Linde's Margin Expansion and Backlog Strength: A Bull Case Amid Growth Slowdown?

In a macroeconomic climate marked by inflationary pressures and slowing industrial demand, Linde plc (LIND) has emerged as a standout performer. The industrial gas giant reported a 30.1% adjusted operating margin in Q2 2025, a 80-basis-point expansion year-over-year, driven by disciplined pricing and operational efficiencies, according to the Linde Q2 2025 results. With a $7.1 billion project backlog and a strategic pivot toward clean energy, investors are left to assess whether Linde's profitability can withstand a moderating global economy-or if its momentum is a fleeting anomaly.

Margin Expansion: A Structural Shift or Cyclical Boost?

Linde's margin trajectory over the past five years tells a compelling story. From a 16.3% operating margin in 2019, the company has steadily climbed to 24.3% in 2023 and 29.7% in Q3 2025, according to a tariff impact report. This improvement is not merely a function of cost-cutting but reflects structural advantages: a globally integrated supply network, long-term take-or-pay contracts, and scale that rivals like Air Products and Air Liquide struggle to match, as noted in the same report.

The Q2 2025 results underscore this durability. Despite flat demand in some manufacturing sectors, Linde leveraged price attainment to offset volume declines, delivering a 6% year-over-year increase in adjusted operating profit to $2.556 billion, the company reported. CEO Sanjiv Lamba emphasized that the company's "operational discipline and pricing power" are embedded in its DNA, suggesting margin expansion is a recurring theme rather than a one-off event, the company said.

Backlog as a Growth Catalyst

Linde's $7.1 billion backlog is more than a number-it's a strategic asset. The projects, concentrated in high-growth areas like hydrogen production and semiconductor manufacturing, align with long-term secular trends. For instance, the global industrial gas market is projected to grow at a 7.8% CAGR through 2035, fueled by decarbonization efforts and surging demand for specialty gases in advanced manufacturing, according to an industrial gas market forecast.

The backlog's strength is further amplified by Linde's ability to convert projects into cash. With a $50 billion pipeline across its portfolio, the company is insulated from near-term demand volatility, the tariff impact report observes. As Lamba noted, "This backlog provides visibility into future cash flows and positions us to capitalize on the energy transition."

Navigating Macroeconomic Headwinds

Tariffs on industrial gases from Canada, Mexico, and Asia have raised costs for Linde, particularly in specialty gases and engineered components, the tariff impact report highlights. However, the company's localized production network and pass-through clauses in customer contracts mitigate these risks. For example, Linde's U.S. manufacturing hubs reduce exposure to cross-border tariffs, while long-term contracts with energy and semiconductor clients ensure pricing stability, the report notes.

Beyond tariffs, the industrial gas sector faces broader macroeconomic challenges. The oil and gas industry, a key end market for Linde's gases, is grappling with 4–40% cost increases due to extended duties on steel and aluminum components, according to a Deloitte outlook. Yet Linde's focus on clean energy-hydrogen and carbon capture projects account for 30% of its backlog-positions it to benefit from policy-driven tailwinds, such as U.S. federal incentives for decarbonization, as the Deloitte outlook also discusses.

A Bull Case with Caution

While Linde's margin expansion and backlog strength are impressive, investors must weigh these against potential headwinds. A prolonged slowdown in manufacturing or a delay in clean energy adoption could strain growth. However, the company's operational agility-evidenced by its 30.1% margin in Q2 2025-suggests it can adapt to shifting conditions, the company reported.

For now, Linde's combination of pricing power, project visibility, and alignment with decarbonization trends makes it a compelling long-term play. As the industrial gas market evolves, the company's ability to balance short-term profitability with long-term innovation will determine whether its current momentum is sustainable-or merely the beginning of a larger transformation.