Regal Rexnord's Q2 2025: Unpacking Contradictions in Rare Earth Supply, IPS Growth, and Data Center Demand

Rare earth magnet impact and supply chain management, IPS order momentum and market expectations, data center demand and competitive position, rare earth magnet supply chain challenges, and AMC segment performance and growth outlook are the key contradictions discussed in Regal Rexnord's latest 2025Q2 earnings call.



Revenue and Sales Performance:
- Regal Rexnord reported a 1.2% decline in Q2 sales on an organic basis compared to the prior year.
- The decline was attributed to project timing impacts in metals and mining in its IPS segment, and temporary rare earth magnet availability affecting higher-margin shipments in the medical and defense markets within the AMC segment.

Orders and Backlog Growth:
- Orders in Q2 were down 2.5% on a daily basis, with a book-to-bill ratio of 0.98.
- Despite a decline in AMC, driven by order timing and medical market destocking, orders in July were up 4.4%, primarily due to strength in data centers.

Cross-Sell Initiatives:
- Regal Rexnord is on track to deliver at least $250 million in cross-sell synergies, achieving $120 million through the end of last year and with a funnel of $300 million.
- The value proposition is resonating, with a win rate 10 points above the enterprise average, leveraging Regal Rexnord's combined business and product portfolio.

Tariff Mitigation and Impact:
- The gross annual unmitigated cost impact from tariffs was $130 million in May and has been reduced to $125 million.
- The company is neutralizing tariffs and expects to be margin neutral by the middle of next year through mitigation actions such as sourcing and pricing strategies.