the third quarter was 15.2% above the prior year rate of 13.3% primarily due to lower discrete tax benefits. We continue to expect a 17% ETR for fiscal twenty twenty five.

Free cash flow of $489,000,000 was $251,000,000 higher than the prior year. Free cash flow conversion was 153% in the third quarter. Slide eight provides the sales and margin performance overview of our three operating segments. While sales and lifecycle services came in as expected, performance in Intelligent Devices and Software and Control exceeded expectations with product growth more than offsetting the decline in our configured order businesses. All segments executed well on our cost reduction and margin expansion targets, helping absorb the year over year increase in compensation expense.

As a reminder, we did not have any incentive compensation costs in the same quarter of last year. Intelligent Devices margin of 18.8% decreased by 140 basis points year over year against one of their most difficult comps of the prior year, primarily due to the higher compensation expense I just mentioned. Given the small year over year dollar change in sales in this segment, decrementals are not as meaningful this quarter. We continue to see good price realization in this segment. Software and Control margin of 31.6 was up 800 basis points versus prior year, driven by double digit volume growth and strong price realization.

The segment saw year over year incrementals in the high 60s. Lifecycle Services margin of 13.3% was down 600 basis points year over year. A mid single digit sales decline against record segment margins that had no incentive expense in the prior year drove the decrementals in the quarter. I want to take a moment to point out the sequential movement we saw in each of our segments. Intelligent Devices had incrementals that were in the 30s from Q2 to Q3, reflecting revenue improvement, cost reduction and margin expansion execution and strong price realization, partially offset by tariff costs, compensation and FX.

Software and Control sequential incrementals were in the mid-40s with strong volume partially offset by higher compensation. Lifecycle Services saw small sequential dollar changes in both sales and segment earnings with higher compensation being the driver of lower margins. Overall for Rockwell, the incremental margin on the sequential sales growth was in the low 30s. This rises to the mid-30s if you exclude tariff based pricing and cost, which again was EPS neutral. The next slide, nine, provides the adjusted EPS walk from Q3 fiscal twenty twenty four to Q3 fiscal twenty twenty five.

Year over year core conversion was close to 60% and contributed $0.35 to our EPS on the 4% organic sales increase. Software and Control was the primary driver of both sales and earnings growth in the quarter, where we saw margin expansion on continued improvement in Logic sales. Pricing was strong for the company and we continued to fund new product development with company R and D at 6% of total revenue. We saw excellent execution on our cost reduction and margin expansion actions, which were above our expectations resulting in a $0.60 tailwind. You'll see a $0.60 impact from compensation.

Our Q3 outperformance and higher guidance for the year brings with it increased incentive expense. As I said earlier, we had no annual bonus expense last year. We expect about $0.30 of compensation cost in Q4. Full year compensation expense, which includes merit and bonus, is expected to be about $230,000,000 Currency was a $0.15 EPS headwind as the timing and movement of exchange rates, particularly in some of our foreign production locations such as Mexico and Poland, created transactional headwinds. All other items resulted in a $09 net headwind.

Moving on to the next slide, 10, to discuss our updated guidance for the full year. We narrowed our sales guidance range this quarter, raising the midpoint of our reported sales guidance to a negative 05% sales decline year over year. This reflects a slight increase from our prior organic sales guide, zero five a point, driven by tariff based price increases in the second half. The other portion of our sales midpoint guidance increase comes from currency as we now expect the full year FX impact to be neutral to sales and a $0.10 headwind to EPS. Our segment operating margin guidance of about 20% is unchanged.

Last quarter, we talked about low single digit sequential sales growth in Q3 and high single digit sequential growth in Q4. With our updated guidance, we expect Q4 will be up low single digits sequentially after a high single digit sequential increase in Q3. Segment operating margins exceeded expectations in Q3. For Q4, we expect margins to be similar to Q3 on slightly higher revenue with unfavorable mix offsetting the sequential volume leverage. We are updating our adjusted EPS guidance to a range of $9.8 to $10.2 or $10 at the midpoint.

The EPS guidance increase reflects our strong operating performance and continued progress on our cost reduction and margin expansion actions. A few additional comments on fiscal twenty twenty five guidance for your models. Corporate and other expense is expected to be around $155,000,000 Net interest expense for fiscal twenty twenty five is expected to be about $140,000,000 and we're assuming average diluted shares outstanding of about 113,000,000 shares. Our share buybacks in Q3 were approximately 500,000 shares in the quarter at a cost of $123,000,000 As of June 30, approximately $1,000,000,000 remain available under our existing share repurchase authorization. Moving on, I want to expand on a few topics.

First, let's talk about tariffs and our assessment of possible pull in activity. We continue to expect the EPS impact of tariffs for fiscal twenty twenty five to be mitigated through resiliency actions and price increases. The EPS impact in the third quarter was close to zero, while about one point of our sales growth in Q3 was attributable to tariff based pricing. With regard to pull ins, as Blake mentioned, we are not seeing a notable inflection in underlying customer demand. We have a strong process to identify and address obvious attempts to buy ahead of announced tariff based price increases and we have canceled some orders as a result.

That being said, we think it's possible that pull ins accounted for at most two to three points of our growth in the third quarter. Our thesis for the second half remains intact and we believe any pull ins that may have happened were largely just Q3, Q4 timing differences. Second, our cost reduction and margin expansion initiative reached a major milestone this past quarter. This program was initiated midway through our last fiscal year with some very ambitious goals. Dollars 100,000,000 of cost savings in the 2024 and another $250,000,000 of savings in fiscal twenty twenty five.

We exceeded our goal and delivered $110,000,000 of savings in fiscal twenty twenty four. This year, we met our full year target of $250,000,000 of savings in only three quarters. All told, that is $360,000,000 in structural cost savings achieved over five quarters. Our team has performed extremely well for the past year and a half, and we are all grateful for their efforts. Well done.

At our last Investor Day, we shared our Rockwell operating model. One objective is to operationalize the excellent work of our cost reduction and margin expansion teams. This bridges the gap to take the program from an event and turn it into a way of life. The team is prepared. Now that we have achieved our targets, we are going to transition the tracking of our cost reduction and margin expansion program into core in our reporting structure because by operationalizing this work into our day to day, it is now becoming part of our core.

Finally, let's talk about the next few years and the art of the possible as well as some of the areas where we have developing programs. As Blake shared earlier, we intend to invest $2,000,000,000 over the next five years. This is inclusive of OpEx and CapEx for plants, digital infrastructure and talent. To be clear, a portion of this will include brick and mortar. We will share additional information at our Investor Day in November, but know that each element of this program will have a clear ROI aimed at enhancing competitiveness, expanding margins, and positioning Rockwell for long term growth.

We believe in the power of industrial automation and digital transformation. That's true for our customers. It's also true for us. This investment reflects our conviction. With our progress on price, productivity, and strong operating performance, we are on a good path to reach the segment margin targets we introduced in 2023.

We are now focusing on long lead time actions that will help us define and drive the next phase of our operating margin expansion. That's this program. Investing today to help expand margins in the future and to help us achieve the next set of goals. Some other items for your long term model. CapEx as a percentage of sales, which has historically hovered around 2%, could range between 2.5% to 4% in any given year as we make ROI based decisions on brick and mortar, digital infrastructure and capital equipment.

R and D spending as a percentage of sales will remain targeted at around 6%. We believe this is important to support our growth engine. A couple of notes on upcoming tax changes. First, as we have mentioned in the past, we will become subject to BEST Pillar two in fiscal twenty twenty six. Current framework could cause our effective tax rate to increase two to three percentage points in fiscal twenty twenty six, resulting in an EPS headwind.

Second, as it relates to the new U. S. Tax bill, we don't expect it to provide significant savings to Rockwell, primarily due to our international structure and minimum tax laws. We do believe, however, that accelerated depreciation can drive investment by our small and medium sized customers. This is a sweet spot for Rockwell, particularly with the help of our partners.

We delivered three solid quarters so far in fiscal twenty five. That doesn't happen without great execution throughout our organization, great customer relationships and a strong partner network. Those efforts are truly appreciated. Let's have a solid finish to the year. With that, I'll turn it back to Blake for some closing remarks before we start Q and A.

Thanks, Christian. We're happy to see a return to year over year growth, including an improving outlook in some of our largest discrete and hybrid verticals. The leverage from this growth will complement our continued focus on cost discipline, execution and margin expansion. I'm excited to supercharge these efforts by further capturing the benefits of automation and digital transformation within our own operations. It's hard to believe that this year's Automation Fair and Investor Day are only three months away.

We returned to McCormick Place in Chicago the week of November 17 with Investor Day activities on November. We're looking forward to showcasing the best solutions and partner network in the business, including software defined automation and AI enabled technology from sensor to software, integrated intelligent devices, robotics, and digital services. You will hear from customers about our differentiated value and from management as we review progress on our goals, details of our internal investments, and inorganic priorities. I'm looking forward to seeing you there. Ajana will now begin the q and a session.

Thanks, Blake. We would like to get to as many of you as possible, so please limit yourself to one question and a quick follow-up. Julianne, let's take our first question.

Certainly. Our first question comes from Scott Davis from Melius Research. Please go ahead. Your line is open.

I'm sorry. I'm sorry. I was I was muted, guys. It's been a long earnings period. But good morning to you.

Anyways, only had one coffee. But, hey, can we talk about the CapEx stuff? Because that's a big number for you guys. Historically, you haven't spent a lot of capital. What kind of why now?

And you could one side of it might be know, you could say, are you behind the investment curve and so you have to catch up? The other is, you know, are you playing offense? So how do you guys look at it?

Scott, good morning. And let me start by saying this is solidly on offense. So we are very encouraged by the progress on our productivity programs, over the last year and a half. And, while we continue to be focused near term on getting to, those margin goals, for each business segment and overall for the company, you've asked us in the past, you know, so what's next? What else can we do to continue to drive this?

And we're taking decisive moves, to be able to address just that in ways to, of course, address our, you know, ongoing capacity needs, but to continue that push to expand margins. And Christian has talked about, the willingness to invest capital in the service of expanding margins, and that's really how you should think about this. And we've talked about our plants, our talent, and our digital infrastructure. I wanna I wanna also make it clear that we're not beginning from a standing start. We've already done this, in a number of our operations, but this is accelerating that.

And we're encouraged by what we've already seen in some of the places within our plants that we've done these things, that we've digitized, we've added additional automation, we've used our own simulation tools to improve layout. And, typically, we see the, results show up in labor, productivity, being able to do more with a finite amount of human resources. We see it in energy consumption. We see it in faster time to confidence. There's a number of benefits that we've seen in our plants.

We certainly are talking about this every day with customers, and now we're doing it at scale. And I could go through the other benefits in each of these areas. We're gonna spend some time on this, in November at, at Investor Day. But now is the time, because these things have a certain ramp time, and, we want you to understand how, as you hear about individual investments, how they fit together as part of this cohesive program.

Maybe a couple of items that I'll add to that.

The not all of this, this 2,000,000,000 is, incremental. That is portion of that is what's already built in our run rate and and our and our current spending level that we have on CapEx, for example. And so, don't don't look at it all as incremental. We are, we're including some of the, the run rate in that. The second part is that these programs, as I mentioned, are all going to be ROI based, and that, you know, our hurdle rate for, for these programs, is in the double digits.

But, obviously, those are risk adjusted based on the program and the project. But for sure, we are looking for each of these to be, to be giving us an ROI and, hopefully, over time, helping us to expand our margins. The last part actually is around the margins. And just to underscore what Blake said, we do see a path already to getting to the 23 and a half percent target that we have, we have in place from November 2023 at our investor day that we put in place and and the corridors for each of the segments. This is really about that next horizon.

It's about thinking about where can we go over the long term, with the business of Rockwell. And as we we think about, when we're going to achieve that 23 and a half percent, what's that next target gonna look like? And we have to create some more runway, and, and this is a great opportunity for us to do that.

Yeah. I think, think about this as, the current programs that we talk about, each call get us to that 23 and a half percent operating margin.

These are programs that, get us through that, those margin corridors.

Okay. That was a lot. So I'll pass it on out of respect for my peers. Thank you, guys. Best of luck.

Our next question comes from Andrew Obin from Bank of America. Please go ahead. Your line is open.

Yes. Good morning. How are you? I know that you're going to talk about at the Analyst Day, but you did sort of highlight some investment headwinds, some tax headwinds. How do you think about just generally about growth into next year?

And does recovery basically and operating leverage trump this? Or does that mean structurally lower growth for the next couple of years?

Yeah. Certainly, the, the top line growth, that we'll be prepared to talk about in November is a is a really important piece of the equation. I'll say, you know, we're happy to have returned to year over year growth in q three, and we intend to do everything that we can to continue that. We're encouraged as we talked about with some of the improvement in some of the key verticals within particularly discrete and hybrid, which, you know, are areas that are important to us. And we are committed to continuing to make progress towards those margin expansion targets regardless of what top line does.

And we've certainly contemplated, you know, the potential for the tax headwind that Christian talked about as we say that. So we're continuing to forge through, and we feel like, we're holding some good cards in terms of momentum that allow us to mitigate the impact of some of these other things.

Yeah. And, just to to build off that a little bit more, the, you know, we we do expect we're gonna get price next year. The cost reduction and margin expansion programs that we've been working on, while they are going into our core as we operate operationalize them, we still continue to, to expect that those programs are going to be giving us a yield.

Obviously, the comps get more and more difficult as we continue to build out these programs, and that's okay. But we are expecting that we're going get margin expansion next year as well. And we'll give you more detail as we get into next quarter on the earnings call.

Yeah. And I guess just just one last point on that, Andrew, is, you know, the tariffs that have been announced, including the more recent ones, we feel like, we have strong mitigation plans, as we did this year for those tariffs as we go into next year.

And just taking a step back and looking at your broader restructuring program, right, I think you sort of indicated that there's going to be a greater emphasis on continuous improvement versus larger restructuring programs, but we did finish quarter early. If you take a step back, how has the progress where did you find the progress the easiest if you look at direct material spend, sort of supply chain, SKU rationalization, rationalization of transport cost? And where do you feel you've sort of discovered you can push a lot harder? Once again, appreciate that I'm sort of asking you for an Analyst Day preview, but at the same time, you know, you did end up sort of much more efficient cost cuts than I think we expected. Thank you.

Yeah. I think part of the and I'm sure Krishna will have some additional comment on this. I think part of the feature of the program that allowed us to get there even quicker than we expected was the breadth of the surface that we went after in terms of cost savings. We certainly had initial savings coming from largely SG and A cost reductions, but we moved pretty quickly into other structural savings. And I'm happy with the way that we saw reductions in what we pay for direct material.

That'll only improve as volume continues to amplify the per unit savings, from that indirect services, and manufacturing efficiencies. I would say, you know, to your question, where do we think we can get more? Manufacturing efficiencies, are a big opportunity, and that's why it's an important feature of, the program that, that we introduced today.

Yeah. And I I think to to answer the the question and and essentially just to build off it, headcount reductions are always frankly, they they're they're hard choices to make, but those can happen faster.

And so the the boy this program developed, is not unlike what you would expect. But, you know, first of all, it started in SG and A with some headcount reductions, and then, you know, it expanded into, indirect spend, which takes a little bit longer to go after, but we went after that. Then you start going after things that that take a little bit longer lead time and not not too bad as far as things like the mode shift and thinking about how we're we're moving materials around. Then we get into product redesigns and working on sourcing. And then we've, we've now transitioned into more operational excellence in the factories.

We're doing a lot more around, you know, things like warehouse automation, things that, again, take a little bit longer lead time. And so all those are outstanding. And I think our experience is that, as Blake said, it's really about doing all of the things and continue to do them well. And importantly, in this program, as we operationalize it, I think we all are well aware that cost can creep into an organization if you are not vigilant. And so the team really needs to, we all need to continue to make sure we're vigilant around making sure those costs don't creep back in and we continue to make good progress.

Our next question comes from Andy Kaplowitz from Citigroup. Please go ahead. Your line is open.

Like or Christian, you reported book to bill of one time, which suggests you continue to see slow sequential improvement in bookings as you guided earlier this year. But you did mention the two to 3% of pull ins in Q3. So is the current environment still supportive of underlying bookings continue to slowly improve from here? And then you mentioned a little more greenfield activity, Blake, from your customers and logic sales are obviously up a lot. So do you think that evidence of more reassuring activity or maybe more CapEx related activity despite delays? How would you any more color would be helpful.

Yeah. The, let me start by saying the projects that we're tracking, we're seeing delays, but, but not cancellations. People are still looking at these as opportunities to increase their resilience, to make market share moves. In general, among our customers, they're just being subject to a higher level of scrutiny. People are, you know, looking again and again at the business case to make sure they have a good handle on their cost, what the demand picture is, and so on.

That being said, when projects do pass that hurdle rate, they are being green lit, and we've seen greenfields and brownfields. Overall, we expect to see a higher intake of orders related to new US capacity in fiscal year twenty five, and we expect that number to go up again in fiscal year twenty six. We're tracking it. We're having a good success rate as we look at these and coordinate our coverage around the world. So I'm encouraged by that.

And as I mentioned, we saw some nice development in, in particular, discrete and hybrid, verticals, which, of course, you know, is our strength. We've been in automotive for a long time, and we had some nice wins in both basic control as well as in software there. Food and beverage, our single biggest vertical. Over half of that business is really concentrated through machine builders, especially packaging machine builders, and some of our new products are helping us win new business there. So, we saw some good results in the quarter.

We didn't show it on the slide, but home and personal care, we're also seeing some spend there. So, we think we're in a good spot, and, we're looking forward to, as, you know, hopefully, additional certainty frees up some of that CapEx spend, but we're not waiting. We're continuing to be on offense both in terms of winning every order that is available out there as well as continuing to expand our margins. On the book to bill question, yes, we've been running around one the last couple of quarters, which is what we were expecting it was gonna do as we got into a more normalized environment. So you can read that to be that the backlog is, is generally flattish.

And, you know, as we get into q four, we do have a little bit more seasonal shipments that happen in our project business, especially in life cycle. So we do give that visibility around book to bill and life cycle. It wouldn't be surprising if their book to bill went a little bit below one. But generally, demand environment, the and and what we're seeing from orders is keeping on with that piece of what we're seeing on the on the shipment side.

Appreciate that. And then you sound arguably a little more positive about getting to your medium target medium term target of that 23 segment margin. But maybe if we could just focus on your largest segment for a second of Intelligent Devices. How do you think about the margin potential in Intelligent Devices? The segment is still in the high teens, but as you guys know, it's delivered low 20s on lower revenue in the past.

So what would it take to improve the margin there? Is it kind of what you guys talked about, more factory work, SKU reduction? Christian, maybe any thoughts there? Can you turn the corner in that segment as early as FY twenty twenty six towards significantly higher margin?

Look, we are absolutely committed to the overall margin target as well as the 22% to 24% corridor that we've talked about specifically for Intelligent Devices. We're encouraged that the last couple of quarters have seen sequential improvement in margin percentage, but we certainly have lots more work there. And we've identified specific areas, and I'll just I'll mention a few, and Krishna will have some others. First of all, I mentioned that we we saw overall good progress in reducing the cost of what we pay for direct material. And that's especially important for intelligent devices because it is a big business with, you know, by far the largest SKU count.

So as we increase unit volume, it's amplified across a broad range of all of those products. The pricing on the long tail of SKUs, that, that we've talked about over the last year is especially important for intelligent devices, again, because they have such a diversity of SKUs in that in that offering. Project recovery, so the configured to order business, is particularly leveraged to any uptick in CapEx spend, and we'll see some improvement there. And then specifically ClearPath, I mentioned it, in my prepared remarks. We're seeing double digit growth.

We're making progress on profitability, but there's more work to be done there.

Yeah. I I think, Blake, you you covered really a lot of the same items I would have talked about. I mean, in in the end, it's really it's about hitting the individual aspects of this business while at the same time continue to do operational excellence really well. So there's definitely a pathway to it.

You know, we we definitely have a longer term plan that we've gone through with the, with the team that, shows that we do have the ability to continue to get leverage in this business.

Our next question comes from Julian Mitchell from Barclays. Please go ahead. Your line is open.

Hi, good morning. Maybe I just wanted to start with the revenue. I'm sorry if it's a bit of a hodgepodge of a question, but I understand, Blake, you mentioned the 2% to 3% pull forward of sales into Q3, but you also referenced a handful of times project delays. And then if I look at Slide 13, you've got nine markets laid out there, and I think the outlook is lower for six of them versus April. So I'm just sort of trying to understand, how significant, let's say, were the pull forwards in Q3 versus the project delays effect?

And, and again, the the sort of weighting of the market updates on slide 13 looks perhaps more negative than your overall tone.

Right. So, let me, let me break that down just a little bit, further. So the, the potential pull forwards that, we, highlighted are really in the product side. So if people are gonna make a pull forward purchase, they're gonna do that in the product area. And we thought that while, again, we have good processes to avoid taking orders that are obviously opportunistic, let's say, to avoid a price increase, we think it's prudent, to give allowance, for the possibility that, that we did see some pull forward in our product orders.

Rockwell Automation (ROK) Q3 2025 Earnings Call Transcript

Company Participants