Johnson Controls
Sells and installs engineered building systems (HVAC/chillers, fire detection & suppression, security, controls) then attaches long-duration, recurring service, maintenance, and software (OpenBlue) contracts on the installed base; project-plus-service model with a large systems-and-services backlog. Now a focused commercial-buildings operator after exiting residential/light-commercial HVAC.
Earnings, margins, COGS & capex
JCI transformed in FY2025-26 from a diversified HVAC conglomerate into a focused commercial-buildings company by selling its Residential & Light Commercial HVAC business to Bosch for $8.1B total (~$6.7B JCI portion, ~$5.0B net after tax) on 2025-07-31, funding a $5.0B accelerated share repurchase. The remaining business (three geographic segments: Americas, EMEA, APAC, plus Global Products) is being pulled by unprecedented AI data-center thermal-management demand. FY2025 delivered $23.6B revenue (+6% organic), $3.76 adjusted EPS, $2.63 GAAP EPS, and $2.5B adjusted FCF. Momentum accelerated into FY2026: Q2 orders +30% organic, backlog a record $20.0B (+26% organic), adjusted EPS +45%, and management raised the FY2026 adjusted-EPS guide twice (initial ~$4.55 at FY25 close, to ~$4.70 at Q1, to ~$4.85 at Q2).
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~64¢ is cost of goods and ~21¢ operating expense, leaving ~15¢ of operating profit.
Revenue trend
Margins
up ~100 bps YoY; FY25 18.4%
up ~370 bps YoY; FY25 13.2%
up ~350 bps YoY; FY25 17.0%
stable, guided
guided FY2026
COGS structure
Not separately broken out post-reorganization. Cost base is dominated by manufacturing of chillers/HVAC equipment and fire/security hardware (steel, copper/aluminum, compressors, refrigerants, electronic controls) plus a large field-labor force for installation and service. Low-GWP refrigerant transition (AIM Act) and tariffs/input-cost inflation are the swing factors; pricing and mix (data-center, service attach) have driven strong margin expansion.
Capex
Modest for an industrial (~$0.6-0.7B/yr, ~3% of sales). Capital allocation skews to shareholder returns (~$6.0B repurchases including the $5.0B ASR, and ~$976M dividends in FY2025) plus tuck-in/technology investments (e.g., stake in two-phase liquid-cooling firm Accelsius) rather than heavy plant buildout.
Latest earnings
Beat; guidance raised (adjusted EPS to ~$4.85 from ~$4.70, organic growth to ~6%)
FY2026: ~6% organic revenue growth, ~$4.85 adjusted EPS, ~50% operating leverage, ~100% adjusted FCF conversion
- Q2 sales
- $6.1B (+8% reported, +6% organic)
- GAAP EPS
- $0.99
- Adjusted EPS
- $1.19 (+45% YoY)
- Orders
- +30% organic YoY
- Backlog
- $20.0B (+26% organic)
- Adjusted FCF
- $526M (Q2)
- Net debt / adj EBITDA
- 2.0x
Growth drivers
- AI data-center thermal management — chillers, CDUs, and new two-phase direct-to-chip liquid cooling (Accelsius investment) plus JCI-published 1GW thermal reference-design guides aligned to NVIDIA's DSX architecture
- Record systems-and-services backlog ($20.0B, +26% organic) converting to revenue
- Recurring, higher-margin service and OpenBlue software attach on a large installed base
- Building decarbonization / electrification and energy-efficiency retrofits (heat pumps, controls)
- Post-divestiture simplification + new-CEO operating model driving margin expansion and operating leverage
- Reshoring / industrial and healthcare/institutional construction demand
Reported financials — SEC EDGAR
Audited GAAP figures pulled from SEC filings · latest filing 2025-11-14. The audited primary-source spine — not financial advice.
Revenue — annual (GAAP)
Margins & balance sheet — FY’25
Bull & bear
A newly focused buildings pure-play with the balance sheet, installed base, and now the liquid-cooling technology to be a prime beneficiary of the AI data-center buildout, compounding a record backlog into double-digit EPS growth and continued margin expansion.
- Backlog $20.0B (+26% organic) and orders +30% organic give rare visibility into sustained double-digit earnings growth
- Data center is now a core secular driver, not a cyclical one, with chillers + two-phase liquid cooling (Accelsius) and 1GW reference-design guides aligned to NVIDIA DSX
- Two guidance raises in FY2026 (adjusted EPS to ~$4.85) show the operating-model overhaul is delivering ~50% operating leverage
- Bosch divestiture (~$5.0B net) funded a $5.0B ASR and cut leverage to 2.0x, leaving room for more returns
- Recurring service + OpenBlue software mix structurally lifts margins and reduces cyclicality over time
The stock has re-rated to a growth multiple on a still-cyclical industrial whose newest driver (hyperscaler data-center capex) is both concentrated and competitive; any demand air-pocket or execution stumble on the transformation gets punished from a high base.
- At ~$140 on ~$4.85 FY2026 EPS the stock trades ~29x, pricing in durable acceleration with little margin for error
- Data-center growth depends on a handful of hyperscalers whose capex is lumpy and could plateau
- Cooling is a crowded fight: Vertiv, Trane, Carrier, and pure-play liquid-cooling entrants all target the same TAM
- Core commercial-buildings demand remains tied to construction cycles and interest rates
- Persistent gap between GAAP and adjusted results, plus transformation/restructuring costs, complicates the quality of earnings
What it is worth
Forward P/E and EV/EBITDA relative to commercial-HVAC/building-automation peers, cross-checked against backlog-driven earnings trajectory
~$100-115
a data-center capex air-pocket or construction downturn compresses the multiple toward ~22-24x on flatter EPS, reverting the stock toward its 52-week low.
~$140-150
~$4.85-5.10 EPS at ~28-30x; steady organic growth, on-plan margin expansion, and continued buybacks hold the current re-rating.
~$165-180
sustained data-center-led double-digit EPS growth compounds to ~$5.50+ EPS with a maintained ~30x multiple; backlog converts cleanly and margins keep expanding.
At ~$140 on ~$4.85 FY2026 adjusted EPS, JCI trades ~29x forward earnings and roughly 2.0x net-debt leverage with a ~$87-89B market cap. That is a growth-multiple re-rating (in line with Trane ~high-20s to 30x, above Carrier ~low-20s), justified by record backlog, +30% organic orders, and data-center exposure, but pricing in continued acceleration.
SWOT
Strengths
- Leading position in commercial HVAC/chillers, fire & security, and building controls with a large global installed base
- Recurring service + software revenue that is stickier and higher-margin than equipment sales
- Record backlog ($20.0B) and orders (+30% organic) give multi-quarter revenue visibility
- Data-center thermal leadership — chillers plus new liquid-cooling capability and 1GW reference-design guides aligned to NVIDIA DSX
- Simpler, focused portfolio after the Bosch R&LC divestiture; deleveraged balance sheet (2.0x)
Weaknesses
- Cyclical exposure to non-residential construction and interest-rate-sensitive capital projects
- GAAP margins still well below adjusted margins; heavy adjustments and prior restructuring/charge history
- Execution risk on the ongoing operating-model transformation under a still-new CEO
- Field-labor intensity and skilled-technician scarcity constrain installation/service throughput
- Reliance on Microsoft Azure for the OpenBlue software platform
Opportunities
- AI data-center capex supercycle and the shift from air to liquid cooling
- Building decarbonization, electrification (heat pumps), and energy-efficiency retrofit mandates
- Cross-sell of OpenBlue software/analytics and service contracts onto the installed base
- Margin expansion runway from mix, pricing, and cost discipline (guided ~50% operating leverage)
- Further capital return from Bosch proceeds and buybacks
Threats
- Hyperscaler capex concentration: a data-center spending slowdown would hit the fastest-growing driver
- Intensifying competition in data-center cooling from Trane, Carrier, Vertiv, and specialists
- Rich valuation (~29x forward EPS) leaves little room for execution slips or a demand air-pocket
- Input-cost inflation, tariffs, and low-GWP refrigerant-transition costs
- Macro/rate-driven weakness in commercial real estate and construction starts; FX headwinds
Moats, dependencies & bottlenecks
Moats
Decades of installed HVAC/fire/security equipment generates sticky, recurring, high-margin maintenance and service revenue with high switching costs.
Building codes and life-safety certification (Tyco/Simplex/Grinnell heritage) create trust, spec-in, and compliance barriers.
Global distribution, engineering depth, and a full stack (HVAC + fire + security + controls) let it bundle whole-building solutions few rivals match.
Azure-based building-management/digital-twin software layered on hardware deepens lock-in, though software differentiation is still contested.
Chiller scale plus new liquid-cooling IP and the NVIDIA-DSX-aligned reference guides create an early-mover position, but competitively assailable.
Dependencies
Project revenue is tied to commercial construction starts and financing costs.
Demand concentration The fastest-growing driver depends on a concentrated set of cloud/AI buyers whose spending is cyclical.
Steel, copper/aluminum, compressors, electronic controls/semiconductors, and low-GWP refrigerants; tariff and inflation exposure.
Installation and service throughput is gated by technician availability.
Technology/partner Software platform is built on Azure; partner-of-the-year relationship but a single-cloud dependency.
Mandated refrigerant phase-downs drive redesign costs but also replacement demand.
Advantages
- Full-stack whole-building offering (HVAC + fire + security + controls + software) that competitors sell only in pieces
- Large recurring-service and software revenue base cushioning equipment cyclicality
- Early, differentiated data-center cooling position (chillers + two-phase liquid cooling + NVIDIA-DSX-aligned reference guides)
- Deleveraged balance sheet and strong FCF conversion funding buybacks and tuck-ins
- Global installed base creating a durable cross-sell and retrofit funnel
Weaknesses
- Cyclicality tied to construction and rates
- Large GAAP-vs-adjusted earnings gap and restructuring-heavy history
- Transformation execution risk under a relatively new CEO
- Single-cloud (Azure) software dependency
- Valuation leaves little cushion for a demand or execution stumble
Bottlenecks
- Skilled-technician and field-labor scarcity limiting installation/service capacity
- Manufacturing/supply capacity for chillers and thermal equipment amid surging data-center demand
- Speed of backlog-to-revenue conversion given long project cycles
- Component and low-GWP-refrigerant supply constraints
Top signals & trends
Top signals
Record book of business; strongest forward-visibility signal.
Demand accelerating, led by data centers.
Management confidence and delivery on operating leverage.
EPS-accretive capital return; leverage cut to 2.0x.
Broad-based margin expansion across all three regions.
Growth-multiple risk on a cyclical base.
Recent pullback from the June peak (from $148.21 to ~$138) despite strong fundamentals.
Trends
Air-to-liquid transition and 1GW AI factories expand JCI's thermal TAM; core secular driver.
Heat pumps, controls, and efficiency retrofits driven by regulation and corporate net-zero goals.
OpenBlue and digital twins add recurring software revenue and stickiness.
Adds redesign cost but pulls forward replacement/retrofit demand.
Pressures interest-sensitive commercial construction and project financing.
New domestic manufacturing and institutional builds add HVAC/fire/security demand.
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
Refrigerants and low-GWP transition chemistry (Opteon).
Also a supplier of refrigerants (Solstice) and controls components, alongside being a competitor.
Not a direct component supplier but the reference-architecture anchor (JCI's 1GW thermal guides align to NVIDIA's DSX architecture) and the demand engine behind liquid-cooling growth.
Two-phase direct-to-chip liquid-cooling technology (NeuCool); JCI led its $65M Series B (announced 2025-10, closed 2026-01).
Steel, copper, aluminum, compressors, and electronic controls/semiconductors (multiple suppliers).
Hyperscaler data-center customer and OpenBlue/Azure partner (named Microsoft ISV partner-of-the-year).
Hyperscaler data-center demand for cooling/controls.
Hyperscaler data-center buyer.
Large AI/data-center capex buyer of thermal infrastructure.
healthcare, education & government Core installed-base and retrofit customers for HVAC, fire, security, and controls.
Closest pure-play peer in commercial HVAC/chillers; strong data-center cooling franchise.
Global HVAC peer, also reshaping portfolio toward commercial/aftermarket; competes in data-center cooling.
Data-center thermal & power specialist; the pure-play threat in liquid cooling and CDUs.
Building automation, controls, and fire/security overlap via Honeywell Building Technologies.
Building management, energy management, and data-center infrastructure (ADR; primary listing Euronext Paris).
Siemens Smart Infrastructure competes in building automation, fire, and controls (ADR; primary XETRA).
Commercial HVAC competitor (less overlap after JCI exited residential/light-commercial).
Controls, automation, and cold-chain/thermal components overlap in parts of the stack.
Global HVAC leader (ADR; primary Tokyo); strong commercial position, competes in applied/chiller and data-center cooling.