Eaton Q1 2026 Earnings Call - Record Revenue Driven by AI Data Center Demand and Boyd Acquisition

Operator: Thank you for standing by, and welcome to Eaton’s first quarter 2026 earnings results conference call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during this session, you’ll need to press star 11 on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press star 11 again. We ask that you please limit yourself to 1 question each. You may get back in the queue as time allows. As a reminder, today’s program is being recorded. Now I’d like to introduce your host for today’s program, Yan Jin, Senior Vice President, Investor Relations. Please go ahead, sir.

Andrew Kaplowitz, Analyst, Citi3: Hey, good morning. Thank you all for joining us for Eaton first quarter 2026 earnings call. With me today are Paulo Ruiz, Chief Executive Officer, and David Foster, Executive Vice President and Chief Financial Officer. Our agenda today including opening remarks by Paulo, then we’ll turn it over to Dave, who will highlight the company’s performance in the first quarter. As we have done on our past calls, we’ll be taking questions at the end of Paulo’s closing commentary. The press release and the presentation we’ll go through today, including reconciliations to non-GAAP measures, have been posted on our website. A replay of this webcast will be accessible on our website after the call. Before we begin, I would like to note that our comments today will include forward-looking statements with respect to sales, earnings, and other matters.

Our actual results may differ materially from our forecasted projections due to a wide range of risks and uncertainties that are described in our recent SEC filings. With that, I will turn it over to Paulo.

Andrew Kaplowitz, Analyst, Citi1: Thanks, Yan, and thanks everyone for joining us. Starting on page 3, I’m happy to report we have delivered solid results to start the year. From a demand perspective, we continue to see tremendous strength. Rolling 12-month orders are up in all businesses, 42% in Electrical Americas and 13% in both Electrical Global and Aerospace. We are winning business at unprecedented rates, resulting in our backlogs hitting a new record high in both Electrical and Aerospace, with book-to-bill increasing to 1.2 combined on a rolling 12-month basis and even stronger than that year-over-year. Our accelerating orders, driven by data center orders up 240%, prove continued strong demand and our winning value proposition as an end-to-end solutions provider. Overall, the businesses are executing nicely to start the year.

We posted record revenue of $7.5 billion, along with Q1 record segment profit of $1.7 billion and margins of 22.7%. We are pleased to beat our adjusted EPS guide and consensus. All the beat was operational. We delivered strong total revenue growth of 17% and higher margins than anticipated. We are executing well on our deals to boost growth. We closed Ultra PCS in January and Boyd Thermal in March, both ahead of schedule. Our partnerships with NVIDIA resulted in a complete solution for their generation of chips, Vera Rubin. Thanks to our teams for the strong work as we keep shaping our portfolio.

As we look toward the rest of the year with an unprecedented demand backdrop, we raised our organic growth outlook by 200 basis points to a midpoint of 10% and also raised our adjusted EPS midpoint expectations to now $13.28 for the year, which covers the EPS dilution from the Boyd acquisition. Another important update, on March 2, we announced Dave Foster as CFO. We are thrilled to have you back, Dave, and he has 29 years career with Eaton, which brings deep understanding of our business and markets, as well as a proven ability to drive performance. Dave and I will dive into Q1 and the 2026 outlook. First, let’s move to slide 4. We continue to drive Eaton forward with our bold strategy to lead, invest, and execute for growth.

All three pillars are designed to accelerate our growth and create sustained value for shareholders. Today, we’ll discuss how we are executing for growth in Electrical Americas, investing for growth, including the Boyd Thermal acquisition, and leading for growth with a customer-centric approach. Slide five includes an update on how we are executing for growth in Electrical Americas. Demand remains incredibly robust. We are winning like never before, and the order and the backlog growth supports that. Meanwhile, we’re accelerating our production ramp in the Americas to meet demand. The investments we are making, over $1 billion in CapEx, are at record scale for us, but well within our capability to navigate. Most importantly, we are on track as planned and feel confident on our path forward, given our strong position in growing markets and proven track record of solid execution at Eaton.

Americas recovered well from a tough January and February with impacts from the winter storms in our facilities and across the supply chain. Our team recovered well in March. April was another strong month. From both sales and margin perspective, Q1 will be the trough as mentioned in our last earnings call in February. We expect progress as we enter Q2 and momentum Q3 and Q4, which will set up the business to meet or exceed our margin target of 32% by 2030. Turning to page 6 in our investing for growth strategic pillar, where we are doubling down on high growth, high margin markets to capitalize on once in a lifetime opportunities.

We’ve taken bold portfolio actions in the last one year, including the successful integration of Fibrebond, which enhances our modular approach, Resilient Power, which fast tracks our solid-state transformer technology, and various partnerships like the design partnership with NVIDIA and the on-site power partnership with Siemens Energy to help solve for global power constraints. Now, Eaton’s broad portfolio has been further enhanced by the acquisition of Boyd Thermal. Our complete offering to data centers now has leading liquid cooling solutions, a true grid-to-chip approach that is unique to Eaton. We have solutions from power generation and the grid, gray space power infrastructure, and now a stronger presence in the white space along with cooling solutions. More specifically on Eaton’s Boyd Thermal, this business is a core design partner to leading hyperscalers and silicon providers.

As cold plates expand across compute, networking, and rack-level components, Boyd system-level position drives also increased CDU adoption. Embedded at the chip and system level, Boyd Thermal expands Eaton’s presence in the white space and gives Eaton early visibility into evolving data center platform requirements, advancing next-generation power and cooling management. The cooling business is on track to record $1.7 billion or better in revenue in the full year of 2026, of which about $1.4 billion will be included in Eaton financials for the year, with margins generally in line with the prior expectations. The Boyd business had a very strong start of the year, up well over 100% in Q1 versus prior year. In fact, Boyd’s backlog doubled over the last 6 months.

Boyd’s recent wins underscore strong momentum in liquid cooling, reflecting customer preference for its deep engineering integration, early design engagement, speed of execution, manufacturing readiness, and ability to scale globally. We are confident in 2026 outlook. We are very excited to welcome this strong team to the Eaton portfolio and look forward to continued success together. Turning to page 7, we are leading for growth by striving to move fast, co-creating innovative solutions with our customers at the center of everything we do. Here, we highlight the Eaton Beam Rubin DSX platform as part of our collaboration with NVIDIA to support the next generation of AI factories with end-to-end grid-to-chip infrastructure. AI factories represent a new class of infrastructure, and they are driving a massive global build-out, where data center power demand could nearly triple between 2025 and 2030.

This unprecedented demand requires end-to-end solutions for faster builds and more efficient energy usage. That’s why we developed the Eaton Beam Rubin DSX platform. It delivers a complete modularized implementation of AI factory infrastructure, spanning grid connection, power distribution, advanced cooling, and structural architectures engineered for higher speed, efficiency, and resilience. Truly an ideal solution. By integrating Eaton’s grid-to-chip architecture, we are enabling our customers to move beyond custom designs toward efficient, reliable, and modular solutions. It’s a unique collaboration tailored to help our customers with their greatest challenges, and we couldn’t be more excited for our customers to benefit from this technology. Now, I will turn over to Dave to walk through the financials.

David Foster, Executive Vice President and Chief Financial Officer, Eaton: Thanks, Paulo Ruiz. I would first like to say how honored I am to be back at Eaton. I’ve seen a lot of great changes in my almost 30 years with the company, but I’ve never been more excited than I am today to be part of Eaton’s growth journey by how well-positioned we are to deliver on our commitments. I’ll start by providing a brief summary of Q1 results on page 8. Organic growth for the quarter was 10%, driven by strength in Electrical Americas, Electrical Global and Aerospace, partially offset by lower sales and eMobility, primarily by a deliberate action to fix the tail, exiting a low-margin North America light vehicle business. Excluding declines in eMobility, our organic growth would have been almost 12%.

We generated record Q1 revenue of $7.5 billion and a Q1 record $1.7 billion of segment operating profit. Adjusted EPS of $2.81 is a Q1 record and $0.06 above the midpoint of our guidance range. We also had a strong quarter for free cash flow, which was up 245% over prior year. Let’s move on to the segment details. On slide 9, we highlight the Electrical Americas segment. Demand is accelerating. Our negotiations pipeline was up 81% in Q1 over prior year, translating to record orders and backlog. The business maintains strong operational momentum, delivering record sales in Q1 record operating profit. Organic sales of 14% was driven primarily by strength in data centers, up about 50%, along with strong growth in commercial and institutional and machine OEM.

Operating margin was 25.6%. As we discussed last quarter, we expected early 2026 headwinds as Electrical Americas is ramping capacity at an unprecedented scale to meet the accelerating demand. While revenue growth was very strong, we faced additional headwinds in the quarter from higher input costs than originally planned, along with costs related to delivering higher volumes in the quarter. The higher costs are short-term timing headwind, which is being offset with an announced April 1 price increase and other additional price actions. We have confidence to execute on our commitments for 2026. Now I will summarize the results for our Electrical Global segment. Total growth of 21% included organic growth of 9% and 6% attributed to the Boyd acquisition. Overall, a very strong performance for the quarter. We had strength in data center, residential, and machine OEM.

Operating margin of 19.2% was up 60 basis points over prior years, driven primarily by higher sales and continued operational efficiencies. As you can see on the chart, demand in global remains incredibly strong, driven by strong orders up 13% on a rolling 12-month basis, with broad end market momentum and exceptional strength in data center demand. This reinforces a powerful growth trajectory ahead for the business. Before moving on to our industrial businesses, I’d like to briefly recap the combined Electrical segment’s performance. For Q1, we posted organic growth of 13% and total growth of 20%. A great start to the year, and we are pleased with the progress we are making on all of our acquisitions. Segment margins were 23.4%.

On a rolling 12-month basis, orders accelerated up 32%, and our book-to-bill ratio for our Electrical Sector grew to 1.2 from 1.1 last quarter. In the quarter, Electrical Sector orders were up 47%. As a result, total electrical backlog increased 48% over prior year. Demand continues to surge, providing tremendous visibility and underpins our confidence in the electrical business. Page 11 highlights our Aerospace segment. Organic sales growth of 9% remained at a high level and resulted in record sales with particular strength in defense aftermarket along with strength in commercial OEM and commercial aftermarket. We closed the acquisition of Ultra PCS in January, and the business performed in line with our expectations, contributing 5 points of total sales growth.

Operating margin expanded by 360 basis points to a record 26.7%, driven primarily by sales growth and a one-time facility sale gain in the quarter. Even excluding the one-time gain, Aerospace margin expanded 80 basis points over prior year. Very strong performance to start the year. The robust orders and a growing backlog continue to position Aerospace for growth. Moving to our mobility segment on page 12. In the quarter, the business, now including both vehicle and eMobility, declined by 6% on an organic basis, driven primarily by the decision I mentioned earlier to exit a low-margin business. Margins are flat year-over-year, primarily driven by mix and operational improvements to offset higher commodity and wage inflation. We remain on track to execute the spin of the segment by the first quarter of 2027.

Now I will turn it back to Paulo to discuss our updated guidance and close out the presentation.

Andrew Kaplowitz, Analyst, Citi1: Thanks, Dave. Page 13 includes our end market growth assumptions. The demand in data center and Distributed IT market continues to grow even faster than we estimated three months ago. We now estimate 32 gigawatts of total data center capacity under construction in the U.S., of which 70% is AI. Total data center backlog has grown to 228 gigawatts or 12 years of backlog at the 2025 build rates, up from the 11 years in our last update. As you can see on the chart, data center is not our only strong market. We see durable strength in many electrical markets and in Aerospace. These many paths for sustainable growth gives confidence to deliver continued differentiated growth in 2026 and beyond. Moving now to page 14, we summarize our 2026 revenue and margin guidance.

Following a strong quarter, we now expect total company organic growth to be between 9%-11%, up 200 basis points at the midpoint, with strength in Electrical Americas and Electrical Global, which both increased 300 basis points at the midpoint. For segment margins, our guidance range of 24.1%-24.5% is 50 basis points lower than the prior guide, primarily due to Electrical Americas’ Q1 performance. We are taking decisive actions to offset temporary cost headwinds in Electrical Americas. As we discussed earlier, we are confident with our sequential margin improvement in Electrical Americas and expect to exit the year with margins north of 30%. On the next page, we have the balance of our guidance for 2026 and Q2. For 2026, we are raising the low end of our adjusted EPS guide.

We expect full year EPS to be between $13.05 and $13.50, $13.28 at the midpoint. For the full year, adjusted EPS guidance includes flowing through the full Q1 beat and absorbing the Boyd dilution to EPS. The tariff impacts are included in this guidance and considered immaterial. We are reaffirming our cash flow expectations for the year, and we have provided a guidance for Q2 on this page. Healthy end markets, combined with our record backlog, provide strong visibility into our outlook for the year. With the industry’s best position portfolio, we are highly focused on disciplined execution throughout 2026. I will close with a quick summary on page 16. Our strategy to lead, invest, and execute for growth is working.

We continue to transform our portfolio, allocating capital and resources towards higher growth, higher margin businesses. The demand environment remains exceptional. We are winning at unprecedented rates. Our orders accelerated once again, and our record backlogs provide visibility going forward. This was another strong quarter for Eaton. We delivered record Q1 adjusted EPS and segment profit, along with record revenue reflecting improved execution, ramping capacity, as well as the impact of strategic actions we have taken to drive earnings performance. Bottom line, we see a compelling and exciting runway ahead with our strongest growth opportunities still in front of us. With that, I look forward to taking your questions.

Andrew Kaplowitz, Analyst, Citi3: Hey, thanks, Paulo. Moving to the Q&A, we ask you to please limit your opportunity to just one question per person. We appreciate your cooperation so we can accommodate as many participants as possible today. With that, I will turn it over to the operator for instructions.

Operator: Certainly. Our first question for today comes from the line of Scott Davis from Melius Research. Your question, please.

Andrew Kaplowitz, Analyst, Citi2: Hey, good morning, guys. I’m sure you’re gonna get a lot of questions on margins, so I’ll go a different direction. There’s a lot of debate around you know, the long-term architectures and data centers, and I think a lot of confusion out there. Can you guys just talk a little bit about your competitive position in the landscape for solid-state transformers or, you know, at least on the medium voltage side? Maybe even a TAM, if you could address that.

Andrew Kaplowitz, Analyst, Citi1: Yeah, sure. Well, thanks, and thanks for starting with a strategic question. Appreciate that. I will start talking about this in broader terms. You said it correctly, a lot of the discussions around the medium voltage solid-state transformers technology, but we also lead in the pack more broadly as a company on how to transform the complete data centers into direct current technology. It’s broader than just the power transformers, right? All the way from the utility down to the chips. We got to think about, you know, power distribution as well, power protection, 800V DC or higher, actually, for future, you know, applications. This is exactly, I wanna clarify, this is exactly the broad scope of our partnership with NVIDIA that we launched for the new generation of Rubin chips.

That’s exactly the scope, is already 800V DC. You know, the most important question for investors is why does this matter? Why does it matter so much for data center operators? I would say it is because the industry wants to increase tokens per megawatt. In other words, to increase the efficiency of the data centers. If you look at where we operate as a company and other companies operate as well, the biggest lever to increase this efficiency is to reduce the use of chillers, because today, chillers consume around 20% of the data center power. With the new chip technology, for example, the one that NVIDIA announced at the beginning of the year, as they can run hotter and counting our advanced cooling solutions from Boyd, we can make this possible. That’s the biggest lever.

The second biggest lever is exactly what you mentioned here, Scott, is to move from AC architectures to DC architectures. If you look at today’s efficiency, even in the most, you know, improved designs in AC, efficiency runs at 93%. We estimate, and all the industry leaders estimate, that switching to this direct current technology in a 800V or above can save up to 5% from data center operations, moving the efficiency all the way up to 98%. If you think about this is huge dollars and huge efficiency gains that can change completely the economics of the data center. I wanna get that out. I would say this, we as a company, we are in a leading position to commercialize our medium voltage solid-state transformers to get more specific to your question.

The fact that we acquired Resilient Power Systems accelerated our tech development. We acquired an immersion-cooled offering that drives much more power density in a much smaller footprint, so it really leapfrogged our evolution here. We have more than a handful of solid-state transformer pilots actually approaching two handful, including hyperscaler customers. What we are getting from those discussions with them is a lot of positive feedback. We are working through those pilots. In the meantime, we start taking the leading role, also developing industry codes and standards in the U.S., but also in Europe. As I mentioned before, as we are taking the commercial lead here, we’re already providing quotes on 800V DC projects now.

We expect orders in the second half of the year for shipments starting in late 2027, and some of those also beginning of 2028. We’re making solid progress there. If I’m to conclude here, in summary, while there are other companies working on this technology, which I would say is good for quicker adoption of the industry, we are very confident in our leadership position in the solid-state transformers, and I would say more broadly to lead the complete power conversion to DC.

Andrew Kaplowitz, Analyst, Citi2: Great. Best of luck, Paulo. Thank you.

Andrew Kaplowitz, Analyst, Citi1: Thank you.

Operator: Our next question comes from the line of Chris Schneider from Morgan Stanley. Your question please.

Chris Schneider, Analyst, Morgan Stanley: Thank you. Maybe I’ll balance for Scott and ask more of a near-term one here. Q1 Electrical Americas margins came in below expectations. It sounded like there was maybe some unexpected cost inflation. Maybe just some incremental color on that. You know, what gives you confidence, or could you help unpack the drivers that get that Americas margin to 30% or maybe even a little bit higher into the back half? It sounds like from the prepared remarks that there’s price coming. Just anything on how material that could be in the timeline there to lift those back half margins. Thank you.

Andrew Kaplowitz, Analyst, Citi1: Great. Thanks, Chris. Well, thanks for this question. Certainly top of mind for all investors. I’d like to get started by providing a little bit of context to this margin discussion because we need to take this discussion in a broader sense of our growth trajectory. As you heard in our prepared remarks, the demand is fantastic. I just wanna give this team, this group of people, three data points for us to reflect on. The first one, look at orders, right? 60% up year-over-year. This is on top of a very strong base in 2025, having data centers being 240% growth validating our strategic choices. This is a 1 strong data point. The second one I will mention, as you heard, our backlogs are up 44% in Electrical Americas.

This was a high bar in 25, and this business added $4.4 billion to the backlog in just one year. It’s incredible what the team was able to add, while we’re still delivering double-digit growths on top line. That’s the second data point. The third one is the negotiation pipeline, as you heard from Dave, is up 81%. If you take a step back here and look at all those data points, I would say we are at the precipice of a new growth cycle here for this business, a real growth cycle, an inflection point, and we are starting to get ready for it. We need to get ready for that inflection point. As a reminder to everyone, I’m getting into the weeds of the margin development.

As a reminder to everyone, we finalized the construction, and we are currently ramping up 12 factories as we speak to handle this growth. The bulk of this ramp-up cost is concentrated in Q4 last year and the 1st half of this year. These expansions are going well. They’re progressing as planned. Now, to the details on the margin development, the year-over-year margin is temporarily impacted by 2 reasons. I reemphasize temporarily impacted. The 1st temporary impact is a negative price cost lag based on, you know, commodity inflation beginning of the year. This temporary impact will be more than offset in the full year by pricing that we already implemented on April 1st. That’s the 1st part of the margin recovery. The 2nd one, we accelerated ramp-up costs in Q1 to deliver 30% higher revenue growth.

As you remember, in February, when we discussed, we committed to a 10% midpoint growth for Electrical Americas. Now we are committing to 13% growth. We needed to upload, you know, investments in Q1, so this is part of it. It’s also a temporary effect. Given this order strength, we took this deliberate action and front-loaded investments in Q1, and we are accelerating our ramp. As you know, we discussed in the last earnings call, every time you add fixed cost, labor, depreciation of new CapEx and start up expenses ahead of volume, it creates this temporary margin headwind.

Most importantly, I wanna report that if you look at the product unit economics, the product margins remain very healthy, and we continue to expect in this new guidance, we continue to expect our full year 2026 segment profit in dollars to be roughly the same, around $4.4 billion as per prior guide. If you ask what the confidence we have, I have and the team has on our second half margins, I would say, we’re on the right trajectory to get started. We finished March with strong performance in Q1, April was also a good start for Q2. That’s the first point I want to get out.

The second, and most importantly, looking towards the second half, as utilization increases and recent pricing actions take effect, we expect to have strong operating leverage and margin recovery over the coming quarters, which reflects into our guidance, as you see, that shows sequential margin improvement starting from Q2 and gaining momentum towards the second half. As explained through our last two earnings calls, this is the year of execution for the Americas, for sure. The team is very focused. I want to report the team is really focused and very supported by the whole corporation. The progress is tangible. At even weekly meetings we have with the team, we can see progress week over week. We remain confident about the strong exit rate for 2026, and we are committed to the 32% margin by 2030.

David Foster, Executive Vice President and Chief Financial Officer, Eaton: Thank you, Paulo. Appreciate that.

Operator: Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our next question comes from the line of Deane Dray from RBC Capital Markets. Your question, please. You might have your phone on mute.

Deane Dray, Analyst, RBC Capital Markets: Yes. Sorry. Can you hear me now?

Operator: Yes.

Deane Dray, Analyst, RBC Capital Markets: Okay. Appreciate that. Thank you.

Operator: Yes.

Deane Dray, Analyst, RBC Capital Markets: Good morning, everyone. I’ll also add my welcome back to Dave. My question is directed to Dave. I’d be really interested in hearing about your early observations now that you’re back at Eaton, and where are your priorities and focus as CFO. Thanks.

David Foster, Executive Vice President and Chief Financial Officer, Eaton: Deane. Thanks for the welcome. Let me start with culture, which is one of the reasons I’ve worked at Eaton for almost 30 years. I can already see and feel positive changes within the company. We have an increased focus on our customers. We’ve had a lot of focus on improving our team operating dynamics. It’s been great to see. You know, if I look at growth, I’ve never seen this level of organic growth across the company in my career. It’s more than just an Electrical Americas story. You know, we see it in Electrical Global, we see it in Aerospace. Then, you know, Paulo talked about it a little bit in his last answer. The commitment that we’ve made to invest to grow the company organically really stands out to me, both people and assets.

You know, I personally reviewed the growth projects in the Americas during my first three weeks on the job, and I came away very confident in our ability to deliver 2026. Now this will be a little different take, but you know, for me, coming back, I clearly see the benefits of functional transformation efforts that have been ongoing at Eaton over the last four years. I see it across the enterprise, but let me share one of the many examples from the finance function. In late 2023, we went all in on centralizing and specializing our credit and collections teams. I’m really happy to say that we delivered record past due percentage performance at the end of 2025, and then we beat it again by 100 basis points at the end of Q1.

The end result is improved cash flow and reduced risk, but it also helps us free up time in our plants and divisions to focus on operations. Very similar to what Paulo sees, you know, since I’ve been back for nine weeks, I can see visible progress and improvement across the total company. I see it in the numbers. I see it in the reviews that I sit in. Again, you know, seconding what Paulo said, we finished March very strong, and the preliminary results for April are, continue to build the momentum that we, you know, take into the second half of the year.

If I look at the top priorities for myself and the company, 1, obviously deliver our commitments for growth, margins, and cash flow in 2026 and make sure we’re positioned well to exceed or meet or exceed our expectations for 2030. For me personally, I get a chance to leverage my strong operations background and my pricing experience with large direct customers. I understand the Eaton Business System very well and how we operate as a company, so it’s made it very easy for me to plug back into the company. I have strong relationships with all the operating leaders across the globe, that really helps to drive results and resolve issues as they come up.

You know, if I look at it, You know, one of the big objectives this year is to successfully integrate the Boyd Thermal, Ultra PCS, and Fibrebond acquisitions, as well as execute the spin of our mobility business. Maybe many of you don’t know, but last year, I supported the businesses at Eaton on both the Boyd and Ultra PCS acquisitions, and I also spent some time on the mobility spin in the fourth quarter of last year. That experience has allowed me to hit the ground running and engage with our efforts involving all of these projects. I clearly know what we need to do to deliver synergies in both of the deals, as well as understanding the base business.

You know, finally, on a functional point of view, you know, I’m gonna continue to work with our leadership team in finance to drive finance transformation objectives. And personally, I’m gonna really lead a continuous improvement culture across all of finance that mirrors the rest of the enterprise with the simple goal of, you know, just getting better every day. Hopefully that answers your question.

Deane Dray, Analyst, RBC Capital Markets: It does. Thank you, and best of luck.

David Foster, Executive Vice President and Chief Financial Officer, Eaton: Thank you.

Operator: Thank you. Our next question comes from the line with Nicole DeBlase from Deutsche Bank. Your question, please.

Nicole DeBlase, Analyst, Deutsche Bank: Yeah, thanks. Good morning, guys.

Andrew Kaplowitz, Analyst, Citi1: Hi, Nicole.

Nicole DeBlase, Analyst, Deutsche Bank: Hello. I guess just kind of following on to all the highlights of the strong order growth that we’re seeing and, you know, Paulo, what you said about this kind of being an inflection with respect to demand, I’m just thinking about, you know, do you have enough capacity to address that inflection in demand based on what’s been done so far and what’s ongoing within Electrical Americas? Or, you know, should we be expecting maybe another tranche of capacity expansion in the, you know, quarters and years to come? If so, like, could that expansion be of a similar size to what you guys have embarked upon in EA already? Or could it be a bit smaller? Thank you.

Andrew Kaplowitz, Analyst, Citi1: Yeah, thanks. As we stated before, we announced the expansion of 24 facilities, and we are done with 12 of them. We are ramping. There are still 6 to come online by the end of the year, that we’re gonna ramp next year, and the other 6 beyond 2027. Of course, there’s a lot of success in our orders. There’s a lot of success in our combined portfolio and our growing backlogs, negotiation pipeline, all of that. I wouldn’t expect to see such an increase in capacity investments all at once hitting our business anytime soon. It’s gonna be more like a continuous investment over time. Something that we are really focused as well as a team is to sweat those assets, right? We are inserting very good operators inside every part of the electrical business. They’re showing results.

We’re gonna make those new plans work, and we’re gonna get, you know, the high returns from our investment. In short, I would say, more than half of the pain is gone, is highly concentrated in Q4, as I said before, Q1, and then starts to get back a much better situation for the second half as we ramp those volumes. There’ll be a continuous improvement and continuous investment, but nothing of this magnitude of 24 plans in a space of 2 years.

Nicole DeBlase, Analyst, Deutsche Bank: Understood. Thanks, Paulo.

Andrew Kaplowitz, Analyst, Citi1: Thank you.

Operator: Thank you. Our next question comes from the line of Chad Dillard from Bernstein. Your question please.

Chad Dillard, Analyst, Bernstein: Hi. Good morning, guys.

Andrew Kaplowitz, Analyst, Citi1: Hi, Chad.

Chad Dillard, Analyst, Bernstein: Okay. I’ve got a quick question for you on competitors buying into the cold plate market. I guess part 1 is what share of cold plates is represented in Boyd? Part 2 is how do these acquisitions impact the competitive landscape?

Andrew Kaplowitz, Analyst, Citi1: Great question. Another top of mind topic for investors. Thanks for that question. I would just start by just showing my welcome and my excitement to have the Boyd team as part of Eaton. I would say it’s a winning team in the fastest-growing portion of the data center market, the advanced liquid cooling. We are really happy to be able to count the support of that talented team. I’m glad I told you, I hope you were in our last earnings call. I made a short comment sarcastically, that we should brace for comments around cooling coming up every month. I would say this is truer than ever with the latest news we saw from the market.

Now, seriously, if I look back even a space of 3 months, I would say that I believe this investor community evolved in their thinking in the last months, and I believe most understand now that cold plates are not commodities. I saw a couple of really good reports coming out from analysts. There’s understanding that cold plates are actually strategic assets for our customer co-development, customer centricity, and future wings that actually can be paired and can pull wings for system business like CDUs for cooling and power management, especially want those 3 things under the same roof. There is much more understanding of its growth potential. I’m happy that’s the case now.

If we start looking at the recent cold plate acquisitions, I would say that they further, in my opinion, further validate our strategy because it demonstrate the attractiveness of this tremendous market growth opportunity we saw earlier on. The other thing I wanna highlight in terms of landscape, competitive landscape to the second part of your question, before acquiring Boyd, our team really did the homework, and we systematically evaluated the market landscape for over 1 year. We did that on our own. We hired an external consultant. We hired a cooling expert from the Department of Energy. All those three independent data points of browsing the market pointed to Boyd. We are confident we bought the best business, the market leader at the right multiple. Also very important to say that.

Based on Boyd’s world-leading market position, we are also very happy about their capabilities and the scale they can, you know, implement, in the next months and years. As, as you said, there’s a lot of deals. We are familiar with those deals. In my opinion, that does not change our view of the market because, as I said before, we browse the market, for the best deal possible. This game around liquid cooling is a game, in my opinion, I would define as a game of trust, given the high stakes of being so close to the chips and keeping the servers working and then revenue generation assets operating well. It’s a game of trust. It’s a game of speed. Constant innovation. Constant innovation is what marks this market, very strongly.

The other thing I want to say, and this is the mindset of our team here, that we will protect, we will learn from, and we will augment what made Boyd great, which is their speed, the superior engineering they have, the manufacturing quality at increased scale. We are really focused there. If I stop, this is a big picture for the business and the cooling markets. We know that the future is bright for this technology, we should ask ourselves what make us feel good about the shorter term. Here, once again, if you look at the Boyd’s business, and now we call it our liquid cooling business at Eaton, revenues should meet or exceed this $1.7 billion in revenue.

Certainly a huge growth over $1.1 billion this team achieved last year. We feel really confident. Why we feel confident on that number? Q1 revenues from this cooling business at Boyd more than doubled year-over-year. Also the backlog doubled from 6 months ago. The business is really growing really fast and winning big. The second thing I would say, the run rate in Q1 was already around $400 million. We modeled to stay at that level in Q2 and raised the second half to $450 million per quarter. It’s reasonable, it’s conservative, and we think it’s perfectly feasible as the business is ramping. We only own the business for 3 weeks, we thought it was premature to raise the full-year forecast at this time.

I wanna reassure everyone we are aiming for an upside, and we’ll be prepared for that upside. In summary, just to give you my final words on this topic, market validation of our strategy, given the last deals, we’re extremely happy to have Boyd in our portfolio, and I’m very confident in delivering our own growth plans for 2026 and beyond.

Operator: Thank you. Our next question comes from the line of Andrew Kaplowitz from Citi. Your question please.

Andrew Kaplowitz, Analyst, Citi: Good morning, everyone.

Andrew Kaplowitz, Analyst, Citi1: Hi, Andrew. Good morning.

Andrew Kaplowitz, Analyst, Citi: Paulo, obviously Good morning. Obviously, you raised your organic revenue guide for the year, which seems like it’s mostly coming from data center strength. What are you seeing in terms of other mega projects? Are you seeing any further unlock there? Maybe your thoughts on broader economic trends impacting EA and Electrical Global. Any impact from the Middle East on your business, for instance?

Andrew Kaplowitz, Analyst, Citi1: Yeah, very good question. I’ll give you a flavor on mega projects first. Another strong quarter. The announcements were up 29% year-over-year, growing 36% in full year 2025. If you put a 2-year stack, it’s staggeringly 65% up. Very strong development in mega projects. The backlog of mega projects now is around $3.3 trillion and is up 31% year-over-year. The most important thing for Q1 is that we saw an uptick on mega project starts, which is when people start spending money and buying equipment. Mega project starts reached $54 billion in Q1, so it’s more than double same period last year. Since we start tracking that in 2021, it’s the third best quarter on record.

Very strong tailwinds that will come from mega projects in the years to come. You have a second and third part to your question. I will just give you some flavor on the other markets so we allow other colleagues to ask questions. We also had strength, we see strength in utility orders, we see strength in, you know, machine OEM. We see strength in Aerospace more broadly for the company. We have different vectors of growth which are not necessarily data center only. I’ll not give full details now, we allow other colleagues to ask their questions as well. Thanks for your highlights on the mega projects. Strong quarter once again.

Andrew Kaplowitz, Analyst, Citi: Appreciate it, Paulo.

Andrew Kaplowitz, Analyst, Citi1: Thank you.

Operator: Thank you. Our next question comes from the line of Patrick Baumann from J.P. Morgan. Your question please.

Andrew Kaplowitz, Analyst, Citi0: Thanks. Good morning. I just had a quick one on the EA margin again for the commentary you made on March and April being better and then, you know, the incremental pricing you put through in April. I’m just wondering if you give any insight into how much improvement you saw in those months, and then what kind of improvement you expect in margin from first quarter to second quarter. It does sound like you expect it to get better, but it’s not really clear to what extent. Thank you.

Andrew Kaplowitz, Analyst, Citi1: Great. I would get started. We’ll also allow Dave to make some comments later. We see the biggest mission for this business actually to reach the top line and keep growing, and they did that exceptionally well in March. We had a very strong end of the quarter. That performance repeated in April. In terms of margin development, the two things I said before, I shared before, they’re temporary headwinds. They will be solved as we execute on the volume ramp. This is on the right track, and that give us confidence. The second thing which hasn’t hit our numbers yet entirely is the pricing that we implemented beginning of April. If you put these two together, the business is demonstrating top line growth and executing on the expansion well.

Also took, you know, the right measures in terms of pricing, already implemented, so we’ll see that coming in the second half. To just go back to what we said last year in terms of the EPS split between first and second half, is pretty much what we see in this guidance as well, right? I will start by making those comments, and allow Dave to give some color here from his perspective.

David Foster, Executive Vice President and Chief Financial Officer, Eaton: Yeah. You know, based on our, how we finished March and April, you know, with our guidance, we’re up 150 basis points from Q1 to Q2 in the Electrical Americas. Keep in mind, you know, on the price actions, you know, we don’t get the full take in the first quarter when we execute them. You know, that tends to come through in the following quarter. Again, we’re confident in our guide for Q2 for Electrical Americas. Again, April demonstrated that we’re, you know, continuing the momentum that we saw at the end of Q1.

Andrew Kaplowitz, Analyst, Citi0: Thanks. That’s 150 basis points you’re saying from one Q to two Q is the expectation?

David Foster, Executive Vice President and Chief Financial Officer, Eaton: Correct.

Andrew Kaplowitz, Analyst, Citi0: Thank you very much. Best luck.

David Foster, Executive Vice President and Chief Financial Officer, Eaton: Thank you.

Operator: Thank you. Our next question comes from the line of Andrew Buscaglia from BNP. Your question please.

Andrew Buscaglia, Analyst, BNP: Hey, thanks guys. Morning.

Andrew Kaplowitz, Analyst, Citi1: Hi, Andrew.

Andrew Buscaglia, Analyst, BNP: Just wanted to check on, you know, a lot of discussion on the data center front, and orders were quite strong, there. Could you give some commentary what’s going on order-wise and trend-wise by the other sub-segments within Electrical Americas?

Andrew Kaplowitz, Analyst, Citi1: Sure. I will give you commentary. Let me talk about utilities, because it’s an important market, and it’s tightly connected with the data center boom as well, as you guys know. We continue to see very strong momentum in terms of orders for the utility business here. We had double-digit growth on a 12-month rolling basis for Electrical Americas, and for Electrical Global, mid-single-digits. Strong orders coming our way on the utility side. On the strategic commentary, I want to say that we continue to make progress gaining share in voltage regulators, capacitors and switchgear, which are actually 3 product groups we are ramping up with our investments, so we keep winning shares in that area. That’s our focus because it has most differentiated performance.

We are a bit more selective on single-phase transformers because it’s the smallest part of our portfolio, also the least differentiated. I would say this, we expect the market to remain strong for a very long period of time. Just, you know, if you recall all those data center announcements triggered what I would say, everyone already sees, the power generation and transmission investment. It’s very well reflected in power gen and power transmission, but it’s not so much yet reflected in the power distribution utility business, right? Just to remind everyone how good it is to see investment in power generation for us at Eaton, every investment in generation creates a compounding opportunity for Eaton.

First of all, when there is a power generation project, we sell the medium voltage gear required for this project. Then in the later stage, you know, when there’s power to get distributed by the grid, once again, opportunity for us to distribute, protect those electrons. Then lastly, and even more impactful to us, is when this power reaches our end customers, being data centers, being, you know, commercial, institutional, any other end market, because we need to manage that power reliably and safely. We are very, very convinced that utility business is going to remain stronger for longer. We also, I would say this, I will give you some color on the short cycle businesses we have. Again, short cycle, high single digits in Q1, revenues from mid-single digits in Q4.

We see this continued momentum quarter-over-quarter. If you go to the details of what makes the short cycle businesses, we saw some recovery in Americas for resi, low single digits. Once again, we are not counting on the resi market to be strong for us to make our numbers by any means. We saw also stronger recovery in the EMEA business in the residential space. MOM is back up for both Americas and global. Distributed IT, we see high single digit in the Americas up. High single digits up, it was a little bit down global versus last year. We see green shoots coming from Q4 extending to Q1 on the short cycle markets.

I will say this, I’m proud to say our team is capitalizing on this market recovery and winning. This is important because we also drive utilization of our factories that serve those end markets. I hope that helps.

Andrew Buscaglia, Analyst, BNP: Very helpful. Yeah. Thank you very much.

Andrew Kaplowitz, Analyst, Citi1: Thank you.

Operator: Thank you. Our next question comes from the line of Joe Ritchie from Goldman Sachs. Your question please.

Joe Ritchie, Analyst, Goldman Sachs: Hey, guys. Good morning.

Andrew Kaplowitz, Analyst, Citi1: Hi. Good morning. Morning, Joe.

Joe Ritchie, Analyst, Goldman Sachs: Yeah, I wanted to circle back on Boyd. Clearly, off to a great start this year. I’m curious, Paulo, how are you managing, like, potential disruption from the integration of this asset with legacy Eaton? Also, as it relates to capacity, I know you addressed the capacity for your core business, but I guess with Boyd coming in, what kind of capacity additions are necessary in order to fulfill, like, their backlog and how fast they’re growing?

Andrew Kaplowitz, Analyst, Citi1: Great question. To the first one, first part of your question, as I said before, it’s a game of trust, it’s a game of speed, it’s a game of, you know, getting the technology implemented and also getting the ramp done in the right way. We are taking a very cautious and deliberate approach to integrating this business into Eaton. The reason we went after Boyd was that they were the market leader. We didn’t want to go for a smaller asset, which we’ve found will be very difficult to make it work in our organization. Here, they know what they’re doing. They were part of Goldman before, and they were performing before. Our philosophies cannot be any harder or more difficult inside Eaton at all. We are taking very good care of the team, a very talented team.

We are retaining them. They report directly to our COO at the sector level. They report directly to Heath, so high visibility, high attention. In terms of investment, over time, this business grew fantastic rates at very low CapEx rates versus sales, like think about 3%, 4%. With this explosive growth they have now, they have more investment in terms of sales approaching double digits temporarily. It’s already part of our guidance for the year, and it’s all been implemented. The teams are running, and as I said before, a very good Q1 in terms of output and growth. We just got the April numbers yesterday, also very strong performance. We are really excited about the business.

We are respectful of what they built, and we’re actually leveraging some of their connections with the chip manufacturers to be a lead for other technologies of Eaton to win. A good example of that could be also what we are doing with NVIDIA and other companies. We keep high touch, you know, connection with this team. We want them to run fast, and we are supporting them to run fast.

Joe Ritchie, Analyst, Goldman Sachs: Very helpful. Thank you.

Andrew Kaplowitz, Analyst, Citi1: Thanks.

Operator: Thank you. Our next question comes from the line of Julian Mitchell from Barclays. Your question, please.

Julian Mitchell, Analyst, Barclays: Hi, good morning. Thanks for the question. Maybe just to circle back to the sort of ramp-up slope that the guidance is predicated on, and I suppose two sides to that. One is, just overall firm-wide EPS is the sort of guide based on a $4-type number in Q4. Allied to that, on the Electrical Americas division, I think incremental margins, you’re guiding year-on-year at about 10% in Q2 year-on-year. Should we think about third quarter in the 20s and then fourth quarter in the sort of 50% type incremental margin? Thank you very much.

Andrew Kaplowitz, Analyst, Citi1: I’ll start. Allow also Dave to provide color. Thanks for your question. Here I would say a couple of things. Once again, you’re perfectly right in your analysis. That’s exactly what we’re committing to. The reasons behind are, once again, twofold. One is the pricing we’ve already implemented, and 2, we’re gonna get the leverage from the ramp-up investments that we have that’s gonna start incrementing our profits, improving our incremental here. Also, all the inefficiencies we are dealing with as we learn how to operate in those plants will be behind us. Yes, absolutely in line, and this is perfectly feasible and aligned with the previous guidance we had between first half and second half EPS breakdown. Any additional comments, Dave?

David Foster, Executive Vice President and Chief Financial Officer, Eaton: The only thing I would add is, you know, in addition to the benefits we see of the scale of the growth on the manufacturing costs, we also see the benefit on reducing support costs as a percentage of sales in the back half of the year.

Andrew Kaplowitz, Analyst, Citi1: True. Okay.

Julian Mitchell, Analyst, Barclays: That’s great. Thank you.

Andrew Kaplowitz, Analyst, Citi1: No, thanks. I’d like to make a couple of comments just to close here the call, some closing remarks. Very interesting questions. I’m glad we moved to this one question per analyst format, made it more dynamic. We could talk to more people. Let me just make a couple of comments to conclude the call. I would start by saying that I would say our strategy is working, right? We are, in my opinion, we are closer to our customers, and we are designing the future together with them. This is really important for the future development of this company. We are shaping our portfolio at fast pace. Just think about how much ground we covered last year. We allocated capital boldly, and I also say surgically.

The proof point, in our numbers, you can see the Electrical business grew 20% total sales with 13% organic. Aerospace grew 16% total sales with 9% organic. Those were two markets where we decided to invest and allocate capital. In terms of execution, I would just highlight once again, we are executing on unprecedented demand. Record orders and backlogs are paired with strong negotiation pipeline, and this give us very high level of visibility and confidence moving forward. I would say also we showed demonstrated operational improvements that allow us to beat our top line commitment for the quarter, also to raise organic growth guidance for the full year. In terms of margins and the Americas development, the ramp is on track. We are accelerating the execution, as I said before.

We have confidence in the top line and the margin upside as the year progresses. In a nutshell, this allowed us to beat the Q1 EPS, have confidence to absorb the EPS impact of our acquisitions, and still be able to raise the full-year EPS guides. Thanks to everyone for your time, and thanks for your questions. Thank you.

Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.