ITW Q2 2026 revenue rose 6.1% to $4.30B and diluted EPS 10.1% to $2.84 as welding and semiconductor-equipment demand drove 4.5% organic growth and a 26.7% operating margin; full-year guidance raised.
Revenue
$4.3B
+6.1% YoY
Net income
$815M
+7.9% YoY
Diluted EPS
$2.84
+10.1% YoY
Operating margin
26.7%
Overview
Illinois Tool Works (ITW), the Glenview, Illinois maker of everything from car-door fasteners and welding machines to commercial dishwashers and adhesives, grew second-quarter 2026 revenue 6.1% to $4.30 billion and diluted earnings per share (EPS) 10.1% to $2.84. Operating income of $1.15 billion was, in the company's words, the most profitable quarter in its history.
The story of the quarter is a shift in where growth came from. ITW's businesses that sell equipment factories buy — welding machines and semiconductor/electronics production gear — grew by double digits, while its restaurant-equipment and auto-parts businesses were flat to slightly down. On the back of that, management raised full-year guidance for both sales and earnings.
A note on the terms used below: organic growth is sales growth from businesses ITW has owned for over a year, stripped of currency swings — the cleanest read on real demand. Operating margin is the share of revenue left after paying to make and sell products, before interest and tax. A basis point (bp) is one-hundredth of a percentage point.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Revenue
$4,301M
$4,053M
+6.1%
Organic revenue growth
+4.5%
—
—
Operating income
$1,147M
$1,068M
+7.4%
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Of the 6.1% revenue growth, 4.5 points were organic, 1.4 points came from a weaker dollar making overseas sales worth more when converted (currency translation), and 0.2 points from a small Test & Measurement acquisition closed on October 1, 2025 ($120 million). Organic growth also absorbed a 60 bp drag from "product line simplification" — ITW deliberately walking away from low-margin products and customers under its 80/20 approach. By region, North America grew 6.4% organically, Asia Pacific 5.6% (China 3.4%), and Europe, Middle East and Africa was flat.
EPS grew faster than net income (10.1% vs. 7.9%) because the diluted share count fell to 287.0 million from 292.9 million a year ago; ITW bought back 2.9 million shares for about $750 million in the quarter.
Segment performance
ITW reports seven segments. The spread between them is the most informative part of the filing.
Segment
Revenue
Revenue growth
Organic growth
Operating margin
Margin change
Automotive OEM
$857M
+1.3%
−0.4%
21.6%
+30 bps
Food Equipment
$692M
+1.6%
0.0%
27.1%
−60 bps
Test & Measurement and Electronics
$769M
+12.1%
+10.0%
25.2%
+240 bps
Welding
$549M
+14.7%
+13.9%
32.4%
−70 bps
Polymers & Fluids
$476M
+8.8%
+7.3%
29.3%
+160 bps
Construction Products
$494M
+4.3%
+2.0%
30.6%
−20 bps
Specialty Products
$468M
+3.0%
+1.6%
31.5%
−110 bps
Total ITW
$4,301M
+6.1%
+4.5%
26.7%
+40 bps
Welding (+13.9% organic) was the fastest grower. Equipment sales rose 18.7% and consumables (wire, rods) 6.0%. The growth was entirely North American — up 18.5%, with the 10-Q citing "higher demand in the infrastructure, energy, aerospace and defense end markets" — while international welding sales fell 6.4% on weaker Asia Pacific and Europe. Despite the volume, the segment's margin fell 70 bps: 220 bps of benefit from spreading fixed costs over more sales (operating leverage) was more than eaten by higher employee costs, 50 bps of price/cost squeeze and 30 bps of higher restructuring charges.
Test & Measurement and Electronics (+10.0% organic) was driven by the semiconductor cycle. Electronics organic revenue grew 21.0%, and within that the electronics-assembly businesses grew 49.2% "due to higher demand across all major regions." The traditional test and measurement businesses grew a more modest 4.2%, with growth at Instron partly offset by a decline at MTS Test & Simulation. Margin jumped 240 bps to 25.2%, almost all from operating leverage (+250 bps), net of 20 bps of dilution from the acquisition.
Polymers & Fluids (+7.3% organic) grew across all regions — car care, engine repair and body repair in North America, and biopharmaceutical demand in the fluids business — and margin rose 160 bps to 29.3%.
Food Equipment (flat organic) hides a sharp split. North American equipment sales fell 8.2%, which the 10-Q attributes to "lower demand in the institutional end market and independent and quick service restaurants," while service revenue grew 4.9%. Internationally the segment grew 5.7%, helped by European warewash (commercial dishwashing) demand. Margin fell 60 bps to 27.1% on employee costs and product mix.
Automotive OEM (−0.4% organic) slightly lagged worldwide auto builds, which were flat. But 80 bps of drag came from product line simplification, so underlying volume roughly tracked the market. Europe fell 5.3% vs. a 1% decline in European builds, which ITW puts down to customer mix; China rose 0.5% while China auto builds fell 3%, helped by exposure to electric-vehicle makers. Margin still rose 30 bps to 21.6% even though price/cost cost the segment 90 bps.
Construction Products (+2.0%) was helped by 12.9% growth in the US commercial market, with US residential up only 0.8%. Specialty Products (+1.6%) had the quarter's largest margin decline (−110 bps to 31.5%), driven by 160 bps of unfavorable price/cost; its organic growth was also held back 140 bps by product line simplification.
Where the margin gain came from
Driver (company-wide)
Margin impact
Enterprise initiatives (80/20 and sourcing savings)
+120 bps
Operating leverage (higher volume over fixed costs)
+90 bps
Price/cost (selling-price increases vs. material cost inflation)
−40 bps
Higher employee-related expenses and other cost changes
remainder (about −130 bps)
Total change
+40 bps
"Enterprise initiatives" is ITW's label for internally generated efficiency — mainly its 80/20 Front-to-Back process (concentrating resources on the largest, most profitable customers and products) and strategic sourcing. They added 120 bps on their own, but most of that was given back. The press release says price increases "more than offset higher raw material costs in dollar terms," but because price increases lag inflation, the net effect still diluted margin by 40 bps — worst in Specialty Products (−160 bps), Automotive OEM (−90 bps) and Welding (−50 bps). Amortization of acquired intangibles took 40 bps off the reported margin (about $0.04 of EPS).
Cash flow and balance sheet
Operating cash flow was $723 million (vs. $550 million), and after $92 million of capital spending, free cash flow — cash left after running the business and investing in plant — was $631 million, up about 41%. That is still only 77% of net income, below the full-year target of more than 100%, as trade receivables rose to $3.56 billion from $3.23 billion at year-end with the higher sales.
ITW returned over $1.2 billion to shareholders in the quarter — $750 million of buybacks plus dividends (the quarterly dividend is $1.61 per share, up from $1.50). That exceeded free cash flow, and the gap was funded with borrowing: short-term debt rose to $3.15 billion from $2.29 billion at year-end, and stockholders' equity fell to $2.90 billion. After the quarter, on August 13, 2026, ITW issued $1.5 billion of 4.650% notes due 2029, with proceeds intended mainly to repay commercial paper (short-term corporate IOUs). Only $865 million of authorization remained under the 2023 repurchase program at June 30.
The 24.4% tax rate was the same as a year ago, so this quarter's EPS growth came from operations and a lower share count, not a tax benefit. (The first-half rate of 22.6% did include a $34 million one-time benefit booked in Q1 from resolving a US tax audit.)
Takeaway: ITW's growth this quarter came from its most cyclical, capital-equipment-driven businesses — North American welding (+18.5%) and semiconductor-related electronics assembly (+49.2%) — while restaurant equipment and auto stayed flat. Margins still rose, but the 120 bps from ITW's self-help program was largely consumed by labor costs and price increases trailing inflation, so the raised outlook leans more than usual on that equipment demand holding up.
Guidance and outlook
Management raised its 2026 outlook in the Q2 earnings release:
Full-year 2026 guidance
New
GAAP EPS
$11.35–$11.55 (midpoint $11.45, raised $0.15; ~9% growth at midpoint)
Total revenue growth
4%–5%
Organic revenue growth
3%–4% (midpoint raised 1.5 points)
Operating margin
26.5%–27.5%, with enterprise initiatives contributing more than 100 bps
Free cash flow
More than 100% of net income
Share repurchases
About $1.5 billion
Effective tax rate
23%–24%
First-half organic growth was 2.5%, so the 3%–4% full-year range implies second-half organic growth of very roughly 3.5%–5.5% — management is effectively assuming the Q2 pace broadly continues. The first-half margin was 26.1%, so reaching the 27% midpoint requires a stronger second half. The free-cash-flow target also implies a large catch-up: first-half conversion was 73%.
Our read: the guidance looks achievable if welding and semiconductor demand hold, but those are exactly the markets that turn fastest when business capital spending slows, and international welding is already shrinking. Two things to watch in Q3: whether price/cost turns neutral as price increases catch up with costs (it was −40 bps this quarter), and whether North American food-equipment sales stabilize after an 8.2% decline. On tariffs, the 10-Q notes that after the Supreme Court struck down many IEEPA tariffs in February 2026, replacement tariffs were imposed under the Trade Act; ITW says it mostly manufactures where it sells and expects to recover tariff costs through pricing, but warns tariffs "may negatively impact overall demand from the Company's customers."