Eaton sales rose 21% to a record $8.53B on 14% organic growth led by data centers, but GAAP EPS fell 16% to $2.11 on Boyd Thermal financing, amortization and deal costs; adjusted EPS rose 7% to $3.15.
Revenue
$8.5B
+21.4% YoY
Net income
$821M
-16.4% YoY
Diluted EPS
$2.11
-15.9% YoY
Operating margin
23.1%
Overview: record sales, lower GAAP profit, and the reason is the acquisitions
Eaton's second quarter of 2026 (three months to June 30) shows two things at once. Demand is strong: net sales rose 21% to a record $8,531 million, and 14 points of that was organic growth, meaning growth from businesses Eaton already owned, with currency effects and acquisitions stripped out. The other 7 points came from acquisitions. Profit went the other way. Net income attributable to shareholders fell 16% to $821 million and diluted earnings per share (EPS) fell from $2.51 to $2.11.
Most of the gap is the cost of buying growth. In March Eaton bought Boyd Thermal, a maker of cooling equipment for data centers, for $9.55 billion. It paid for that and other deals with about $10 billion of new bonds, so interest expense nearly tripled. Amortization of acquired intangible assets (a non-cash charge that spreads the value of purchased customer lists and technology over several years) doubled. Deal and separation costs rose, and so did the tax rate. Before those corporate costs, the operating businesses earned more than a year earlier. Their margins still slipped, though, because commodity and wage inflation outran pricing, especially in Eaton's largest segment. Eaton reports adjusted EPS, which excludes amortization, deal costs and restructuring. It rose 7% to $3.15.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$8,531M
$7,028M
+21.4%
Organic sales growth
+14%
n/a
n/a
Gross margin
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Eaton has no single "operating income" line on its income statement. "Segment operating margin" is total segment operating profit ($1,974M vs $1,682M) divided by net sales, before corporate items such as amortization, interest, restructuring and deal costs. Pre-tax margins and the percentage changes above are computed from the 10-Q figures. Orders are shown as the rolling 12-month organic change Eaton reports, not as a dollar figure.
First half of 2026: sales of $15,982M (+19%, with 12% organic), net income attributable to shareholders of $1,687M (vs $1,945M, -13%), GAAP diluted EPS of $4.33 (vs $4.96), and adjusted EPS of $5.96 (vs $5.67, +5%). Segment operating profit was $3,664M on those sales, a 22.9% margin, down from 23.9%.
Why GAAP EPS fell 40 cents while adjusted EPS rose 20 cents
The 10-Q breaks down the change in EPS from $2.51 to $2.11. The operating businesses added $0.62 per share and currency took off $0.01. Corporate items then took off more than that:
Deal and separation costs: -$0.35. Pre-tax acquisition, integration and divestiture charges were $154M (vs $70M). They include $27M of retention awards tied to the Fibrebond purchase and costs of the planned Mobility separation. After tax the charge was $190M ($0.49 per share). That includes $52M of withholding taxes Eaton paid to move cash for the Boyd Thermal purchase.
Higher interest: -$0.27. Net interest expense rose from $71M to $201M. In March Eaton issued $8.5 billion of US-dollar notes and €1.2 billion ($1.39 billion) of euro notes, and it had $2,088M of commercial paper (short-term corporate borrowing) outstanding at June 30. Long-term debt, including the current portion, was carried at $18,520M, up from $9,894M at the end of 2025.
Higher amortization: -$0.25. Amortization of intangible assets rose from $129M to $255M, mainly because of Boyd Thermal.
Higher tax rate: -$0.16. The effective tax rate rose from 17.2% to 28.1%. Eaton gives two reasons: more income earned in higher-tax countries, and the Boyd withholding tax.
Adjusted EPS adds back amortization, deal costs and restructuring, but not the higher interest bill or most of the higher tax rate. That is why it grew only 7%, while segment operating profit grew 17%.
Segment performance
Segment
Q2 2026 sales
YoY
Organic
Operating profit
Margin
Margin Q2 2025
Electrical Americas
$3,951M
+18%
+18%
$1,088M
27.5%
29.5%
Electrical Global
$2,517M
+44%
+18%
$499M
19.8%
20.1%
Aerospace
$1,222M
+13%
+7%
$278M
22.8%
22.2%
Mobility
$841M
0%
-2%
$109M
13.0%
12.1%
In the first quarter of 2026 Eaton combined its old Vehicle and eMobility segments into one Mobility segment and restated prior periods to match.
Electrical Americas: volume is up, margin is down. Sales rose 18%, all of it organic, because Fibrebond had been part of Eaton for a full year by April. The 10-Q attributes the growth to "strength in data center and machine OEM end-markets," partly offset by weaker residential and industrial demand. Products sales rose from $817M to $1,144M and Systems sales from $2,533M to $2,806M. The operating margin still fell 200 basis points (a basis point is one-hundredth of a percentage point) to 27.5%. Eaton says "higher commodity inflation" cut the margin by 470 bp and higher sales volume added back 260 bp. In other words, costs for metals and other inputs rose faster than prices. The earnings release says the margin was up 190 bp from the first quarter, so the problem was easing within the year.
Electrical Global: Boyd drives the headline figure. Sales rose 44%. Of that, 25 points came from Boyd Thermal, 18 points were organic ("broad-based strength... with particular strength in data center and machine OEM") and 1 point was currency. From March 12 to June 30, Boyd added $524M of sales and $121M of segment operating profit. That is about a 23% margin, above the segment's 19.8%, so Boyd is helping the segment's margin. Inflation cut the segment margin by 460 bp. Higher volume (+240 bp), a better product mix (+100 bp) and efficiencies (+80 bp) made up most of that.
Aerospace: margin improved. Sales rose 13%: 7% organic and 6% from Ultra PCS, a UK-based maker of electronic controls and stores-ejection equipment bought in January for $1.53 billion. Aftermarket (replacement parts and service) sales grew fastest, from $396M to $474M. The 10-Q credits favorable mix with adding 150 bp to the margin, though it does not say which products drove that mix. Ultra PCS added 40 bp. The 22.8% margin was up 60 bp even after 300 bp of inflation.
Mobility is shrinking and will be separated. Sales were flat, as a 2% organic decline in Europe was offset by currency. eMobility sales fell from $182M to $157M. The margin still rose to 13.0% because operating efficiencies added 300 bp.
Orders and backlog: the leading indicator
Backlog means orders customers have firmly committed to that Eaton has not yet delivered. It grew much faster than sales:
Segment
Backlog Jun 30, 2026
Jun 30, 2025
Total change
Organic change
Orders, organic (rolling 12 months)
Book-to-bill
Electrical Americas
$15,175M
$11,377M
+33%
+33%
+41%
1.3
Electrical Global
$3,602M
$1,771M
+103%
+54%
+33%
1.1
Aerospace
$5,164M
$4,025M
+28%
+18%
+17%
1.2
Book-to-bill is new orders divided by sales, averaged over four quarters. A figure above 1.0 means orders are arriving faster than Eaton is shipping. The +41% organic order growth in Electrical Americas is a sharp jump from +2% a year earlier. According to the earnings release (8-K Exhibit 99.1), the combined Electrical businesses' backlog was up 43% and their book-to-bill ratio was 1.2.
Takeaway: The GAAP decline comes from how Eaton paid for its growth, not from weaker demand. Sales rose 21%, segment profit rose 17%, and Electrical Americas orders rose 41% organically. Borrowing roughly $10 billion for Boyd Thermal, plus the amortization, deal costs and taxes that came with it, turned that into a 16% fall in EPS. The part of the business to watch is the Electrical Americas margin. It fell 200 bp year over year because costs rose faster than prices. It recovered 190 bp from Q1, but it is still below where it was a year ago.
Portfolio moves: more data center and aerospace, less vehicle
Boyd Thermal (March 12, 2026, $9.55 billion): makes cooling components and systems for data centers, aerospace and other markets. It has more than 6,000 employees and is reported in Electrical Global.
Ultra PCS (January 23, 2026, $1.53 billion): electronic controls, sensing and stores-ejection equipment. It is reported in Aerospace and contributed $111M of sales and $31M of segment profit through June 30.
Fibrebond (April 2025, $1.43 billion) and Resilient Power Systems (August 2025; solid-state transformer technology) are now part of Electrical Americas. The 10-Q notes $6M of incentive compensation tied to Resilient this quarter.
Mobility separation: Eaton announced a spin-off plan on January 26, 2026, and on June 10 signed an agreement to combine Mobility with Dana Incorporated in a Reverse Morris Trust. This is a tax-efficient structure in which a unit is split off to shareholders and merged into another company in the same step. Eaton shareholders are expected to own at least 50.1% of the combined company, and Eaton is to receive a cash distribution of about $1.1 billion, which it expects to put mainly toward paying down debt. Closing is expected in Q1 2027, subject to Dana shareholder and regulatory approvals. If the deal fails, Eaton intends to spin Mobility off anyway. Until closing, Mobility is still reported as part of Eaton's continuing results.
Cash flow and balance sheet
For the first half, operating cash flow was $1,634M, up from $1,156M, mainly because less cash was tied up in working capital. Eaton spent $11,079M on acquisitions in the half and made no share buybacks, compared with $1,306M of buybacks a year earlier. The 10-Q says the company "does not intend to pursue share repurchases in 2026" because of the Boyd deal. It expects capital expenditures of about $1.15 billion in 2026 to add production capacity. According to the earnings release, Q2 operating cash flow was $1,127M and free cash flow (operating cash flow minus capital spending) was $874M, up from $716M.
Guidance and outlook
The following guidance is from the July 31 earnings release (8-K Exhibit 99.1), not the 10-Q. Eaton raised its full-year organic growth outlook and now expects for 2026:
Organic growth of 11–13%
Segment margins of 24.1–24.5%
GAAP EPS of $10.36–$10.56 (about flat at the midpoint versus 2025, according to the release)
Adjusted EPS of $13.40–$13.60 (up 12% at the midpoint, according to the release)
For Q3 2026 it expects organic growth of 13.5–15.5%, segment margins of 24.6–25.0%, GAAP EPS of $2.77–$2.87 and adjusted EPS of $3.46–$3.56.
Our read: The demand outlook looks solid. Backlog in the three growth segments grew 18–54% organically, well ahead of sales. The full-year margin target is the harder part. First-half segment margin was 22.9%. To reach 24.1–24.5% for the year, the second half needs margins around 25% or higher, which fits the Q3 guide. That requires the Electrical Americas pricing and cost recovery seen from Q1 to Q2 to continue while commodity inflation is still the largest drag the 10-Q cites. GAAP earnings will keep lagging adjusted earnings for as long as the Boyd financing costs are in place. The ~$1.1 billion cash distribution from the Dana deal and the end of Mobility's lower-margin sales are 2027 events, not 2026 ones.