Rockwell Automation Surpasses Expectations Amid Cautious CapEx Climate

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $12% year-over-year growth, with 2 points from currency and 3 points of organic growth from price
• EPS: $2.75 adjusted EPS, above expectations, with $0.09 boost from discrete tax items
• Gross Margin: Expanded year-over-year, driven by positive price cost, productivity, and favorable mix
• Operating Margin: Total company segment margin was 20.7%, exceeding expectations

Guidance:

• Maintain organic sales growth outlook of 2% to 6%, with midpoint assuming gradual sequential improvement.
• Additional recurring revenue expected high single-digit growth.
• Full year segment margin expansion of over 100 basis points expected.
• Adjusted EPS guidance raised to $11.80 (midpoint), with full year free cash flow conversion ~100%.
• Q2 sales slightly up sequentially, with modest sequential margin improvement.
• Q2 adjusted EPS expected low single-digit sequential growth.

Business Commentary:

Revenue and Sales Growth:

• Rockwell Automation reported sales growth of 12% in Q1 2026, with double-digit year-over-year growth in both reported and organic sales.
• The growth was driven by strong demand across core offerings and verticals, particularly in logics and motion, and contributions from new U.S. production capacity projects.

Segment Performance:

• The Intelligent Devices segment saw organic sales increase by 16% year-over-year, with strong performance in drives and motion.
• Growth in this segment was broad-based, supported by strategic wins in food and beverage, CPG, and entertainment sectors.

Software & Control Segment Growth:

• Software & Control segment organic sales grew by 17% versus the prior year, exceeding expectations.
• This growth was driven by strong momentum in Logix, with North American sales up over 25% year-over-year, and adoption of new software offerings like Emulate3D and FactoryTalk Design Studio.

Order Growth and New Capacity:

• Rockwell Automation saw strong growth in orders related to new U.S. production capacity, contributing to confidence in its market position.
• The company's traditional product offerings combined with digital services and edge computing provided a competitive edge in securing these orders.

Challenges and Market Conditions:

• Despite strong sales, large CapEx investments remain on hold for many customers, affecting demand for certain products.
• The macro environment remains fluid with geopolitical uncertainties impacting trade and supply chain stability, although Rockwell's disciplined execution mindset mitigates some complexities.

Sentiment Analysis:

Overall Tone: Positive

• Management stated 'sales, margin and earnings all exceeding our expectations' with 'double-digit year-over-year growth' and 'strong momentum.' They highlighted 'solid start to the year' and 'strong performance up and down the P&L.'

Q&A:

• Question from Scott Davis (Melius Research LLC): Kind of reconcile your more cautious comments with CapEx budgets being inched a little higher... Do you think people will underspend their budgets? Or are they just pushing back to the back half of the year?
  Response: Optimism exists in some areas, but need to see broad-based order release to move higher in guidance; inventory levels are normal, distributors are optimistic but all taking a prudent approach.

• Question from Julian Mitchell (Barclays Bank PLC, Research Division): Flesh out how you see the margin drivers playing out across the segments for that second quarter commentary... help us understand kind of mix impacts and anything you see with price cost from here with memory chips.
  Response: Expect slight sequential sales improvement across all segments and modest margin expansion; memory chip inflation is a single-digit million dollar factor, manageable due to strong supply chain positioning.

• Question from Andrew Kaplowitz (Citigroup Inc., Research Division): If Logix does stay strong... could incrementals creep up for the year? And maybe you can update us on some of your programs like Rock on Rock and how you're doing with dynamic pricing.
  Response: Logix has strong flow-through; broader productivity initiatives and cost reductions are key to maintaining ~40% incremental margins; Rock on Rock best practices are being rolled out to existing facilities.

• Question from Christopher Snyder (Morgan Stanley, Research Division): Are you still seeing positive momentum on more of the shorter cycle kind of products business... and they're just deliver at a slower rate because they're so long cycle? Or do you kind of still think that big project order ramp is on the horizon?
  Response: Good demand for modernizations and brownfield product business; new capacity orders are growing but not at a breadth to raise full-year guide; need to see more orders to move higher.

• Question from C. Stephen Tusa (JPMorgan Chase & Co, Research Division): Can we get a little bit of a bridge on this S&C margin, pretty strong. What was the trend in like the software-related business there in that context?
  Response: Software & Control margin strength was broad-based, with strong performance in Logix, software, ASEM, and network; ARR growth was particularly strong in Plex.

• Question from Nigel Coe (Wolfe Research, LLC): Do you see enough bias to that outlook for process... and secondly, chemical strength, where you're seeing it? And how do you feel that plays out?
  Response: Process performed well in Q1 due to energy (oil & gas, midstream), specialty chemicals resilience, and competitive conversions; outlook remains low single-digit growth for the year.

• Question from Andrew Buscaglia (BNP Paribas, Research Division): Are you hearing anything regarding new competition from AI creeping in? And... are they potentially more impactful to your numbers sooner than later than maybe you would have thought 6 months ago?
  Response: AI is integrated into architecture for specific productivity applications (e.g., Vision AI, Logix AI, Plex modules); focus is on simplifying workflows and fortifying existing systems, not disruptive new offerings.

Contradiction Point 1

Logix Volume Recovery Timeline

It directly impacts expectations regarding the production timeline and delivery capabilities of a key product, potentially influencing company revenue and investor expectations.

What is Logix's volume recovery outlook, and will Q1 hybrid industry growth persist? - Julian Mitchell (Barclays Bank PLC, Research Division)

2026Q1: For the full year, Logix unit volumes are expected to reach or slightly exceed pre-pandemic levels. - Blake Moret(CEO)

How do current Logix volumes compare to pre-COVID levels, and will the 2026 product rollout affect margin patterns or seasonality? - Andrew Obin (BofA Securities)

2025Q4: In the second half of fiscal 2025, Logix unit volumes touched pre-COVID levels, but for the full year, they were still below pre-COVID. - Blake Moret(CEO)

Contradiction Point 2

Process Segment Margin Drivers and Outlook

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

How do you assess the process industries outlook, considering LNG/power project wins and the sources of chemical strength? - Nigel Coe (Wolfe Research, LLC)

2026Q1: Process performed well in Q1, driven by energy (oil & gas, midstream, power) and specialty chemicals... Low oil prices are prompting capital caution. - Blake Moret(CEO)

What was the analysis of why the Sensia JV didn't meet expectations? Is improving Process segment margins to Discrete levels driven by volume, cost, or scale? - Scott Davis (Melius Research LLC)

2025Q4: The Process segment typically involves more order-specific engineering, which suppresses margins. However, improvements in Lifecycle Services margins prove that profitability can be enhanced through better project selection and execution. - Blake Moret(CEO)

Contradiction Point 3

Demand Momentum and Order Visibility

It pertains to supply chain issues and demand forecasts, which are crucial for understanding market dynamics and the company's ability to meet demand.

Are you seeing positive momentum in shorter-cycle products and is the big project order ramp (with new U.S. capacity investment) starting to materialize? - Christopher Snyder (Morgan Stanley, Research Division)

2026Q1: While positive signals exist, orders need to convert more broadly to raise the full-year organic guide. - Blake Moret(CEO)

Is the book-to-bill ratio currently near 1x, and will it remain stable without significant improvements, with confidence in larger CapEx projects by 2026? - Andrew Kaplowitz (Citigroup Inc.)

2025Q4: Project delays persist... The guidance does not assume a major improvement in the capital spending environment. A faster release of capital would push results toward the higher end of the sales growth range. - Blake Moret(CEO)

Contradiction Point 4

Order Intake and Visibility

It reflects inconsistencies in the product roadmap and supply chain execution, affecting strategic planning and market confidence.

Are you seeing positive momentum in shorter-cycle products and is the big project order ramp (invested in new U.S. capacity) starting to materialize? - Christopher Snyder (Morgan Stanley, Research Division)

2026Q1: While positive signals exist, orders need to convert more broadly to raise the full-year organic guide. - Blake Moret(CEO)

Will this occur in the first half or more in the second half of next year from an orders perspective? - Charles Stephen Tusa (JPMorgan Chase & Co, Research Division)

2025Q3: They have a big funnel and expect orders related to new capacity to be significantly larger next year than this year. - Blake Moret(CEO)

Contradiction Point 5

Outlook on New Capacity Investments

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

Are you seeing positive momentum in shorter-cycle products and has the big project order ramp from the new U.S. capacity started to materialize? - Christopher Snyder (Morgan Stanley, Research Division)

2026Q1: New capacity orders were good in Q1 and are split across all business units... While positive signals exist, orders need to convert more broadly to raise the full-year organic guide. - Blake Moret(CEO)

Will this occur in the first half or second half of next year from an orders perspective? - Charles Stephen Tusa (JPMorgan Chase & Co, Research Division)

2025Q3: They have a big funnel and expect orders related to new capacity to be significantly larger next year than this year. - Blake Moret(CEO)