Carrier's Q2 2026 sales rose 4% to $6.35B as organic growth returned (+3%), but tariffs, input costs and mix cut operating margin to 13.0% and continuing EPS to $0.60 from $0.70; orders jumped ~40% and full-year guidance was raised.
Revenue
$6.4B
+3.9% YoY
Net income
$501M
-17.6% YoY
Diluted EPS
$0.60
-14.3% YoY
Operating margin
13.0%
Overview
Carrier Global, which makes heating, air-conditioning and refrigeration equipment (brands include Carrier, Viessmann, Toshiba and Carrier Transicold), grew second-quarter 2026 sales 4% to $6.35 billion but earned less on them. GAAP operating profit fell 9% to $825 million and diluted EPS from continuing operations fell to $0.60 from $0.70. The 10-Q's explanation is consistent across nearly every segment: "higher input costs, including the impact of tariffs, and unfavorable business mix" outweighed higher volumes, better pricing and productivity savings.
The more encouraging signal is volume. Organic sales, meaning growth excluding currency swings and acquisitions or disposals, rose 3% after a weak first quarter (first-half organic growth was only 1%). The Americas residential business, which had been flat for the half, grew 9% in the quarter.
Key metrics
All figures are GAAP and from continuing operations unless marked otherwise. Carrier reported no discontinued-operations result this quarter. Last year's Q2 included a $17 million loss from discontinued operations, so last year's total net earnings to shareholders were $591 million, against $608 million from continuing operations.
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$6,351M
$6,113M
+3.9%
Organic sales growth
+3%
n/a
n/a
Gross margin
27.2%
28.9%
-170 bps
Read 0 community reports on Carrier Global, or write your own.Write a report
Net earnings to common shareholders (continuing ops)
$501M
$608M
-17.6%
Diluted EPS (continuing ops)
$0.60
$0.70
-14.3%
Adjusted diluted EPS (non-GAAP, per 8-K)
$0.86
$0.92
-7%
Effective tax rate
25.0%
20.0%
+5.0 pts
Diluted shares outstanding
836.5M
866.3M
-3.4%
Operating margin is the share of revenue left after running the business, before interest and tax. "Adjusted" figures are the company's own measure: they strip out restructuring costs, amortization of acquired intangibles (a non-cash accounting charge left over from past acquisitions, $213 million this quarter) and one-off items such as this quarter's $46 million Riello impairment.
Takeaway: Demand came back sooner than Carrier expected, but margins have not followed. All four segments grew sales and all four reported lower segment operating profit. The Americas unit's margin fell 260 basis points (2.6 percentage points) to 24.4% even though sales rose 4%. According to the earnings release, that growth came "mainly" from price, and price was more than offset by input costs and mix. With the order book growing fast, the question for the second half is whether Carrier can turn that volume into profit.
What drove the quarter
Sales. Reported growth of 4% was 3 points organic and 1 point from a weaker dollar. Carrier's 10-Q credits the Americas segment for most of the organic gain ("improved end-market demand resulted in higher volumes"), with smaller contributions from Europe and Asia Pacific/Middle East/Africa. Transportation (truck, trailer and shipping-container refrigeration) was flat organically.
Margin squeeze. Gross margin fell 170 basis points to 27.2%. Cost of products and services sold rose 6% while sales rose 4%. The filing attributes the gap to higher input costs, including tariffs, and to an unfavorable mix, meaning more of the sales came from lower-margin products and businesses. The 10-Q says 2025 tariffs were "fully mitigated," but new Section 232 tariffs on steel, aluminum and copper were announced on April 2, 2026. Carrier also says it has booked no benefit from potential refunds of IEEPA tariffs, which the Supreme Court ruled unauthorized in February 2026. Any refund would therefore be upside that is not yet in the numbers.
Below the operating line. Three smaller items hurt as well:
Equity-method earnings, Carrier's share of profits at joint ventures it does not control, fell 26% to $58 million because of weaker JVs in the Americas and Asia Pacific/Middle East/Africa. The earnings release links the latter to the Middle East conflict.
Interest expense rose 10% to $126 million because of commercial-paper borrowing. Commercial paper is short-term corporate debt, and $685 million was outstanding at June 30.
The tax rate jumped to 25.0% from 20.0%, mostly because the $46 million Riello impairment is not tax-deductible and a higher German tax rate added $10 million of tax expense.
Together these explain why net earnings fell 17.6%, about twice as fast as operating profit.
Segment performance (Q2 2026)
Segment
Net sales
Organic growth
Segment op. profit
Segment margin (vs. Q2 2025)
Climate Solutions Americas
$3,372M (+4%)
+4%
$823M (-6%)
24.4% (27.0%)
Climate Solutions Europe
$1,324M (+6%)
+3%
$95M (-4%)
7.2% (7.9%)
Climate Solutions Asia Pacific, Middle East & Africa
$917M (+4%)
+4%
$108M (-20%)
11.8% (15.3%)
Climate Solutions Transportation
$738M (+2%)
0%
$118M (-8%)
16.0% (17.6%)
Total segment
$6,351M (+4%)
+3%
$1,144M (-8%)
18.0% (20.3%)
Americas: residential and light commercial up, large commercial down. Residential organic sales rose 9%, which the 10-Q attributes to "improvements in end-market demand and pricing". Light commercial rose 10%. Large commercial systems fell 6% "driven by timing of customer deliveries". The earnings release puts that decline at 8% when the NORESCO energy-services business, which Carrier is exiting, is excluded. The first half looks very different: residential was flat and commercial was down 2%. Segment operating profit fell 10% on an operational basis (excluding currency and other adjustments) because of input costs, tariffs, mix, higher overhead and lower JV income.
Europe (including Viessmann heat pumps and boilers): Residential and light commercial grew 7% on higher volumes, although the 10-Q notes "pricing promotions" (discounting). Commercial fell 6%. Half of the 6% reported growth came from currency. Europe's margin is by far Carrier's thinnest at 7.2%. Operational profit fell 7%, and the filing blames mix, the price promotions and higher overhead.
Asia Pacific, Middle East & Africa: China fell 14% as "end-markets experienced economic challenges impacting both demand and price". The earnings release says double-digit growth in India, the Middle East, Southeast Asia and Australia more than offset it. Operational profit fell 36%. The reported decline of only 20% was cushioned by a gain on a land sale (17 points of the bridge), so the underlying deterioration is worse than the headline.
Transportation: Container refrigeration rose 39%, but global truck and trailer volumes fell 13% on weaker North American and European demand. The mix shift toward containers pulled the margin down 160 basis points.
Refrigerant transition and destocking: the Q2 10-Q does not attribute any of the quarter's results to the U.S. refrigerant changeover or to distributor inventory destocking. Its explanations are end-market demand, pricing, mix, tariffs and input costs. Carrier's own inventory rose to $2,759 million at June 30 from $2,483 million at December 31, mostly in finished goods ($1,793 million, up from $1,572 million).
Data centers and orders (from the earnings release)
The 10-Q does not break out data-center sales. Carrier's July 28 earnings release (8-K Exhibit 99.1) reports that total company orders rose about 40%, commercial HVAC orders about 65% and data-center orders more than 300%. All three figures exclude NORESCO and Riello. CEO David Gitlin cited "record backlog levels" as a reason to raise guidance. Orders are not revenue: the 10-Q shows Americas commercial sales down 6% this quarter, so the data-center demand has yet to show up in reported sales.
Portfolio changes: continuing operations and divestitures
Riello sold. Carrier agreed in December 2025 to sell Riello, a burner, boiler and heat-pump maker reported mainly in the Europe segment, to Ariston Group for expected gross proceeds of about $430 million. It took a $46 million impairment in Q2, meaning it wrote down Riello's book value toward the sale price. The sale closed on July 1, 2026. Riello was presented as held for sale, not as a discontinued operation, so its results are still included in continuing sales for this quarter.
NORESCO exit announced (per the earnings release). Guidance now assumes about $225 million of lost 2026 revenue from Riello and about $125 million from NORESCO.
Restructuring: $8 million in Q2, down from $47 million a year ago. First-half charges were $116 million, of which $89 million was in Europe. At June 30, $111 million of restructuring costs were still accrued.
First half 2026 (year to date)
Metric
H1 2026
H1 2025
Change
Net sales
$11,692M
$11,331M
+3% (organic +1%, FX +2%)
Gross margin
25.4%
28.4%
-300 bps
Operating profit
$1,083M
$1,532M
-29%
Adjusted operating profit (non-GAAP)
$1,689M
$2,014M
-16%
Net earnings to common (continuing)
$739M
$1,020M
-28%
Diluted EPS (continuing)
$0.88
$1.17
-25%
Effective tax rate
9.4%
20.1%
-10.7 pts
The first-half tax rate is flattered by a one-off $99 million net benefit from partially releasing a valuation allowance at a Swiss subsidiary, plus an $18 million favorable state tax settlement. Without them, first-half EPS would have been lower still.
Cash, debt and shareholder returns
Cash flow: the earnings release reports Q2 operating cash flow of $927 million and free cash flow (operating cash flow minus capital spending) of $810 million, up from $568 million. The 10-Q shows first-half operating cash flow from continuing operations of $953 million, up from $752 million, which it attributes to "favorable changes in working capital balances".
Buybacks: Carrier bought back 6.94 million shares in Q2 at an average price of $63.61, and 12.0 million shares for $748 million in the first half. That cut the diluted share count by 3.4% year over year, which cushioned the EPS decline. About $4.6 billion of buyback authorization remained at June 30. Dividends paid in the first half totaled $400 million, and the quarterly dividend is $0.24 per share.
Balance sheet: net debt (total debt minus cash) rose to $10.6 billion from $10.3 billion at year-end, with $1.34 billion of cash, about 95% of it held abroad. S&P rates Carrier BBB+ (stable) and Moody's rates it Baa1 (positive).
Guidance and outlook
The earnings release raised full-year 2026 guidance:
Full-year 2026
New guidance (Jul 28)
Prior guidance
Sales
~$23 billion
~$22 billion
Organic growth
up mid- to high-single digits
flat to up low-single digits
Adjusted operating profit
~$3.5 billion
~$3.4 billion
Adjusted EPS
~$2.90
~$2.80
Free cash flow
~$2 billion
~$2 billion
The new EPS outlook absorbs about $0.05 of costs from the NORESCO exit and new U.S. factory costs.
Our read: the raised outlook implies a much stronger second half. First-half adjusted operating profit was $1.69 billion, so hitting about $3.5 billion requires roughly $1.8 billion in the second half. First-half organic growth was only 1%, so reaching mid-to-high single digits for the year requires high-single-digit or better organic growth from July to December. The order figures (commercial HVAC up about 65%, data centers more than tripled) make the volume part plausible. Margins are the less certain part: in Q2 every segment's margin fell despite growth, and tariffs, input costs and mix are ongoing pressures. Q3 commercial deliveries in the Americas and whether China stabilizes are the two items to watch. Free-cash-flow guidance of about $2 billion was left unchanged despite the higher profit outlook.