Snapshot

Eaton generated revenue of $27.4 billion, gross profit of $10.3 billion, operating income of $5.2 billion, net income of $4.1 billion and diluted EPS of $10.45 in FY2025. The company employed 97,000 people in FY2025.

In Q2 FY2026, revenue was $8.5 billion, gross profit was $2.9 billion, operating income was $1.4 billion, net income was $822.0 million and diluted EPS was $2.11. Revenue over the TTM to Q2 FY2026 was $30.0 billion, while net income over the TTM to Q2 FY2026 was $3.8 billion. Market capitalisation was $167.6 billion as of September 28, 2026.

Growth

Revenue increased 10.3% in FY2025 against FY2024, reaching $27.4 billion in FY2025. Revenue compound annual growth was 9.77% in FY2022–FY2025 and 8.98% in FY2020–FY2025. Diluted EPS increased 10.0% in FY2025 against FY2024 to $10.45 in FY2025, with compound annual growth of 19.4% in FY2022–FY2025 and 24.5% in FY2020–FY2025.

Free cash flow was $3.6 billion in FY2025, increasing 0.80% in FY2025 against FY2024; its compound annual growth was 20.1% in FY2022–FY2025 and 7.19% in FY2020–FY2025. Revenue increased 21.4% in Q2 FY2026 against Q2 FY2025 to $8.5 billion in Q2 FY2026, while diluted EPS declined 15.9% in Q2 FY2026 against Q2 FY2025 to $2.11 in Q2 FY2026. Free cash flow increased 21.5% in Q2 FY2026 against Q2 FY2025 to $875.0 million in Q2 FY2026.

Profitability

Gross margin was 37.6% in FY2025, a change of −0.6 percentage points in FY2024–FY2025, and it increased 7.1 percentage points in FY2020–FY2025. Operating margin was 19.0% in FY2025, increasing 0.4 percentage points in FY2024–FY2025 and 8.8 percentage points in FY2020–FY2025.

Pre-tax margin was 18.0% in FY2025, a change of −0.4 percentage points in FY2024–FY2025, while net margin was 14.9% in FY2025, also a change of −0.4 percentage points in FY2024–FY2025. Return on equity was 21.5%, return on assets was 10.3%, and return on invested capital was 11.4% in FY2025. Gross margin was 33.5% and operating margin was 16.3% in Q2 FY2026.

Balance sheet

Total debt was $9.9 billion, net debt was $9.1 billion, cash and short-term investments were $803.0 million, and shareholders’ equity was $19.5 billion in FY2025. Working capital was $3.0 billion and book value per share was $49.93 in FY2025.

Net debt increased to $17.8 billion in Q2 FY2026 from $9.1 billion in FY2025. The current ratio was 1.2× and debt to equity was 0.9× in Q2 FY2026. Management reported that $2,088 million of commercial paper was outstanding at June 30, 2026, used primarily to manage working-capital fluctuations and partially fund acquisitions closed during 2026; it also reported no borrowings outstanding under the revolving credit facility at June 30, 2026.

Cash flow & capital return

Operating cash flow was $4.5 billion, capital expenditure was $839.0 million, and free cash flow was $3.6 billion in FY2025. Free cash flow represented 88.8% of net income in FY2025. Operating cash flow increased 3.35% and free cash flow increased 0.80% in FY2025 against FY2024.

Dividends paid were $1.6 billion and net share repurchases were $1.8 billion in FY2025, contributing to $3.4 billion of capital returned to shareholders in FY2025. Capital returned to shareholders totaled $11.5 billion in FY2021–FY2025. Weighted average shares were 389.9 million shares in FY2025, and the share count changed −3.06% in FY2020–FY2025. Operating cash flow was $5.0 billion and free cash flow was $4.0 billion over the TTM to Q2 FY2026.

Valuation

As of September 28, 2026, P/E was 43.8×, above the five-year median of 30.3× and the ten-year median of 27.6×; it was 1.4× its five-year median and 1.6× its ten-year median. As of September 28, 2026, P/E was higher than the industry median of 29.0× and stood at 1.5× the industry median.

As of September 28, 2026, P/S was 5.6×, P/B was 8.3×, EV/Sales was 6.2×, and EV/Cash flow was 46.4×; each was above its five-year and ten-year median. As of September 28, 2026, P/S, P/B and EV/Sales were higher than their industry medians of 2.7×, 3.1× and 2.9×, respectively.

What changed since last quarter

Revenue increased 14.5% in Q2 FY2026 against Q1 FY2026, while diluted EPS declined −4.95% and free cash flow increased 148.6% in Q2 FY2026 against Q1 FY2026. Gross margin declined −2.1 percentage points and operating margin increased 0.6 percentage points in Q2 FY2026 against Q1 FY2026. Net debt declined −$43.0 million in Q2 FY2026 against Q1 FY2026.

Revenue increased 21.4% in Q2 FY2026 against Q2 FY2025, while diluted EPS declined −15.9%, gross margin declined −3.5 percentage points, and operating margin declined −1.6 percentage points in Q2 FY2026 against Q2 FY2025. Management attributes Q2 FY2026 sales growth to strength in data center, machine OEM, commercial OEM, commercial aftermarket and military OEM end-markets, alongside acquisitions; it cites weakness in residential and industrial end-markets and the European mobility region as offsets. Management attributes the gross-margin decline in Q2 FY2026 primarily to higher commodity and wage inflation and higher intangible asset amortization, partly offset by higher sales.

Open questions

• How will acquisition-related costs and intangible amortization affect earnings after Q2 FY2026?
• What will determine whether commodity and wage inflation continues to affect margins after Q2 FY2026?
• How will the higher net-debt level in Q2 FY2026 affect financing costs and cash deployment?
• How will weakness in residential, industrial and European mobility end-markets develop after Q2 FY2026?

Sources

• Form 10-Q filed July 31, 2026 — management’s discussion and analysis