Johnson Controls' fiscal Q3 2026 sales rose 9% to $6.61B (10% organic) as data-center-driven orders jumped 27% and backlog hit $21.0B; GAAP EPS was $1.23 and full-year adjusted EPS guidance rose to ~$5.05.
Revenue
$6.6B
+9.3% YoY
Net income
$749M
+6.8% YoY
Diluted EPS
$1.23
+15.0% YoY
Operating margin
14.9%
Overview
Johnson Controls (JCI) sells and services the heating, cooling, fire and security systems inside large buildings. Its fiscal year ends September 30, so the quarter to June 30, 2026 is fiscal Q3 2026. Sales rose 9% to $6.61 billion and organic sales (growth after stripping out currency swings and businesses bought or sold) rose 10%, ahead of the 7% organic growth for the first nine months as a whole. The 10-Q attributes the gain to "strength in Applied HVAC" (the large chillers and air handlers used in big buildings and data centers), with organic growth in every region.
Profit grew faster than sales. Adjusted segment EBITA margin, the company's preferred profit measure for its three regions (earnings before interest, tax and amortization of acquired intangibles, excluding items it treats as one-offs, as a share of sales), rose from 17.6% to 19.8%. GAAP diluted EPS was $1.23 versus $1.07; the company's adjusted EPS was $1.42 versus $1.05.
The most forward-looking figures are the order book: orders rose 27% organically to $6.8 billion, and backlog (signed work not yet billed) reached $21.0 billion, up 32%. Management raised full-year guidance on the back of the quarter.
Key metrics
Metric
Fiscal Q3 2026
Fiscal Q3 2025
YoY Change
Net sales
$6,614M
$6,052M
+9.3%
Organic sales growth
+10%
n/a
n/a
Gross margin
37.4%
37.1%
+0.3 pts
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Income from continuing operations attributable to JCI
$749M
$618M
+21.2%
Net income attributable to JCI (incl. discontinued ops)
$749M
$701M
+6.8%
Diluted EPS, continuing operations
$1.23
$0.94
+30.9%
Diluted EPS, total (GAAP)
$1.23
$1.07
+15.0%
Adjusted EPS (non-GAAP)
$1.42
$1.05
+35.2%
Orders
$6.8B
n/a
+27% organic
Backlog (June 30)
$21.0B
n/a
+32% organic
Operating margin is our calculation, because JCI doesn't report an operating income line. It is gross profit ($2,474M) minus SG&A ($1,407M) and restructuring and impairment costs ($80M), i.e. $987M, divided by net sales; the prior year is $778M on $6,052M. Subtracting net financing charges ($71M) and adding equity income ($1M) ties it to the $917M of reported pre-tax income from continuing operations.
Takeaway: The order book is growing much faster than revenue: Q3 orders up 27% and backlog up 32%, against 10% organic sales growth, and the 10-Q ties that order growth to "large-scale data center projects." That gap is what backs management's higher guidance, because the work is already signed. The watch-point is that the growth is mostly Americas equipment (Products and Systems orders there rose 55%), and equipment carried a lower gross margin this quarter than a year ago while services margins rose.
Why net income grew 7% while EPS from continuing operations rose 31%
The year-ago quarter still included the Residential & Light Commercial (R&LC) HVAC business, sold in July 2025 and reported as a discontinued operation. It added $83 million of income attributable to JCI shareholders in fiscal Q3 2025 ($0.13 per share) and nothing this quarter. On a like-for-like basis (continuing operations only), profit attributable to JCI rose 21% and diluted EPS rose from $0.94 to $1.23.
EPS grew faster than profit because there are fewer shares. JCI spent $5.0 billion on an accelerated share repurchase agreed in August 2025 (43.7 million shares at an average $114.43), then resumed open-market buybacks, retiring another $635 million of shares in Q3 and $850 million over nine months.
A higher tax rate held back the bottom line: the effective tax rate was 18.0% against 12.3% a year earlier, so pre-tax income from continuing operations grew 30% ($917M vs. $705M) but after-tax income grew 21%.
What "adjusted" EPS leaves out
The $0.19 gap between GAAP EPS ($1.23) and adjusted EPS ($1.42) is made up of items the company treats as non-recurring. The two largest:
Transformation costs of $80 million ($0.13 per share), up from $45 million: spending on growth and cost-saving programs tied to the company's portfolio simplification. These have been excluded in the prior-year quarter too, so "one-off" deserves some skepticism.
Restructuring and impairment costs of $80 million ($0.13), up from $51 million, including $35 million of "other impairments." This sits within a multi-year plan the 10-Q says will cost about $400 million in total and save about $500 million a year once completed in fiscal 2027.
Working in the other direction, the quarter included $17 million of insurance recoveries tied to the AFFF firefighting-foam water-systems settlement and $28 million of mark-to-market gains, both removed from adjusted figures. Over nine months, AFFF insurance recoveries totalled $148 million and JCI booked a $70 million gain on selling ADT Mexico. Those two items explain most of the 5% year-to-date fall in SG&A (selling, general and administrative costs), so that decline is not purely cost-cutting.
Segment performance
Segment
Q3 sales
Reported change
Organic change
Adj. segment EBITA margin Q3 FY26
Adj. segment EBITA margin Q3 FY25
Change
Americas
$4,504M
+11%
+11%
21.1%
18.5%
+2.6 pts
EMEA
$1,264M
-1%
+1%
14.3%
14.1%
+0.2 pts
APAC
$846M
+15%
+15%
21.2%
19.4%
+1.8 pts
Segment
Q3 orders
Orders change (organic)
Backlog, June 30
Backlog change (organic)
Americas
$4.8B
+37%
$15.9B
+40%
EMEA
$1.2B
+6%
$3.1B
+14%
APAC
$0.8B
+12%
$2.0B
+12%
Total
$6.8B
+27%
$21.0B
+32%
Americas (68% of sales) did the heavy lifting. Products and Systems sales rose 12% and Services 10%. Segment EBITA rose 25% to $926M, which the 10-Q attributes to "strong operating leverage on higher revenue," meaning fixed costs were spread over more sales. Orders for Products and Systems rose 55%; the earnings release says Americas orders and backlog were "supported by sustained demand from data centers and other mission-critical environments."
EMEA was flat. Reported sales fell 1% mainly because JCI sold its ADT Spain (April 1, 2026) and ADT Mexico (October 2025) security businesses, which removed $41 million of sales; organic growth was only 1%, which the 10-Q says was "constrained by continued pressure in the region due to the conflicts in the Middle East." Pricing and productivity nudged the adjusted margin up 0.2 points.
APAC grew fastest: organic sales up 15%, led by 20% growth in Products and Systems. The 10-Q credits the margin gain to "productivity improvements, favorable business mix and higher revenues."
Data centers: named, not quantified
The 10-Q says AI and high-performance computing have "led to increased demand for hyperscale and data center cooling solutions" and that "this trend has contributed to increases in the Company's orders and backlog." It attributes Q3's 27% order growth to "sustained demand in large projects across the Company's core markets, including the Company's solutions for large-scale data center projects." Neither the 10-Q nor the earnings release gives a dollar amount or percentage of sales, orders or backlog from data centers, so the exposure can't be sized from the filings.
Mix: equipment growing faster, with thinner margins
Splitting gross margin by type of sale (our calculation from the income statement):
Gross margin
Q3 FY26
Q3 FY25
Products and systems
34.5%
35.6%
Services
44.1%
40.4%
Products and systems sales rose 11.5% to $4,596M while services rose 4.6% to $2,018M (both reported, not organic). Equipment is where the data-center orders land, and its gross margin slipped about a point; services margin improved almost four points. Overall gross margin still edged up 0.3 points, and most of the operating-margin gain came from SG&A falling from 23.4% to 21.3% of sales. If the backlog turns into a larger share of lower-margin equipment revenue, further margin gains will depend on services and cost control.
A caution on the orders comparison
The earnings release notes that "orders prior to Q1 2026 exclude certain equipment-only sales for longer cycle projects" and that backlog "has been restated to include this new category." It does not say whether prior-year orders were restated the same way. If they were not, part of the 27% order growth reflects a broader definition rather than demand alone. The backlog comparison, at least, is on the restated basis.
Cash and balance sheet
Over the nine months, operating cash flow from continuing operations was $2,572M, up from $1,586M, which the 10-Q attributes to higher net income and favorable changes in payables and accrued liabilities, partly offset by higher receivables. In Q3 alone, operating cash flow was $1,289M and free cash flow (operating cash flow minus capital spending) was $1,194M. JCI paid $245M of dividends in the quarter, and about $3.9 billion remains under its buyback authorization.
Guidance and outlook
Management raised its fiscal 2026 guidance for continuing operations in the Q3 earnings release:
Guidance item
New
Previous
FY2026 organic sales growth
~8%
~6%
FY2026 operating leverage
45% to 50%
~50%
FY2026 adjusted EPS
~$5.05
~$4.85
FY2026 adjusted free cash flow conversion
~100%
~100% (unchanged)
Q4 FY2026 organic sales growth
9% to 10%
new
Q4 FY2026 adjusted EPS
~$1.55
new
"Operating leverage" here is the share of each extra dollar of sales that the company expects to turn into extra profit. The slight trim, from ~50% to 45% to 50%, came alongside a higher sales forecast, which fits the mix point above: more of the growth is coming from lower-margin equipment.
Our read: Backlog of $21.0 billion equals roughly ten months of sales at the nine-month run rate ($18.6 billion over nine months), and orders are still outpacing revenue, so the 9% to 10% organic growth guided for Q4 is largely backed by work already signed. The risks are concentration and margin: growth is concentrated in Americas large projects tied to data-center construction, EMEA is barely growing, and "adjusted" results exclude transformation spending that has recurred ($80M this quarter). The Q4 and full-year figures will arrive with the fiscal 2026 annual report.