Eaton Stock

Thank you, everybody. I'd like to welcome you to our 14th Annual Laguna Conference. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley representative. I'm pleased to be here with Eaton. I'm here with CEO, Paulo Ruiz, and looking forward to speaking.

Thank you. Good afternoon.

So starting off, you're getting into year 2 on the job as CEO. You just completed the first year and 2026 is tracking pretty well ahead of the plan you laid out. What's changed since you started? And what should investors expect from here?

So I would say our strategy is really working, and it's gathering pace. So execution -- we have execution momentum. You just pointed out, we are ahead of our own committed numbers this year. So we initiated guidance with 8% organic growth. In the first review, we turned to 10%. And now in the second review, we said we can do 12%. We want to keep operating that way, proving that we can do more and actually increasing our own numbers. That's the spirit. That's how the whole team is working on. So we feel really good about the traction and the momentum we have.

If you take a step back and look at historically what the company has achieved, it took us 100-plus years to get to $20 billion, right? It only happened when we made the acquisition of Cooper in 2013. After that it was a decade of making the portfolio better. So we reshaped the portfolio. We didn't grow much. The top line was only $1 billion in 10 years, but we improved margins significantly. So that was a decade of improving margins. If you fast forward the last 3 years, including the guidance I just gave you for this year, we're going to be adding $10 billion to the top line in just 3 years. So just think about that momentum of $1 billion in 10 versus $10 billion in 3. And looking forward, that will inflect even faster right now looking towards 2030.

So we feel really good about that. And if you think about this in the construct of what the company is doing as an overall strategy, we see that the best years for this business are still ahead of us. And I'm really confident there's a new Eaton taking place because the strategy we have in place today is designed to do both top line growth and margin expansion at once. So we have all the measures in place to achieve exactly that. And I would say, out of the construct we are today as a company, you should see a new Eaton coming up, a new inflection point in terms of growth. And I'm certain that all the things we did in the past and we did recently are going to pay good dividends looking forward.

And to the point on that guide, any update on how things have been tracking in Q3? And any updates to the -- for the year?

We feel really good about Q3. We had a very strong July, also very strong August. So we are aiming at the high end of the guidance for everything we track. We also look the same way towards full year. It's very strong end of the year. So we are looking at the high end of the guidance for where we were. And once again, the spirit, no one is taking a victory lap here in the company. We are aiming for the upside, and we want to be able to surprise for the good side as we move on.

So all the measures in place. Why we feel good about this? First of all, we were ramping 24 facilities, as you guys know. So 3 quarters, so 16 -- if you think about -- so 16 of the 24 actually are in ramping phase and producing much better rates every day. So that turns to be a tailwind for us moving forward. Price cost, we took pricing actions in April. We took pricing actions in August, and we did selective repricing of the backlogs as well. So that construct together with strong end markets and record backlogs make us really confident about not only Q3 and Q4, but also looking forward to '27.

And to that point on '27, any sense of -- without guiding, any sense on how that's shaping up? And right now, we're seeing consensus modeling incrementals below the Q4 exit rate. Any commentary around it?

So you don't expect me to guide today. I know that, but it's fine. The setup is a strong one. As I said before, with the ramp, most of the disruption of that ramp behind us that happened Q1 this year and Q4 last year, we start to bring much better revenue per day numbers to be precise in Electrical Americas, we actually -- in Q2, we are showing already 25% revenue per day increase to January last year. So we grew around 16% in 5 quarters, but a heavy lift. And in just a quarter from Q1 to Q2, we grew 8% sequentially. So it's a tremendous work by the team. So I feel really good about that.

Once again, pricing is going to be a tailwind versus a headwind in price cost. The markets are strong, and we are sitting on very strong backlogs, record backlogs as we speak. So that's a very strong construct for '27. And then on top of that, we took action on our portfolio being on the acquisitive side, making the right acquisitions. So Boyd is then going to start counting as organic growth starting in Q2 next year. So it's going to be a huge tailwind for us. And the announced Reverse Morris Trust deal with Dana is on track. So when you look at Q2 next year, we're going to have Boyd counting on organic. We're going to have the separation of the mobility business, which helps both top line and margins. So it's a very strong setup.

Then speaking a little bit more on that, on the portfolio, you deployed $13 billion in capital, agreed to separate mobility within a year. How should investors think about the portfolio from here?

So I'm really proud of what the team did in terms of changing the portfolio so fast. We were more -- even more disciplined than in the past because we picked our lanes. We said we'll do data center, we do aerospace only. Therefore, we could move quicker. I'm really glad that every acquisition we made is printing better numbers than we initially forecasted.

So it's a good thing. And also, looking forward, if you think about this, looking forward in the portfolio, you should see us continue to have activity on the electrical side. But you shouldn't expect large acquisitions like the one we had with Boyd. So we're digesting. We are ramping those businesses. They're all growing very fast. So we're still going to have some bolt-on moves to make, especially in electrical, but we don't want to make any large acquisitions in the next couple of years.

And also still kind of staying on that capital allocation framework, and you mentioned the facilities ramping up, 16 are already in that ramp-up phase, 8 more left in the plan. Any sense on the timing from here and how that ramp should pace through '27?

No. This is -- again, it's much easier when you're dealing with 6 versus dealing with 18 as we did. So we have that advantage in our books and in our momentum. But we also changed the way we operate culturally. We are much closer to the operations as an executive team, as a leadership team, and that's yielding a lot of good results. So we are fostering that culture of proximity with the operations, with the supply chains, with engineering teams. So we are working to augment and make these people successful. So that is helping us put problems and opportunities faster on the table. And therefore, we're making tangible progress as a corporation. So there'll be more coming up on this culture reset we are having, but it will be easier for us because it's less disruption and we are better equipped.

Speaking more about that, the culture, can you walk us through Eaton's culture model? And how does this connect to the business performance we're seeing this year?

So our culture model is, at the same time, very simple and very powerful that we distill what we expect out of our people in 3 different behaviors, mainly. The first one, think big, the second one, act boldly, the third one, win together. So instead of talking to you theoretically about that, what I think is better use of investors' time here is to talk about tangible results of those behaviors in action. I think that's a better way to describe that. So if I start with the first one, one example of many, but one example of thinking big was the fact that we sat down as a leadership team and looked at our data center portfolio. And we said, well, we are clearly a leader in gray space.

There's a lot of growth. Are we happy with that? And the answer was no. Let's think bigger. And that thinking process pushed us to think about being a leader in the white space as well and move all the way from the utility down to the chips. So with that thought process, then you look at acting boldly, we took the actions decisively to get to that point. So acting boldly in that case means, okay, we want to make an acquisition of Resilient Power because that will fast our progress on 800-volt solid-state transformer DC architectures. Let's do that. Let's make the acquisition of Fibrebond. By the way, they grew fantastically in the first year of ownership. And by the way, let's go and acquire the cooling leader in the market called Boyd. So that is the thinking big put into action and taking bold actions to make it happen.

Winning together, I started talking about that before, but winning together is nothing else than putting everyone in the organization to work closer to where the customers feel the company. So closer to our operations, close to our sales teams, close to our design teams. And we changed the way we run the company, the cadence of the company. And the win together example I want to give you is exactly the one with Electrical Americas, the ramp. So we meet every week in a very hands-on way with the Electrical Americas leadership and their people, and we look plant by plant, and every function and every leader in the organization is there to support that team being successful. So that's, I think, a better way to describe the culture we are striving for through real tangible examples. I know I'm very passionate about that. So is my leadership team. And we are investing in coaching 4 levels of the organization. Actually, 1,500 people are going through training and coaching to behave that way. You're going to see that in our numbers. I see that every day. So there's more to come.

Kind of following up on those acquisitions you mentioned, especially like looking at modular and Fibrebond. I guess when you're looking at your share of RFPs and how those are moving to prefab and modular, how do these acquisitions change your competitive positioning?

So modernization is a clear trend in the industry, especially in data centers, not only but especially in data centers. The big question is why is it so? Why is it so important to operators? There are 3 main reasons. The first one, everyone knows about labor scarcity for plumbers and electricians. So as much as we can move that activity away from stick-build construction in the data center to a factory environment, we deal with that constraint. So that's one of the key value propositions of modular. The second one is speed.

Even if you have those electricians and those plumbers, it will take 18 months for you to stick build what you need to do in the data center. A model can be built in 9 months. So it's half the time. The third one, some operators decide to use, some don't, but it's an extra bonus here. When you have all this equipment put into one model delivered at one box, one container, you can decide to put this outside the building and use most of the space inside the building for servers where the data center operators generate revenue. They can decide to put this underground. There are many other options.

But the 3 measures are important, and this is part of the menu of our customers using modular solutions. To give you a proof point because this is just a theory, but the proof point, when we acquired Fibrebond, their fiscal year, they produced $375 million in revenue, the 12 months prior acquisition, the 12 months after acquisition were over $600 million. So from $375 million to $600 million. So we had in our investment thesis, an expansion of the existing plant and the build-out of a new plant was already in the works when we acquired the company. That's what we put in our financial model. And that happened very quickly because they're already working on the expansion of existing sites. And we just announced the build-out of a new factory in Arkansas. So think about doubling the capacity once in the existing sites they operate today and doubling again with a new site. So there's a lot of traction there. That's a proof point. Look outside the U.S., you see similar trends for modular. And this is why we ended up having this partnership or joint venture with NordicEPOD in Europe. So it's a clear trend, and it's growing.

And then similarly, looking at Boyd, how does that enhance your offering to your customers? And there are a lot of new entrants entering liquid cooling. What's Boyd's competitive advantage?

So we worked really hard before acquiring Boyd on our own. We hired consultants to browse the market and interview hyperscalers and chip manufacturers. And with zero in going after Boyd for a couple of reasons. The first one, they are the market leaders, number one. They have the engineering power that allow them to be in multiple silicon platforms that are going to be launched in the future at the same time. So they have 350 design engineers, the best in the industry. And they have 150 engineers that turn those designs into producible units in the factory. So they have a very strong engineering pedigree.

They cut their teeth in aerospace in the past. So aerospace failure is not an option, very stringent quality, very stringent engineering mindset. They're bringing that to the data center. So we felt really good about acquiring the leader also because we didn't have a liquid cooling business in the company. So if you go after a smaller player, we will not have a home for them because it will be a stand-alone $100 million company in the $30 billion organization will be tough. Having a large business, now we can augment that and grow even faster. So engineering power, leadership and the fact they look forward in the development of the silicon also gives a lot of strategic power, not only for the cooling business in the future, but also for our power business that we are so strong today and also software business.

And let's not forget, we all talk about liquid cooling growing really fast. It's true. It's growing really fast. So last year, $1.1 billion revenue. We adjusted our guidance this year for $1.8 billion. So that's the growth from $1 billion to $1.8 billion year-over-year. I'll be shocked if they don't actually go higher than that. I think they're going to achieve higher than $1.8 billion in my view. And looking forward, if you think about the loads today, very few data centers actually have liquid cool direct-to chip today. So there's a lot of tailwind for years to come. So we feel really good about it.

And kind of looking at these changes in the industry and these infrastructures, turning to 800-volt DC, every company seems to claim leadership. Why should investors believe that Eaton will be a winner?

I think the big difference is that we worked -- we looked at the architecture of a new 800-volt DC data center more holistically than just one product line. We look at everything that will be required to win in the future, and we decided, once again, think big and act boldly, what do we do to be in a leading position in each one of those 4 blocks. I'm going to run through them in a minute. Before I do that, I must say this is part of our culture in our company, we could settle where we are today because we are a leader in data centers, especially with the Boyd acquisition, the Fibrebond acquisition. why would we bother than looking at transforming that business that we are a clear leader from the utility feeder all the way down to the chip.

The answer is that there is economic value to moving to 800-volt DC for our customers, which is a 5% losses that we can avoid by moving that way. Just do the math on 5% on a gigawatt site, it's a lot. So if our customers want that to happen, this is going to happen. So you want to be in a position to drive that, and we want to be in a position to be future ready. Why, The core of your question, why you should feel that Eaton is leading there? I believe we are leading each of the 4 major blocks I'm going to talk about. The first block is medium voltage solid-state transformers. We were developing our own technology, and we decided 2 years ago to go after resilient power. We're accelerating that development. The feedback we get from both hyperscalers, multi-tenant data centers, but also the silicon providers is that we are ahead of competition.

As a consequence, we have 10 prototypes that were committed. So we got those 10 orders for prototypes with these people. We are working on that as we speak. And we also decided to start preparing our lines in where we produce our UPSs in a flexible way that we could produce UPS and solid-state transformer. So we are ready. And we start to see activity for larger bids also coming in the second half of the year. We're already working on them. So that's the first block. Leading position. And by the way, we are also working as a chair or co-chair for all the safety and the code discussions among other suppliers to be ready for that new world.

The second block is around when you have the solid-state transformer, you need to have DC breaker technology. So we're strong there as well. We've been doing breakers forever. We are leading the pack there as well. The third piece is around power electronics. Think about UPS, think about side cars. We are very strong there, and we don't see any issues migrating to the new world. The fourth one is actually liquid cooling. You can't do 800-volt direct-to chip if you don't have liquid cooling done properly. We talk about boy, they don't need to repeat that. So everywhere you look, we have a leadership position in each one of the 4. And once again, we are working to make that possible. We don't need the market to migrate to that to be successful. But when it does migrate, we're going to be leading the pack.

As you look at those technologies coming together, rack density is rising, how do you think of the content opportunity for Eaton, especially with the move to 800-volt and liquid cooling taking share?

Yes. So I'll talk to you about the transition from cloud to AI, and then we can talk about this new world with 800-volt DC. So the move from cloud data centers to AI make a very, very favorable impact on our content per megawatt, moving from 1.5 million per megawatt in the cloud space to 3 million on AI space before the Boyd acquisition. With the Boyd acquisition, that content goes up to 3.4. So we moved from a 1.5 to 3.4 already as a company. Looking forward, there are many things we need to answer with our customers. We're still working on the designs of the new 4 building blocks I described, the reference designs we agreed with NVIDIA, et cetera, et cetera, but still a moving target. I think the best number for all the investors in terms of modeling is still to use the 3.4 we have today. We're going to mature on that discussion with customers. When we have a better view, we can update you guys. But 3.4 is a good planning number for the future.

And then just looking at demand more broadly, data centers orders were up 85%, revenues up about 65%, how much runway is left? And how do you answer investors who think this pipeline can be a bubble?

That's a $1 trillion question. So the market is really strong. Let me give you this. Of course, we grew 65% revenues, 85% orders. But you look at the pipeline, the negotiation pipeline was over 130% in data centers. And this is what we are working today as we speak. We're negotiating with our customers. And then you look at what our customers announced that most of those projects, we are not even yet quoting for. And every time you look at that, the number is higher. So when we released our Q2 numbers, the total announced projects for data centers was 307 gigawatts to be built, just think about that.

And now today, we checked this week, is already 342. So less -- a month later is already more. And then you contrast to what this industry has ever built, we have installed 50 gigawatts. So today, operating there 50 gigawatts. So we are talking about between 6 and 7x what exists today is what's going to be built in the next years. Most of this is not going to turn into '27 or '28 revenue. So it's going to be a longer cycle. That's the way to think about it. So everywhere we look, we see strength in this market. I'm also aware of the discussions around models. I think large language models can adapt much quicker than the physical infrastructure. I don't see a slowdown. I don't expect a large slowdown anytime soon.

I guess as you think about that visibility and orders, like your backlog was up about, I think, $700 million sequentially, book-to-bill of 1.3. What kind of visibility do you have? And how does that -- how far out does that look?

So once again, we have a larger business just the data center. So we track our negotiation pipeline. Our negotiations pipeline was up 60%. And a subtract of that, a part of that is data centers being up 130%. So we have a lot of visibility. We also look beyond that and look at the markets. I just talked about 340 gigawatts of data center to be built. We look at mega projects announcement that goes much broader base to chemical plants and pharmaceutical plants and semiconductor plants. So every indication, including reshoring, extends to a much more solid market coming up, which is great for data centers, but goes much beyond data centers.

We are proud of the portfolio we have because we have multiple paths to growth, including utilities, including commercial and institutional, industrial facilities, et cetera, et cetera. And let's not forget the smaller part of our portfolio, which is the short-cycle business, we see some green shoots of that market coming back. So it's a good setup.

To that point on the verticals outside of data centers, the growth does not seem only driven by one end market. What other verticals have been most attractive? And what are the underlying drivers there?

So we -- still today, data centers get most of the air coverage, which is understandable. It's a very exciting market. But the biggest segment we have today is still commercial and institutional. We have a massive, massive and very traditional, very well-performing distribution network as a company, especially in North America, but also over the world. So that is a growth -- a perpetual growth market. It is not susceptible to much of the cycle and it is a good business to be in. We also are very strong in utilities. And utilities, you have all the dynamics we talked about being data centers. But even before data centers, there is electrification of society in many different areas, right? And loads were increasing even before data center. They're going to increase much more. And you still have on top of that grid hardening because of natural disasters, et cetera. But you also have old infrastructure, especially in North America that needs to be replaced.

So the utility market is a growth story today, and it's going to be even stronger in the future. Just think about all this power generation coming online that all those gas turbines being sold, et cetera, this is going to turn into transmission already now and it's turning to utility distribution business for us in the next couple of years. So this is coming our way. So it's a great place to be. And then again, we have other markets in the electrical franchise, they're also coming back like machine OEMs. We see that coming back. We also see distribution IT, which is more on the edge, not so much on data center. That market is also recovering. So we have many paths to growth. Let's not forget about aerospace as well that adds up.

Then kind of shifting gears, looking at Electrical Global, 18% organic growth. What's been driving that strength? And how durable is it given what some of your peers have been saying about Europe?

So we are really proud of the global electrical franchise as well. So you said 18% growth. We see that every business inside the global segment did their work. So I'm talking about APAC. I'm talking about EMEA, both growing 20% organically. And then our global energy infrastructure business related more to energy markets growing high teens. So everyone delivered on the quarter. The underlying performance is motivated by improvements in our portfolio, improvements in execution and also the fact that especially in Asia and in Europe that we are getting a lot of traction on data centers.

Coincidentally, we reported that in Q2 that the data center business for the global segment grew the same 65% as the North American business last year, coincidentally. But if you look at their backlogs for the whole business, Global, the backlogs were up 103% year-over-year. So large, large orders gaining share, gaining momentum. And even if you look at the total backlog, and I got the question earlier today, well, Paulo, how much of that was Boyd? Boyd was half of the backlog. If you deduct Boyd, the traditional legacy Eaton businesses in Electrical Global grew backlog 54%. So very strong performance. The mindset back to think big and act boldly and win together is about not looking at PMIs, not looking at this -- if we have market share gains, we have the platform, and our customers in the U.S. want us to be successful elsewhere, let's win with them. Let's win with the hyperscalers, let's win with the multi-tenant and let's win with the local players as well. So that's the mindset. No one is looking at PMIs.

And honestly, it seems like all the electrical players have been able to beat and raise on AI demand. What differentiates Eaton?

I think what differentiates Eaton is that we started early in this moment of recognizing we need to ramp. So we have most of the headache behind us. I told you guys that Q4 and Q1 will be the bulk of the disruption. We have that behind us. The other thing that differentiates us in this environment is that we can categorically say today, we have the most complete portfolio from the grid all the way down to the chip. Everything you see inside the data center that matters. We have a strong presence as a company. And we are not taking a victory lap here. So the difference is that not only we have that, we are saying, what's next and let's be ready for that environment where this is going to change to 800-volt DC, and we want to be the leader in that new world. And we have all those 4 tech blocks I talked about. So the difference is we are already today in a very strong position all the way from the utility down to the chip, one. Two, we are working in being future-ready in that particular market.

Three, we don't depend on data center only. We have many other growth avenues you asked me about. So that differentiates us. The fact that we have that connection to utility market, data center is something we want to explore more as well because we can help our operators -- our data center operators to be more successful in the way they handle the loads with the utility. So it's a unique setup, and I think this differentiates us. The other thing that differentiates us is the culture because we have this culture of humility, courage and collaboration that not everyone is displaying the same way.

And between the capacity coming online, the portfolio coming together, as we look out to the 2030 targets, that $31 billion revenue for electrical, at this point, is that maybe a floor? Can that push higher?

It is a floor. You got me young. I'm looking at him here. We need to see investors next year ready. Why is it a floor? When we announced the 2030 growth setup, and let's just summarize to all investors here, we said we would grow between 6% and 9% organically, so 7.5% at the midpoint. We said we will reach 28% margin -- segment margin, and we would reach 32% margin in Electrical Americas. As you look at our setup today, including our guidance for this year, we're going to reach already 33%. And what we didn't have in our model, and I told everyone, so we conservatively baked only 17% growth in data centers in that model.

And in Q2, we completed 8 consecutive quarters of growth beyond 35%, including last one was 65%. So we're clearly ahead because of the data center growth, we also didn't include in that growth any of the M&A dollars. I said we have a strong balance sheet. And since then, we deployed $13 billion in acquisitions. So that was not part of the calculus. What also was not part of the calculus was the fact that back then, we still have and still have today the mobility business. But moving forward, as they become part of this combined business with Dana, that will have an impact -- a positive impact on our growth rates organically and also in terms of our margins. So we need to get all of this together, probably going to be seeing you guys next year to make a mid-cycle review to the upside.

And I guess at this point, demand seems like it's pretty hard to argue, but what most people have started to poke at is execution risk. I think some of your peers have pointed to supply chain congestion and pushouts in project timing. How has Eaton been able to deliver through that environment?

So we've been there. It's the reality, right? We started earlier than other folks, which is a good position to be in today. So most of that hard work and it's hard work was a headwind for us in Q4 last year and Q1 this year. So think about building new facilities physically, but also staffing, training people, but also bring your supply chains along. So the numbers I described before of 25% revenue per day increase, that's the way we track. We track revenue per day increase. We could only get there because we did the homework in the last 18 months. Now in a much better place, having 18 of our 24 expansions behind us and ramping really fast. So we see that most of that headache is behind us. Moving forward, what we're going to do a little bit differently is to have not so many projects done at once. We did a lot of catch-up as a company. So we announced one project here. We might have another project launched next year, but we should not expect the company to be running 20 projects in parallel.

I think we're about at time, but thank you again. Really appreciate it.

Thank you so much.

Thank you for standing by, and welcome to Eaton's Second Quarter 2026 Earnings Results Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Yan Jin, Senior Vice President of Investor Relations. Please go ahead.

Good morning. Thank you all for joining us for Eaton's Second Quarter 2026 Earnings Call. With me today are Paulo Ruiz, Chief Executive Officer; and Dave Foster, Executive Vice President and Chief Financial Officer.

Our agenda today includes operating remarks by Paulo. Then he will turn it over to Dave, who will highlight the company's performance in the second quarter. As we have done in 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. And a replay of this webcast will be accessible on our website after the call.

Before we begin, I would like to remind our comments today will include forward-looking statements with respect to revenue, 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.

Thanks, Yan, and thanks, everyone, for joining us. Starting on Page 3, I'm happy to share the strong second quarter results driven by improved execution. Adjusted EPS of $3.15 exceeded guidance by $0.10 at the midpoint, reflecting strong operating performance by our teams. We posted record revenue of $8.5 billion with 21% total revenue growth, 14% organic growth and 23.1% margins, all better than the high end of our guidance.

Americas continues to execute well through its capacity ramp, delivering 18% organic growth and 190 basis points of margin expansion over prior quarter, all stronger than expected and very encouraging. We also continue to see unprecedented demand. Our total company book-to-bill remains strong at 1.2, with Americas book-to-bill expanding to 1.3 and Aerospace to 1.2.

While demand is broad-based across end markets, you can see here, the data center orders and revenue remain robust. Overall, accelerating orders and growing backlogs are clear proof points that our customer-focused end-to-end solutions are winning in the market.

This strong first half of the year give us confidence to raise our guidance again: organic growth by 200 basis points to a midpoint of 12% and our adjusted EPS midpoint by $0.22 to $13.50 for the year. Dave and I will dive further into Q2 and the 2026 outlook. But first, let's move to Slide 4.

Okay. A year ago, we began our journey to show what a new, focused Eaton could deliver through our bold strategy to lead, invest and execute for growth. The progress is real and is gathering pace, and I have strong confidence where we are going. We are leading with a stronger team and a sharper enterprise mindset. We're investing with discipline in the portfolio and capabilities that will define our future. And we are executing for growth through operational discipline across every part of this company. Today, we will provide an update on our strong progress and share how our focus on culture is helping us grow faster, serve our customers better and win for investors for years to come.

Moving to Slide 5. Enabling this unprecedented demand is our ability to execute, which rests on the work we are doing to evolve and strengthen our culture. Leading for growth through an evolved way of working is how we deliver results at scale. Together, the combination of our growth strategy, market dynamics and culture is how we will win.

Thinking big, we are transforming a leadership position we have in gray space for data centers into an unparalleled portfolio from grid to chip and leading the conversion to direct current applications. Through thinking big, we've positioned Eaton's portfolio ahead of secular demand, focusing on serving high-margin and high-growth end markets. By acting boldly, we've prioritized what matters and led decisively, making the bold case to acquire companies like Fibrebond, Resilient Power, Ultra PCS and Boyd that are delivering higher growth and accretive margins to their respective segments.

And we made the necessary hard [ cause ] like separating our Mobility business to align our capital to the highest-return, highest-growth opportunities. We also continue to invest organically with conviction, making Eaton a stronger partner to our customers. We win together. As One Eaton, we are pushing decision-making and leadership closer to where the action is: to the customer, the engineering and sales teams, the plants and service teams. And we are scaling our advantage by fostering a culture of humility, courage and learning, putting problems and opportunities on the table fast and solving for them as one unified team.

This is not just about our executive leadership. It is about empowering 100,000 people to win together. We are transforming Eaton to win by being leaner, more agile, more customer-centric, more competitive and more innovative. We see this culture internally every day, and you see this culture reflected in our numbers.

Moving to Slide 6. We are already seeing how this mindset and discipline translates into real results. We've said before that 2026 is Eaton's year of execution, and we are making solid progress in Electrical Americas. Scaling capacity to turn demand into revenue remains the clear priority in the business. As you know, we are investing more than $1 billion in capacity expansion and bringing online 2 dozen projects across Electrical Americas.

As these facilities ramp, we see clear momentum in revenues per day. We are delivering roughly 25% growth in revenue per day since the start of 2025, up 16% in the year and another impressive 8% in Q2 over Q1. Q1 to Q2 represented the largest quarterly ramp in production output in our financial model, and we overdeliver on it. It is behind us. We remain laser-focused for the second half of the year.

Demonstrating such strong execution milestone give us even more confidence as we step up in the second half. Importantly, we are realizing margin improvements for our Execute for Growth strategy in Americas. Margins improved 190 basis points quarter-over-quarter and will improve further in the second half of the year. Meanwhile, even after 18% organic growth, backlog continues to expand due to strong demand and winning projects at record pace.

Altogether, higher shipments, improving margins and backlog driving extended visibility demonstrate our Execute for Growth strategy is working and give us confidence in the second half and beyond. I want to thank our Electrical Americas and all the supporting teams for the tremendous work they are doing.

And now I'll hand over to Dave, who will cover our financials.

Thanks, Paulo. I'll start by providing a brief summary of our strong Q2 results on Page 7. Total revenue grew by 21%, with a strong contribution of 7 points from acquisitions. Each acquisition is at or above our expectations for growth and margins.

Organic growth for the quarter was 14%, driven by the strength in Electrical Americas and Electrical Global. Excluding Mobility, our organic growth would have been 16%. Adjusted EPS of $3.15 exceeded our original expectations and was a Q2 record. Adjusted EPS for the first half of $5.96 was also a first half record. We generated a strong $0.25 segment profit beat versus our guidance that was partially offset by $0.15 from a higher tax rate. We also posted Q2 record cash flow, with operating cash flow up 23% over prior year.

Now let's move to the segment details. On Slide 8, we highlight our Electrical Americas segment. Organic sales growth accelerated to 18%, driven primarily by strength in data centers, up about 65%, along with strong growth in machine OEM and commercial and institutional. We are pleased with our better-than-expected margins of 27.5%, 190 basis points higher than Q1. Again, a reflection of our Execute for Growth strategy starting to work.

From a year-over-year perspective, the majority of the margin decline was driven by temporary negative price cost. With the pricing actions taken in Q2 and early Q3, we are confident this will return to a roughly neutral impact in the second half. Meanwhile, demand is accelerating. Our negotiations pipeline was up 60% year-to-date over prior year, translating to record orders up 41% on a rolling 12-month basis and a book-to-bill increasing to 1.3. This is solid progress and gives us even more confidence to execute on our commitments for 2026.

Now I will summarize the strong results for our Electrical Global segment. Total growth of 44% included organic growth of 18% from strength in data center utility and machine OEM, along with 25% attributed to the Boyd acquisition. We are very pleased with Boyd's performance and the strong growth ahead of us in the liquid cooling market.

Operating margin of 19.8% was down 30 basis points over prior year, but about 1 point higher than we had expected for the quarter. We have also pulled in our planned general price increase from Q4 to Q3, which gives us even more confidence in our full year guidance. As you can see on the chart, demand in Global increased, driven by our accelerating order growth, up 33% 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 in this segment.

Before moving to our industrial businesses, I'd like to briefly recap the combined Electrical segments' performance. For Q2, we posted organic growth of 18% and total growth of 27%, a great second quarter. Segment margins were 24.5%, [ 110 basis points ] higher than Q1. On a rolling 12-month basis, orders accelerated up 38%, and our book-to-bill ratio for our electrical sector was 1.2. Our backlog for our total Electrical business increased 43% over prior year.

Page 10 highlights our Aerospace segment's performance for the quarter. Organic sales growth of 7% remained at a high level and resulted in record quarterly sales and Q2 record segment profit, with particular strength in commercial OEM along with strength in commercial aftermarket.

The Ultra PCS acquisition is performing to our expectations. It added 6 points of growth and is accretive to Aerospace margins. Total Aerospace operating margin expanded by 60 basis points to 22.8%. Demand remains strong in Aerospace, with robust orders driving backlog expansion and book-to-bill increasing to 1.2. While we made progress in our Electrical businesses, Aerospace continues to see strong demand now and into the foreseeable future, resulting in higher sales growth with attractive margins.

Moving to our Mobility segment on Page 11. In the quarter, the business declined by 2% organically, which was fully offset by positive foreign exchange impact. Excluding the impact of the intentional exit of the low-margin business that I mentioned in our prior earnings call, organic growth would have been slightly positive. Meanwhile, margins increased 90 basis points year-over-year.

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

Thanks, Dave. Page 12 includes our end market growth assumptions. We've raised our expectation for the MOEM market to solid growth on the chart. I shared last quarter the demand in the data center and distributed IT market continues to grow even faster than we estimated in our initial guidance. And today, it's even stronger than we expected 3 months ago.

Total U.S. data center backlog has grown to 307 gigawatts or 15 years of backlog at 2025 build rates, up from 12 years in our last update. Only roughly 20% of this backlog converts near term. The majority will translate to 2028 and beyond deliveries, a very nice tailwind for Eaton for years to come.

We also continue to expect durable strength in many of the remaining electrical markets and in Aerospace. All in, we estimate our total addressable market will grow about 10% this year. These many paths for sustainable growth give us confidence to deliver continued differentiated growth in 2026 and beyond.

Now moving to Page 13, we summarize our updated 2026 organic growth and margin guidance. Following another strong quarter, we now expect total organic growth to be between 11% and 13%, up 200 basis points at the midpoint from the prior 9% to 11% range. This increase is driven by strength in Electrical Americas, up 200 basis points to a midpoint of 15% growth, and Electrical Global, up 450 basis points to a midpoint of 12% growth. Our margin progress is encouraging and provides the confidence to reaffirm our segment margin guidance ranges.

On the next page, we have the balance of our guidance for 2026 and Q3. For 2026, we are raising our adjusted EPS guide. Now we expect full year EPS to be between $13.40 and $13.60, $13.50 at the midpoint. We are reaffirming our cash flow expectations for the year. We have also provided guidance for Q3 on this page. As a reminder, we also provide supplemental guidance, which includes raising Boyd's full year revenues to $1.8 billion, of which $1.5 billion will be in Eaton's books for the year.

Continued strength across end markets, combined with our record backlog, provides strong visibility into our outlook for the year with the industry's best positioned portfolio. Strong end market demand and significant secular tailwinds, we are confidently entering the back half of 2026 and very well positioned to extend our momentum into 2027.

To wrap up on Page 15, these results reinforce what we've been saying for some time. First, our Lead, Invest and Execute for Growth strategy is working and is gathering pace. We are transforming our portfolio and evolving our culture. We are positioning the company to capture strong demand to accelerate growth and beat our own short- and long-term commitments so we can deliver meaningful value creation for our shareholders.

Second, execution continues to be a difference maker. Our teams are doing a great job increasing capacity, serving customers and turning demand into shipments and earnings. We are making real progress, and there's still plenty of runway ahead of us, all while we continue to innovate, scale acquisitions and reshape the portfolio to achieve higher growth with higher margins for better earnings consistency.

Third, we continue to see very strong customer demand. Orders, backlog and our project pipeline all give us confidence that the opportunities in front of us remain significant, and we are winning because customers value our technology, our solutions and our ability to deliver. And finally, when you put it all together, strong demand, improving execution, higher shipments and growing earnings, we feel confident in both the near-term outlook and the long-term commitment we've laid out. That's reflected in the guidance increase we are announcing today and our confidence in delivering on our 2026 and 2030 commitments.

We are remaining focused, staying close to customers, innovating with speed, leading and investing in growth and executing with high discipline. I believe the best is still ahead of us.

Now we will open the floor to your questions.

Thanks, Paulo. Moving to the Q&A. We ask you please limit your opportunity just 1 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 Instructions] Our first question comes from the line of Deane Dray from RBC.

We're seeing continued strong growth in data center. I mean, really, that's what we were expecting. That's really good execution on the team. But I'd like to put the spotlight, if I could, on your other nondata center electrical businesses, the end markets there. Can you take us through the growth that you're seeing and what that means for the second half?

Sure, Deane. I'll answer your question, but let me make a couple of comments first. Thanks for the question, by the way. But I want to make a comment on you for a moment to recognize your strong career. So after 30 years and plus in the industry, 12 years at RBC, you're stepping into a very well-deserved retirement. And we couldn't let this call pass without recognizing that. So our huge congrats from this team on behalf of the complete Eaton team, truly a remarkable career. And I hope you turn this next chapter into something fun with your family, well-deserved rest. And please note that we are very grateful for all the candor, your tough questions, your right questions over the years and also your support. So thank you very much. It was a pleasure working with you. You cannot see, but the team here is all nodding. So thank you, Deane, and congratulations once again.

Now to your question, we expect a lot of questions on data center. So thanks for asking us a question which allow us to talk about the other parts of the portfolio. So I'm going to just make a comment on data centers because it's important. What we have ahead of us in terms of demand is still very incredible. It's an enormous growth opportunity.

Just think about this 300 gigawatts of announcements versus the 50 gigawatts that was built over decades that's going to be online by the end of this year, 6x what this industry built ever is going to be built in the next years to come. So it's an incredible opportunity. I don't want this to go unnoticed.

But the beauty of our strategy and, frankly, about our portfolio, is that we are anchored in deep secular trends that are even broader than data centers, right? So we have other meaningful growth opportunities beyond data centers. Your question was around Electrical. I'm going to answer around Electrical, but we also have a strong Aerospace business.

As you look beyond data centers in Electrical, you'll see that we realized strong growth across most of Electrical end markets in the quarter, including double-digit organic revenue in commercial and institutional, which is still a very important market for us. Machine OEM recovering really strongly, also double digits, and also distributed IT recovering really nicely, also double digits. So that was revenues.

In terms of orders, it's even more encouraging. Orders are accelerating broadly again, with growth in all of our end markets. I'm going to give you some highlights here. Our total Electrical orders increased mid- to high teens for commercial institutional utility, industrial and even residential, which is a market that is not as strong as you guys know. And the machine OEM market rebounded even faster with orders in the mid-30s. So very strong, all [ 12 month ] conclusion.

So I just want to say to this team and everyone and our investors that we are anchored on these secular trends beyond data center. We have many paths to growth, and we remain committed to data centers. So our end markets are really strong. Thanks, and congratulations again, Deane. And just a -- all the best to you, man. Before the second question. Go ahead.

No, I'm going to keep to the one question, no follow-up. I just appreciate all the support you and your team have provided me, and I wish you all continued success.

Same to you. Take care. All the best. Before we move to the second question, operator, I just want to recognize that our IR team received a number of inbound calls regarding the IEEPA refund. So in respect to all of you, in order to make this call a bit more fluid, I'd rather address that upfront and clear the air.

So I want to say that our impact in Q2 from the IEEPA refunds is less than $3 million. So it's less than $0.01 of EPS, right? And so it's a clearly operational bid when Dave talked about $0.25 beat, it's truly operational. I just want to make that very clear.

And then the impact of the tariffs for the second half is immaterial, the refunds, and is already embedded in the guidance. I just want to clear the air on that because I think we have multiple calls into Yan and his team.

And our next question comes from the line of Andrew Obin from Bank of America.

Yes. Thank you for the IEEPA data point. I will go to data centers. So lots of questions on Boyd. You raised your full year guidance for Boyd revenues. The business appears to perform well. Can you remind us how you look at Boyd's competitive advantages compared to competitors? And maybe also talk about Boyd's cadence between 3Q and 4Q?

Thank you. So thanks for the question. So I think it's important that I highlight, we are very, very excited to have Boyd as part of our portfolio. We are really happy with the acquisition, they're performing really, really well.

Why are we so happy? Not only I see this business as a winning business with this leadership position in cooling, but also, as you're going to see in a minute through my comments, they're also a high performer financially. And the third thing that I love about this business is that it gives a lot of early strategic read into the chip development that will determine the future of the data center. So it's a very strong business, but also very strategic, and it performs well financially. So nothing not to like here.

As I said last quarter, and I want to get back to it, many questions on cooling over time. I truly believe the investor community evolved in their thinking in the last months, and most understand its growth potential and how strategic it is. So I don't want to spend much time there.

Now looking at the cooling business we have today, we are glad to say Boyd is part of us now. We are very confident they're going to deliver on this raised forecast for the full year, $1.8 billion. It is certainly a huge jump from last year at $1.1 billion, but we believe this team can deliver, and I will be shocked if they cannot over-deliver on this number, to be honest.

Now if you look at Q2, they delivered $432 million in revenue, which was 20% above their commitment and our Q2 guidance. So very, very strong performance. So in the short term, we know we are in a very good position. I guess, your question, Andrew, was more how can we be sure they will continue to win. What is their competitive advantage. That's what I understood from your question, at least.

So if I am to address that, I would start by saying that I believe they're going to continue to win because they are the partner -- the design partner for broad-based chip providers. They are always in their road maps and gives them a first look and a first chance to bid, which I think is fascinating.

If you look at their size and scale for liquid cooling, they are the market leaders for liquid cooling. If you think about the cold plates and the CDUs. And this team has proven over time they can scale reliably and with high quality. So I think this is really important for most data center players. If you compare to other companies, they are rather small. So there are question marks on whether they can scale with the same quality and efficiency. And some are actually showing some quality issues from the get-go. So I think they're going to win also on quality and the capacity to ramp.

I must say, you guys probably remember, when we announced the deal, they cut their teeth, they developed their pedigree in aerospace. So it is very, very stringent conditions technically where failure is not an option. So they bring that DNA to the data center environment. So I think it's a winning formula. And I also believe they have a deep breadth of products and systems, it's a very well-balanced portfolio. And they have, as I said, multiple times the deepest engineering team and experience. So whatever comes next, they're going to be able to lead the market. So that's what I think makes all the difference.

Now I start talking about the way we are integrating them to the rest of the portfolio, which is also very important. They provide us this to chip part that so we can say now we have the full portfolio from grid to chip. And a couple of words on integration because some of you might be interested in how the integration is going. I would say it's going really, really well. Our approach to it is that we are accelerating their development. At the same time, we are protecting, we are learning from it, and we are augmenting what made this company great, which is their superior engineering once again, their manufacturing quality at increased scale. So we are really taking good care of it.

So I think it's a high-performance team that leaves a high successful business, and we're just making them better as we continue to invest. So beyond cooling, the other thing that not many people realize, but it's really important. The strategic importance to have the seat on the table with the chip manufacturers once again will bring benefits to our power but also a software business.

So in summary, I think our customers validate our strategy. I'm extremely happy to have Boyd in our portfolio, and we are all very confident they're going to deliver on the growth plan.

And our next question comes from the line of Chris Snyder from Morgan Stanley.

I wanted to ask on Electrical Global organic growth, which was the biggest upside surprise in our model, at least. So you guys, I guess, high-teens organic versus high singles expectations. So just kind of wondering what drove that level of upside and organic inflection? Is it the legacy business getting better? Like is data center coming to market? Are you starting to see maybe revenue synergies or tailwinds from the contribution of Boyd? So just -- what are you seeing there? And what gives you confidence in -- it seems like the guide is saying it's going to hold double digits into the back half. So just any color there would be great.

Thanks, Chris. I'll give you two reads. I first talk about the individual businesses. Then I'm also going to give you a read into the end markets so you have a complete view on how the segment is behaving and performing.

So I would lead by saying that in Q2 -- and I'm very pleased to say that all businesses, our EMEA, our APAC and our [ GIS ] businesses all performed meaningfully ahead of organic growth expectations. All did really, really well. So if I go individually, revenues were up 20% in both EMEA and APAC. And they were high -- they were up high teens in [ GIS ]. So you see the 18% combined segment organically. So very strong performance by all, and we are very pleased.

If you cut this by end market, we are getting a lot of traction in data center. So organic revenues were up 65% and much, much faster than the underlying market that is growing at 23%. So definitely gaining momentum, gaining shares. And if you look also the traditional markets we had for this segment, like machine OEM are also up more than 20%. So it's a strong data center story, but not only a data center story.

So OEMs were up 20%. Utilities were up low teens. And so was commercial institution, also low teens. So the comment I want to make -- and I hope you get this very clearly -- growth was broad in terms of different geographies or different businesses. Every business did well, but it's also broad in terms of end markets.

And the conclusion, this was a look back view, of course. If you look towards the future, orders were up 33% on a 12-month basis. The total backlog, as you could see in the chart, is up 103%. There is a contribution of Boyd in that, of course. But even if you take the Boyd contribution out, the organic backlog is up 54%. So very, very strong performance by the team. So that's what gave us this confidence, Chris, to raise our guidance from 7.5% to 12%.

We believe this team can deliver. And I think I'm also going to talk about execution for a moment here because this is an integral part of our strategy. We said in multiple events and calls that it's well known that the APAC team is a center of excellence for us in terms of operation, high-performance team, compete in a very tough market. I think there's no surprise there.

I would like to shed some light and recognize the EMEA team in this call because their turnaround in the last the 18 months is really, really remarkable. So their organic growth of 20%, and they keep expanding margins, gaining share and momentum. It's really a great performance.

So here, you see our 3 pillars of our strategy implemented at speed and at scale as we move forward. And just connecting the dots here a little bit to the question before from Andrew Obin on Boyd. Let's not forget that Boyd joined that group now. So it's the new elite player who joined the Electrical Global segment. They keep winning. I talked about their performance. So I'm not going to repeat that. So just think about the moment where they start joining, the organic growth rates, it's going to be a great moment for this business as well.

So we'll continue to deliver good news, I guess, as EMEA, APAC and [ GIS ] keep delivering. And we are looking forward to Boyd to join organic growth in 2027. It's going to be a good moment for us. Thank you.

And our next question comes from the line of Scott Davis from Melius Research.

Paulo, I think you just crossed a year as CEO. Any reflections? Any -- maybe you can talk through some of the ups and downs and how that makes you think about the business going forward?

Thank you for the question. I appreciate the strategic angle to it. I really appreciate that. The team has accomplished a lot, Scott. So my answer is going to be a bit long because I need to pay justice to what the team has just did, okay?

So I had the benefit to be announced months before I took over. So we could think about the strategy a little bit in advance and hit the day 1 really as one team moving forward, which was great. And I give credit to Greg and the Board for allowing me to do so.

So as you know, we developed this strategy, having 3 pillars. And you should ask yourself, why did we include growth into each one of those pillars. We look back as a team, I would say this even before I started as CEO a quarter before. And we looked at all the things we loved about the company, all the things we wanted to keep that made Eaton great.

At the same time, we looked forward at the growth opportunity ahead of us. And we concluded that what brought us here would not necessarily be enough for us to double the size of the company moving forward. So for perspective, if you look at our history here, it took us 100-plus years, 112 years to hit $20 billion in top line when we acquired Cooper. Then the following decade, you guys know as well, we didn't grow much. We just grew $1 billion in the top line.

But what we did do as a team we start reshaping the portfolio. We divested hydraulics, et cetera, and we definitely increased margins in that period. So we became this premium company with premium valuation, and we are proud of it.

Now if you start looking at the last 3 years, including our guidance today, from '24 beyond is where the line actually bends for us. It's an inflection point in terms of growth. So if you look at these 3 years, beginning of '24 to end of '26, including our renewed guidance, we will add $10 billion to the top line. So in 3 years, we're going to do 10x what we did in the last decade, so the prior decade. So that's what we are getting the company prepared for.

So I believe this is only the beginning, to be honest. The opportunity now we have as a company is actually to add much more to our top line and bottom line. Not in 100 years, not in 10, but in the next 4 until 2030. So that's this period. I'm going to give you a bit of a hint on the performance of each one of the pillars.

First of all, why lead for growth, what we're trying to achieve here. It's about culture, it's about strong values we want to keep, and it's also about improving speed and customer centricity. So over time, why this was required. Over time, we moved to more of a hybrid go-to-market model. In the past, we're just primarily a distribution model. Now we have strong distribution and strong direct accounts.

And the team needed help in getting there. So we put actually a program together to provide coaching to our leaders, and we involved over 1,000 people in the organization. So 4 different levels of organization are supported by this program. And we also recognize -- I did recognize it and my own team, my executive team, we need to set the tone from the top and lead by example. So we looked at strengthen my executive team for faster results. So we are building a more focused and integrated team with higher collaboration not only internally, but also with our customers.

Under invest, another 1 minute on invest. Here, the idea is to focus on the structural transformation of our portfolio. I still believe that story is not fully appreciated by the market. But every quarter, we're going to be working to prove that we are transforming the company here. So within the first year, we deployed capital to acquire businesses, and the idea was to accelerate both growth and margins.

Just a reminder, we acquired Fibrebond on the models for data centers, Resilient Power, which is the medium voltage solid-state transformers for 800-volt DC. We also acquired Boyd. So now we can actually say we have the complete portfolio, going from the utility all the way down to the chip. So that happened really fast, and I'm proud of the team.

Let's not forget, we also acquired Ultra PCS, which is a great leader in technology, in defense systems, so we're also proud of it. So we continue to refine our portfolio, including the tough call, once again, on the Reverse Morris Trust to move away from the automotive sector. All those are required measures.

And let's not forget that part of invest for growth is also on organic investments. We are ramping several facilities, as you guys know. And most of the pain now is behind us, happened in Q4 and Q1. So we start to see the plants delivering better volume, better output. Going forward, what to expect here is more productivity out of the plants, and the learning curve is getting every time, easier as we move forward. So top line should grow faster with less bottlenecks.

And just to conclude on execution, we know we have pockets of excellence in the company. I talked about APAC being the center of excellence before. We still have room to improve in operations in all the high-margin businesses, Electrical Americas, Europe and Aerospace, and that gives us hope. We are focusing on that, and that can bring us a lot of self-help for the future.

So all in all, having this new leadership team and portfolio enhanced, I want to say we are now fully focused on executing for growth. And I want to say that give us this full confidence for the year, but also '27 and our 2030 commitment.

So I want to stop here. I know it was long, but the team has done a lot. I'm thankful and I'm proud of the team for what we achieved together in the first year. And I would say, I'm very, very confident in that the best years for Eaton is still ahead of us. Thanks for allowing me to talk about it.

And our next question comes from the line of Nigel Coe from Wolfe Research.

Great. I think this is going to be a short answer. Before I ask my question, can I just clarify -- I know you don't want to talk about tariffs, Paulo, but I heard $30 million, the transcript's got $30 million. I think you meant to say $3 million, is that correct?

$3 million. Less than $3 million. $2.8 million, if you want to be precise.

Okay. That's perfect. Okay. Okay. I just wanted to double click on the Electrical Americas margin ramp in the back half of the year. And you talked about better price. So I just want to really understand how much is coming from kind of better price business cost? And then what benefit are you seeing from factory productivity, lead times, et cetera?

Thanks for the question. I will kick it off to give the big picture, and then I'll not steal Dave's thunder. He's ready to go on the bridge. So I'm not going to steal his thunder.

I just want to remind everyone that's something that is really important. First of all, we know this is top of mind. Rest assured, we spend a lot of time on this as a team, we're really focused. We know what we need to do. So I will start with that.

And the demand, once again, is fantastic. We cannot talk about margin progress without understanding how much capacity we are adding and how we are growing this business. I would say this, I don't need to go back to every detail, but you see the orders keep growing our backlog. Only the Electrical Americas, we had $5 billion since beginning of last year and only sequentially is another $700 million. So although the organic growth accelerates to 18%, we keep growing backlog. So that needs to be taken into consideration as we look for the second half and the future of that business.

The other thing I want to say, if you pull all these elements together, the acquisitions we made, how we are reshaping our execution model, our leadership model, I truly believe we are in the precipice of what I call a new growth cycle for the whole company, and especially here for Electrical Americas, and we're getting ready for it. I think what was really important for us was to realize that the bulk of the disruption we expected to happen, and we told you so, happened in Q4 and Q1, Q4 last year and Q1 this year for the ramp.

I would say by now -- and I want this before Dave goes through the ramp -- the expansions are going well and progressing better than planned now in Q2, we started to get speed on this. And I want to say once again, we cleared the biggest hurdle we had in terms of sequential order -- revenue per day growth, which was the sequential Q1 to Q2. So that was the strongest hurdle we had to clear, and we did that successfully.

So I want to say no one is taking a victory lap here. The whole team stays absolutely laser-focused to meet the commitments. We meet as a team every week. And my executive team is working to support the Electrical Americas group to achieve that. So Dave is going to give the sequential walk. I don't want to steal your thunder, Dave.

All right. So we'll start out with the first quarter to second quarter sequential. So we're up almost 190 basis points. About 100 points of that was price cost, and the other 90 points was pure output as we got the scale that Paulo just talked about.

If we talk -- look at H1 versus H2, some of you like to look at it that way, we'll be up 450 to 500 basis points. 300 basis points will come from price cost relationship. All of our pricing actions that have either been implemented in Q2 or early August, and then we'll get about 150 to 200 basis points from output and productivity.

So then if you look at Q2 to Q3, which is a 250 basis point improvement, 150 basis points is price cost and 100 basis points is output and productivity. Again, the difference maybe from Q1 to Q2 compared to Q2 to Q3 is not only do we get the scale, but to Paulo's point earlier, we're starting to see productivity in those factories as our workers get more experience.

And then if you look at the sequential from Q3 to Q4, again, it's a 200 to 250 basis point improvement. 150 basis points is price/cost and 50 to 100 is output and productivity. So we're on the right trajectory. We finished Q2 really strong. We -- I have early reads on July as of this morning. Again, it's an improvement from what we saw in second quarter. So I'm feeling very confident about our exit rate for 2026. And we're still committed to our 32% margin by 2030.

And our next question comes from the line of Jeffrey Sprague from Vertical Research Partners.

I was going to ask about 800 [indiscernible]. But given that answer, I have -- I was going to ask about [indiscernible]. But I think I want to come back to the ramp. I appreciate all that color. It looks like your guide, right, for Electrical Americas actually assumes relatively flat sequential revenues, right, to the Q3 to Q4. So that lift in margins tied to price cost and output, right? It sounds like that requires higher revenue, right? You're going to have more revenue coming through on price, and you're going to have more factory output supporting the margin improvement.

So is there any kind of mutual exclusivity between revenue and margin here as we think about that bridge? Perhaps you're still just being a little bit cautious on the ramp in terms of what we gave here today?

Some of it, to be quite honest, is when you look at the difference between Q2 and Q3, we're going to be doing it on regular time versus over time as an example. We're going to have less premium costs involved because we're already ramped. The biggest ramp was from Q1 to Q2.

And again, I talked about it, we have more experienced operators, the manufacturing engineers are making cost out improvements. And then if you look from Q3 to Q4, we have productivity investments we've made as well in our capital spending that will drive cost out as we move forward. So it's your normal improvements as you go through and get more comfortable with the products you're making at these plants. And we're seeing it in our numbers already in July.

And also, price is going to -- price cost is going to normalize.

Yes, more with price coming up than costs going down, I guess, right? I mean, you're taking cost actions, but you're going to have more actual price going through the system in the back half?

Absolutely. Yes. And it's more than just general price increases. We're also doing discrete price increases as we need to. We kind of commented on that in the prior earnings call.

Yes, absolutely. Okay. I'll leave it there in the interest of time. I appreciate it.

And our next question comes from the line of Nicole DeBlase from Deutsche Bank.

I wanted to ask about Electrical Global. Organic growth there was much stronger, I think, than you guys had expected. Curious, what really drove the upside? And then thinking about how you're framing the rest of the year, you've got full year up 11% to 13%. I know that's up from prior, but it does embed a pretty kind of a material decel in the back half. Was there any sort of pull forward of demand? Or could that maybe be a bit of conservatism?

Can you repeat the last part of your commentary? It was a bit muted for me.

Sure. Yes. So just the implied second half within EG organic comes down a little bit relative to 2Q. Just curious if that could be some conservatism or if there is any sort of pull forward of demand?

Yes. We are very prudent here, but we just raised 450 basis points. So we are still prudent in our guidance, but it's still a large, large upside. Not only for Electrical Global, Nicole, but if you look at our trajectory, start with the big picture for the company, we started the year saying we'll grow 8%. In the last earnings call, we said we'll grow 10%. Now we said 12%. And then the same is true for Americas, right? We started -- I think it was 10%, and then 13%, and now it's 15%. So we want to continue that trajectory, keep improving and keep proving that we can do more. There is no downside here. We keep pushing as hard as we can.

And our next question comes from the line of Andy Kaplowitz from Citi.

Now that Boyd has been as part of the portfolio and you've had several quarters of very high data center orders, maybe you can update us on what you're thinking for content per [ mega ] and data centers? Is $3.4 million the right number to think about now? And you gave us last quarter, your view on Eaton's positioning for [ DC ]. Has your confidence has been improving that when the dust settles on the transition that you feel good about Eaton's ultimate content at least in that 3, 4 range?

Thanks. So I would answer your question directly. The $3.4 million is the right number to think about it. So for your modeling, it's the right one. You asked about the 800-volt trajectory. Let me make a couple of comments. I think there is a lot. As we travel, we talk to investors and analysts around this.

Last quarter, I talked about why this matters to data center operators. I just want to remind everyone. What our customers want to do ultimately it's to improve tokens per megawatt, so improve the efficiency of the data centers. And this transition to 800-volt DC helps quite a big deal. 5% is huge for a gigawatt site. So there's a huge impact.

In my opinion, I hear a number of different opinions in the market, I believe this it's going to happen and customers are going to get what they want, right? We -- when there's so much money involved, this is going to happen. So the core of your question was the dollars per megawatt. And you talked about this transition.

Everyone thinks about the solid-state transformer, medium voltage solid state transformer is a very important element of that transition. And we are clearly ahead in terms of technology after the acquisition of Resilient Power last year, and we are speeding up their development. So we know we are ahead. That's the feedback we get from hyperscalers and multi-tenants and also chip manufacturers. But there are more elements to this transition.

So it's broader, and we are working every element of this transition. So the first thing I want to say, of course, the medium voltage transformer is a key element of it. But you also need to have, in order to be a great player in this new world, you need to have core DC breaker technology. You need to know how to break that circuit, right? Otherwise, you're not a reliable partner to the data center operators.

So you need to have the transformers. You need to have breaker technology. The third build block for me is around power electronics and power quality. So think about UPS capabilities that we also are a leader in the marketplace. And the fourth big element of this transition, in my opinion, is cooling. You need to have cooling because it becomes even more important. And here, I'm talking about both cold plate and CDUs.

So in order to win in this new era, In my opinion, you need to have those 4 technical blocks very strongly, be a leader, be able to supply that to our customers. And even when you get all of them, you still need to clear another hurdle, which is to have the service available. So having a strong service network that can show up in a site in an hour, not in days, is also required.

So it's not for everyone. It is not for every company. And again, it's my personal opinion, and my team coincides in this opinion here is that if you're a company who will be missing 1 or many blocks of these 4, they'll have a really hard time convincing their competitors to sell to them so they can package the solution. So that's why I want you to understand, yes, there is dollars per megawatt, but being able to offer the complete spectrum here will be also differentiated performance KPI for the future.

And our next question comes from the line of Chad Dillard from Bernstein.

I was hoping we could spend some time on prefab and modularization. Can you talk through what share of your RPs are for prefab and modular? And then how does that change your competitive positioning? And then third, what does it mean for the adoption of this approach as we think towards [ 800-volt architecture ]?

Great. Great question. So there is a clear trend. If you think about one of the bottlenecks in the industry, which is to have availability of electricians, plumbers, et cetera, there is scarcity of people to work on a stick build. So there is a push towards more modular solutions.

This is exactly why we last year decided to make the acquisition of Fibrebond. We saw them as a strong market leader in building those models. And there are packaging things we know pretty well, which is our equipment, our UPSs, our switch gear, et cetera. So there is a very good connection there.

I just talked -- I love -- actually, you asked this question after we talked about the 800-volt conversion. When you simplify the architecture, you even increase the opportunities of using modular solutions here. I just want to highlight a couple of things because I got many questions recently about this and complexity, et cetera.

It is a different skill set than working in the manufacturing side. So that needs to be dealt by professional people, professional engineers, professional project managers. That's exactly why we acquired the competence of Fibrebond, and we are scaling them up. They are very strong already in gray space, as you guys know. And as we migrate into the white space with the 800-volt DC, we can also tap on their capability and also cut other partnerships to win in that space.

So we're going to do this. We're going to do this responsibly. We're going to do this effectively, and we're going to do what our customers want of us basically.

And our next question comes from the line of Jeff Hammond from KeyBanc.

Thank you for the color on the bridge. That was very helpful. Just to ask, as you kind of expand, your capacity comes online, you get more productive. I'm just wondering what you're seeing on lead times for some of your longer lead time items? And then as you get more productive and your lead times are maybe better in line relative to your competitors. What's your line of sight where you start to get more of your fair share as these lead times get better and these plants come on?

Yes. Very great question. So lead time is important to our customers, especially in the fast-moving market like this. We are working on that. We constantly work on that. If you see our growth, especially in data centers where lead times are even more important, we grew 65%. And I asked the team to look back. And I think we completed in total, 8 consecutive quarters of growth beyond 35% in data centers, which is fascinating.

And just as a reminder to all of you, when we shared the 2030 commitments for growth, we only baked 17% of the data center growth in our model. So we are clearly ahead of that, moving towards 2030.

So my point, I'm going to get back to your lead time question in a second, we cannot be winning at that pace with that progress if we're not competitive. So I want to lead with that first. Having said this, we believe we can and should improve. And we know the product lines where our lead times are extended. We are ramping capacity not only in the factories, but ramping engineering support. And we're going to knock them down time by time and time again.

Thanks.

Okay. Just thanks, everyone. It was a very intense and productive call. I just want to conclude with my closing remarks. First of all, once again, Deane, congrats, man. Well deserved retirement.

Many thanks to all of you for your interest in Eaton for all your analysis and your questions. I want to say once again, thanks to the Eaton team. I know I've been hard -- fair but hard with all of you. You guys are responding exceptionally well. I'm pleased with the progress, knowing that we are committed to continue to improve. So this is really important.

So I would say our strategy is working. I hope you can appreciate that is gathering pace. Our markets are strong and durable. We accelerate organic growth, keep moving our backlogs up. And we're going to benefit from the strength of this market for years to come, right? If you think about all the announced projects.

We also took the size of portfolio moves to structurally transform the company. And I believe -- I truly believe that new Eaton is taking shape as we speak towards higher growth and higher margins. We have this unique grid to chip capabilities. So all in all, a much stronger team and a stronger portfolio.

And execution continues to improve, especially with Electrical Americas improvements. We're going to keep moving margins up as we progress. And consequently, I would just remind you that we could print a very strong operational bid in Q2, which gave us confidence to raise our guidance once again for the year.

So thanks for your interest. Great afternoon to all. Thank you.

Thanks, guys.

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

Good morning, and welcome to Dana Incorporated Transaction Announcement Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, both the speakers' remarks and Q&A session will be recorded for replay and transcribed. For those participants who would like to access the call from the webcast, please reference the URL on our website. [Operator Instructions] At this time, I'd like to begin the presentation by turning the call over to Dana's Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber.

Thank you, Regina. Good morning, and welcome to Dana's update call. Today's presentation includes forward-looking statements about our expectations for Dana's future performance. Actual results could differ from what we discuss here today. For more details about the factors that may affect the results, please refer to our safe harbor statements and the disclaimers found in our materials published on our website and filed with the reports with the SEC.

I encourage you to visit our investor website, where you'll find this morning's press release and presentation. As stated, today's call is being recorded, and the supporting materials are the property of Dana Incorporated may not be recorded, copied or rebroadcast without our written consent.

With us this morning is Bruce McDonald, Dana Chairman and Chief Executive Officer; Byron Foster, Senior Vice President and President of our Light Vehicle Group and our incoming CEO; and Timothy Kraus, Senior Vice President and Chief Financial Officer. Bruce, I'll turn the call over to you.

Okay. Thank you, Craig. Good morning, everyone, and thank you for joining us this morning on what's been, I guess, short notice. We're extremely excited to be announcing a business combination with Eaton's mobility business. Just by way of background, this is a business that we've long been, you could say, coveted. Obviously, it wasn't available in the marketplace being a part of Eaton. And so since last January, when Eaton announced their intention to spin this business off, we've moved very quickly and aggressively to reach the agreement that we're announcing here this morning.

As we communicated at our Capital Markets Day in March, Dana's vision is to be the world's best powertrain company. And we believe this combination, we make a major step towards achieving our vision. If you look at it by combining our axle driveline and electrification portfolio with Eaton's transmission capabilities, we will be a truly differentiated supplier in the powertrain space. In terms of the transaction, it's structured as a Reverse Morris Trust or RMT, and that is being effected so that the transaction is tax-free for Eaton shareholders. The pro forma ownership of the combined company will be Eaton shareholders will own just over 50% and Dana shareholders will own just under 50%.

The combined structure -- or sorry, combined enterprise value will be about $10 billion based on our current share price. And as I mentioned earlier, the transaction while being tax-free for Eaton shareholders will also be tax-free for Dana's shareholders. In terms of the strategic rationale, it's fairly simple. This really transforms Dana and expands our 2030 strategy. It increases our scale in both CV and aftermarket segments, and provides us with cross-selling opportunities where we think we can accelerate the growth rate that we're already committing to in each of those 2 businesses.

In terms of margins, it's accretive to both EBITDA and free cash flow margins. We committed to a 15% adjusted EBITDA margins for Dana under our 2030 strategy. We believe we will be there in 2027, the first year this transaction is in effect. And we're upping our 2030 EBITDA targets and free cash flow targets significantly, and Tim will get into those later on in his presentation. And then lastly, we believe there's compelling value creation for our shareholders through the $250 million of cost synergies that we are absolutely committing to.

Turning to Page 5. I'll just go through a little bit more of the details on the transaction. In terms of the enterprise value at $5.1 billion, that represents a multiple of about 5.9x 2026 pro forma EBITDA, and that includes our run rate of $250 million of synergies. In terms of the shareholding, we already talked about that. The equity component of the deal will be about $4 billion, and that's essentially a fixed number of shares based on our VWAP, a 5-day VWAP on June 4. And then we will also pay a cash dividend to Eaton, which will be funded by new debt of $1.1 billion. And I would note the $1.1 billion dividend was subject to normal closing adjustments for cash and debt levels.

In terms of our balance sheet, we expect it to remain extremely strong at 1.2x immediately after closing. And we don't -- at that level, we expect our current credit ratings to be unchanged. In terms of the governance of the company, I'm going to transition, as previously announced into the Chairman role. Now my role will change. I'll stay on as Executive Chairman, and I will have primary responsibility for integrating the businesses and synergy realization. Byron will become the Chief Executive Officer on July 1. Tim Kraus will remain our CFO, and we'll be joined -- the management team will be joined by Erin Rowse, who from Eaton, who will serve as our CHRO effective upon closing.

In terms of the Board of Directors, in addition to the current 8-member Board that we have, we will be adding 3 Eaton nominees. One of them will be an Eaton executive and 2 will be current directors at Eaton. So we believe it will significantly strengthen the Board of the company, of the combined company with the addition of these 3 high-quality directors. In terms of closing, the deal is subject to normal regulatory and competition type approvals as well as a shareholder vote from our -- from Dana shareholders, and we expect the transaction to close sometime in the first quarter of 2027. And as I talked about before, we are committing to deliver $250 million of synergies within 24 months of closing, a number that we are extremely confident we can deliver.

With that, Byron, I'll turn it over to you to go through an overview of the new business.

Okay. Thanks, Bruce, and good morning, everyone. Thanks for joining. Let me give you an overview of Eaton's mobility business. In terms of the business's focus, it's really around providing engineered solutions for creating, distributing and optimizing power for commercial vehicle, light vehicle as well as supplying the aftermarket space. In terms of products, you can see some of the key product lines there. I'm on Page 6. Commercial vehicle transmissions, engine and emission systems and various components as well as a suite of EV products. And then an aftermarket business that supplies various products and components, which we'll talk a little bit more about in the coming slides.

In terms of the financials, $3.3 billion of revenue is the estimate for 2026, and you can see that split roughly 65% of that revenue is focused on the commercial vehicle space and 35% on light vehicle. 25% of the revenue is aftermarket. So a very strong aftermarket position, and we're looking forward to the opportunities of combining our aftermarket businesses. And then you can see from a margin perspective, in 2026, the estimate is 19% EBITDA margins. In terms of the regional split of the business, roughly 50% of the revenue is here in North America with the other half of the revenue, pretty equally split between South America, Europe and APAC. And then serving all of the major OEMs across both the light vehicle and commercial vehicle space.

If you turn to Page 7, you can see the global footprint, 28 manufacturing sites deliver to the customers. You can see a very strong footprint in the key regions, North America, South America, and then you can see 4 sites in Europe and 5 sites in the Asia Pacific region.

Going to Page 8, as Bruce mentioned, this combination fully aligns with Dana's vision to be the world's best powertrain company. And if you really look at the capabilities brought to the table from Dana as well as from Eaton's mobility business, it really positions the combined company to win in this space. Just to take a second here and walk through this. If you think about the drivetrain portfolio, Dana brings obviously, expertise in the driveline space as well as a low-cost manufacturing footprint that now combines with Eaton's leadership position in the commercial truck transmission and clutch space.

In terms of the powertrain, you can see, obviously, Dana brings expertise and depth in axles, driveshafts and various thermal management products that you guys know well and combining that with Eaton's transmission and mission-critical power creation and distribution products. So really broadening our product portfolio and the solution set that we can bring to our customers. From an aftermarket perspective, Dana brings a broad portfolio of sealing and thermal and driveline product to that space. That now combines with Eaton's global distribution network and commercial vehicle replacement parts. So again, bringing a broader set of solutions to our customers in the aftermarket space.

And then from a margin expansion and resiliency relative to cash generation, really the combination of Dana's program cadence, the cost discipline that we've put into the business, combined with a really durable demand pattern and margin -- strong margin portfolio. from Eaton really positions us well from a P&L and balance sheet standpoint.

If you go with me to Page 9 now, just to kind of step back at a high level and look at the combination. We're bringing together Dana's $7.5 billion driveline business that is very highly, from a mix standpoint, leveraged to the light vehicle space with 20% of our business being commercial vehicle and the remainder being aftermarket. Combining it now with Eaton's mobility business, $3.3 billion top line. And you can see the mix there being 42% commercial vehicle, 34%, light vehicle and the remainder -- remaining 24% aftermarket. So you can see that combination really provides a much more balanced portfolio across the end markets and a stronger position from a mix standpoint in the aftermarket space. So really excited about the combination of 2 great companies and the value that can be created for our customers and our shareholders.

So with that, let me turn it over to Tim, and he'll take us through more of the financial update of the deal.

Appreciate it, Byron. And thank you, and good morning to everybody. If you turn to Page 10, just to give a quick overview on the aftermarket business. It was -- the aftermarket growth was a key pillar of our 2030 strategy, and this transaction strengthens that pillar and helps accelerate the growth in our business. So as you can see, Dana's current business is about $900 million in the aftermarket. We're adding about $800 million from Eaton for a combined business that's about $1.7 billion. So we're very excited, offers a comprehensive range of genuine and all makes products. We believe there's a lot of additional opportunities around cross-selling and significant growth runway within this business. So we do see this as a high-margin noncyclical business that really helps underpin the financial strength of the combined business.

And with that, I'll turn it on to Page 11. And we'll talk a little bit about our Dana '30 growth strategy. So as Bruce mentioned, our strategy is to be the world's best powertrain supplier and this transaction absolutely strengthens that. And with that, we remain 100% committed to the strategy we laid out in March at our Capital Markets Day. So if you look, our prior sales target that we laid out for 2030 was $10 billion in revenue. We're revising that today to be between $14 billion and $15 billion, really accentuating that this transaction accelerates our 2030 growth targets, broadens the scope of our traditional products, that's both in CV transmissions and in cross-selling opportunities across all the products. And especially in aftermarket, as I just mentioned, broadens the breadth and really deepens the products across all of our end markets. So we're really excited to advance the growth strategy and take those targets up from $10 billion to $14 billion to $15 billion.

So part of the compelling value creation of this transaction are the $250 million of projected synergies. So as you look, we believe that this will be a -- be completed by the end of the second year of the acquisition. So $250 million of run rate savings after 24 months of the transaction. The synergies will typically come from corporate, so duplicative corporate functions, the integration of the CV and LV businesses between Dana and the Eaton business, additional purchasing opportunities. So as we gain scale and breadth and we'll be able to continue to leverage both organizations. Engineering. So there are a number of different engineering centers that we're going to be able to rationalize and bring together to drive cost savings.

And then manufacturing is another key pillar. So operational improvements as well as automation and footprint realization. And then, of course, aftermarket. As I just mentioned, aftermarket is a key pillar, and we believe there's a lot of opportunities to drive synergies through the business. So and as Bruce mentioned, we are 100% committed and don't believe we have any issue in being able to deliver $250 million of run rate savings as a result of combining our business. So that's $250 million out of what amounts to an $11 billion business.

So if you move to Page 13, the transaction, the combined businesses provide a robust financial profile and strong profitability. Combined sales on a 2026 estimated basis, about $11 billion, as Byron mentioned. Pro forma adjusted EBITDA, about $1.7 billion, driving margins to 15%. So as you may recall, our 2030 target was $10 billion with 15% EBITDA margins, and those are going to be realized immediately upon the consummation of this transaction. And then our combined aftermarket sale, again, $1.7 billion, creating a very large and scaled aftermarket business for the combined entity.

If you turn to Page 14. This transaction, given the significant component that's being paid in stock continues to maintain our strong balance sheet. So we have committed financing in place for the transaction, and we expect to refinance our existing capital structure as part of the transaction. And we expect the pro forma net leverage after considering synergies will be about 1.2 turns. So again, we're running around 1% today. We will continue to have an exceedingly strong balance sheet with maturities that are largely pushed out well beyond 2030. And we are committed to completing our existing $2 billion shareholder return authorization that we approved earlier in the year. We had to temporarily suspend the buyback program to preserve the tax-free nature of the Reverse Morris Trust transaction, and we expect our excess cash in the interim to be used for deleveraging. And we do expect our credit ratings to remain largely unchanged as a result of the transaction.

So if you turn with me now to the next page. So Dana 2030 driving multiple expansion, right? These are our new targets for 2030. Sales of $14 billion to $15 billion, adjusted EBITDA margin of approximately 18%, that's 750 basis points improvement over our 2026 guide for Dana alone and adjusted free cash flow margins of 8% to 9%. That's a 450 basis points improvement over our 2026 guide. So this acquisition accelerates and expands Dana 2030 targets. We have above-market rate growth. It fundamentally improves -- improvements in operations for top quartile margins, and we're accelerating our free cash flow generation. And we continue to be laser-focused on increasing shareholder value, and we believe this transaction does just that.

And with that, I will turn it back over to Byron for some concluding remarks.

Okay. So just to close it out. Thank you, Tim. Thank you, Bruce. We couldn't be more excited about the opportunity that combined with Eaton's mobility business presents to our team, to the Eaton team, to our customers and to our shareholders. Just a couple of highlights of the key points that we want to leave you with. One, it creates a comprehensive high-value powertrain portfolio right in line with the vision that we've put in place for the company. It accelerates our aftermarket expansion. We've shared with you that that's a key pillar of the Dana 2030 strategy. And so this just accelerates that plan for us. Increases our commercial vehicle scale and market coverage, again, bringing better balance to our mix of end markets that we serve, reduces our customer concentration. As you know, Dana has a very concentrated kind of customer mix. So this diversifies the customer base that we serve, combines really 2 exceptional teams that have history.

These companies go back a long way. We've had partnerships in the past, and we look forward to bringing these teams together, again, to drive performance and serve our customers, expands our margins and free cash flow, maintains our strong balance sheet, and at the end of the day, increases shareholder value. So again, we're excited to share the news with you all this morning, and we look forward to any questions that you might have. Thank you.

[Operator Instructions] Our first question will come from the line of Rajat Gupta with JPMorgan.

Congrats on the announcement. Just had a quick question on the long-term sales targets of $14 billion to $15 billion. Is there any change to like the legacy Dana organic growth assumptions? And also what's being assumed for Eaton Mobility organic growth in those targets? And maybe like you could layer in what kind of revenue synergies you're expecting from the deal that might be aiding that target as well? And I have a quick follow-up.

Yes. Let me take the first part in terms of Dana's organic growth plans. I would say no changes to the strategy that we have in place. If you'll recall, we talked about 3 pillars of growth, our traditional business, which we've already had some proof points in terms of our ability to continue to grow our driveline business with our key customers. Aftermarket, I think we've laid out a number of strategies of what we're doing there to drive growth in the aftermarket space, as well as our applied technologies that gets us into complementary markets where we think the Dana technologies and product portfolio can bring value. So those plans, those targets that are part of Dana 2030 remain in place, and we see no change to what we're driving there. Tim, do you want to speak to that?

Yes. So if you take a look, we're still committed, as Byron just mentioned, to our $10 billion target. We're showing $14 billion to $15 billion for the combined entity. Eaton is currently about $3.3 billion. So we see significant growth in -- or growth in Eaton coming as well over that 5-year period. Obviously, they're in some of the same markets we are. If you think about our growth in terms of the market recovery in CV, that's part of the story for Eaton. And then we do believe that there are opportunities given the products that Eaton has as we combine, and we start thinking about our applied technology growth pillar that we're going to find opportunities in that -- those pillars to be able to continue to push our sales further in terms of growth out in the out years. But the vast majority of all of the cost synergies, the $250 million of synergies that we're underwriting today are all on the cost side of the business.

Understood. That's helpful. Just a quick follow-up on the buyback. I understand the temporary suspension here. Given like this is like a bigger EBITDA base, a bigger free cash flow trajectory, is there any change to like the prior $2 billion through 2030 authorization? Or do you anticipate any change to that once this transaction is closed?

So no change to the authorization, so we haven't. But you hit the nail on the head. As we think about the size of the business and where the capital structure is, we believe we're going to have significant excess capital as we move into the latter part of the plan years, which should give us the ability to continue to and accelerate our capital return program. But as of today, we are fully committed to returning the full $2 billion within that time period.

And just so everybody knows, I don't think I mentioned it in my opening remarks. We are prohibited for 24 months after the closing of the transaction on the buyback. So that's the limit. So we believe if you fast forward, when we get into '29, we'll be able to resume the buyback.

And I think our previous $2 billion obviously didn't use up all of our free cash flow. So we had cushion there. And clearly, this gives us a lot more cushion than we had before. So I would say there's upward bias on our buyback as opposed to risk.

Our next question comes from the line of Emmanuel Rosner with Wolfe Research.

Can you maybe talk a little bit about the backdrop of this deal for you, how that came about? It seems like based on your recent Capital Markets Day, you have a lot of growth opportunities organically as well. Obviously, your 2030 targets are still very, very much there. So what is essentially this -- what is this bringing you essentially that would help you and get longer term?

Well, I think, first of all, this is a business that has always been of high strategic interest to Dana. The axle, our driveline, powertrain, especially when you look at some electrification, these products fit exceptionally well together. For us, this improves the scale of our business in commercial vehicle, which has accretive margins. It also brings a very healthy aftermarket exposure. So it's a business that we, I'll say, have long desired.

Unfortunately, it was a portion of Eaton, and it was not available in the market. So in late January, Eaton announced their intention to spin the business off and it became kind of a once-in-a-generational opportunity for us to acquire a premier asset of high strategic interest and fit with significant synergy opportunities. So it was opportunistic, but it certainly fits in our strategy to become the world's best powertrain supplier.

Got it. And then just a quick follow-up. Can you just give a little bit more detail on pro forma free cash flow, I guess, both now and sort of like post synergies? And then to the extent that the -- you're prevented from doing buybacks for probably the next couple of years, 2, 3 years, what would be sort of like the use of free cash flow sort of like in the meantime?

Yes. So their business is -- has a better free cash flow profile than we do, largely due to the higher margins that are coming in the business and the higher exposure to aftermarket, which is a big component of that. So we would expect our free cash flow in the near term, if you think about where we're at today, and where we're now projecting in 2030, we'll have additional free cash flow returns in the near term as well.

In terms of use of our free cash flow, so obviously, we need to integrate the business. There are cost to do that. So we'll spend a bit on that. And then we will use the proceeds in the interim or the cash flow interim to delever the business. And then from there, we'll continue to think about our ability to then redeploy that capital, whether it be in growth or as we talked about here just a few minutes ago in terms of increasing the size of our capital return program.

Our next question will come from the line of Colin Langan with Wells Fargo.

Any way to -- I'm just trying to struggle with the $250 million of synergies. It's quite a large number given that the sales were -- I think EBIT for the business that you're acquiring was only $400 million. What is driving that? Because is there a product overlap? Is there consolidation? Because some of the items you listed on the slide like purchasing and corporate, this is coming out of a large corporation. So why wouldn't they have had those synergies in the current company?

Yes. I'll maybe start with that, Colin. I mean, first of all, I think our $250 million is a certainty. It's a covenant that we're signing up to, and we have absolute confidence that we can deliver it just like we have with our other cost reduction commitments. In terms of the buckets, I mean, Tim kind of went through those in detail, but I guess I wouldn't look at it like we're taking $250 million out of Eaton's $3.3 billion. We're taking $250 million out of the combined company. So we have duplicative head off overhead structures in light vehicle and commercial vehicle on a regional basis, and we intend to run the company as 1 unit, not as 2 separate pieces.

Same situation, if you look at our aftermarket, that's completely duplicative network, warehousing structures, we intend to integrate those. Within Eaton's business, there's a fairly significant number in terms of corporate costs that are allocated to that business. And I can tell you, our overhead cost structure is a lot leaner than Eaton's. And so that's a big driver of the savings as well.

Yes. I think I'll comment a couple of other things here, right? You mentioned purchasing. I think the -- what we're seeing here is this business is very different from the rest of the businesses within the Eaton portfolio. And so there's a lot more synergies on the purchasing side with Dana than there was actually in the broad umbrella of Eaton. The other big driver, I think, on the -- or I don't think I know on the synergies is around the automation in their -- on their factory floors. They have exceptionally well-run plants, but much like the journey we have been on over the last few years, they had been spending a lot of capital on their EV journey.

We now see -- and not increasing automation and efficiencies from a plant perspective. So we do see all the things that we're doing around our 2030 being overlaid onto the Eaton -- the Eaton business and be able to really drive a lot larger synergy number than you would typically think you'd see in a transaction or a combination of this size.

Got it. And you didn't mention the -- my follow-up was going to be on the EV products. Any color on -- is there overlap with what you're doing today in that segment that you're acquiring? And you've been kind of deemphasizing EV? Is this a shift? Is that -- are you -- is this one of the assets you're looking at? Or how should we think about the incorporation of those EV assets? And what kind of position does Eaton have in those areas today?

Well, I guess to the first part -- it's Byron, Colin. The first part of your question, the products do not overlap. So think more kind of power distribution type of products and components that come with the Eaton portfolio. And they have gone through what the entire supply base and our OEs have gone through in terms of rightsizing and repositioning that business to the reality of kind of where the volume profiles are. At the end of the day, the EV vehicles, if you will, aren't going away. It's just the trajectory is a lot different than initially planned.

So they've been kind of rebalanced and rescoped to support the customers given that trajectory, much like we've done with our business. So we haven't stood up and said we're exiting EV. We just have to rightsize it to the real market demand and outlook.

Yes. And just to add on to what Byron's comment. We are putting 2 subscale EV businesses together. So that's a huge opportunity for the business. And then I think to your point, are we changing our strategy in terms of how we're thinking about EV? No, we are not. It's still part of, obviously, the portfolio, but we are going to continue to have the same philosophy towards EV is after the transaction as we have now, which is we'll look at opportunities. They have to meet our hurdle rates. And if the customer wants bespoke products. They have to pay for the capital and the engineering. If they want to buy an off-the-shelf product, then we'll work with them to do. So -- but we have not changed our EV strategy at all.

Our next question comes from the line of James Mulholland with Deutsche Bank.

I just want to revisit those 2030 growth buckets, if we could. So looking especially at that $1 billion in traditional aftermarket and applied technology, should we think of these as materially larger now to get to that $15 billion or the $14 billion to $15 billion? Or does the acquisition already accomplish the aftermarket component? Are these separate? What's your thought process there?

The thought process is that the acquisition is additive. So we will continue -- so if you think about our chart, right, we had $200 million in aftermarket, just speaking on that. We're still fully committed. And I think as we walk through the year, we'll be able to demonstrate the opportunities that we're capturing for aftermarket. But no, we got a $1.7 billion aftermarket today. You're going to add $200 million in -- from our 2030. And then there is additional growth coming with Eaton because they, like us, were focused on continuing to grow and find those opportunities on the aftermarket side. So the aftermarket is not, "Hey, Eaton solves that problem." It's additive to what we've shown in our current 2030 strategy.

And if anything, I would say, it brings the opportunity to accelerate our aspirations in the aftermarket space because things like boots on the ground, in the regions, supporting customers, I mean, we're looking to leverage that network that is much better in place, let's say, with the Eaton team than building organically. So we're really looking to leverage both the capabilities and capacity that Eaton brings to bear to accelerate our aspirations in the aftermarket space.

Great. That's helpful. And then I guess, looking at the new company's manufacturing footprint. I guess it's probably fair to say that some of the plants are going to need to be evaluated, maybe changed over to Dana Systems. But should we expect some material restructuring expense in the meantime? Or at first glance, does the footprint look relatively turnkey and something we won't expect to see material changes or closures? And if so, could there be some upside to synergies there if you do have to go out and close a few of these plants?

Yes. I think we -- we obviously have a lot of work to do in order to understand their manufacturing footprint. We do see opportunities. And -- but we'll -- as we kind of work through integration and do that planning, we'll come back. But to your point, do we think there's upside? Yes, we are supremely confident in our ability to deliver the $250 million. So if you just think about kind of where we've been on the journey on our own cost reduction plan, we're going to continue to work. We won't be satisfied with the level of efficiency that we've laid out. And as we find those opportunities, we'll clearly go after them.

Our next question will come from the line of Joe Spak with UBS.

Tim, maybe just going back to the product portfolio. As you mentioned, it does look fairly complementary. But are there -- is there any overlap? Or are there any sort of areas or products you think you might need to take a look at just for regulatory purposes?

Short answer is no. Joe, short answer is no. We have some transmission business in the specialty kind of sports car space, but again, very different product. And as I mentioned on the EV side, really no overlap there. So short answer is no, we don't expect that we'll have to peel anything on from a regulatory standpoint.

Okay. And then just back to the synergies. I mean, I guess I had a slightly different take because like when you sold Off-Highway, you found $300 million sort of stand-alone. And I know maybe there was some greater inefficiencies at Dana versus Eaton, although I think you just said it might be the inverse at this point. So just wondering, again, if you could give us a little bit more sort of color on those synergies and maybe just some high-level split of the synergies by the buckets you listed between corporate, purchasing, engineering, et cetera.

Yes. Joe, it's Tim. Look, I think we'll certainly, as we kind of come through give more detail around the buckets. I think we've done obviously, quite a bit of work, but we still have some more to do. But again, I think it's -- we're bringing an organization that has lots of overlap with what we have, and we do believe that the way we're going to think about running the business is going to allow us to drive those costs out of the business.

So again, we can kind of break them down as we get a little bit further into integration. But from our perspective, like $250 million is -- if you notice on our deck, it doesn't say approximately anywhere, it just says $250 million. And there's a reason for that. We're that confident in being able to deliver those synergies.

Yes. Maybe -- and Joe, maybe just to add on to that. A key decision for Eaton was should we spin the business off or do this transaction? And we have shared a lot more details with our synergy plans with Eaton in order to convince them that this was the best deal for their shareholders, and they have high confidence, hence, their decision to go with us that we can deliver that.

Our next question will come from the line of Tom Narayan with RBC Capital Markets.

Just understanding the Slide 5, that 5.9x '26 multiple for Eaton Mobility. And that includes the synergies. That doesn't include the $1.1 billion special dividend, right?

No. No, it does not. But the multiple. It's fully synergized. It's EBITDA plus purchase price.

Total purchase price. Total purchase price.

But -- yes, I'm sorry. It's based off the $5.1 billion enterprise value, which includes -- which includes the $1.1 billion, I apologize.

Okay. Got it. Okay. I understand. Okay. So that $8.3 billion then includes the $1.1 billion, but excludes the synergies?

Correct.

Okay. Okay. I guess -- and I know you said that we'll get more color on the buckets that Joe was asking about. But just -- I mean, is there any sense of kind of low-hanging fruit? There was obviously a deal that -- in the industry that just got announced with some fairly funky buckets, let's say, on the procurement side, it's like 50% of their synergies? Just I think people just want to better understand, given the percentage of "target" if you call Eaton the target here synergies, I think it's like 7.5% of sales does seem a little high versus kind of the standard 5%. So any just help on like what's like obvious low-hanging fruit? Is it like the majority of the $250 million? Is it just -- I know you're going to figure it out so any...

There's obviously a slug that's purchasing, but that's not the significant driver. The bigger buckets are the overlapping structures and automation and increases in productivity that we can drive into the business. But obviously, they run a fully standing group of businesses that are divisions within Eaton. We do the same. There are quite a bit of duplicative costs that are going to come out of the business.

And the -- I remember at the Capital Markets Day, a big topic was nonautomotive, right, like including non-CV either. Just wondering how that changes or improves potentially with this. There's been a lot of interest in things like data center, energy storage, et cetera. Does that change because of this? Or is it kind of what you've been saying before?

No. I think, obviously, we have a broader product mix and then maybe Byron can chime in. And we see more opportunities, not less as a result of the transaction.

Yes. Again, I think the spaces that we've highlighted that we see as great adjacencies for Applied Technologies, I mean, just think about the Applied Technologies portfolio, to Tim's point, now increases. So our way to serve markets like power sports or defense or what have you, would increase.

I think in terms of this data center question, our feedback isn't any different than what we've put out there at the last couple of conferences, which is it's on the list relative to looking at if there's a solution that would make sense and -- but very early stages at this point. And I wouldn't look at this transaction as changing or accelerating that particular market.

Our final question will come from the line of Dan Levy with Barclays.

I wanted to just first ask on the broader end market strategy going forward. When you did the Off-Highway spin, one of the rationale for that was a broader simplification of Dana. Now I know that you're still getting light vehicle commercial vehicles that's different from Off-Highway, but how do you address sort of the question of simplification, which I think has been one of the core targets here? Does that change that at all for you?

Well, no, I mean, look, we're going to continuously examine our product portfolio for those products that we think we can add value for our customers and shareholders and where we can't make those decisions about kind of where to go with a particular product line. So that work that we've been doing in Dana continues. And I know Eaton culturally had that same kind of mindset relative to their product portfolio. So obviously, our portfolio expands here. But again, each product, each segment, each customer that we serve has to stand on its own and deliver value, and we're going to continue thinking about the business in that regard.

Yes. Maybe just a little bit to add on to that. I mean when we announced the sale of our Off-Highway business. We had a lot of questions about CV next. And we like the commercial vehicle business. We recognize we had a lot of opportunities to improve the margins in that business. And so I would kind of look at this as this is highly complementary. We remain very laser-focused on commercial vehicle and light vehicle and this transaction only gives us an increased amount of scale on the CV side. So it further enhances our business diversification.

Great. And then as a follow-up, sometimes when we see companies spin out assets, sometimes those are assets that just didn't get the investment that they needed over the years. So what's your confidence that you had from your diligence that the business here has had the right level of investment and that there's not some uptick investment that you're going to have to make to get the products on par with where they should be?

Yes. I mean obviously, as part of diligence, we visited the main manufacturing sites. And I would say like Byron alluded to earlier, I mean, the business has spent a lot of money on EV in the past and probably just like us has neglected, let's say, capital spending on automation. They're probably where we are in the journey, maybe a little bit behind. So it's not like -- this is a well-run business that makes high teens margins. I mean let's not forget about that. But yes, there's definitely opportunities for increasing the investment in the plants and generating some of the synergies that we've talked about in the manufacturing area. But not -- it's not going to be a major uptick in our CapEx. And as Tim alluded to, our -- we expect our free cash flow margins to expand on day 1.

Okay. So with that, I think we'll bring the call to a close. Again, I want to thank everybody for joining the call on relatively short notice, and just reiterate how excited we are for the future of Dana and Eaton's mobility business coming together, serving our customers and shareholders. So we're excited. We'll keep you updated as the process matures. And again, thanks for joining.

This concludes today's call. Thank you again for joining. You may now disconnect.

Thank you for standing by, and welcome to Eaton's First Quarter 2026 Earnings Results Conference Call.

[Operator Instructions]

As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Yan Jin, Senior Vice President, Investor Relations. Please go ahead, sir.

Hey, good morning. Thank you all for joining us for Eaton's First Quarter 2026 Earnings Call. With me today are Paulo Ruiz, Chief Executive Officer; and Dave Foster, Executive Vice President and Chief Financial Officer. Our agenda today, including the opening remarks by Paulo, then I will 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, and 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.

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 backlog 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 bid was operational. We also delivered strong total revenue growth of 17% and higher margins than anticipated. We are also 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.

But first, let's move to Slide 4. We continue to drive eaten forward with our bold strategy to lead, invest and execute for growth. All 3 pillars are designed to accelerate our growth and create sustained value for shareholders. Today, we will 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 5 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. And 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 impact 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 and as mentioned in our last earnings call in February. We expect progress as we enter Q2 and momentum in Q3 and Q4, which will set up the business to meet or exceed our margin target of 32% by 2030.

Turning to Page 6 and 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 both portfolio actions in the last year, including the successful integration of Fiber bond, which enhances our model 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 [indiscernible] plates expand across compute, networking and rack-level components, Boyd system level position drives also increased CDU adoption. Embedded at a cheap 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.

Therefore, we are confident in 2026 outlook. We are very excited to welcome the 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 [indiscernible] DSX platform as part of our collaboration with NVIDIA to support the next generation of AI factories with end-to-end grid to cheap 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 [indiscernible] 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 cheap 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.

Thanks, Paulo. 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 mobility driven by -- primarily by a deliberate action to fix the tail, exiting a low-margin North America light vehicle business. Excluding declines in mobility, 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.

Now 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, translated into record orders and backlog. The business maintained strong operational momentum, delivering record sales and 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 America's 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 an 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 onetime facility sale gain in the quarter. Even excluding the onetime 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.

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 3 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 a 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 on to Page 14. We summarized our 2026 revenue and margin guidance. Following a strong quarter, we now expect total company organic growth to be between 9% to 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% to 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. And 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. Now 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 provides strong visibility into our outlook for the year.

With the industry's best positioned 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. And with that, I look forward to taking your questions.

Thanks, Paulo. [Operator Instructions]

With that, I will turn it over to the operator for instructions.

Our first question for today comes from the line of Scott Davis from Melius Research.

I'm sure you're going to get a lot of questions on margins, so I'll go in a different direction. But there's a lot of debate around 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 on the medium voltage side? And maybe even a TAM, if you could address that?

Sure. Well, thanks, and thanks for starting with a strategic question. I appreciate that. I will start talking about this in broader terms. You said it correctly, a lot of the discussion is around the medium voltage solid state transformers technology, but we're also leading the pack more broadly as a company on how to transform the complete data centers into direct current technology. So it's broader than just the power transformers, right, all the way from the utility down to the chips. So we got to think about power distribution as well, power protection, 800 [indiscernible] DC or higher actually for future applications. And this is exactly -- I want to clarify, this is exactly the broad scope of our partnership with NVIDIA that we launched for the new generation of Rubin chips. So that the [indiscernible] scope is already 800-volt DC. But the most important question for investors is, why does this matter? Why does it matter so much for data center operators and I would say it is because the industry wants to increase tokens per megawatt.

In other words, to increase the efficiency the data centers. So 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. So with the new cheap 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. So that's the biggest lever.

But the second biggest lever is exactly what you mentioned here, Scott, is to move from AC architecture to DC architectures. If you look at today's efficiency, even in the most improved designs in AC, efficiency runs at 93% and we estimate and all the industry leaders estimate that switching to this direct current technology 800 volts or above can save up to 5% from data center operations, moving the efficiency all the way up to 98%. So if you think about this, this is huge dollars and huge efficiency gains that can change completely the economics of the data center. So I want to 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 accelerate their [indiscernible] development because we acquired an immersion code offering that drives much more power density in a much smaller footprint. So it really leapfrogged our evolution here. And we have more than a handful of solid-state transformer pilots actually approaching 2 handful, including hyperscaler customers. What we are getting from those discussions with them, it's a lot of positive feedback. We are working through those pilots. And in the meantime, we start taking the leading role also developing industry codes and standards in the U.S. but also in Europe. And as I mentioned before, as we are taking the commercial lead here, we're already providing quotes on 800-volt 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 '28. So we're making solid progress there. So 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.

And our next question comes from the line of Chris Snyder from Morgan Stanley.

Maybe I'll balance for Scott and ask more of a near-term 1 here. So Q1 Electrical Americas margins came in below expectations. It sounded like there's maybe some unexpected cost inflation. So maybe just some incremental color on that. And then 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. So just anything on how material that could be in the time line there to lift those back half margins.

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. And as you heard in our prepared remarks, the demand is fantastic. And I just want to give this team -- this group of people, 3 data points for us to reflect on. The first one, look at orders, right, 60% up year-over-year. And this is on top of a very strong base in '25, having data centers being 240% growth validating our strategic choices. So this is a one strong data point. The second one I will mention, as you heard, our backlogs are up 44% in Electrical Americas. So this was a high bar in '25, and this business added $4.4 billion to the backlog in just 1 year. It's incredible what the team was able to add, while we're still delivering double-digit growth on top line. So that's the second data point.

The third one is the negotiation pipeline, as you heard from Dave, is up 81%. Now if you take a step back here and look at all those data points, I would say we are 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. So as a reminder to everyone, I'm getting to 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 first half of this year and these expansions are going well. They are 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 first temporary impact is a negative price cost lag based on 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 1. So that's the first part of the margin recovery.

The second one, we accelerated ramp-up costs in Q1 to deliver 30% higher revenue growth. So 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. So we needed to upload investments in Q1. So this is part of it. It's also a temporary effect, given this ordinance trends, we took this deliberate action and followed [indiscernible] 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 want to 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.

And 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 and April was also a good start for Q2. So that's the first point I want to get out. But 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.

And as explained through our last 2 earnings calls, this is the year of execution for the Americas, for sure. And the team is very focused. I want to report the team is really focused and very supported by the whole corporation. And the progress is tangible at even weekly meetings we have with the team, we can see progress week over week. So we remain confident about the strong exit rate for 2026 and we are committed to the 32% margin by 2030.

[Operator Instructions]

Our next question comes from the line of Deane Dray from RBC Capital Markets.

Yes. Sorry, can you hear me now?

Yes.

I'll also add my welcome back to Dave and 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?

Dean, thanks for the welcome. Let me start with culture, which is one of the reasons I've worked at Eaton for almost 30 years. So I can already see and feel positive changes within the company and we have an increased focus on our customers, and we've had a lot of focus on improving our team operating dynamics. It's been great to see. If I look at growth, I've never seen this level of organic growth across the company in my career. And it's more than just an Electrical Americas story. We see it in Electrical Global. We see it in Aerospace. And then Paulo talked about it a little bit in his last answer, but the commitment that we've made to invest to grow the company organically really stands out to me, both people and assets.

I personally reviewed the growth projects in the Americas during my first 3 weeks on the job, and I came away very confident in our ability to deliver 2026. No, I'm going to -- this will be a little different take. But for me, coming back, I clearly see the benefits of functional transformation efforts that have been ongoing at Eaton over the last 4 years. I see it across the enterprise, but let me share 1 of the many examples from the finance function. So in late 2023, we went all in on centralized and specializing our credit collections teams.

And 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. So 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. So very similar to what policies since I've been back for 9 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. And again, secondly, what Paulo said, we finished March very strong and the preliminary results for April are continue to build the momentum that we take into the second half of the year.

So if I look at the top priorities for myself and the company, one, 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. And then I have strong relationships with all the operating leaders across the globe, and that really helps to drive results and resolve issues as they come up.

If I look at it, we're going to -- one of the big objectives this year is to successfully integrate the Boyd Thermal Ultra-PCS and fiber bond acquisitions as well as execute the spin of our mobility business. And 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 spend in the fourth quarter of last year. And 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. And then finally, on a functional point of view, I'm going to continue to work with our leadership team in finance to drive finance transformation objectives. And personally, I'm going to really lead a continuous improvement culture across all the finance that mirrors the rest of the enterprise with the simple goal of just getting better every day. So hopefully, that answers your question.

And our next question comes from the line of Nicole DeBlase from Deutsche Bank.

I guess just kind of following on to all the highlights of the strong order growth that we're seeing and Paulo, what you said about this kind of being an inflection with respect to demand. I'm just thinking about 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 should we be expecting maybe another tranche of capacity expansion in the quarters and years to come? And 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?

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 going to 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 backlog, negotiation pipeline, all of that, but I wouldn't expect to see such an increase in capacity investments all at once hitting our business anytime soon. It's going to be more like a continuous investment over time. and something that we are really focused as well as the 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 going to make those new plans work, and we're going to get the high returns our investment. So in short, I would say half -- more than half of the pain is gone, is highly concentrated in Q4. As I said before, and then starts to get back in a much better situation for the second half as we ramp those volumes. And there will be a continuous improvement and continuous investment, but nothing of this magnitude of 24 plants in the space of 2 years.

And our next question comes from the line of Chad Dillard from Bernstein.

So I've got a question for you on competitors buying into the cold plate market. So I guess, part one is what share of cold places is represented in Boyd. And then part 2 is how do these acquisitions impact the competitive landscape?

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, is a winning team in the fastest-growing portion of the data center market, the advanced liquid cooling. So we are really happy to be able to count the support of that talented team. And 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. And I would say this is truer than ever with the latest news we saw from the market. But 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 co plates are not commodities, I saw a couple of really good reports coming out from analysts. So there is understanding that cold plates are actually strategic assets for our customer co-development customer centricity and future wins that actually can be paired and can pull wins for system business like CDUs for cooling and power management, especially one of those 3 things under the same rule. So there is much more understanding of its growth potential. I'm happy that's the case now. If we start looking at the recent co plate acquisitions, I would say that a further, in my opinion, further validate our strategy because it demonstrates the attractiveness of this tremendous market growth opportunity we saw earlier on.

And the other thing I want to highlight in terms of landscape -- competitive landscape to the second part of your question, before acquiring Boyd, the team really did -- our team really did the homework and we systematically evaluated the market landscape for over a year. So we did that on our own. We hired an external consultant. We hired a cooling expert from the Department of Energy. All those 3 independent data points of browsing the market pointed to Boyd. So we are confident we bought the BaaS business, the market leader at the right multiple, also very important to say that. And based on Boyd's world leading market position, we are also very happy about their capabilities and the scale they can implement in the next months and years.

And 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. And this game around liquid cooling is a game, in my opinion, will define as a game of trust given the high stakes of being so close to the chips and keeping the servers working and the revenue generation assets operating well. It's a game of trust, it's a game of speed and cost on innovation. Constant innovation is what marks this market very strongly. So the other thing I want to say, and this is the mindset of our team here that we will protect you will learn from and will augment what made Boyd great, which is their speed, the superior engineering they have, the manufacturing quality at increased scale.

So we are really focused there. Now if I stop, this is a big picture for the business and the cooling market. We know that the future is bright for this technology. But then we should ask ourselves what makes us feel good about the shorter term. And 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. And 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. And also the backlog doubled from 6 months ago. So 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. So 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. Now we only owned the business for 3 weeks. So we thought it was premature to raise the full year forecast at this time.

But I want to reassure everyone we are aiming for an upside and we'll be prepared for that upside. So in summary, just to give you my final words on this topic, market validation of our strategy given the last years, we're extremely happy to have Boyd in our portfolio, and I'm very confident in delivering our own growth plans for '26 and beyond.

And our next question comes from the line of Andy Kaplowitz from Citi.

Obviously, you raised your organic revenue guide for the year which seems like it's mostly coming from data center strength, but what are you seeing in terms of other mega projects? Are you simply further unlock there? And maybe your thoughts on broader economic trends impacting EA and Electrical Global, any impact from the Middle East on your business, for instance?

Very good question. I'll give you a flavor on mega projects first. Another strong quarter, another strong quarter. The announcements were up 29% year-over-year, growing 36% in full year '25. So if you put a 2-year stack, the stack [indiscernible] 65% up. So a very strong development in mega projects. So the backlog of mega projects now is around $3.3 trillion and is up 31% year-over-year. But 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. So mega projects parts reached $54 billion in Q1. So it's more than double the same period last year. And since we start tracking that in 2021, it's the third best quarter on record. So very strong tailwinds that will come from mega projects in the years to come. You had 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. But we also had strength -- we see strength in utility orders, we see strength in machine OEM, we see strength in aerospace more broadly for the company. So we have different vectors of growth, which are not necessary data center only. So I'll not give full details now, so we allow other colleagues to ask their questions as well. But thanks for your highlights on the mega projects. So strong quarter once again.

And our next question comes from the line of Patrick Baumann from JPMorgan.

I just had a quick one on the EA margin again for the commentary you made on March and April being better and then the incremental pricing you put through in April. I'm just wondering if you could give any insight into how much improvement that you saw in those months. And then what kind of improvement you expect in margin from first quarter to second quarter? Because it does sound like you expect it to get better. But it's not really clear to what extent?

Great. So I would get started 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 have a very strong end of the quarter. That performance repeated in April. And in terms of margin development, the 2 things I said before, I shared before, there are temporary headwinds. They will be solved as we execute on the volume ramp. So 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 at beginning of April. So if you put these 2 together, the business is demonstrating top line growth and executing on the expansion well, also took the right measures in terms of pricing already implemented. So we'll see that coming in the second half. And 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? So I will start by making those comments, and I'll allow Dave to give some color here from his perspective.

Yes. Based on our -- how we finished March and April, with our guidance, we're up 150 basis points from Q1 to Q2 and the Electrical Americas. And keep in mind, on the price actions we don't get the full take in the first quarter when we execute them. That tends to come through in the following quarter. So again, we're confident in our guide for Q2 for Electrical Americas. And again, April demonstrated that we're continuing the momentum that we saw at the end of Q1.

And that's 150 basis points you're saying from 1Q to 2Q is the expectation?

Correct.

And our next question comes from the line of Andrew Buscaglia from BNP.

I just wanted to check on -- a lot of discussion on the data center front and orders were quite strong there. But can you give some commentary on what's going on order-wise and trend-wise by the other subsegments within Electrical Americas?

Sure. I will give you a 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. So we continue to see very strong momentum in terms of orders for the utility business here. So we had double-digit growth on a 12-month rolling basis for Electrical Americas and for Electrical Global mid-single digits. So strong orders coming our way on the utility side. And 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. And 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 and I would say this, we expect the market to remain strong for a very long period of time. Just if you recall all those data center announcements triggered, what I would say, everyone already sees the power generation and transmission investment.

So 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? We see this uptick in orders, but we believe the biggest wave in investment is going to come later. And 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 it. And first of all, when there is a power generation project, we sell the medium voltage gear required for this project. And then in a later stage, when there's power to get distributed by the grid once again, opportunity for us to distribute protect those [indiscernible]. And then lastly, and even more impactful to us is when this power reaches our end customers, being data centers, being commercial, institutional, any other end market because we need to manage that power reliably and safely. So we are very, very convinced that the utility business is going to remain stronger for longer. And we also -- I would say this, I will give you some color on the short cycle businesses we have. So again, short cycle, high single digits in Q1 revenues from mid-single digits in Q4. So we see this continued momentum quarter-over-quarter.

And then if you go through the details of what makes the short-cycle businesses, we saw some recovery in Americas for resi, low single digits. And once again, we are not counting on the resi market to be strong for us to make our numbers by any means. And we saw also a stronger recovery in the EMEA business in the residential space. MOEM is back -- up for both Americas and Global. And distributed IT, we see high single digit in the Americas, up, right? High single digits up, and it was a little bit down global versus last year.

So we see green shoots coming from Q4 extending into Q1 on the short-cycle markets. And I will say this, and I'm proud to say our team is capitalizing on this market recovery and recovery and winning. And this is important because we also drive utilization of our factories that serve those end markets. I hope that helps.

And our next question comes from the line of Joe Ritchie from Goldman Sachs.

I wanted to -- I wanted to circle back on Boyd. So clearly off to a great start this year. I'm curious, how are you managing like potential disruption from the integration of this asset with legacy Eaton? And then also as it relates to capacity, I know you addressed the capacity for your core business. But I guess, as Boyd coming in, what kind of capacity additions are necessary in order to fulfill like their backlog and how fast they're growing?

Great question. So to the first 1 -- 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 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. So here, they know what they're doing. They were part of Goldman before and they were performing before. So our philosophy cannot be any harder or more difficult in side item at all. So we are taking very good care of the team, a very talented team. They are retaining them. They report directly to our COO at the sector level. They report directly to Heath, so high visibility, high attention.

And in terms of investments, over time, this business grew fantastic rates at very low CapEx rates versus sales, like think about 3%, 4%. And with this explosive growth they have now, they have more investment in terms of sales approaching double digits temporarily is already part of our guidance for the year, and it's all been implemented. So 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. So we are really excited about the business. We are respectful of what they built and we're actually leveraging some of their connections with cheap manufacturers to be a lead for other technologies of Eaton to win. And a good example of that could be also what we are doing with NVIDIA and other companies. So we keep high touch connection with this team. We want them to run fast, and we are supporting them to run fast.

And our next question comes from the line of Julian Mitchell from Barclays.

Maybe just to circle back to the sort of ramp-up slope that the guidance is predicated on, and I suppose 2 sides to that. One is overall firm-wide EPS, is the sort of guide based on a $4 type number in Q4? And sort of 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 50s percent type incremental margin?

Yes. I will start, I'll also, Dave, to provide color. Thanks for your question. Here, I would say couple of things. Once again, you're perfectly right in analysis. That's exactly what we're committing to. And the reasons behind are, once again, twofold: One is the pricing already implemented; and two, we're going to get the leverage from the ramp-up investments that we have that's going to start implementing our profits, improving our incremental here. And also all the efficiencies we are dealing with as we learn how to operate in those plants will be behind us. So 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?

The only thing I would add is, in addition to the benefits we see on 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.

Okay. 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, maybe more dynamic. We could talk to more people. Let me just make a couple of comments to conclude the call. I will 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 and Aerospace grew 16% total sales with 9% organic. So those were 2 markets where we decided to invest and allocate capital.

And in terms of execution, I would just highlight once again, we are executing an 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 and also to raise organic growth guidance for the full year. And 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.

So 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 guidance. So thanks to everyone for your time, and thanks for your questions. Thank you.

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

Great. Well, thanks, everyone, for being here. It's my pleasure to have up next Eaton Corporation. We have Michael Regelski, CTO of the Electrical businesses at Eaton. Clearly, a lot of focus on data center technologies, the evolution of power and thermal management within data centers. That's really going to be our topic to focus on today rather than kind of near-term demand trends and so forth. So thanks very much, Michael, for being here. with us.

Maybe a first kind of broad brush demand question on data centers would just be around, I think Eaton has talked about 100-plus gigawatts of cumulative sort of opportunity in data center buildouts in the U.S.? Where are we on that kind of journey? How do you see the market size evolving?

Okay. Well, Julian, thank you very much, and it's a pleasure to be here. Back in March of last year, we estimated that the data center build-out in the U.S. would be roughly around 100 gigawatts by 2028. And at the end of last year, we kind of estimated that, along that progression, there was between 35 and 40 megawatts or gigawatts of installed data center capacity. We see about 17 gigawatt planned for 2026. And our latest estimates show that there is a backlog of over 165 to 200-plus gigawatts that are planned through 2030 and beyond. So a lot of the estimates that we had provided in the past, we feel very comfortable and confident about those, and we see continued growth and upside.

And when you think about the durability of growth and kind of the recognition of that very large backlog, how many sort of years of visibility you're starting to get because of that backlog in terms of the outsized gigawatt installations?

I think if you go with the kind of planned migration and progression that's occurred, we could see this going up to 10 years or so. I mean there's only physically so much that can be installed. There's capacity constraints. There's labor constraints, et cetera. But all of this looks like it's going to hold true, and you keep on seeing next generation of chips that keep on coming out that are going to further AI. So we think there's a long tail here.

Perfect. And you mentioned the 17 gigawatts, I think, planned for this year. How has sort of the thought around that evolved? Any context around maybe kind of how much was put in, in the last year or 2, just to give us a sense of scale of the industry ramp?

I am probably not the best on that. I want to say that in the year before that, there was probably about 11 gigawatts or so that were installed, and this is going to continually kind of ramp up. Again, some of the limitations are going to be permits and there's things that are just beyond our control and everything. But we think that this is going to stay pretty steady, if not increase.

And within the data center, I think there's a growing trend to try and get higher voltage current straight into the IT room. When do you see that 800-volt DC coming in? Do you see much of a role for the, I think, 400-volt people have talked about as a bridging path to that? Maybe help us understand kind of some of those changes and what it means for Eaton?

So 800-volt DC to the rack is probably one of the biggest architectural changes that are starting to be designed into data centers. And a lot of those designs are taking place right now. Honestly, when I look at Eaton, I think that's one of the untold stories here is that DC power is probably one of the biggest transformational things that are going to hit the electrical industry since, quite frankly, AC electricity was around in the Edison days. But the designs are starting to happen now. And you look at why. Well, we know that there is a shortage of generation -- electrical power generation that's occurring to meet all of the power demands that are out there. And if you just look at from the utility feed all the way through to the rack, and you step down voltages going from medium voltage to low voltage and then down to 54 volts into the rack and the conversion from AC to DC and back, we estimate that there's roughly about 5% electrical loss during that transition.

If you could just go from DC directly from the utility feed all the way through to data center into the rack, that's 5% efficiency gain that you could get. So on 50 gigawatts or 100 gigawatts of power generation that's needed, that's 5 gigawatts of power that all of a sudden just appears from the existing infrastructure. And that is really exciting. Can people get their all in one shot? No. So as you mentioned, Julian, there're some bridge strategies to get there with 400 volts. But the underlying movement towards the direct recurrent, that's pervasive and that's going to happen. And as you start seeing higher and higher rack densities, the demand to move to DC power is going to increase.

Got it. And I think solid-state transformers is something that we hear about as a product category that will have a big uptake in that transition. Maybe help us understand why is the solid-state transformer important in that transition? And how well placed is Eaton there in terms of developing solid-state transformers and starting to get the capacity in place to build them?

Sure. So -- and when you look at power coming into a data center, if we start there, there's a utility feed and that's medium voltage, and then it goes through a traditional transform, gets stepped down to low voltage and gets distributed throughout the data center, and all that's AC power until it gets to the rack. The medium voltage solid-state transformer takes the utility feed and can convert it directly using power electronics into DC, direct current. That direct current can then flow throughout the data center through all the switchgear and all the bus bar directly into the rack. So you're avoiding all the conversions. You're already at DC power, which is what the servers and the chips take in order to provide the electrical power to make them run.

So that's why that's so important. It eliminates the loss, but it simplifies the whole architecture of the data center. Everything now is direct current.

Got it. And as you're CTO of Electrical and thinking about Eaton's position in solid-state transformers versus other companies out there, some of them are at this conference who are developing solid state as well. How comfortable do you feel about Eaton's position there, technology lead? When do you think it might start to come into sort of mass production at Eaton for the solid-state transformers?

You know what, I feel actually really comfortable and really confident about our solid state capabilities. And just to kind of put that in context. We started investing in next-generation power electronics about 10 years ago. And we saw a trend that says DC power is going to be prevalent. And why is that? Because most of the loads outside of motors that are out there that require electricity are DC in nature. If you think about your phones, if you think about anything inside of a house, LED lights, they're all DC. So we thought that, that was going to be the case. And we started investing very heavily in that. I mean, today, we probably have the most power dense UPS because of next-generation power electronics that we invested in. So we saw that coming. We just didn't know the market segment or the timing and what would happen.

So about 3 years ago, we started investing organically in our own medium-voltage solid-state transformer. We actually have pilots that we're running today over in Asia Pacific using that. And then we acquired Resilient Power because of some of their breakthrough technology in medium-voltage transformers as well. So we feel very good about where the direction is going, the investments that we made and how it's going to start helping data center customers optimize their energy flow throughout a facility.

Now the timing, we know that we're working with customers today. They're pulling us in to say, help us start designing what that data center looks like. We think that when it hits, no one's really sure, we'll know when the orders come in, but based on pilots and on interest, we think it's going to be sooner rather than later. It's probably in the 2- or 3-year time frame before it starts getting mass adoption. And a lot of that, honestly, is timed with the compute power that's increasing for the chips as well. So those will be kind of in coexistence. As you start approaching megawatt racks, you're going to start needing this technology to provide the power into the rack.

And historically, as you said, Eaton's strength is in the lower and medium voltage side of things. As you get more higher voltage activity inside the data center, are there some risks there? Or do you think because of the investment already undertaken, Eaton can do well in that higher-voltage environment?

Yes. I feel very good about it. And there's -- whenever -- it's interesting. Different market segments, when they think about high voltage, it means different things to different people. So in an IT world, when you're looking at a server rack and you're saying 800 volts DC, that's looked as very high voltage. When we think about the voltage that's coming in from the utility, that's 1,500 volts. So 800 is actually pretty low. So we feel pretty confident in that. And there's one other thing that we're really looking at when we're helping customers plan out these architectures, and that's the circuit protection and power distribution side of this. It's one thing to be able to convert it, but you're talking about now a lot of power into a very small area with highly valuable equipment. And the circuit protection world has been designed around alternating current.

And so now you have to come out with a whole new class of protective devices to be able to make sure that you can circumvent fault conditions, and you could provide a safe environment for those assets to sit in. And we've been investing in solid-state circuit protection and hybrid circuit protection for several years to try to go and meet this demand. And you may say, well, okay, why is that important, a circuit breaker? And I won't go technical, but I will give a very easy example. When you have alternating current, the current goes up and down below 0, and where 0 voltages, that's where the actual circuit breaker and the mechanical device can interrupt the circuit safely. When you have direct current, the voltage level is always on. So you have to interrupt the circuit at a much faster pace if you're going to provide a safe condition.

A lot of people overlooked and say, well, AC, DC, it's -- no, it's totally different. And you have to come up with different schemes, and that's why customers are bringing us into these [indiscernible] now I can't just get somebody with -- from IT to go into a rack and pull out a server. There's a lot of power coming in. I have to be able to do it safely. Do I need to wear protective equipment? And how do I go and make sure that, that environment is safe for people as well as the assets?

And on that point, Eaton is well positioned, I think, because it has a very broad remit within data center electrical equipment. In the conversations with hyperscaler customers, do you think they're moving more towards that systems approach? Historically, it seemed like it was more kind of best-of-breed, let's say. As you get these technology changes in the data center, do you see the customers evolving towards more of a systems purchasing arrangement?

Yes. You know what, it's a really interesting dynamic. And all customers traditionally look at individual products, and you have to have open interfaces because people want the ability to choose best-of-breed components that they could fit together. They also want to have multiple sources of supply as well. However, when you're looking for optimal efficiency and you're trying to go and make sure that all of the components can fit together, especially when the industry isn't established, they're really looking for a systems approach. They're saying, how can you help us design the system from end to end so all the things work together. And then at the boundaries, can we make sure that there's a best-of-breed component in there so that I can have the choice of multiple suppliers.

So it's an industry dynamic that's in existence, but we're finding more and more that right now, and we think this is going to be the way as long as people are maximizing efficiency and value that they're going to want a systems play. They're going to want people to say, how can you help us do all the work so that we don't have to do the engineering ourselves? And probably the best analogy I'd be is, if you think about an Apple ecosystem, you know that everything just kind of works. You don't have to be the engineer on it. And more and more, that's what kind of customers are looking for.

Great. And I think something that within the data center overall, Eaton historically very strong in the gray space, so-called, and I suppose that has been growing very quickly. There's some question marks around does white space start to grow faster maybe as server technology is changing? So maybe 2 questions there. Kind of how do you see gray space versus white space growth rates from here in the data center? And how do you feel about Eaton's positioning in the white space, not just in the gray where it's clearly very strong?

It's an interesting evolution. I think historically, if you look at kind of data centers and how they were designed, you had power systems engineers working on everything in the gray space, and you had IT professionals working on everything inside of the white space. And as these -- as you started getting those rack densities that are going to be up to 1 megawatt, there really is no differentiation in the power between the gray space and the white space. It's flowing seamlessly. And we're starting to find ourselves getting pulled into these design discussions because everybody is sitting at the table and saying, how does the power flow from end to end all the way from the utility into the building and then through into the rack? So those discussions are evolving. And I think, especially as DC power becomes more prevalent, gray space, white space delineation is going to start becoming more and more artificial when you look at it from a pure power perspective.

Interesting. And on that point on gray space, historically, it was sort of power coming from a centralized source. Now there's more of a push for distributed power generation kind of at the data center side itself or very close to it. How does that trend affect Eaton? Understanding you don't do much in the pure generation side, but there's some implication on the electrical equipment anyway.

Actually, it's one of the things that we don't necessarily talk about a lot, but it plays in very well for Eaton. And we noticed this trend a while ago is that power flow now is not just unidirectional, it's bidirectional. So you really have to have that mindset when you're designing your equipment. And there's a couple of things to manage the flow of electricity from the utility feed as well as on-site generation. We have like microgrid controllers to help manage how that flow gets optimized for the facility. And we've also put a lot of technology inside of our equipment as well. And to give you an example, in some of our high-powered UPSs, we have this feature called EnergyAware. And what that does is it takes all of the capacity of the battery that's just sitting there waiting for a failure, and it says, how can I take portions of that and allow the data center customer to provide that back to the utility to do frequency regulation. So the utility operator doesn't have to spend more CapEx to go and put infrastructure in to manage those small, minute fluctuations in power.

So now that UPS starts becoming grid interactive and provides benefit back to utility so the data center operator and utility can maximize the efficiency. So we see those trends happening. And actually, that's pretty exciting for us.

Great. And if we dial into maybe an emerging part of kind of white space, there's been liquid cooling for 12, 18 months now. Maybe help us understand kind of how you see the cooling loop today? How will that evolve and liquid cooling technology as you get different types of high-powered chips emerging?

That's a great question, Julian. And it really starts with the chip. And when you look at chips that are 1,000 watts of power and you have racks that are 100 kilowatts, 200 kilowatts up to 1 megawatt, you have a lot of heat that's being dissipated from all that power in a very, very tight area. And we see -- one of the things that's used to dissipate that heat is the cold plate. And why the cold play? Well, inside of these tight cabinets, you don't have enough room to move airflow. So you have to do it through some other means. And cold plate technology is advancing very, very rapidly.

It's actually a very high precision thermal management device. There's different materials that are going in to minimize the resistance between the silicon chip and the cold plate and extract as much thermal heat as possible. There's different microchannel architectures that are being designed into the cold plate that are optimized specifically for the thermal profile of that chip. So it looks like something, it's like, okay, it's just a bunch of groves and you're moving water through it, but it's actually a highly, highly precise piece of thermal management equipment optimized specifically for that chip.

And you mentioned before the systems play. So you can design cold plates today and in very low thermal environments. Okay, they can work kind of as a stand-alone component. But the more and more you get into these high capacity, high thermal devices, optimization with the CDU to be able to move fluid through at the right pace, extract it, take it out and put it through the heat exchanger, that's starting to become more and more of a systems play. You still have to design them independently, but it's becoming more and more optimized to be a system play.

And when you think about the customers and the kind of route to market for some of the cold plate product, it seems like there's a lot of competitors out there. Maybe talk to how does the customer buying behavior evolve? How confident you feel in, say, Boyd Thermal's competitive position in that landscape?

Yes. We found a few things there from talking with customers and to what they value. And this is where Boyd Thermal gives us, we think, a really nice synergy with a lot of our power equipment. So the first thing is, is that reliability is key. And Boyd Thermal really in their cooling technology came out of the aerospace industry. So aerospace is probably one of the most rigorous environments out there, and it's really simple, right? If something fails, people can die. So highly, highly -- high reliability is there.

Now you have these data center assets that have to be protected. So reliability is key. The second is being able to work at a rapid pace with the chip manufacturers. So you have chips that are coming out every 12 to 18 months. And one of the things that I think it's underappreciated is the amount of modeling and simulation capabilities that somebody like Boyd and has that you have to have to work with the silicon providers. Being able to go and create a model of what a cold plate would look like and then tailor that to a model of the thermal profile of the chip and rapidly iterate through simulations that say, how will this go and extract heat, that's really critical in order to rapidly go and produce something. And then being able to take that, go from okay, this works virtually to a rapid prototype and then high-scale precision manufacturing, those are all characteristics that we find that the customers are looking for because they don't want these things to fail, and that's one -- those are some of the attributes that really made us -- made Boyd a very attractive acquisition for us.

And I think in the cold plate, people sometimes worry about, say, how well Boyd cope in that transition to 2-phase liquid cooling? How do you sort of see that technology transition playing out for it? You think you it can maintain very high market share even with that shift?

Well, the -- so we think that even in these -- even in single-phase cooling, that there's still a lot of runway to grow. And there's a lot that can be extracted out of the technology that exists today. Just if you look at some of the announcements that were made where NVIDIA said that, you know what, hey, we can use warm water cooling instead of cold water cooling. A lot of that's just due to the advances in cold plate technology and being able to reduce the thermal barrier with the chip and not have to use really chilled water to go and extract heat. And as we move into 2-phase cooling, Boyd has been doing research in there as well. It optimizes the CDU and the heat exchanger for that. But the cold plate is still front and center to the connectivity point with the chip.

So we see that as a lot of runway that exists in the current technology path, but a gradual migration as warranted into advanced cooling technologies.

Great. And then maybe some of the more kind of specific questions on sort of customers and competition for Boyd. I don't know how much you can talk about this. But I think there is sort of market perception out there that NVIDIA and Google, a couple of Boyd's biggest customers, any sense of kind of the weighting amongst them? And I think there's also been some stories around Boyd maybe not -- maybe losing some share on the latest version of Google TPU Version 7 to an Asian competitor. So I guess anything you could say on that? And more generally, and it's part of the same theme trust me, but just there's a lot of Asian tech hardware companies in that cold plate arena. They're a different mindset used to really rapid product cycles. So why do we -- why are you confident that Boyd can cope with that type of environment?

Well, I can give some generalization. You said we haven't closed on Boyd yet. But Boyd is in the discussions with all of the chip silicon providers. And they're using the modeling and simulation capabilities and going designing cold plates to go and meet their chips. So that's happening. One thing you could see, and this is really evident from OCP discussions is that there's nobody that's going to lock themselves into any single vendor. So OCP is out there to say, how do you go and co-develop with customers, but then move towards standards so that you could have choice and best-of-breed of components. So that's really always going to be the case.

The thing that we're finding is though the customers are valuing what is your background, how reliable are your products? And can you work at the speed and then scale the manufacturing to go and meet our needs? And that's where we see Boyd as really being advantageous. That modeling and simulation capability really is key because that's how things are designed today in the world. That's how accelerated product life cycles are coming to bear. And there are going to be a lot of competitors that are coming out there. I think the question that we're finding that's being asked is, what's your pedigree in reliability? What's your track record? What's your product failures that are known? And is this a trusted supplier that we could count on to give us the speed that we need, the reliability that we need and the efficiency that we need?

And from everything that we could see, we think that Boyd carries a lot of those capabilities.

Fantastic. Well, with that, we'll switch quickly to audience response questions. So the first question is just, do you currently own shares in Eaton? So a decent balance there.

The second question is around general attitude to Eaton right now regardless of ownership? So generally very positive approach.

Third question is around EPS growth for Eaton versus the peers set here just broad U.S. multi-industry? So very high growth profile.

Next question is on uses of excess cash. Eaton has clearly been pretty busy on that front already. So a mix of smaller M&A and organic investment.

Penultimate question is on valuation, I think, and what year 1 PE should Eaton and trade at? Sort of low 20s.

And the last question is, any anchors on the multiple reasons that people don't own Eaton shares? So a bit of a mishmash sort of operational execution and margins, I suppose, which are fairly common route, and we can see that in the last kind of 6 or 9 months.

So with that, Michael, that was a real pleasure. Thanks so much for a very illuminating discussion.

Okay, Julian. Thank you very much.

Thanks a lot.

Good day, and welcome to the Eaton Fourth Quarter 2025 Earnings Results. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to turn the call over to Yan Jin, Senior Vice President of Investor Relations. Please go ahead.

Good morning. Thank you all for joining us for Eaton's Fourth Quarter 2025 Earnings Call. With me today are Paulo Ruiz, Chief Executive Officer; and Olivier Leonetti, Executive Vice President and Chief Financial Officer.

Our agenda today includes opening remarks by Paulo, then he will turn it over to Olivier, who will highlight the company's performance in the fourth 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 have been posted on our website. This presentation, including adjusted earnings per share and other non-GAAP measures, they're reconciled in the appendix. A webcast of this call is accessible on our website and will be available for replay.

I would like to remind you that our comments today will include statements related to the expected future results of the company and are, therefore, forward-looking statements. Our actual results may differ materially from our forecasted projection due to a wide range of risks and uncertainties that are described in our earnings release and presentation.

With that, I will turn it over to Paulo.

Thanks, Yan, and thanks, everyone, for joining us. I'm happy to report we've delivered solid results. From a demand perspective, we continue to see tremendous strength. On a rolling 12-month basis, our orders accelerated in Electrical Americas, up 16% from up 7% in Q3. Our Electrical Americas backlog grew 31% year-over-year, hitting an all-time record. In addition, demand in our Aerospace business remains very strong. We posted order growth of 11% on a rolling 12-month basis and backlog expansion of 16% year-over-year. And as a result, our book-to-bill for the combined segments was above 1.2 on a quarterly basis or 1.1 on a rolling 12-month basis.

We continue to deliver robust growth in data center market. Our orders accelerated approximately 200% and our sales were up about 40% versus Q4 2024. Our accelerating orders in 2025 demonstrate continued strong demand and our winning value proposition.

Among the Q4 highlights, our adjusted earnings per share were up 18% versus prior year, and our segment margins of 24.9% hit a Q4 quarterly record, up 20 basis points year-over-year. We reaffirmed our commitment to strategic capital allocation with $13 billion in announced investments in 2025, highlighted by the acquisitions of Fibrebond, Resilient Power Systems, Ultra PCS and the announced addition of Boyd Thermal. In addition to that, we announced our intent to spin off the mobility business into a separate publicly traded company, further strengthening our portfolio and our growth trajectory.

Lastly, we delivered on our 2025 adjusted earnings commitment, and we are strongly positioned to outperform against 2026 guidance.

Olivier and I will deep dive into Q4 and the 2026 outlook. But 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 3 are designed to accelerate our growth and create sustained value for shareholders. Today, we will focus on invest and execute for growth, including our recent announcement to spin off our mobility business and sharing progress on the actions we've taken to best position us to execute operationally in Electrical Americas, both exciting and meaningful to our strategy.

So let's move to Slide 5 and our intent to spin mobility. This is an exciting next step, which will unlock greater long-term sustainable value for our teams, our customers and shareholders for both of these world-class companies. The separation of mobility, including both our Vehicle and eMobility segments, builds on our track record and continues our work to reshape the company's portfolio. So I want to share more today about what this move means for Eaton and Mobility.

Eaton will be even better positioned to capitalize on strong growth trends across electrical and aerospace markets. This will allow us to focus more sharply on these leading businesses that are powering strong revenue growth and margin expansion. For Mobility, this move will allow the team to build on its strong leadership position in automotive and commercial vehicle markets. As a stand-alone public company, Mobility will be the leading independent provider of engineered solutions to global vehicle, auto and off-highway OEMs with a strong portfolio and compelling organic growth prospects.

Turning to Slide 6. As a stand-alone business with approximately $3 billion in revenue, Mobility's leading scale provider engineering solutions that creates, distributes and optimizes power for all types of vehicles and propulsion systems. It focuses on safety critical components and systems on automotive and commercial vehicles. The Mobility team has built a reputation that is highly valued in the market and recognized as a true innovation partner to its customers. We expect Mobility to benefit from increased strategic focus to drive a more optimized capital allocation strategy, which will allow for more flexibility to pursue additional growth opportunities in the markets where it's best positioned.

Now turning to Slide 7. The Mobility spin is the right move at the right time. The decision to separate Eaton and Mobility underscores our bold 2030 strategy to lead, invest and execute for growth. This transaction will sharpen our strategic focus and optimize the portfolio. It will provide Eaton with improved agility and flexibility to meet the moment of generational growth. And we'll be able to advance our growth strategy by prioritizing capital on higher growth, higher-margin markets with more earnings consistency. It will enable both companies to unlock greater value through fast decision-making and more tailored capital allocation.

This separation builds on our strong track record of value creation and portfolio transformation and follows the divestitures of Lightning in 2020 and Hydraulics in 2021. We expect it to be immediately accretive to organic growth rate and operating margin. As we work to integrate Ultra PCS and close Boyd Thermal, I'm confident that separating Mobility will position both companies to sharpen their focus to drive long-term value.

Moving to Electrical Americas on Slide 8. Here is a quick update on mega projects. which we will do annually moving forward. There is a clear correlation between the acceleration of these projects and our future order growth. The mega project secular tailwind is one of the many reasons we are expanding capacity to invest and execute for growth. Trends remain very positive. Mega project backlog is up 30% year-over-year to $3 trillion, and now we are tracking 866 projects.

Data centers continue to drive most of the growth, representing 54% of the year-to-date announcements. The rest is largely U.S. reshoring. Additionally, the U.S. Dodge data center construction backlog is now up to 11 years at the 2025 build rates, and the U.S. backlog stands at 206 gigawatts. The start rate for these projects increased slightly to approximately 16%. And our mega project revenue grew more than 30% in 2025 over 2024. These large long-cycle projects typically convert to revenue over 3 to 5 years and provide a durable long-term growth tailwind, a market that will be stronger for longer.

Now for Page 9, you'll see that not only does the mega project data support continued strength, but so does a robust negotiation pipeline and backlog. Negotiations in Electrical Americas are up to nearly $10 billion in 2025. In fact, the pipeline has increased over 4x since 2019 with a multiyear CAGR of 26%.

On the right, backlog also continues to set records with Electrical at $15.3 billion and Aerospace at $4.3 billion for a total backlog of $19.6 billion. Versus prior year, our backlogs grew 29% in Electrical and 16% in Aerospace. They also increased compared to Q3 by 9% in Electrical and 3% in Aerospace. We are clearly experiencing extraordinary growth. And as a result, we have high level of confidence in our future demand and structurally higher organic growth rates through 2030.

Turning to Slide 10. Let me share how we're accelerating our Execute for Growth strategy in Electrical Americas. Electrical Americas is seeing unprecedented demand with all-time high backlog and record order intake. It's a good challenge to have. And we are well positioned to meet it with our broad portfolio and strong engineering expertise. In response to this incredible demand environment, we've already announced investments around $1.5 billion to strategically expand capacity.

At the same time, we are adapting quickly to our evolving customer landscape. We are partnering very closely with our customers to tailor solutions to their needs and deliver fast responses, including increasing our engineering velocity, scaling of the network of partners in our supply chain to ensure timely, reliable material availability across our operations. To meet this moment, we are ramping up quickly at never before seen pace. We are laser-focused on the critical sites that are driving the majority of our growth. We've assembled tiger teams with deep specialized expertise and deploy into our operations to accelerate focus.

At Eaton, we have a strong operational track record of operational excellence across our businesses. We did this recently in our Electrical Global business to help us win larger power distribution projects and to grow margins. We also did in Aerospace to post considerable gains both in our growth rates and margins. So as we turn to optimizing our largest business, the Electrical Americas, we are highly confident in our ability to do it again. While there's clearly complexity while we ramp, I'm confident that Eaton has the right actions in place to execute for growth in the Americas and meet our 2026 margin guidance of 30% at the midpoint in 2026 and 32% margin target by 2030.

Now I will turn it over to Olivier to walk through our financials.

Thanks, Paulo. I'll start by providing a brief summary of Q4 results on Page 11. Organic growth for the quarter was 9%, driven by strength in Aerospace, Electrical Americas and Electrical Global, partially offset by weaknesses in Vehicle and eMobility. Otherwise, organic growth would have been almost 12%. We generated quarterly revenue of $7.1 billion and expanded margins by 20 basis points to 24.9%. Adjusted EPS of $3.33 increased by 18%, which is in line with the midpoint of our guidance range.

Now let's move to the segment details. On Slide 12, we highlight the Electrical Americas segment. The business maintained strong operational momentum, delivering another record quarter on operating profit and strong margins. Organic sales growth of 15% was driven primarily by strength in data centers, up about 40%, along with strong growth in commercial and institutional. Operating margin of 29.8% was down 180 basis points versus prior year, largely driven by capacity ramp cost.

Orders accelerated by up 16% on a trailing 12-month basis from up 7%. This reflects a powerful acceleration with total quarterly orders increasing sequentially by more than 18%. Building on that momentum, we achieved an all-time record level of orders booked in 2025 and orders in the quarter were up more than 50%. Book-to-bill increased to 1.2, and our backlog year-on-year grew by over $3 billion or 31% to $13.2 billion, providing strong visibility for our organic growth outlook. Data center demand is accelerating faster than ever, setting us up for an exceptional growth runway in the years ahead.

Now I'll summarize the results for our Electrical Global segment. Total growth of 10% included organic growth of 6%, a very strong performance for the quarter. We had strength in data center, residential and machine OEM. Operating margin of 19.7% was up 200 basis points over prior year, driven primarily by sales growth and EMEA continued operational improvement, partially offset by higher inflation. Orders climbed 6% on a rolling 12-month basis, driven by broad end market momentum and exceptional strength in data center demand, reinforcing a powerful growth trajectory ahead. Backlog increased 19% from prior year, while book-to-bill remained above 1 on a rolling 12-month basis.

Before to move to our industrial businesses, I'd like to briefly recap the combined Electrical segment's performance. For Q4, we posted organic growth of 12% and segment margin of 26.5%. On a rolling 12-month basis, orders accelerated to up 13%, and our book-to-bill ratio for our electrical sector remains over 1. This represents continued acceleration with quarterly orders up sequentially by 10%. In the quarter, electrical sector orders were up by more than 40%. As a result, total electrical backlog increased 29% over prior year. With demand surging, we are energized by the significant growth opportunity ahead.

Page 14 highlights our Aerospace segment. Organic sales growth of 10% remained at a high level and resulted in quarterly record sales with broad-based strength across all markets and particular strength in commercial OEM and defense aftermarket. Operating margin expanded by 120 basis points to 24.1%, driven primarily by sales growth. On a rolling 12-month basis, orders increased 11%, driven by defense OEM and aftermarket up 11% and 13%, respectively.

On a 2-year stack basis, trailing 12 months orders were up 21%. Our book-to-bill for our Aerospace segment remained strong at 1.1 on a rolling 12-month basis, resulting in backlog increase of 16% year-over-year and 3% sequentially. We are excited to welcome the Ultra PCS team with the closing of the deal in January. Overall, Aerospace delivered a strong Q4 and is poised for continued strength.

Moving to our Vehicle segment on Page 15. In the quarter, the business declined by 13% on an organic basis, primarily driven by weaknesses in the North America truck and light vehicle markets. Margins are down 230 basis points year-over-year, primarily driven by lower sales.

On Page 16, we show results for our eMobility business. Revenue decreased 15% from 17% lower organic, partially offset by 2% favorable FX. Operating profit was $10 million.

Now I will pass it back to Paulo to go over the remainder of the presentation.

Thanks, Olivier. I want to take this opportunity to recognize Olivier's significant contributions to our company ahead of his leaving on April 1, 26 as part of a planned transition. He has been a Board Director for 5 years and a valued member of the management team for 2 years, and he continues to help ensure a smooth transition. We wish him the best of luck when the time comes to leave Eaton. Mercy, Olivier.

Thank you.

Shifting our attention ahead to 2026 on Page 17. Here's an update to our end market growth assumptions for the year. All in, this continues to equate to about 7% growth and with some outgrowth is consistent with our 2030 organic growth CAGR of 6% to 9%. We've increased our expectation for commercial aerospace to strong double-digit growth from solid growth. We now expect residential market to be flat from slight growth. We continue to see many paths to sustainable growth, and we are confident in our end market positioning to deliver another differentiated year of growth.

Moving to Page 18. We summarize our 2026 revenue and margin guidance. Following a strong 2025 in which we posted 8% organic growth for the year, we expect the total company to be between 7% to 9% in 2026, with strength in Electrical Americas at 10% at the midpoint. For segment margins, our guidance range is 24.6% to 25%. That's up 30 basis points over 2025 at the midpoint, driven by improvements in each of our businesses.

On the next page, we have the balance of our guidance for 2026 and Q1. For 2026, our adjusted EPS is expected to be between $13 and $13.50, $13.25 at the midpoint and up 10% from 2025. And for cash flow, our guidance is $3.9 billion to $4.3 billion, up 14% at the midpoint. As previously communicated, we do not plan to buy back shares in 2026 due to the pending Boyd deal. So we expect the share count to remain relatively flat to prior year.

We also provided guidance on this page for Q1, including organic growth of 5% to 7% and operating margins of 22.2% to 22.6%. As we scale capacity in our largest business, we're incurring higher than typical ramp-up costs to start the year with improvement anticipated in each quarter. We have great confidence in the acceleration in both revenue and margins from this starting point. The healthy end markets, combined with our record backlog provides tremendous visibility for our forecast for the year. We have the best positioned portfolio, enabling us to be laser-focused on execution in 2026.

I will close with a quick summary on Page 20. We had a strong quarter where we delivered on our adjusted EPS commitment. It also included record revenue, record segment profit and Q4 record for segment margins. The demand we are seeing is unprecedented and is reflected in the continued order acceleration and growing backlogs. Our strategy to lead, invest and execute for growth is positioning us to capture generational demand and deliver lasting value for our shareholders. We are leaning into a higher growth, higher-margin businesses for better earnings consistency, and we see this as an inflection point for a new growth story.

Bottom line, as we head into 2026 and beyond, we are moving forward with strong demand momentum, and we have exceptional confidence in the setup and our capabilities for sustainable growth. We see an exciting runway in front of us with our strongest days still ahead.

And with that, I'm happy to take your questions.

Thanks, Paulo. For the Q&A today. [Operator Instructions]. With that, I will turn it over to the operator to give you guys the instruction.

[Operator Instructions] And our first question comes from Andrew Obin with Bank of America.

Can you hear me?

Yes.

Olivier, thank you for all the help over the years. My first question would be just to give obviously, very strong order number, but maybe give us more context as to what gives you confidence in double-digit growth in data center markets in '26 and beyond.

Yes. Thanks, Andrew. I think this is top of mind for everyone. So let me elaborate on this. I will start with the market because that's what drives our optimism here. We're extremely confident when we look at the indicators from the market, announcements on the industry were up over 200% year-over-year in 2025. Similar rate, almost -- the backlog is also over 200% up and it equates to 11 years of what was built in 2025. So although the industry continues to find ways to build data centers faster, the backlog keeps growing. So it still represents 11 years, which is incredible. And the kickoff of the project starts were also up almost 100% year-over-year. So the market is very, very strong.

You probably noticed on recent news from the hyperscalers that they reconfirmed their CapEx plans for 2026. This is also great news that supports these projects. Multi-tenant and new cloud players, they are so active, never seen them so active as they are today. If I'm to summarize the market picture here, lots of strength, and these projects will take years to complete. So that's what gives us the optimism in the future.

And then I'd like to turn to Eaton a little bit because you saw in our order numbers, we are winning. And as I mentioned to you before, I consider Eaton to have the broadest portfolio in power management solutions today already in data centers. As you think about what's happening with AI, our solutions start with the white space products centered around the chip, moving to the gray space where we traditionally won with our core power distribution, power quality products, moving all the way up in front of the meter with our utility grid products. So as you know, we offer hardware, we offer service, we offer services and software and hardware. So we are very well positioned already. But we didn't stop there as a team.

We decided to invest both organically and inorganically in this very growing market. So examples of organic investments are our capacity plans to ramp up our factories as we're going to discuss surely later as well. We also invest in front-end resources, and we also invest in innovative technologies. Those are the innovative investments we have. We also have deployed capital, as you know, and we deployed capital to grow inorganically as well. So Resilient Power accelerates our future towards this direct current technology. The acquisition of Fibrebond has been very successful with models built out for the data centers and the announced acquisition of Boyd, which is, it's even faster-growing part of the market, which is the liquid cooling.

So with all that in mind and using the Q4 data as a proof point, our Electrical Americas orders grew 200% and our orders in Europe grew almost 80% year-over-year. So that proves that not only, Andrew, the market is strong, but our strategy is working. The value proposition we have is resonating with customers and also indicates that we're going to be ready for the future of this industry to lead the future as a company. So we are very bullish about the data center market.

And maybe a follow-up question. As you alluded to, there has been a lot of chatter on liquid cooling and technology trends over the last few months. Paulo, what do you think about recent market developments?

Thanks, Andrew. I would say this to everyone. I think news on cooling will be out every month. We just need to get used to it, right? People talk about new technology developments, new wins. And it's a fast-growing market, which is rather fascinating. So that justifies the excitement. I will only get started by pointing out, I just talked about how important the data center market is for us and the industry and remind that the liquid cooling portion of this market is growing at even faster pace than the average of the business, which is already fascinating.

And I also said last quarter to everyone that with AI loads increasing, the white space become much, much more interesting for Eaton, not only with our traditional solutions in terms of power protection and power quality. But also if you look at cooling, which is also very important, we believe in the synergies, commercial and technical synergies of these 2 technologies in the white space. So this is an exciting development.

I'm going to make a short reminder to everyone why we chose Boyd to be the acquisition on this field. I consider they have very similar approach as Eaton. They lead with technology, they lead with innovation. They are a market leader in their space with global footprint and the best engineering team. So whatever happens in this market, when you have a group of engineers, there are 500 of them and 500 of the best in the industry, you can figure out ways to win today in the future.

And to give you a sense of the development of this market for us, I said before that with AI loads, our dollars per megawatt of accessible market are growing. So today, we are already at $2.9 million per megawatt with our current portfolio. And after the Boyd acquisition, when the Boyd acquisition is completed, this accessible market will be increased to $3.4 million per megawatt. So it's really exciting to see that development.

Now to your question specifically on what to expect from the latest NVIDIA announcement as a good example for cooling, I'll try to help everyone here to visualize the system in simple terms. So try to think about 2 types of loops, 2 types of circuits or fluid circuits. The first one, the main one, I call the inner loop, which is close to the white space, is designed to protect the revenue-making assets and the secondary loop, so the outer loop, which is used to connect the white space to the utilities area of the data center, supported by the chillers.

So if you think about the inner loops, where we decided to play, they're closer to the white space, and they are there to protect and keep all the revenue makers operating all the assets, think about GPUs, but also think about TPUs, think about CPUs, think about power supplies, network switches, et cetera. They all require cooling. And this is the portion of the cooling market that Eaton decided to play in.

And here, just a summary of what is offered in this inner loop Think about the cold plates, think about the CDUs, so the coolant distribution units, and then you have piping manifolds, controls units, et cetera. So basically, what happens is that the CDU, the coolant distribution unit pumps cool liquid into the loads, again, the chips, the power supplies, et cetera. This cool liquid absorbs heat via the cold plates and the warmer liquid returns to the CDU. So the CDU today has capability, has a heat exchanger, can take care of part of the heat dissipation, but it also communicates with the outer loop with the chillers. So this outer loop separate circuit from the inner loop is where the CDU sends hot water to the chillers and get refrigerated water back. So this is how the system works today in a very, very, very simplistic way.

As I said before, we don't participate in the chillers market directly. We consider a best option for Eaton to collaborate and partner with the specialized market leaders on chillers. And this announcement from NVIDIA, just to conclude the point here, that implies that their chips, the next-generation chips can run hotter, meaning that supposedly, the data center operators will not need as many and/or as powerful chillers as today, but this still needs to be proven. But I would like to say that there is no negative impact on the inner loop, the part of the cooling that we decided to play. I would say it's quite the opposite because with those systems, those new systems will require began and even more sophisticated elements. It's true for cold plates and also true for CDUs.

So all in all, I'm very confident and comfortable with the Boyd's position as they have, as I said before, early technical engagement, effectively participating commercially in all the cheap platforms, the hyperscaler plans, et cetera, current and future. So we feel good about their future position. We confirm that optimism through diligence process by checking incredible breadth of solutions that are about to be launched today and the years to come. And for the shorter term, which I think is also important, after a very solid finish to 2025 and a very strong January, we remain confident in Boyd's strong position to meet or exceed the 2026 revenues of $1.7 billion. I hope that helps, Andrew.

Our next question comes from Chris Snyder with Morgan Stanley.

I wanted to ask about the quarterly cadence of the '26 EPS guide. At the midpoint, Q1 is calling for maybe just low single-digit year-on-year growth, but the full year is at 10%. So obviously calling for a pretty big pickup post Q1. Could you just provide some color on that trajectory as we get past Q1?

Great. Great, Chris. I think it's another top-of-mind question for everyone. So thanks for asking that. Let me start with how we see the guidance for the full year. We believe 2026 guidance represents strong organic growth and it's supported by record backlog. So we feel really good about it.

In terms of margins, we continue to expand segment margin while we absorb all these ramp-up costs, and we continue to deliver what I consider industry-leading margins. As you saw, we keep winning orders, and we are preparing ourselves for the next wave of this differentiated growth and margin expansion cycle. And if you compare our guidance with our models that I saw from most of you, I think above the line, we are pretty much on dot in terms of segment margin and top line. Below the line, I see some differences with most of the models outside. I see higher interest expense year-over-year, and this is due to the acquisition of Ultra PCS and the finance of Fibrebond. And we also -- the second item is that we plan to keep our share count flat as we decided to temporarily suspend the share buyback as we invest in our business. So those are the 2 differences for the full year.

In terms of the split to the core of your question, first and second half split, we expect roughly 44% of the EPS coming in the first half and around 56% in the second half. When I look at the historical averages of the business for the last 10 years, first half has been 47% and the second half, 53%. So these 3 points difference can be easily explained by 2 main reasons. Tax rate takes care of 2 of the 3 points. We see a higher tax rate in the first half of 20% to 21% versus 16% to 17% tax in the second half. So that's the biggest difference here. And then the Electrical Americas ramp is the explanation for the other point, given the extensive headcount additions and depreciation costs we're going to have in the first half, especially in Q1.

So the way to think about it, our guidance fully absorbs these ramp-up costs. And I believe we have a high degree of confidence, I want to say, in our forecast for the year. The way to think about is that we set realistic expectations, which we aim to beat.

I really appreciate that. And if I could follow up on some of the capacity expansion plans in the Americas. So obviously, a pretty massive undertaking. And just since this is something that the company really hasn't had to do for a long period of time, I would be interested, has there been any challenges that have come through related to the capacity expansion? And do you have line of sight to that capacity coming online? And just kind of really trying to figure out when do you think this capacity expansion turns from a headwind for the company to a tailwind for the company?

Yes. Another top of mind question. So I would say this is a great challenge to have, Chris. We are not in a position to turn our back to the opportunities we see in the market here. We have strong markets, strong backlogs, record levels of backlogs. We are winning higher share of orders as well. And I believe that those investments we are making are also giving our customers the confidence to place their business with us. So this is really important that we keep in mind.

If you think about accelerating ramp-up, our second half orders last year were 41% higher than 2024, 41%. So we had -- we announced those plans to expand capacity. When you start looking at this market and getting those orders, you need to accelerate. So we're accelerating our ramp, and this is what caused some pressure for Q4 last year and especially Q1 this year as well. So it's based on the order successes that we're accelerating our ramp.

Overall, I would say the capacity expansion, the construction goes on plan. We -- it's a multiyear program, as you know. And we are not entirely surprised with the temporary short-term headwinds we have because those we have far too many sizable projects. The company has never done this before at the same time. At the same time, if you look at the Electrical Americas business in the past 4 years, they grew double digits in the last 4 years straight. So it was about time for us to invest in that business. And actually, the average growth was 15%. So it's incredible growth that the business experienced. So we needed to invest to cope with the success we are having, and we are very confident in the short, medium and long term of this business.

In simple terms, if you think about the capacity adds, when you add manufacturing costs like headcount, depreciation and you do this ahead of your sales ramp, you naturally incur in margin headwinds. This is what happens, right? We are fully absorbing those ramp-up costs. And I would say we continue to deliver industry-leading margins of roughly 30%. So just think about the potential of this business. You put all this pressure on cost on this business, and it keeps running and delivering around 30% margin. So the potential is there for when those ramp-ups are over.

Specifically, on the cadence of these investments, the $1.5 billion we invested around 2 dozen projects, so think about 24 projects, 2024 projects. By mid of last year, we finalized the construction of half of them. So half of the projects were over, and we started the ramp in the second half, specifically more into Q4. And we continue to ramp those plants in 2026. For the other half of the projects that are remaining, construction investment, half of this will be largely done by the first half, the construction and the ramp will start in the end of the first half. And the last quarter of projects will continue through 2026 with production ramp in '27.

So what gives us confidence here is that half of the projects were already online last year, and we continue to ramp them. And we are adding additional projects with ramp-up expected in the first half of this year. So we have high confidence in our plan for the year. And the simple way to think about cadence because that's probably the spirit of your question is think about Q1 as being our guidance for the business, expect progress in Q2, I would say, expect momentum into Q3 and then a stronger pace of backlog liquidation in Q4 and moving to 2027. That's the way to model how the Americas business will behave.

And I would just like to conclude, I know it's a lot of information, but possibly the most important discussion point of the whole call, I believe our long-term growth is supported by strong markets, and we're making investments to win. We have a strong portfolio position. So no problem here. It can only get better after these investments. In the short term, in the near term, our growth is in the bag. So it's in our backlog, and we are strong operators, and that's the time to execute and get it done. So I think that's the message.

And Chris, an additional color on your question on the impact, quantifying it. We have said that all along. The impact on ESA margin due to those ramps, and Paulo went through those was about 100 basis points last year. We believe this year is going to be a bit higher, difficult to quantify with precision, but we see an impact of about 130 basis points in the full 2026. And those higher costs would be front-end loaded. And as a reminder, despite those impact, the ESA margin is still clocking at about 30%.

Our next question comes from Nigel Coe with Wolfe Research.

Very detailed question so far, Paulo. Just maybe just a follow up on that last answer. Q1, it'd be great to just fill in some of the gaps on the Q1 guide. And in particular, what you done in for the Electrical Americas organic versus a tougher comp. But more importantly, it sounds like the headwind from investment spending could be maybe 200 basis points in the Americas. Just wondering where you see the margin starting off in that segment.

So the way -- as I said before, Olivier correctly stated the yearly impact of the ramp for the Electrical Americas business around 130 basis points is not equally distributed across quarters. So it's first half loaded. So we're going to get most of the impact in Q1 and Q2 from those extra costs. So that's the way to think about it. Overall, as I said before, the business continues to win large orders we didn't need to change our plans in terms of what we wanted to build or the capacity plans we wanted to add. What we needed to do and we did was to accelerate the ramp in terms of bringing people and bringing the resources earlier in the process so we can respond to this incredible order intake we are having as a team.

And once again, I believe the team is doing a fantastic job in terms of balancing that with still industry-leading margins. And we are confident that when this is behind us, we're going to see those inefficiencies go away, and we're going to print even higher margins in the business. So we remain committed to the 32% margin corridor through the long-term plan that we stated last year. And as you look at this business, right, 15% organic growth in Q4, you look at the total growth of around 20%. The way to think about the business is we are adding integrating companies like Fibrebond, et cetera, and we continue to deliver 30% margins as a business.

So it is a fantastic business opportunity for us, and we're going to stay very close to this team as we did with Aerospace, as we did with Electrical Global to help this team execute on this large ramp.

Great. I've got a follow-up question on the portfolio and your longer-term growth outlook. But I'm just wondering maybe, Olivier, perhaps if you could just clarify if Electrical Americas margins kicking off the year with, I don't know, it's 28% handle on the margin. Are we exiting with a 31% type handle? Just want to make sure that, that cadence is what you're communicating. But Paulo, back to you on the organic kind of like the 6% to 9% framework, just subtracting the lowest growth business from that framework. you're adding a business that you see very strong double digits. How are you thinking about how the framework sort of recast for the portfolio changes you're making? And then, of course, Fibrebond, et cetera, into that mix?

Yes. So I think you're alluding to the commitments we made in March last year for the long-term plan, I suppose, correct?

Yes, correct.

So okay. Let me comment on that. So of course, we are making -- every move we are making is to make the situation better. It needs to get very clear for the get-go. But let me refresh the targets we committed to the whole group here. We committed last March in our 6-year plan, long-term plan, we committed to a growth between 6% and 9% top line growth for the period. Segment margins of 28% in 2030, and we also committed to EPS growth on average of 12% or higher over the period.

So what happened since then, since March? Several things happened and to confirm our optimism in the 2030 targets that I would say this, Nigel and everyone, we are committed to overachieving as a team. There is upside, I'll be honest, there is upside to the plan. At the same time, as a group, we want to be conservative. So we want to beat and raise over time on the expectations. And I would like to give you now a balanced view of where we stand now versus the commitments we made.

So first, I will look at the upside. If you look at the upside on this business, the first big upside is not necessarily on the portfolio per se, but it is that I baked only half of the data center forecast growth from the industry into my original plan. So back then, the industry forecasts were around 33% growth on data center for the period. I included only 17% in our numbers. So this is by far the biggest positive we have. If you look at how we performed in 2025, we are growing at a much faster pace than that. So we grew at 44% the business being 49% in Americas and 36% in global. So not only we are ahead of the 33% market growth, but we are much ahead of the 17% I consider. So this is one very positive upside to keep in mind.

The second one is the one that you mentioned is around the portfolio because the long-term plan we shared with you transparently, we said did not include any inorganic benefits. So since then, we closed the acquisition of Resilient Power, Fibrebond, Ultra PCS and soon we'll close Boyd. And we also announced last week the spin-off of Mobility. I would say this, none of those measures were part of this long-term plan. And all those moves, no exception, are accretive to top line growth rates and margins. So again, another big, big upside to the long-term plan.

Now I'm going to allude to the other side, which is to be more cautious and prudent, right? It's a 6-year plan. We just concluded 1 year. So I believe we need to be cautious and prudent as a team. And I'm observing -- I'm still observing the short-cycle businesses. We believe they have bottomed out right now, which is good, some green shoots here. That includes resi, machine OEM and even mobility markets, hopefully. And it's also true that our exposure to those markets as share of the total company is decreasing over time, but we need to watch these markets closely. So momentary improvement is encouraging, but no clear positive trend yet. We also mastered other things that were not in the plan. Just think about tariffs in 2025. This was not part of the plan. We mastered that pretty well.

So all in all, I would say this, there is clear upside to the plan. We are prudent. We think it's too early to provide new targets for 2030. We plan to refresh those targets as soon as most of these portfolio moves are concluded. And I'll tell you, we want -- we don't plan to have an Investor Day in 2026 because we want to focus to execute on this large ramp on strong backlog we have, and we also want to make progress on our acquisitions and the spin-off. So that's a balanced view on the future, positive for sure, but cautious because of the 6-year plan.

And our next question comes from Nicole DeBlase with Deutsche Bank.

Just wanted to circle back on margins. Sorry, there's been a lot of questions on this already, but there's a pretty big sequential step down embedded in the first quarter versus what you did in 4Q. And I think normally, margins are down more like 60 bps sequentially. You obviously have a lot more than that in the guide. Is that all attributable to what's happening with Electrical Americas capacity ramp and just confirm that the investments and the inefficiencies are stepping up that much sequentially relative to 4Q?

Yes. So you are in the ballpark right, Nicole. So it is mostly related to the Electrical Americas ramp for sure. And as we said before, it's not equally distributed across the year. So we are taking most of that hit in Q4. If you think about the whole program in terms of expanding plants, it doesn't finish with the year-end. So the most pressure we get was Q4 last year, Q1 '26 and starts to ease up in other quarters towards the end of the year. So that's the good way to model the sequence here.

Okay. Understood. And then just going back to the Electrical Americas order trends. You gave the 200% growth for data centers. Can you just talk through a little bit of what you saw in the non-data center verticals this quarter?

Absolutely. So we talked extensively about utilities as well. We believe in this long-term potential for this business, given everything that's happening with electrification, data center build-out and also resilience and grid hardening. So this is a good business. We saw for orders, we had momentum in this utility business. On a 12-month basis, our Electrical Americas orders were up low teens. So also very strong orders for utilities. And our Electrical Global orders were up mid-single digits as well on a 12-month basis. So sales were up in Electrical Americas in the year, mid-single digits and Electrical Global up 10%. So good performance here.

We talk extensively about data centers. I'm not going to repeat. The data here is a fantastic story, not only in Electrical Americas, but also in global. But then I'd like to talk about Aerospace as well because I rarely get a question on aerospace. We are really proud of this team. Not only they landed tremendous wins for programs in 2024 and '25, but at the same time, they're improving execution. So you see their top line accelerating to 12% in the year and margins improving 90 basis points. So it really looks good. We had a good surprise in 2025, which was the aftermarket pickup was really good. We might get that surprise again in 2026, but the market is good as well.

And my last comment is just we can deep dive in any of those segments you guys feel like. But just a short comment on short cycle, again, I said we are encouraged by the latest view. We consider this to be green shoots on the market. It's inflecting positively in global, and we expect it's going to inflect positively as well in Americas, including for resi in the future. We're just cautious here, right, as we move into the year with guidance we can beat and raise.

Our next question comes from Deane Dray with RBC Capital Markets.

I wanted to circle back on the data center order mix, and you can either give it for 4Q or for the year. Just be interested in directionally, how much is hyperscale as a percent of your orders versus colo and enterprise? And are you being asked to do more of these 5-year supply agreements as your backlog extends?

Okay. Great question. I would say this, I'm very, very happy and proud that the team managed to create an environment where we have multiple customers in data center very important to us. Some years ago, we had a couple of hyperscalers that carried most of the weight. Today, we are very well positioned with all hyperscalers and the key multi-tenant. So much more balanced approach. That's also part of the secret sauce why we are winning larger orders versus other companies because we are exposed, we are servicing them well, and we are investing capacity. So I don't want to give you a breakdown there because we made this very much a much more balanced mix of customers, which I love.

The other part of your question, if I'm getting this correctly, I can give you a data point. In the past, most of our orders and revenues came from cloud versus AI. What we saw in 2025 in terms of our orders to give you some sense of the transition here, we already saw the orders in 2025 were 50-50. So 50% of our orders were cloud-based data center growth. The other half were AI, which is -- actually helps us. If you remember what I said 10, 15 minutes ago, our dollar per megawatt content increases with AI loads. So we welcome that change and that shift.

Looking at our revenues for 2025, it still most of the revenues were cloud-based. So 70% were cloud, 30% were AI, but AI is growing, as you can see in the order mix, which is great for Eaton.

That's really helpful. Just to clarify, there had been discussion a year ago about Eaton being asked to do more 5-year supply agreements with these hyperscale players, and these are very profitable supply links. But just where does that stand? Have you been signing any more to those? And then just my follow-up question was where does Eaton stand on the 800-volt DC transition?

Okay. So on the multiyear part, we don't see that dynamic any longer to be very transparent with you. This happened some years ago where customers are buying on a panic to guarantee capacity. We've been investing on capacity. So the orders we are getting now are to be delivered in between 12 and 18 months. That's it. That's the way to think about it. So no one is prebooking or preordering capacity that they see for the future.

And the 800 volt?

800-volt, we are leading the technology here with Resilient Power. We are working with authorities to create codes so we can commercialize the technology. And we have a seat on the table to define those codes together with the industry leaders. But we are ready. We are ready to make that shift. And we want to partner not only with the chip manufacturers, but also with the hyperscalers, and we are partnering with them to design their new setups.

Thanks, guys. We have reached to the end of our call. We do appreciate everybody's questions. As always, the IR team will be available to address your follow-up questions. Thanks for joining us, and have a great day.

Thank you for your participation. You may now disconnect.

All right. We're going to get started here. Thanks, everybody, for joining in the room and on the webcast. My name is Amit Mehrotra. I lead the multi-industry franchise here at UBS. Super happy to have Paulo Ruiz, the CEO of Eaton Corp. In the audience, we have Yan Jin. Yan, there you are. Nice to see you. Thanks for joining.

I hope this is going to be interactive. There's so much to talk about with Eaton in terms of where the company has been under Paulo's leadership. I think on June 1, where it's going. And obviously, data centers and power and now liquid cooling. Obviously, it's December 2. So we're going to talk hopefully about 2026 a little bit. And I'm trying to make this as interactive as possible. So there's a lot of people in the room today. So please don't feel shy. Raise your hand, we'll get you a mic. But maybe to start, Paulo, thank you for joining. First of all, I really...

Thanks for having me.

Appreciate your time. First and foremost, you've been at Eaton for a while, but obviously taken the top job, the top position mid this year. And it's not lost upon anyone the change in direction, maybe moving into more growth verticals via most recently the acquisition of Boyd Thermal.

Maybe just talk about like your vision. So if we look back 5 years from now and look back, what is going to define Eaton and where is the direction that you want to take the company relative to where it was over the last 15, 20 years, which is obviously a very successful direction, but still a little bit different.

No, thanks for the question. Thanks for having me, and thanks for the audience for the interest. I would say this, I shared in March during the Investor Day with the group in New York and you included that we put our strategy around big pillars, 3 big pillars, strategic pillars. And I purposely inserted growth in each one of those pillars, names.

So the first pillar of the corporate strategy is lead for growth. It's all about being customer-centric. It's all about being nimble and moving fast and making the decisions. The second pillar is about execution. If you think about execute for growth, I'm an operator. That's my background. That's what I cut my teeth on 20-something years of P&L management. Seizing the opportunity of a growing market requires the company to have strong operators. So it's operating well in our sales teams, our engineering teams, operating well our factories, et cetera. So that supports the growth.

And the third pillar is about investments being -- have the conviction to invest in high-margin, high-growth verticals. And we have plenty. We have not only -- everyone mentioned data center, which is pretty obvious growth vector for us. We have the utilities market in electrical. We have the C&I market. We have all the mega project that's just started in the U.S. So it's a long tail of business coming our way. And we have the strongest distribution channels that haven't gone anywhere. So they're a strong asset for the company. So there's a lot of investment in our future growing the company organically.

And then inorganically, to your point, I think it's a misconception that we are doing much more. I think we're doing what the company always did well, which is to have tough internal targets where we want to return our investment over 200 or 300 basis points of our capital in M&A, but we are a bit more focused this time. I gave the company clarity on where we wanted to invest, part of the invest for growth mindset. We said we're going to do electrical and aerospace. And within electrical, look at data centers and utilities, and that's exactly what we're doing. So the company has historically done a number of deals. If you think about the position we are in today, the big acquisition of Cooper 13 years ago transformed the company.

Since then, many, many, many small deals happened. Some of them didn't even hit the mainline here. But I think the company has that in the DNA. We are disciplined in our approach. We have a very well-oiled machine in terms of diligence and integration. But this year, we were more focused. And I give also credit to Craig when he goes out and makes the announcement on behalf of the Board that I will be elected, he does that in August '24. So that gave me almost a year. So I start working with the team on the new strategy, looking for targets. Don't think as something that we did in the last 6 months. We started 18 months ago. So that helped a lot.

And one thing, obviously, we noticed this most recent quarter is the big sequential step-up in orders of the company within the Electrical Americas business, call it, from $3.4 billion, $3.5 billion to above $4 billion in the quarter. And you were quite bold on the call talking about how you expect this to even improve further in the fourth quarter. Maybe just talk about that because you talked about 100 gigawatts plus, which is just an insane amount if you just think about what that means.

Where are we in that kind of build-out or time line? And where is your confidence that you can continue to build on this very, very strong order momentum within EA?

So you talked particularly about data center build-out, right? So think about that in March, when we had Investor Day, we talked about market projections of the data center to go to 70 gigawatts to 130 gigawatt, having 100 gigawatt at the midpoint in '28. Some people were skeptical, but those were market projections, not Eaton projections. We took different projections into consideration.

Back then, 2023, the overall U.S. data center capacity was around 20 gigawatts. Approaching the end of the year, we are going to get much closer to 40 already by end of '25. So I would say there is upside and the backlog that our customers have in hands in terms of projects they announced, some started, some have not, is 165 gigawatts. So we moved from 20 2 years ago to close to 40 now in December. And then we have $165 million that's going to be executed. So just follow the CapEx trend. And then if you think about it, this is incredibly powerful for a company like us in terms of winning business. And when I say we need to invest and we are investing, I'm glad we started early because we are capturing that business. When we talk about data center orders in particular, you saw that our year-over-year orders in Q3 were up 70%, 7-0. So there are 2 things here for you to consider.

Over time, we improved our lead times. Over time, we have more visibility into our customers' plans. And then over time as well, the data around chips is moving so fast. The new technology is moving so fast. There's a new chip coming out every 18 months. Everything I mentioned here should point to less orders because lead times are coming down. There's more certainty on supply because we're investing in new plants. And with the chips coming -- the changes coming more frequently, you would expect that orders will come down. And orders are coming really up because the market is so strong that is overcoming the lead time reductions overcoming the shift in technology coming so fast. So there's much less multiyear orders now, more like data center by data center build-out because we are ready. So I would argue, of course, the market is really strong. The fact we started to invest early also is helping us to win more than our fair share of this business.

And what's interesting on that point is we talk about this elongation of the backlog. But if I look at your backlog most recently relative to kind of the revenue, I think it was 34%, 35%, which is more than double where it was or double where it was several years ago. Are we actually seeing an elongation of the backlog because of lead times? Or is this really more foreshadowing the revenue growth that's coming kind of in '26?

No, this is the market strength that is pushing that. It's not about lead times allocation. I just told you, we are reducing lead times. So it's actually the strength of the end markets. We talk a lot about the electrical backlog, which is not only bigger is fourfold what we had historically, 4x bigger and growing. In Q3, we said our backlog is 20% higher than last year, being 9% organic and 11% was the acquisition of Fiberbond. So it's growing. It was historical levels. We keep investing. We reduced lead times, and we continue to grow backlogs. But it's also true for aerospace, which we don't talk much about it. Our backlogs are also growing. So I think it's the strength of the end market that's driving that.

And the technology is obviously changing so fast. We were talking about now high-voltage data centers. And when we think about your capacity in solid-state transformers, do you feel like you guys are very well positioned? I assume the answer is yes, but maybe you can offer a little bit more color around how you guys are prepared for that transition and whether your capacity in solid-state transformers will allow you to kind of participate in that growth?

No, I will get to the solid state. I'll give you a broader picture then we get to the solid state. So for data centers, I think we are winning in that space for 4 main reasons. The first one being that we have the broadest portfolio. I'm going to get to the transformer in a minute. We have the broadest portfolio that starts from the utility feeder where the transformers sit all the way down to the chips. This is really important. So portfolio was very large and comprehensive. And with the 3 acquisitions we made in that space, Fiberbond, resilient power and most recently, Boyd, we're just increasing our penetration in that market. So it's an incredible portfolio we have.

Two, I think the way we approach that business, which is key to winning across the world, but especially in North America, you need to come with an integrated offer. What I mean by that is about the hardware, it's about the software, it's about service capabilities as well. If you don't have service, you don't win in that space. So we have that. We started, as I said before, talking about capacity getting ready for the growth. That's another area which I think is really important. And the fourth piece, which I think is also important for us to have in mind is, we start to integrate those solutions, not looking at a product sale one by one, but offering full systems to our customers.

Getting to a specific point on 800-volt DC architectures, what happened over time, we moved closer to the chips as a company, and we are embedded in the developments of the NVIDIA, the Googles, the Metas, et cetera, on their next generation of chips. So -- and that's what Boyd does extremely well. We made a so interest in that business. When you do that, we start projecting back what the power should be. We got to the discussion about accelerating the development of our solid-state transformer technology. We are doing that organically, and we always do that. We are paranoid about market dynamics. We had a review. And as a team, we said, can we look outside? Is there anyone ahead of us? And the answer was like, we don't know.

Let's go check and they found out that Brazilian was actually a couple of years ahead of us. So we're accelerating that development, and we're going to be ready by when those chips that require service without 1 megawatt power, we're going to be ready to supply the whole chain. So we can ramp up -- we know how to do it, and we just don't need to be ahead of the chip development. That's all.

And I think this is an important point because data center exposure is not created equal across all the different players. And if I think about kind of the total data center supply chain from the power generation side to the transmission distribution side to within kind of the gray and white space of the data center, there is a point of differentiation among companies. But when I look at companies like Eaton or Vertiv or obviously Schneider with Motivair, there are questions around kind of what differentiates Eaton versus those kind of soup to nuts players, so to speak, in terms of within the gray and the white space of the data center.

How do you think about how you guys differentiate yourself against maybe those specific players?

So I'd rather talk about Eaton than other companies. I agree. But since you asked me I need to address your question. No, I think the big obvious difference between Eaton and those 2 players you mentioned is that we have 3 phase transformers, they don't. And one of the 2 has a very limited power distribution portfolio, which is the biggest item in terms of dollar per megawatt in the power side. So they don't have much of that capacity there and technology and portfolio. And what we also do as a company, as I said before, we go from the utility feeder all the way down to the chip now, and we do that at scale. That's also important.

Boyd will give us, it's not part of the company it will be, will give us a scale entry into cooling and we won this because, in my opinion, the cooling and power integration will be won by engineering power. So if you put together the Eaton engineering power, Ingenuity and Boyd, they have 500 of the best engineers together, we're going to continue to win. If you move outside the data center for a moment, another big difference to the 2 companies you mentioned, we are present in utilities. Those guys are not. So we can help our data center operators to have better connection to the grid. And the question you raised before around the current Think about our connection with direct current on energy storage, battery systems or even renewable integration, we can help our customers because we are a utility player as well and the broadest North American player. So we can help them. If you go outside then electrical, we have aerospace as a growth vector that those companies don't have.

So my message to you is, yes, of course, we are a formidable player in data center. Those 2 companies also are, no doubt. I believe we have the most complete portfolio, especially now with the recent 3 acquisitions in that space, and we can play outside the data center as well.

And I guess that also just maybe quantifiably, we can move to like content per megawatt as a differentiating factor as well. I mean it was at Investor Day, you talked about maybe a couple of million dollars per megawatt. Now we're at $3 million per megawatt. I mean 100 gigawatts, that's 100,000 megawatts. That's a $300 billion market. I don't think that there's a company out there, maybe one other that has a similar kind of content per megawatt. But maybe talk about that bridge that 2 to 3 pro forma for the Boyd acquisition.

Yes. So we -- today, with the current portfolio we have, we already see our content per megawatt growing in AI data centers close to 2.9 million per megawatt. And the Boyd acquisition would add 500,000 on top of it. So it moved from 2.9 million to $3.4 million, rounding 3.5 million for good math. The way to think about it for us as Eaton is all upside. Why do I say this? First of all, data center is the fastest-growing part of our business, for sure, it is, but still 20% of the company, right? And then within data center, AI, although it's growing really, really fast, it's 30% of the data center. We are talking most of the time around 6% of the company, growing really fast.

Now the conversion to AI is to be expected that our leadership will only grow because we can go all the way from the utility feeder down to the chip and the content per megawatt going up favors us. So think about as a very large tailwind of secular growth coming our way.

And just on that point, we talk about brownfield, greenfield, retrofits. Is there something in the order data that we can observe that tells us something about that and what the opportunity shift is if we move more to retrofit versus greenfield?

Yes. It's a very interesting question. We talk a lot about that internally, but also with our customers. I would say today, it's all greenfield, and there is a reason for it. There's a race for in building those -- at the same time, those training data centers for AI, at the same time, need to build the cloud infrastructure for companies to move their data to cloud so they can leverage AI. So that's their race. And the other element, which is important for us to consider here, the demand is higher than the offer of the capacity in the market. So our customers are favoring greenfields. Having said that, it's logical to think when the training models are already developed to a certain degree, you need to have inference data centers that are closer to big urban areas.

So I would expect that it's logical to think that more retrofits will happen in those today cloud data centers that are closer to big centers and big cities. And we're already debating and discussing with our customers flexible design architectures where they can have both cloud and inference AI in the same data center. Again, it's something that's coming. It's a tailwind, but it's still very small, and it's going to come.

Can we -- I want to talk about liquid cooling, which is not something we could have talked to Eaton about a year ago as much, but now obviously, it's a different picture. It seems like when you close Boyd, I mean, Boyd is going to grow 70% next year, something like that and good margins. I think there is a question about the defensibility of their business when you think about how much of their business is hardware components? And what is the commoditization risk of hardware components within that even cold plates as we move to two-phase cooling with higher-density racks or whatever. Just talk about like the runway of growth for Boyd. And it seems like Eaton with this acquisition is kind of underwriting another acceleration in orders as you close this deal kind of middle of next year. A lot of questions there, but let's talk first about the commoditization risk of Boyd and how their ability to kind of maintain that market share as we move into higher density racks.

Yes. So I got really comfortable. We asked ourselves those questions over time. We started approaching Boyd 14, 15 months ago. We wanted to get to know the business better. We wanted to acquire the business and was not on the market. So we got closer to them much before the deal was signed. What really attracted us to Boyd is not only the scale that they have in terms of revenue and the deep connectivity they have with customers and the build-out of the chips, but especially because of their engineering power.

So in a market that's moving so fast, when chips are launched every 18 months to 2 years, if you don't have a seat on the table today with NVIDIA, with Google, with Meta, with Microsoft, and those people do have that seat on the table with all of them. If you're not embedded in their design of the future chips, when they are launched, you are after that, right? So the race is about engineering and innovation. Why cold plates are important. They are a mirrored image of a chip. So every chip has a different heat map, and you cannot swap a cold plate from one chip to another. So you build a cold plate for a particular chip. And as you're embedding those developments years in advance, when they are launched, you already start producing. It's closer to what we do in businesses like aerospace or even mobility markets where you win a position in a platform and you start getting the orders. That's what these people do.

Eventually, other companies can try to copy and emulate that. It's possible. But the time you copy a cold plate and you are able to do that, there's a new generation of chips. So you're always behind. So you need to have that engineering power and you need to be connected to the future development to win. Now what comes out of that connectivity is not only about cold plates. I don't see Boyd as a cold plate company. I see them as a cooling company. So they move up in the chain. They're moving up in the chain in terms of doing CDUs, the cooling distribution units, which are systems that are detached from the rack, but they're really important, and that connectivity is important. So they're already moved up. So think about this, they are moving from the chip upwards, we are moving from the utility down, we are meeting the middle. So it's a real powerful combination between 2 strong engineering cultures, and we believe we're going to win by innovating.

So maybe a few months ago, when you were far along in this process and the headline comes out with Microsoft Microfluidics, I assume that spurred some questions. And obviously, you got very comfortable with that. You've done a lot of work. But just talk about why that's not a concern for you.

It was not a concern. And to be honest, we are also connected with the company that Microsoft was leveraging in Europe. We knew them. We were in connection with them. Those -- my point here only reemphasizes what I just said. Innovation will come out every time, like we just heard about Google's chip launched the other day. It was not a surprise for Boyd. They've been embedded in this development for a long period of time. Those innovations will come out. And I would not -- of course, undeniably today, NVIDIA has an edge over any other chip manufacturer. It's a fact. But I would expect that the major hyperscalers, they're going to come more frequently with their launches. They want to have their own technology. And ultimately, the industry will move to -- from 2 platforms to maybe 5 or 6 platforms around different chips and the companies that will win will be those that can understand this road map, understand the implications on cooling, understand the implications on power and they can be ahead of the game. When the chips are launched, they have the whole technology ready.

And this valuation discussion, I think it was like 20, 22x or something next year's EBITDA coming down to single digits. Is that just more of a function of growth? I mean this is probably not a business where there's a lot of cost opportunity. I would imagine it's just a function of the growth that they're going to endure beyond '26.

Yes. So yes, from the multiple going down to high single digits, the biggest contributor to that is the growth because they're growing at 40% CAGR from '26 to '29. So in 3 years' time, the multiple will be less than double digits. This is the biggest contribution. But also very importantly, when you have a business that is a $1 billion revenue business, they cannot get the same deals we get with suppliers. We have much more purchasing power. And that's an easy, I would say, synergy to execute. So that's the second biggest.

The third one, not so big because we normally don't like embedding much of a sales synergy into the model because we are conservative. But there is a third area where we believe we have better connectivity with the multi-tenant, the colos, data center operators than Boyd does. Again, being an engineering company that's focused on chips, they are embedded into the hyperscalers and NVIDIA and AMD's road maps. We believe we can help them with the big colos, winning also more of the cooling business there. But the biggest one is growth.

Helpful. I just want to pivot a little bit more to maybe some observations about what you're seeing right now in the market relative to kind of the guidance and then obviously, sitting at December 2. So I would love to get your perspective on 2026. But first, we're 2 months into the fourth quarter. You guys obviously reiterated the guidance for the full year. Good growth in the fourth quarter. Maybe just talk about kind of how things are trending relative to maybe what you talked about in the third quarter.

Absolutely. So we are on track to deliver on our Q4 and our full year guidance on EPS. We are fully on track. We are fine. I also anticipate in Q3 that our growth will be in the lower range of the guidance, given the vehicle market, the resi market, again, no surprise here. So we are on track for the year as per the Q3 earnings call. In terms of '26...

Before we start to '26, so the margins in EA were better in the third quarter. Growth was a little bit weaker than maybe expected. But obviously, that's reversing in the fourth quarter. Growth is very strong in EA margins, incremental margins implied by our guidance are a little bit weaker. Maybe just -- I know you're going through a big expansion. You're more than halfway through this year. You've got another. Talk about when we kind of get to the point where we can get back to the incremental margins that are more lockstep with what they had been prior to this expansion.

Yes. So we have a lot of activity in Q4. We are doing well, but there's a lot of ramping happening in the Electrical Americas business. That creates a number of inefficiencies. When you have so many plants that are ramping at the same time, training people expediting material, it creates a number of inefficiencies. So that's a reality. We keep investing. So you should think about '26 as a year of continued investment. We should expect towards the end of the year that we're getting most of these inefficiencies away and we start running at full speed and all those expansion projects. And for Q4, specifically, that's what's driving.

We had in Q3 some carryover of products we couldn't deliver that we're going to deliver in Q4. I think we are tracking really well. And the comparison point to last year, I said in the earnings call, some people cracked the laugh, some of your colleagues, the comparison point with last year is the easiest, easiest comp because last year was 9% growth only because we had some hurricane and some issues with strikes and things like that. So the comparison point is the easiest one. This business is growing well. We are investing. It's natural. It's a growing platform that you see some inefficiencies. As we get towards the end of next year, we should see those inefficiencies go.

And I think like it's not lost upon me that the margin expansion stories are from companies with significantly lower margins than Eaton as well. So in some ways, you are a little bit of a victim of your own success in terms of where the margin is today and where the incremental margin can be. But do you feel that we can get back this time next year when we're on the same stage, look back and say, hey, we're back to that 35-ish percent type of incremental margin algorithm. Is that the way -- in EA, is that the way you think about it?

We are improving that for sure. I don't want to give you guidance. That's February for next year for sure, but we are working really hard to ramp those factories up. And then more broadly, I think it's also important, the way I talked about execution being one of the pillars of my strategy, we have a lot of opportunity in running our plants better independently on the ramp. What I mean by that, still within the company, if you look at the way we run our vehicle plants or electrical Asian plants versus our Electrical Americas plants, there's a lot of opportunity in Electrical Americas.

So of course, the margins are high, close to 30%. We love it. But we are not just relaxing on this big achievement. We are pushing the teams. We are giving them the tools and the talent they continue to improve. There is some juice for us to squeeze here in terms of execution.

Great. And so maybe -- sorry, I interrupted you when you were kind of talking about 2026. So you're exiting this year very good growth, but expectations are also for good growth next year. So maybe just talk about how you think '26 kind of shapes up. I know you're giving guidance in February, but maybe give us some broad brush strokes.

Yes. So guidance comes in February, but we gave you an idea of where our markets will be. So we see our 2026 markets growing around 7%. It's natural to expect we plan to have some growth on top of the market. So make some assumptions there. And then using a decent incremental 30% would be a good proxy. That's the way to think about it.

Got it. And there's obviously you're closing on Boyd, below-the-line stuff can matter. So you gave us the above-the-line variables, but maybe talk about some of the below-the-line moving parts that could maybe either help or hurt '26.

Yes. So I think in terms of '26, below the line, 2 items for me to highlight here. First is pension. We normally don't talk about that. It was a positive guy. It turns into a negative next year. And the other thing, we are acquisitive, so we need to finance and those costs will hit the below-the-line item as well. So we have pressure there on the corporate cost. and we continue to see improvement on the segment margins.

And then just on the acquisitions, obviously, Fiberbond, Boyd Thermal, Ultra PCS, like what's the way to think about the financial impact from those aside from the below-the-line item stuff that you talked about?

Yes. So 2 of those we already closed, right? One is pre-revenue, but then Fiberbond is in full speed and growing really rapidly. So on Fiberbond, I think the assumption could be look at the market growth in data center, assume the same growth and put an increment on top, that's fine. When we close the other 2 deals, when we close Ultra, when we close Boyd, then we're going to give guidance on how we're going to grow those business. But think about market growth as being a good proxy.

And then just obviously, orders such an important KPI for Eaton and a lot of the companies. You kind of were very bold to say, hey, we're going to see another step-up in orders in the fourth quarter. As we think about kind of the runway for this growth and the next-generation platforms and the acquisitions you made, can we have a decent step-up in kind of order activity next year? Is that the right expectation?

So again, it's early to talk about next year. I can talk about Q4. And we -- as you see, we kept growing our orders profile quarter after quarter. So we had a very strong Q3. We expect Q4 to be even stronger. And with large backlogs like that and the value proposition we have, I see no reasons why we should not continue to win business in that pace, right? So that's logical to expect.

Do you still think we can build the backlog next year?

We could, but we're also growing. We are -- we have...

Another way of me to ask you orders, by the way.

I know. I get your point. But for 2 consecutive years, we've been talking about the backlog being 4x, 3x or 4x historical levels would not be a problem the backlog will come down because we're investing capacity. Reality is we kept growing backlog quarter after quarter.

But I guess like the orders, I mean, it's tricky because there are some companies now that are moving away from quarterly order disclosures. And I know we try to get away from that, but we can't really get away from that. And there's always a need to like show sequential momentum in orders, which is difficult because the orders are large and lumpy and timing is important. But you guys did do chunky, chunky orders in the past, and sometimes that's been a headwind as you look prospectively. Do we have $1 billion-plus orders kind of in the pipeline that we could start booking here in your opinion?

So we had -- as an example, we talked about that openly and publicly. Q1 '24, we had a multiyear order, which was above $1 billion from a particular customer. We see less of these multiyear orders because First of all, the customers believe that we can deliver because we invest in capacity. So there is no reason for placing multiyear orders on us. We have a forecast, but we don't have necessarily multiyear orders because they are not needed. The second thing I told you before, with the chips changing every 18 to 2 years, customers would not love to place orders 3, 4 years out when technology might change.

Having said all that, we look at how we are performing, and we're substituting this big order with the new bread-and-butter business, which is with high data center, big data center AI data centers is much more common today that we negotiate orders around $500 million, $600 million, $700 million. They're much more frequent. And our negotiation pipeline now is around $8 billion that we are discussing right now. And a big portion of it is data center.

Any questions for Paulo from the audience, raise your hand. We'll bring the mic over to you. I wanted to just -- finally, just in the last couple of minutes that we have, Electrical Global has kind of been -- the spread between Electrical Global margins and Americas margins has been very wide. Boyd, if I'm not mistaken, it's actually going to go sit within global, if I'm not mistaken. So that -- I think that's part of your strategy about moving away from maybe residential machine OEM end markets towards faster-growing, more value-added end markets. So that's great.

But that business has actually inflected quite nicely from a growth perspective. And it feels like those 2030 targets seem within reach. But if you could talk about maybe some of the -- what you're seeing in global, particularly in Europe, that's kind of driving that inflection?

Yes. So cooling aside, when you're not a market leader as we are not a market leader in Europe, and the only thing you can do is to win market share. So we -- as a mindset, I talk about lead for growth, the mindset with that team is don't look at PMIs, Don't talk to me about PMIs. Look at the -- all the good things we do in the Americas and try to emulate them in Europe. And we put a new management team together. We actually got someone from the Electrical Americas team to lead Europe with a mission to shift us more towards the growth areas of the market, data center and utilities.

Traditionally, our European business has been very strong and it's still strong and will continue to be strong in MOEM, so machine builders, resi distribution business, we value it. We're going to protect it. It's all fine. We're going to continue to invest and grow. But we were not that strong in utilities and data centers, and now we are becoming stronger. So that's driving the top line. And then true to my 3-pillar strategy, we had a strong focus on execution as well. So we said, if we are going to grow in those areas, we need to invest in those areas. We need to restructure other parts of the business, and we are restructuring, and saving money. At the same time, we are improving the way we run our supply chains, the way we run our factories. So it's a combination of a different mindset, going after the right growth vectors, not looking at PMIs and executing better. So that's the formula.

That's great. And just as a final point, I wanted to just maybe tie a bow around how we think about '26. So it feels like another year of underlying market growth in the high single digits, which you should and expect to outperform a little bit. Maybe the incremental margin algorithm is good at 30%, but still kind of being pressured by the first half ramp in capacity. But as we kind of exit the first half into the second half, it kind of might look like a tale of 2 halves, so to speak, as you exit some of those maybe inefficiencies related to capacity growth. Is that a fair characterization of '26?

It's accurate. Yes. Again, guidance is going to come in...

Okay. And then you've got some below-the-line item stuff that's maybe transitionary.

Any final questions for Paulo before we end it here? All right. Well, thank you, sir. Appreciate your time.

Thank you. Appreciate it. Thank you so much.

Thank you for standing by. Welcome to Eaton's Third Quarter 2025 Earnings Results Conference Call.

[Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Yan Jin, Senior Vice President of Investor Relations. Please go ahead, sir.

Good morning. Thank you all for joining us for Eaton's third quarter 2025 earnings call. With me today are Paulo Ruiz, Chief Executive Officer; and Olivier Leonetti, Executive Vice President and Chief Financial Officer.

Our agenda today include opening remarks by Paulo, then he will turn it over to Olivier who will highlight our company's performance in the third 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 have been posted on our website. This presentation includes adjusted earnings per share and other non-GAAP measures. They're reconciled in the appendix. A webcast of this call is accessible on our website and it will be available for replay.

I would like to remind you that our commentary today will include statements related to expected future results of the company and are, therefore, forward-looking statements. Our actual results may differ materially from our forecasted projections due to a wide range of risks and uncertainties as described in our earnings release and presentation.

With that, I will turn it over to Paulo.

Thanks, Yan, and thanks, everyone, for joining us. I'm happy to report we delivered solid results. From a demand perspective, we continue to see tremendous strength. On a rolling 12-month basis, our orders accelerated in Electrical Americas, up 7%, from up 2% in Q2. Our Electrical Americas backlog grew 20% year-over-year, hitting an all-time record.

Demand in Aerospace business remains very strong as well. We posted order growth of 11% on a rolling 12-month basis and backlog expansion of 15% year-over-year. As a result, our book-to-bill for the combined segments was 1.2 on a quarterly basis and 1.1 on a rolling 12-month basis.

As we continued to deliver robust growth in data center market, our orders accelerated 70% and our sales were up 40% versus Q3 2024. This strong demand picture gives us confidence in our ability to deliver sustained growth and add value to shareholders.

Among the Q3 highlights, our adjusted earnings per share were up 8% versus prior year, and our segment margins of 25% hit a quarterly record up 70 basis points year-over-year. We're also reaffirming our 2025 guidance.

Lastly, yesterday, we were excited to announce the agreement to acquire Boyd's thermal business, a global leader in liquid cooling. And I will talk through this in much more detail in the following slides. Olivier and I will dive into Q3 and the full year outlook in just a minute, but first, I'd like to share more details on how we are investing and executing for growth in our operations, starting on Page 4.

So earlier this year, I laid out our bold new strategy with 3 pillars: lead, invest and execute for growth. All 3 are designed to accelerate our growth and create sustained value for shareholders. These 3 pillars also enable us to capitalize on key megatrends we've discussed for the last few years. Today, we will focus on invest and execute for growth.

The Boyd acquisition fits squarely into our strategy to invest for growth. Executing for growth involves elevating operations from good to best-in-class. It includes self-help growing the head and fixing the tail and controlling our destiny independent from end market developments. Today I'll walk you through a few examples of what we are doing and the results we are starting to see from this strategy.

Turning to Page 5. Yesterday, we announced the acquisition of Boyd, the global leader in liquid cooling technologies for critical markets like data centers, aerospace and defense and industrial. This is a high-growth business playing a high-growth market, and we expect it to generate $1.7 billion in sales next year at an adjusted EBITDA margin of 25%. This level of sales represents significant year-over-year growth, demonstrating how the business is benefiting from strong customer demand, especially in data centers.

And the business itself has a large global presence with over 5,200 employees and 16 manufacturing locations. This global presence is critical to Boyd's success as they are able to support customers almost anywhere in the world as they build out their data center infrastructure.

Of those 5,200 employees, over 500 are engineers, which is another important part of Boyd's success. These engineers work directly with the customer teams design the next chip platforms to understand the thermal characteristics of this next generation. And then this knowledge gets translated into Boyd's own designs.

Boyd's manufacturing engineering teams are also involved in the design of the cooling systems to ensure the highest reliability and the production can be rapidly scaled to meet customer needs anywhere in the world. This deep application engineering expertise combined with world-class manufacturing and supply chain create a powerful flywheel for Boyd to always stay ahead of the competition in terms of technology, reliability and scalability.

On Slide 6, we show some market data. As we talked about previously, the chips used to power AI models and other high-performance compute applications are getting more and more powerful. If you look at the data, before the advent of GenAI, the power used in a typical rack was in the 10 to 15-kilowatt range. At this level, you can cool this chip using air cooling, which is a pretty mature technology and has been around for many years.

Now, the introduction of more and more powerful AI chips, the power in each one of those racks is just skyrocketing. Take NVIDIA for example. Its GB200 chip unveiled in 2024 uses 120 kilowatts per rack. Fast forward a year to 2025 and NVIDIA's GB300 chip now uses 180 kilowatts per rack. And it's only increasing from there. NVIDIA's Rubin chip is expected to use 600 kilowatts per rack, and its Feynman chip, 1,000 kilowatts per rack.

Now in addition to these higher-power chips requiring more and more electrical equipment, which is a great thing for our business, once you get above roughly 50 kilowatts per rack, traditional air cooling is replaced by liquid cooling. The physics of these power levels require liquid-cooling the chip, otherwise performance is degraded, chips don't last as long or they just might not work at all.

So all the demand that you are seeing for GenAI chips will drive commensurate demand for liquid cooling solutions to cool those chips. The growth goes hand in hand. Market estimates vary, but we believe that the global liquid cooling market will grow around 35% annually through 2028: just tremendous growth that is supported by long-term underlying factors. And to go back to my point from the prior slide, Boyd is the global leader in liquid cooling, which is why we are so excited about this business.

With the acquisition of Boyd, Eaton's data center portfolio will now be even bigger than before, shown in more detail on Page 7. We can now provide solutions for all major power and cooling systems from the chip to the grid. This includes all of our traditional power distribution, power quality and infrastructure products in the data center gray space. And here you can see our other 2 recent acquisitions of Fibrebond, modular parts; and Resilient Power, medium-voltage substation transformers. And in the data center white space, we can provide everything from power distribution units, remote power panels and busway, to racks, enclosures, cable tray and, in 2026, liquid cooling.

And of course, I need to mention our software and services capabilities, which we historically have been focused on the gray space and the white space power distribution and power quality equipment only, and now we added the same service capabilities for liquid cooling, which we view as a really attractive avenue for growth. Truly an impressive portfolio of solutions for data centers.

Moving to Page 8. I already talked about how this acquisition bolsters our data center portfolio, and I also want to mention how it aligns with how our customers are thinking about the future data center architectures.

Starting from the chip out, there are really 5 main technology blocks that work outwards toward the utility grid. There is a thermal management system to handle heat loads, primarily from the chip, but also from other heat-generating assets like storage devices and power supplies. There is white space power distribution and infrastructure equipment to get that power to the racks.

There is the grid equipment to distribute, transform and condition medium-voltage AC power down to low-voltage AC and then low-voltage DC power. There is Eaton assets to connect the data center to the grid. And finally, there is software and services to monitor and manage all these power and IT assets. So with this acquisition of Boyd, Eaton now plays a leading position in each one of those technology blocks.

One reason this is important is that we can now offer our data center customers a greater share of wallet. This is important as they seek to consolidate their supply base among a smaller set of stronger, more globally capable players. And the other important reason is that customers are increasingly looking to integrate these various systems to drive increased technical performance and more rapid deployments. This is especially true in data center white space, which is exactly where Boyd plays. So overall, a really exciting acquisition for us and one that we know will allow us to continue supporting our customers today and into the future.

Now let's pivot to execute for growth, another exciting important pillar of our strategy. So on Slide 9, these are key leading indicators in Electrical Americas. This segment is clearly the head of our portfolio, and we have an execution plan to grow it even stronger and with increased margins. All leading indicators on this page are proof points of the generational growth opportunity ahead of us. They also show that our team is executing well to capture this growth.

The visibility is unprecedented. So let me walk you through what we are seeing. Over the last 2 years, the mega-project announcements have increased a staggering 185%. In the same time frame, our negotiations pipeline have increased 35%, following into rolling 12-month orders up 23% on a 2-year stack and a book-to-bill of 1.1.

For data centers specifically, the 2-year stack of rolling 12-month orders are up more than 100% and the data center book-to-bill is 1.7. Electrical Americas backlog is up 51% over the last 2 years, of which data center backlog extends over 2 years. On a 2-year stack, Electrical Americas has grown 23% organically, and we think that data centers have grown 104%.

So the demand indicators clearly support why we are so bullish for this business. Our position of strength in the Americas keeps resonating across the market. We are proud to have the broadest portfolio of electrical products in the market, to cultivate strong and trustworthy relationships and to be the partner of choice to codesign the technologies of the future together with our key customers.

Slide 10 showcases Electrical Global organic growth journey. Last year we grew 4%; this year, approximately 7%. We've talked about the focus to increase Electrical Global margins, well, we continue to make strong progress. Our 2025 guidance reflects year-over-year margin expansion of 100 basis points.

And let's talk about the growth rates in Electrical Global now. Our Electrical Global organic growth is accelerating, up to about 7% in our 2025 guidance from 4% last year. Our 2030 target of 6% to 9% growth for the portfolio assumes about a middle single-digit growth over the period, and we are off to a great start. We are seeing order acceleration, building strong backlog and positioned to win for years to come.

We've talked about being in the right markets, targeting fast-growing markets supported by secular mega-trends. For example, the data center growth is impacting our business globally as governments and enterprises are prioritizing data localization and resiliency, and we are partnering with our hyperscaler customers in various parts of the world. And by the way, all these data centers need power, and we are a key beneficiary of our global utility space as well. And we have a broad portfolio with breadth and capabilities leveraged across end markets.

All these enable us to win and position us to gain market share on the global front. The strategy is clear, and as you'll hear from Olivier soon, we are booking sizable orders already, which is momentum to position us for strong growth for years to come.

Now I will pass to Olivier to walk through the financials.

Thank you, Paulo. I'll start by providing a brief summary of Q3 results.

Organic growth for the quarter was 7%, driven by strength in Aerospace, Electrical Americas and Electrical Global, partially offset by weakness in short-cycle markets, including Vehicle and eMobility. Otherwise, organic growth would have been almost 10%.

We generated quarterly revenue of $7 billion and expanded margins by 70 basis points to 25%. Adjusted EPS of $3.07 increased by 8%, which is at the high end of our guidance range.

Now let's move to the segment details. On Slide 12, we highlight the Electrical Americas segment. The business continues to execute at a high level and delivered another record quarter on operating profit, and Q3 record margins. Organic sales growth of 9% was driven primarily by strength in data centers, up about 40%. Operating margin of 30.3% was up 20 basis points versus prior year, benefiting from higher sales and increased operational efficiencies.

Orders accelerated to up 7% on a trailing 12-month basis, from up 2%. This represents a strong acceleration, with total quarterly orders up sequentially by more than 11%. We are confident that we will have an all-time record level of orders booked in 2025. Book-to-bill remained at 1.1, and our backlog grew by $2 billion or 20% to $12 billion, providing strong visibility for our organic growth outlook.

Now I'll summarize the results of our Electrical Global segment. Total growth of 10% included organic growth of 8%, so a very strong performance for the quarter. We have strength in data center, residential, commercial and institutional and machine OEM. Regionally, we saw high single-digit growth across all 3 regions. Operating margin of 19.1% was up 40 basis points over prior year, driven primarily by sales growth, partially offset by higher inflation.

Orders were up 2% on a rolling 12-month basis, with mid-single-digit growth in APAC and EMEA. EMEA orders increased by more than [ 30% ], driven by data center orders, including sizable orders in the Middle East and a large order with a hyperscaler in Scandinavia. This represents strong acceleration with quarterly orders up sequentially 15%. Backlog increased 7% from prior year, while book-to-bill remained above 1 on a rolling 12 months basis.

Before moving to our industrial businesses, I'd like to briefly recap the combined Electrical segments' performance. For Q3, we posted organic growth of 9% and segment margin of 26.6%, which was up 40 basis points over prior year. On a rolling 12-month basis, orders accelerated to up 5% and our book-to-bill ratio for our Electrical sector increased to 1.1. This represents continued acceleration with quarterly orders up sequentially by 13%. We are very excited to capture growth from the robust demand with strong margins in our overall Electrical business.

Page 14 highlights our Aerospace segment. Organic sales growth of 13% remains at the high end and resulted in Q3 record sales, with broad-based strength across all markets and particular strength in defense aftermarket. Operating margin expanded by 150 basis points to 25.9%, driven primarily by sales growth.

On a rolling 12-month basis, orders increased 11%, driven by defense OEM and aftermarket up 16% and 14%, respectively. On a 2-year stack basis, trailing 12-month orders are up 70%. This demonstrates strong momentum with quarterly orders increasing over 9% sequentially. Our book-to-bill for our Aerospace segment remains strong at 1.1 on a rolling 12-month basis, resulting in backlog increase of 15% year-over-year and 4% sequentially. Overall, Aerospace posted a solid Q3 and remains well positioned going forward.

Moving to our Vehicle segment on Page 15. In the quarter, the business declined by 9% on an organic basis, primarily driven by weaknesses in the North America truck and light vehicle markets. Margins are down 160 basis points year-over-year, primarily driven by lower sales and higher inflation.

On Page 16, we show results for our eMobility business. Revenue decreased 19% from 20% lower organic, partially offset by 1% favorable FX. Operating loss was $9 million in the quarter.

Now I'll pass it back to Paulo to go over the remainder of the presentation.

Thanks, Olivier. Here on Page 17 is our updated guidance for the year for organic growth and operating margins. We are reaffirming our growth guidance range of 8.5% to 9.5%. We'll likely end up at the low end of this range in total, primarily due to market dynamics in our Vehicle and eMobility businesses. We are also reaffirming our margin guidance of 24.1% to 24.5%, with minor revisions between Aerospace and eMobility.

Moving to Page 18, here's the outlook for Q4 and our updated guidance for the year. For the upcoming quarter, we see EPS of $3.23 to $3.43, representing 18% year-over-year growth. We see organic growth at 10% to 12%, which is a reacceleration of growth for the company. And for the year, we are reaffirming our adjusted EPS guidance at $11.97 to $12.17, which includes our near-term investments to position us for sustained long-term growth. And this represents 12% growth in earnings per share at the midpoint, which I promised you in March.

Shifting our perspective ahead to 2026 on Page 19, we provide our view of end market growth assumptions for the year. All in, this equates to about 7% market growth rate and, with some outgrowth, is consistent with our 2030 organic growth CAGR of 6% to 9%.

I won't go line by line here, but this chart shows that we anticipate growth across our end markets with attractive growth for over 70% of our portfolio. In particular, the data center, distributed IT and electrical vehicle markets are expected to be the strongest, up double digits. We also expect solid growth in the utility end market along with both commercial aerospace and defense. In summary, we continue to see many paths to our sustained growth, and we are confident in our end market positioning to deliver another differentiated year in 2026 of growth and strong shareholder returns.

I will close with a quick summary on Page 20. We had a strong quarter, Q3 record revenue and an all-time record on segment profit and margins. We are seeing unprecedented demand reflected in continued order acceleration and growing backlogs. Our strategy to lead, invest and execute for growth is positioning us to capture generational demand and deliver lasting value for our shareholders.

We look forward to welcoming and integrating Boyd into our business and satisfying our customers with a complete solution offering. Bottom line, we have confidence in our guidance to close out the remainder of the year, and we are well positioned as we go into 2026 and beyond. And we remain confident that our brightest days are yet to come.

And with that, we are happy to take your questions.

Thanks, Paulo. [Operator Instructions] With that, I will turn it over to the operator to give you guys the instruction.

[Operator Instructions] Our first question comes from the line of Andrew Obin from Bank of America.

So I know orders, maybe you guys don't want to talk about them, but investors certainly do. Maybe we can talk about Electrical Americas LTM orders outlook. Electrical Americas orders continue to accelerate on an LTM basis, I think it was 2% in second quarter, 7% in third quarter. So what's your expectation for orders in fourth quarter and the beginning of '26, if you're willing to talk about it?

Sure. Thanks for the question, Andrew. Based on the orders momentum we had in Q3 and a very strong October in orders, and we also have a growth in our negotiations pipeline, we have a lot of visibility into Q4 orders. So we remain very bullish about our orders growth also in Q4. And I say that because we continue to have specific projects that we track in the pipeline that support this outlook that I'm referring to for strong order acceleration of LTM orders into Q4. So we are bullish about orders.

Excellent. And maybe we can talk about Electrical Americas quarterly orders. You only disclose orders on an LTM basis. But I think externally, we do estimate your orders on a quarterly basis in Electrical Americas, I think we sort of came up like mid-20s to close to 30% year-over-year. Is that in the ballpark? And is it close to 30% or is it close to 25%?

Another great question. Based on these LTM disclosures we make, we know that people externally estimate quarterly orders as well. I would say this direction, your estimate, is in the ballpark, I would say towards the higher end of your estimation. So we continue to see strong inflection in orders in Q3. And as I just said, we continue to see momentum in Q4.

But most importantly, I would like to remind you and the whole team why we are winning businesses at this pace. I think it's important we talk about it. We have this success because we have the broadest portfolio of electrical products in Electrical Americas. We have all the solutions and services. We count on strong channels. And we also have deep customer intimacy, so we codesign future technologies with our customers.

And this allows us to be a leader in several end markets. I'm not talking only about data centers, but we also lead in utilities, we had very strong orders in utilities, C&I, et cetera. So every investment we make into Electrical Americas actually scale across many different end markets. And as you know, we're expanding our footprint in North America as well to better serve our customers and to continue to capture more than our fair share of the market.

And at the same time, I would say this, that we are also in the position of strength that we have today and winning all these orders because of the way we intentionally position our portfolio. So we have proven to be disciplined, proven to be nimble, progressive, and we continue to make the right moves to boost our growth. So we believe the best days and years are ahead of this business yet.

And Andrew, as there was a lot of focus also on data center and hyperscalers, the growth on orders in this particular vertical was very strong. In the Americas, close to 70%, same number for Global. And in total for the Electrical sector, close to 70% order growth in the quarter for data center and hyperscalers.

Yes. And I'll just conclude by saying that we are beating every competitor in the market in orders. And part of this is attributable to the portfolio and our sales channels and the relationships. But partially is also to the fact we are investing in our footprint, and our customers feel comfortable and confident in giving us more orders versus other competitors. So I think that's also a point that I would like to stress.

Well, I'll let others to ask how Boyd was going to help you with that.

And our next question comes from the line of Andy Kaplowitz from Citigroup.

Paulo, you previously said that AI data centers can get you $1.2 million to $2.9 million in sales per megawatt and that you expect data center growth to be 17% over the next several years. But as you suggested today, Eaton and the market have changed, even since your Investor Day, with the market beginning to evolve toward 800-volt DC power architecture. And you added Fibrebond and now you're obviously adding Boyd. So can you talk about what total Eaton sales per megawatt within your eventual new portfolio could be? And do you ultimately see the data center market growing considerably faster than that 17%, with Eaton outperforming?

Yes, great question. Let me lead with this. We mentioned to you before that we have the broadest portfolio of power management solutions for data centers. We had it already even before the announcement we made yesterday.

But starting with the white space products. The white space is centered around the chips. And moving to the gray space, we have all this power distribution, power quality products, and all the way to the front of the meter where we have our utility grid products. So we have a very extensive portfolio. And the recent acquisitions we made, made our position so much stronger.

And as you know, the data centers exist to support the chips ultimately. And as these chips become more and more powerful, especially in support of AI workloads as you mentioned, data center operators are moving towards direct current. Why is that? Because direct current offers advantages in terms of reduced power losses, fewer conversions with alternate current, and the ability to offer direct integration with other sources of power just like renewables and battery storage.

And Eaton is extremely well positioned for this change, not only because today our products touch every conversion of AC and DC in the data center, but also because we have decade-long experience with dealing with DC power in other segments, like machinery, industrial facilities and also eMobility, we're dealing with DC power for a while. So this is another example that makes Eaton unique in this space. And the Resilient Power acquisition we made a couple of quarters ago actually accelerates our readiness for DC integration right from the utility feed down to the chips.

So the question you made is how this can be possible. We are working with a number of customers. We're also working with institutions and governments, and we have a seat on the table to decide on the codes for the new systems. And we also, as you probably know, we are partnering with NVIDIA, so we design the data centers from the chip out.

On your specific question on the dollars per megawatt, our range was between $1.2 million to $2.4 million per megawatt, being the lower end cloud and being the higher end AI loads for the portfolio we have today. And with the acquisition of Boyd, we're going to add another $500,000, so it will be close to $3 million per megawatt at the high end of the guide here for construction.

Paulo, that's helpful. And then maybe just for Olivier. Your organic revenue growth in Electrical Americas slowed in Q3 versus Q2. I think the comps are pretty similar. I think you also have more capacity coming on. So can you give us more color on what happened in your end markets? Was maybe residential slower? And I know you have a relatively big implied ramp in Q4, easier comps help. But where is that coming from? Is it data center revenue growth? And how does that translate into '26?

So if you look at Q3 on organic growth for ESA, we had 2 factors impacting our sales to the downside. One, residential being slower in September; and two, some small orders, some orders being delayed from Q3 to Q4. We are confident that we'll catch up in Q4. If you look at the implied revenue guide for ESA, that would be in the range of 17% to 18%. We're confident in our ability to deliver this kind of revenue growth as we're adding capacity.

I'd like to complement this -- just to complement what Olivier said, which is absolutely right. I'd like you to take this into perspective. This miss of Electrical Americas to the midpoint of the guide, if you calculate the dollars, are $80 million, 8-0. If you think about the future performance of the business and the overall company, it's not comparable, it's not really important, if you compare versus the backlog sequential increase we had for the company. The backlog increase from Q2 to Q3 for the overall company is about $1 billion, being $600 million only in Electrical Americas.

So that's what gives us the confidence we have the right number going forward. And then a reminder, last year, we had also a tough Q4 because we had impacts of strikes and hurricane. So the comparable as well helps in this case year-over-year.

And our next question comes from the line of Chris Snyder from Morgan Stanley.

I wanted to follow up on some of that Q3 versus Q4 commentary, but specifically more on EPS. So Q3 EPS was up, I guess, 8% year-on-year. You're guiding Q4 at the midpoint up to 18%, above the full year of 12%. So is that just all driven by the Americas seeing stronger organic growth, which you just talked about? Or are there other factors in here that's driving that sharp pickup in earnings growth?

Mainly other factors. If you look at, first, the tax rate, last year our tax rate in the quarter for Q4 was 17.4%. We are modeling 15%. The 15% is supported by discrete tax items. This is under our control. So that would be half of the difference between the 18% and the 12% for the full year.

And the other half is a compare benefit. Paulo mentioned that last year we had the impact of strike and hurricanes, which impacted EPS and would benefit from the compare as well. So between the 18% and the 12%, 50-50 of the gap between tax and the compare, Chris.

And Chris, just to add one element to this, just to complete the picture here. If you adjust by the 2 factors that Olivier just mentioned, the EPS growth will be around 13%, which is a little bit higher than the average of the year. So that gives us confidence that we can hit that.

I appreciate that. And maybe if I could follow up with one maybe more thematically around the Boyd acquisition. I imagine that there has always been some benefits if you were able to supply customers power equipment into both the gray and white space within data center. But it does seem like the ability to supply both is getting more important. I don't know, maybe that's on the move to 800 volts, I'm not sure. But I guess, Paulo, from your standpoint, is the ability to sell into both the white and the gray space becoming more important? And was that a big -- and if so, why? And ultimately, is that kind of a big motivation for this acquisition?

Yes. No, great question. If you'll allow me, I'd like to give you a big picture rationale on the acquisition, we can deep-dive on this particular topic. We are excited about the data center market. We all know it's growing at a very fast pace. But if you look at liquid cooling in particular, it's growing at even faster pace than the average of the data center market.

So you saw in your chart, in the low point, projection of the market is 35% CAGR. So market will be between $6 billion and $9 billion already in '28. In 2030, we expect the market to be between $15 billion and $18 billion. So it will be a massive market.

And I told you, I think it's important I get back to that point, I told you last quarter that the white space became much more interesting for Eaton given the power ranges that now also go into the racks, moving from a few kilowatts to a megawatt, which is at sites now. And this makes a remarkable change in the way we design the power solutions, to be more attractive for Eaton having mission-critical solutions here.

And then if you look at the cooling portion of it, there are technical synergies in the way you design the white space from the chip out, and that's what we are interested in, and converting power and cooling technology and knowledge to come up with better designs for our customers.

Then, why Boyd? I would say I would start with this. Firstly, they really have similar DNA that Eaton, which means that they lead with technology and innovation. Second, they are the market leader, so that provides us with a scaled entry into the market, not the suboptimum assets we saw on the market before. This is a market leader. They have a global footprint, which is impressive, in all 3 continents, and a best-in-class engineering team because they have around 500 engineers and they are the best cooling experts on the market. So we like what we see.

And we also like the way they sell it because they work through technical sales, meaning they work intimately connected with all the chip companies. So think about the merchant chips like NVIDIA, AMD, but they also work on the captive proprietary custom silicon developers which are the hyperscalers. So they are in those development projects for the long run. So they know 2 or 3 generations ahead of what is commercial today, what's going to be delivered, because they are part of those projects.

So talking about synergies here, first of all, Eaton, in our power portfolio, we can leverage this connectivity they have with the chip manufacturers and the hyperscalers on their own chips to leverage our power system designs as well. So they have the customer intimacy. On the other end, we believe we can help them grow their co-location, multi-tenant market. We have better access and better relationships than them. And then we also can help them reducing their cost position given our purchasing power at Eaton.

So this business is growing really, really fast. And this year they're going to reach $1 billion in revenue. Next year they're going to reach $1.7 billion in revenue, which is a staggering 70% growth. We double-clicked on that during diligence, and their Q4 exit rate is already $400 million, which gives $1.6 billion if you multiply it by 4, making this $1.7 billion plan not only achievable, but there is upside next year.

So I mean, everything we saw from that angle made us believe that was the right asset to go after. And we also know that we keep our discipline with the returns between 200, 300 points, being accretive on year 2. So all the good stuff.

So the asset is fantastic. I'm really excited about winning this business, especially because we've been working, getting them to know as a supplier first for over a year, getting to know the teams, the technology. We hired independent consultants to browse all the cooling players. And all the inputs we got pointed to Boyd as the best option for us. So when the asset came to market, we knew exactly what we wanted to check, we knew what plants we wanted to visit, we had an idea on the talent we wanted to retain. So we were quick. We were fast. And we won by certainty of our proposal, fully vetted by our Board, not necessarily because we were bidding higher than other folks.

So a great step for us, a great step for the business. And we believe that combining these 2 technologies in the future will bring a lot of wins for the company, even though I'd say we didn't need to put much of the synergies into the model to make the math work, because the business is growing so fast that it wins on its own merits.

And our next question comes from the line of Joe Ritchie from Goldman Sachs.

Paulo, maybe just continuing the conversation on Boyd. I'm just curious, when you think about this asset and how long they've been providing liquid cooling or CDU solutions to data centers, maybe help us provide a little bit of a history on that.

And then secondly, we're trying to level-set the portfolio of their business that you've laid out on Slide 5. I'm curious specifically, how much is liquid cooling, how much is cold plate? Just any color you can give us on that would be helpful.

Great. So the company historically started by designing cooling systems for aerospace, which is a great place to start because it's very stringent, tough requirements, tough engineering solutions. And they really got traction there. And then when cooling became a reality in the data center space, they migrated to cooling in data centers.

You should think about Boyd as over 80% of their revenues are in the data center space and the other 20% are divided between aerospace and industrial applications. So the data center part is growing at a much faster pace, as you know. But the aerospace part is also interesting. We were working on our own projects to achieve exactly that. And now with that technology, we don't need to continue with those projects any longer in Aerospace. It's also important, but not any close to the growth rates that we see in data centers.

And as you think about Boyd, they are not a -- don't think of Boyd as a cold plate company. They are the cooling experts on the market. When you have 500 engineers and you are embedded into 2 or 3 generations of chips ahead of what's commercial today, you know what's going to happen in the next 5 years and you are designed in. And it's almost like the same behavior we have in the Aerospace selling. You get to develop something with your customers, you win and you are in the platform. The difference here is that the aerospace platforms change every 30 years and the chips change every 18 months.

So they are ahead of the curve for the new designs to come to reality, which gives them a lot of advantages. I'm going to explain what I mean by that. When solutions are stable, people will try to copy and do it cheaper. When the design is changing every 18 months, there is no way a company can catch up with them, unless you have a seat on the table, you're working with the engineering teams of your customers. That's exactly how they play. So we felt really comfortable with that.

And then they have a long range of products in the cooling space, and they also have systems and they have systems capabilities. So the way to think about the future of this business is: whatever makes more sense to the customers, they will develop and they will implement. They will not be fighting for Product A or Product B. They will always be offering the best solution to make the chips work perfectly fine.

So that's how they are wired. We love the way they conduct themselves. And we talked a lot about engineering side of it, but they also have a great footprint with plants in Asia, Eastern Europe, North America and cutting-edge, lean qualities as well. So it's a well-run business. And we know we can scale. We know we can scale that business, and we will.

Got it. That's super helpful. And then just a quick follow-on question on EA backlog. So you've grown the backlog by about $2 billion year-over-year. It sounds like you have an expectation it will continue to grow through the end of the year. Just how are you thinking about 2026 just given the strong growth that you're seeing and potentially continuing to see backlog growth in EA in '26?

Yes. So particularly on Electrical Americas, through Q3, we saw this backlog growth of 20%, which includes 9% organically. And on LTM basis, our book-to-bill was 1.1, as I said before. We were supported by higher growth in our end markets and also because, as I said before, we are investing and the customers are trusting us. So great results for Q3.

As we look into Q4, and I said before we are bullish about orders growth once again in Q4, we see momentum in negotiations in orders, so it's very possible that our backlog at the end of '25 will be up year-over-year at similar growth rates as Q3 was versus last year. So there are indications that could be possible. And the book-to-bill could also improve beyond 1.1 as a consequence.

For '26, the second part of your question, I would say it's a bit too early to call. We will have more to share when we provide our guidance in February. One thing is for sure, I want to share with you. We will start 2026 with record backlogs and enormous -- just enormous visibility into the fiscal year. That's a guarantee.

Our next question comes from the line of Nigel Coe from Wolfe Research.

Just want to change gears a little bit here and maybe talk about Aerospace. Perhaps you could just unpack the drivers of the Aero performance and, in particular, the margins and, obviously, very strong leverage there. So just wanted to understand what's driving that.

Okay. Great. Well, you probably remember, Nigel, that we shared in March our plan for the Aerospace business to go to 2030 and to reach 27% margins. John Sapp explained that to the whole team. I will start by saying that we are on the right track to deliver on 2030 commitments. I see great performance by the Aerospace team this year that supports my statement. I'll give you more detail on that.

Firstly, I want to say, which is really important for this business, they landed historical wins on new platforms that were available, defense platforms. So those historical wins will give us a lot of revenue decades to come. So the long-term view of this business is fantastic and incredibly strong. For the short term, I'm again proud of the team as they keep ramping volumes consistently and improving customer satisfaction while they do that, which is also great.

So if you compare, this business last year we grew 10%, and this year we're yet again raising organic growth guidance up 100 basis points to the midpoint of 12% this year, which is a great year-over-year performance. And on the margin front, we start to see upside from some of the key strategic levers, which are driving already 70 basis points of margin expansion. So I would say we are on track to reach the 27% margins we promised for 2030.

You asked for details where we are working to improve margins. The first thing is no surprise in the industry: supply chain. We invested in AI tools to improve planning and the connectivity between our suppliers and our customers, including our plants. This is growing well. Second, we are investing in manufacturing excellence, improving the way Aerospace runs the show. And it's also going in the right track.

And third, I would say this, we also -- although there is not the massive investment we had in Electrical Americas, Aerospace is also expanding a couple of plants and they're doing that very well. But their growth is basically getting more products out of the same facilities they have, which is great performance.

And fourth, I would say this, we talk about portfolio management, both for the short term and for the long term, I see also green shoots here. You've heard me saying before, we treat every GM as a portfolio manager. So John Sapp and his team, they took care of some contracts that we saw as a tail of the portfolio, and they renegotiated those contracts, which will give us better margins in the future.

And the other thing I want to highlight, which the team also landed, I don't want you to forget, is that the Ultra PCS announced deal is a great example of an asset we will acquire that will add to the top line in terms of growth acceleration and will start adding to the margin, being accretive to margins right away. So it's a great asset. And we expect now to close this year, in Q4, rather than beginning or the first half of next year, which is also great news.

So I would summarize by saying I'm proud, really proud of this team, and I'm confident that they will deliver on their commitments towards 2030.

One additional statistic, Nigel, if I may. The 12% revenue guide for the year will also assume a backlog growth. So we're not flushing the backlog. We are growing faster than prior year and adding to the backlog. As a reminder, the backlog in Q3 was 15% higher than it was a year ago.

Yes, that's great color. And then second was margins. There's a lot going on in the Americas margins, price, tariffs, investment spending, et cetera, obviously, a lot of volume leverage as well. So just wondering how we should think about incremental margins in 2026 and how that all plays out.

Yes. I will start and then I'll allow Olivier to provide more color. It's too early to talk about 2026 margins, but I think Q3 was a good proxy where the top line didn't come to the levels expected and the business could produce very good margins. And why was this possible? First, because we had a backlog we could deliver on. Second, because the team now covers for all the tariff costs and is not a drag on the margins. So it's not only recovering on the dollar-by-dollar basis by the end of the year now, but also it's not dilutive to margins, which is great news.

Where are we now in Electrical Americas? That's exactly the discussion we should be having. Think about a business that has been growing consistently with the same portfolio of plants, and all of a sudden, now they're expanding 12 facilities at the same time. So 6 are built and they start to ramp. Other 6 are in building phase.

So it's a lot of activity in that business, preparing us to start a new S curve, a new chapter of growth for the business. That's the way to think about Electrical Americas. Our customers trust that, and it's proven by the amount of orders they are giving us, which is it's just fascinating to see that quarter after quarter.

So that business is exactly getting ready for all this demand that we announced the expansions at the right time. And we realized, with all this order momentum we have, we need to accelerate investments, get the people ready so we can produce on this backlog that we count on today. And with all that, we have over 100 basis points of inefficiencies, minimum, that we have, by dealing with those inefficiencies and all this turmoil, are ramping 6 facilities at the same time.

So we're going to give you full guidance in February for 2026. But in '26, you should expect that we continue to ramp, so some of those inefficiencies are still going to be there. But they're going to disappear over time, and then we can print even better margins for Electrical Americas.

And our next question comes from the line of Jeffrey Sprague from Vertical Research Partners.

Hey, a lot of ground covered. I just want to come back to Boyd one more time, at least for me. Just a little more color sort of on some of the deal assumptions. Paulo, that was very helpful, giving us the $1 billion to $1.7 billion. That was part of my question. But this 25% margin that you're pointing to, is that their organic margin? Is that kind of comparable to Eaton accounting? Or do you have some synergies baked into that number?

No. This is their margin.

This is their margin, yes.

Today.

And then so if you think about synergies, you alluded to revenue synergies working together, I would assume you're maybe not ready to totally kind of give us a number on that, although the $500,000 of content certainly is a starting point. But how about on the cost side, is there a cost story here too? Or coming out of private equity, maybe these guys have a lot of capacity they need to add or something to kind of keep up with this demand. Should we just think about kind of investment for growth as opposed to kind of cost-related synergies as part of the earnings algorithm?

Yes. We have both. I would say this, and I'll go back to the deal criteria so it's clear that we remain disciplined. This year is delivering between 200, 300 basis points over cost of capital, is going to be accretive on year 2. And I said before, we didn't need to use the synergies to make the business case work given all the growth that they have in the pipe. But if you look at the synergy, the multiple after the synergies, the multiple goes down to high single digit.

So there are synergies that we can play here. The most -- the quickest and the easiest to implement is, on the cost side, we look at what they buy and we compare to our purchasing volumes and our purchasing power, we believe we can help them a great deal. And then again, the other part on synergies, about sales, that we see as a great opportunity, and we work towards that. But once again, we could even take this out of the model and the math still works fine. Olivier can give you more details on how we're going to run the financing, et cetera.

We also checked our leverage point, and we believe that after the deal, we're going to still be at the same credit rating as today. So that would not be affected. You want to add anything, Olivier, to it?

Nothing more to add. No.

Our next question comes from the line of Steve Tusa from JPMorgan.

So just to kind of clarify in the fourth quarter here, so I guess what you're saying with the EA revenue is that the resi stuff remains weak and some of these other nits and gnats that were onetime issues ship. And so I think the midpoint of the prior range was higher than 18% revenue growth. Is that basically the resi impact in 4Q?

Yes. So you got this correctly, Steve. I'll go back. So we -- if you look at the sequential revenue growth for Electrical Americas, around $200 million, we are confident, we check plant-by-plant what needs to happen, and this is around 5% to 6% sequential growth. And this is possible because new capacity came online in Q3 and we are ramping up as we speak.

In terms of the miss you mentioned, which was half of the miss to the middle of the guidance on growth, you should think about this as being less than 1 day of sales, right? So think about a whole quarter and they missed less than 1 day of sales. And this is going to be a carryover for us in Q4. So that product is on the pipe, it was on the shop floor and now becomes a tailwind for Q4. So this is one element for you to consider. That's why we believe the strong double-digit growth is possible, having this carryover from Q3, that we were working on, we couldn't deliver.

And then the second thing was that last year is the easiest comp of 2024, which the growth was only 9%. So we believe it's possible to achieve that.

Yes. That makes sense. Like only 9% growth, that's not exactly the easiest comp in the grand scheme of the economy, but I understand for you guys, it's kind of a different scale.

And then just lastly, following up on Nigel's question on the margins. I think your margins are guided this year down 50 bps, and you have this 100 basis points of inefficiencies, but you're also absorbing tariffs and maybe like a deal here and there this year. Like why wouldn't it be better than down modestly next year? Like does 100 bps get it worse next year or does that get a little bit better? You should be able to kind of, in my view, engineer to something that's at least up a little bit for next year for EA.

Yes. So on the first part of your question, of course, we are dealing with those 4 different deals and we are investing. And we don't regret doing that because that makes our position so much stronger.

We cannot continue acquiring companies at that pace. You shouldn't expect that next year, right? We need to digest those deals. They were the right deals in the right time, the right place, but we cannot continue to make acquisitions at that pace per year. It's not what we're going to do. So that addresses the first part of your question.

And of course, the business is making things better, as we speak, every month, every day. And you should expect that those inefficiencies will go away as more of the plants that we start to ramp up, they become mature. I'll only caution you, it's too early to give you guidance for '26. We're going to talk in February and then I'm going to give you more detail on the plan. I need to meet with the team to see the bottoms-up plan myself. They're working on that as we speak.

But directionally, think about this, less deals next year. We focus to digest what we acquired this year. And then in terms of efficiencies, should start getting better over time for Electrical Americas as we mature the footprint.

And our next question comes from the line of Deane Dray from RBC.

Just want to follow up on Jeff's question regarding capacity investments, and particularly for Boyd. We talk about the 70% growth expected for '26. How much capacity do they need to add? One of their key competitors announced they're doubling capacity, you said Boyd has 16 plants. Just what's in front of them in terms of capacity? And really, what are you solving for? Is there a backlog that you have in mind that you don't want to exceed in terms of how much capacity you'll be adding?

So this was a key part of our diligence and we double-clicked on that. They are ramping 2 facilities, large facilities, 1 in Asia and 1 in North America. They have ordered. They have equipment in place, they are hiring people at a high pace. And then all the long-term, the long-lead items, the long-lead capital goods, machinery, et cetera, are ordered already. So the capital plan is well underway, and so whatever is required for '26 and '27 is already in the pipe.

And then we feel really good about their capacity to ramp because we were, we saw those plants, we saw the exit rate now in Q4 already in the ballpark of the revenue numbers for next year. So yes, they are investing, they are growing. The investment is already in their plan. And over time, it could well happen, as it's happening with Fibrebond, that we can accelerate and augment their wins and then we can come to a decision later on to invest even further. But today it's not required. It's all in.

That's really good to hear. And then just a follow-up, we appreciate the update on the mega-projects. You all have been really good about providing some data points given your perspective. Can you talk about the number of projects you see today and your win rate?

Yes, great. Great question. We didn't have a slide -- we planned to have a slide here before we closed the deal, so we needed to remove. So maybe next quarter, I'll bring it back.

So another very strong quarter, record announcements once again. So in Q3, the mega-project announcements reached -- sorry, $239 billion, which is up 18% year-over-year. And if you think about the sequential growth from Q2, it's almost 50%. So a very, very, very strong quarter.

You look at the composition of those mega-projects, you would expect a big portion of it be data centers. And it's true, it's almost half of the total. But the other half is not data center, which is also great and diversifies the end market.

And if you look at what's happening, I gave you data about starts and announcements last quarter, if you look through September, and you look back from January to September, average announcements per month are reaching $65 billion, and the starts for all 9 months are only $100 billion. So there is a lot of things to still come to the markets, a long runway. And the backlog today is around $2.6 trillion. So it's up 29% from last year. So astronomical numbers.

And if you translate to us, we won around $2 billion in orders. We have a negotiation pipeline now, we are active on negotiating other $4 billion-ish in products and solutions. And we win around 40% of what we bid on. So that's a very strong win rate.

With all those numbers and you compare the potential to what we booked so far, I hope you're going to get to the same conclusion I got, which is those large projects typically take between 3 and 5 years from announcement to our revenues. So think about this as a great, great tailwind for extended duration of the market growth that we have for even a longer period of time.

You could also triangulate those large projects with what the -- with the announcement from the hyperscalers. If you remember, during the earnings season, the top 5 in U.S., they announced a growth in the CapEx '25 to '24 by 67% year-on-year, and then '26 versus '25 about 45%. And all those numbers are higher than what they had announced the prior quarter. So many triangulation points.

That's a good point. Thanks, Olivier. We are over time, so let's go for the last question, please.

Our final question for today comes from the line of Scott Davis from Melius Research.

Congrats on the numbers, et cetera, or the outlook, I should say, is very encouraging. Just a couple of cleanup items because I think you've touched on 99% of what matters here. But the CapEx, I think you were guiding to kind of, call it, $1.2 billion this year and next combined. Are you at the point where you may need to upsize that '26 CapEx number given the order book?

So we will be higher in CapEx in '26 versus '25. We have said that constant -- in a consistent manner. We think we're going to have leverage -- you go back to the question from Paulo on the CapEx we have deployed in '25, '26 would be a peak, and then we'll go back to the historical CapEx as a proportion of revenue you had at Eaton.

As of '27, right?

As of '27, correct.

So you should -- we are actually accelerating our hiring and our ramp now on the existing expansions we announced already.

Okay. That's helpful. And then, guys, just again another cleanup item. Where do we stand right now with channel inventories? Are they back to kind of more normal levels?

Yes. So we have a closer look with our distributors. I think resi reached bottom, in my opinion. And then we see other markets that are coming back really nicely. Distribution IT, for example, recovered, not only in North America, but also in EMEA, double-digit orders growth. Our utilities business came back very strongly now as well in terms of orders; strong double-digit growth.

So this is coming back. Resi is still down, DIT is back. And then utilities very, very strong orders, which we didn't have an opportunity to cover, but utility business did really well in orders as well in Q3.

Thanks, guys. As always, the IR team will be available to address your follow-up questions. Thank you for joining us. Have a nice day, guys.

Thanks, everyone.

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

All right. Thank you, everybody. Chris Snyder, U.S. multi-industry analyst. Very excited to have Eaton with me, CEO, Paulo Ruiz. Thank you for coming.

Thanks for having me. Excited to be here.

Well, absolutely. Maybe just starting high level, with the strategy overview at the March Investor Day, you unveiled 3 pillars of the strategy. So can you kind of talk us through that, and over the last 6 months, are there any milestones that you would like to highlight there?

Great. So thanks for the question. I would say the transition has been fantastic. So I could hit the road running. And the fact that I had 3 quarters of overlap with Craig helped me to gradually take the reins of the company, but more importantly, gave me the opportunity to think about where we needed to raise the bar in terms of our strategy, and we launched the strategy back in March, so before my start date and we're already in full implementation.

So let me walk you guys through the great concept of the strategy is that we want to recognize the things that the company is doing really well, recognize, identify and keep them. At the same time, we are not complacent at all. So we want to raise the bar on areas we believe we need to do better.

So the framework of the strategy addresses exactly that. It has 3 pillars, as you mentioned. The first one is invest for growth. Invest for growth is about us working really hard to be a fast-moving company with higher customer centricity. You might ask, how can you prove this? We decide to think about the fast-moving markets we serve, get the learnings from it and apply across the company. So we are benchmarking with everything that's happening in data center today, that becomes our new standard of how we approach. We have customers centricity we apply across the organization. So if it's good for the fastest growing, it's going to be even better across the portfolio. So that lead for growth.

And the invest for growth, we have generational market opportunity coming from the markets we serve. Think about electrification of society, that touches the utilities, it touches also behind-the-meter. We have tremendous opportunities on data centers and digitalization of society. Reshoring the U.S. is another field. Aerospace being commercial and defense, also another growth vector. So if you look at all of this, how can we, as a company, be selective and work and double down on those areas that will give us the biggest return for our buck, give us highest growth and highest margin potential. So that's the framework. And it's all about the organic investments we're doing technology and capacity, but it's also about inorganic investments, M&A. So it's going really well. It's in full implementation.

The third one is about execution. I call it execute for growth. You can have the best ideas under your invest part. You can have the best coach or the best leaders. If you are not executing well, you're not delivering to our potential. So we are raising the bar on the way we run our facilities, our factories, our functions. We are applying AI on top of everything we do with objective to bend the cost curve, the fixed cost curve as we grow the top line.

And then ultimately, talking about things that I love in the company, I want to keep under execute for growth, I'm committed to keep a concept that Craig introduced, which is nothing else than we see every general manager is a portfolio manager. So we expect the general manager to look at the head of the portfolio, higher growth, higher margin, how do you fast develop that? How you make it work? What is the tail of the portfolio, how you take care of it and either fix or get out of it.

In terms of highlights, I would say every pillar is under full implementation. But for this public, I would say it's important to note that we announced 3 deals in 3 months. right? So 2 in the data center space, Resilient Power and Fibrebond and 1 in the aerospace, that's the only 1 that will close next year, the other 2 already closed. So high result, lots of discipline, execute on the strategy we shared in March.

I wanted to follow up on the invest for growth pillar. You talked about doubling down on the best, highest growth markets and just kind of making sure that organic stays strong. But kind of from the outside looking in, one of the beauties of Eaton in electrification is that there are a lot of good end markets out there. So I guess which ones are the most exciting to you? Which ones do you think deserve the capital?

So we are definitely looking at data center, utilities and aerospace as the premier destination of our investment dollars. But I also want to give everyone a reminder, a lot of things we do in our technology and our product is fungible across end markets, right? So we look at those end markets as the biggest growth drivers for sure. But a transformer can go into multiple different areas. A breaker can go into multiple different end markets. But that's the frame we're looking at.

Why are we excited about those markets in particular? Think about data center. I ask Yan and his team to give me the data from the last Laguna Conference. So the last Laguna Conference 1 year ago, the data center industry had $150 billion in backlog in hand between things that they were building and things they announced. This number today folks is $470 billion. So it's over 3x the backlog that the industry had in hands last year. So it's a tremendous tailwind for our business, and we are really excited about it.

Are we growing this business? Definitely. You guys saw Q2 year-over-year, we grew 50%, and our orders grew 55%. So that market is really hot. We also like utilities. We grew decent amounts in the past where -- when electricity growth was only 0.5% per year. And now with electrification of everything and data centers, the load growth is forecasted to be 3% per year. It's a lot of a change. And then everything around data, aerospace that you aware being commercial and defense, they're actually looking more positive than even the forecast we had for defense back in March.

Yes. I appreciate that. You highlighted the 3 deals that you guys have done in recent months. And that is a bit of a change. And over the last few years, Eaton has been very much inorganic growth story. But you guys are adding businesses that are bringing very good growth to the company. So can you kind of update us on the M&A priorities? How is the pipeline? And then what do you consider to be a bolt-on for Eaton?

Yes, we said we want to do bolt-on deals. There are two sides of looking at bolt-on. One is the enterprise value. And the other one is the degree of complexity for integration. So for us, bolt-on is when it is less than 5% of the market cap. So if you are at $140 billion today, you'll be less than $6 billion to $7 billion down. The deals we closed are much smaller than that, around $1.5 billion, the 2 bigger ones. And Resilient Power is much smaller as a technology play. But we think about this as we are very disciplined. We're not going to lose the discipline on the way we acquire. We have high return expectations, and we look at the synergies we create. So we remain very, very consistent with that approach that Eaton always had. And we have those opportunities, right, at the end markets provide to us.

And I just want to remind you that commitments I made back in March did not include M&A dollars, right? So whatever we do to put this $21 billion of cash generation over the planning cycle to work, is going to be an upside.

Yes. No, I appreciate that. Maybe kind of getting to the more thematic side of the house, anyone who reads my research, knows that I'm a big proponent believer in U.S. reshoring. Obviously, everything needs to get powered. Manufacturing 26% of the electricity in the country, which I feel like is underappreciated. So I guess what do you think about reshoring? What could that mean as you look out to the end of the decade? And what verticals within the Eaton complex benefit?

Yes, we see the reshoring as a very long tail and it's actually a trend that touches a number of end markets. Think about, of course, our definition of mega projects is, any process that has more than $1 billion in investment. Most of the data centers will fall into that category today, but they are much more than data centers. Think about LNG terminals, think about petrochemical plants, think about all this manufacturing reshoring that already -- was already happening. And we expect that with the advent of the tariffs is going to happen even more.

So it's a long tail. We track this every single month. And since we started tracking those projects for 3 or 4 years now, the current backlog of projects is $2.6 trillion. It's incredible, right? Only 15% of it started. So it's like $390 billion to $400 billion actually started. So there's -- the message here is a very, very, very long tail of projects to come. What we've seen in our books today, early innings, early moves, we closed around $2 billion in orders already. We are in current negotiation of other $3.5 billion.

And I just wanted to make one project as an example for you to make it more tangible for everyone. We recently closed the deal in Pennsylvania, it's a power gen side. It's called Homer City. It's a huge power generation site, 10 gig -- $10 billion for 4.5 gigawatts of power. The electrical content of our product is around $200 million. So we are lucky to win the first phase. We already booked $100 million. So we feel good about it.

And the reflection always is because we get the question why our market share is as high or even higher than your bread and butter business. If you're a project manager sitting on a $10 billion budget, would you take a risk on 2% of your cost to maybe sell 5% or 10% of 2%. You probably won't.

So I'm saying here, we know we can compete and we track this very closely, and they're more than data center only.

Yes. You mentioned that $2 trillion plus mega projects kind of -- I think if we go back to -- I think that number probably started in '21 cumulatively. I guess, any sense on how those mega project announcements are tracking maybe in '25 versus '24? And is there any change in conversations with customers following the election and all the policy that's come through?

We track -- we always track cancellations and announcements. The announcements are surpassing the starts by a lot. So the way to think about it, if you think about announcements around $40 billion per month. So every month, on average, there's $40 billion of announcements of new projects. Starts are on the $25 billion per quarter. So it's much lower. So there's a huge tail.

Now someone might ask, well, maybe they're canceling those projects or delaying those projects. We track that as well. The severe delay or cancellation is around 11%, which is lower than the average project size globally. So it's not high. So still to be seen whether tariffs is going to increase the pool, we believe it will. But we already see a lot of business for us to go attack in the near days.

If we kind of think about what you're saying on the announcements for start, clearly, announcements always lead start. Has there been elongation on that? And why do you think it is? Is it just there's a lot of competition for whether it's transformer, labor? What's causing that?

Yes. There is -- of course, if you think about data center being a big portion of it, they're competing for the same resources, right? The power, they're competing for the labor, they're competing for the specialized crafts. So as we look at it, and there was one of the many reasons why we got so much excited about Fibrebond, we can only observe that or we can work to make it better for our customers, right?

So when we decided to acquire Fibrebond was exactly with that direction, right? We are hearing you want to move faster, you don't have engineering to design one by one. You don't have the labor on site. I can do that in my factories in a controlled environment. So there are actions we can take. But definitely, there is a competition for resources. And that's why in our long-term plan, although we are a firm believer of the data center development, I haircut the CAGR, the forecast CAGR of the market for 35% at the midpoint, I embedded only 17% to my plan. And I'm working towards 35% or more. But it was just like a proactive way to be on the safe side.

Yes. No, that makes sense. It's hard to know when these constraints are going to come. And then maybe just asking on data center. If my memory is right, Q2, you guys had sales up 50%, orders up 55%. I think I'm sure everyone saw Oracle a couple of days ago, pretty eye-popping. I guess kind of maybe leave this one high level, why are you positioned to win in data center? And how do you make sure that you guys capitalize on the opportunity?

Yes, it's an excellent question. So we -- historically, we've been very strong with our portfolio, diversify products, service offerings, software as well. And with advent of AI, we believe we can even expand our presence. So traditionally, we were very, very strong in the gray space, right?

Now with power requirements being much increased on the server side from a few kilowatts per rack to a megawatt per rack, that requires much more sophisticated power management solutions. So the white space that, although we always had the technology to attack, we didn't want to because it was highly commoditized, high volume, low margin is resembling much more the businesses we love, mission-critical, high technical content, and that's what we love. So with the advent of AI, something that was very, very good for us already is going to get much better. So that's why the content per megawatt for Eaton will increase.

So we are very excited about the market. Why we win because we approach this from a solutions approach. So by the recent acquisitions we made and also the people we hired, today, we can have conversations with NVIDIA that we can take all the way up to the utility feed. We can go from the grid to the chip. That's powerful. We have the scale, manufacturing scale. We have the engineering scale, we have the service scale. And we have good technology, we have unique IP in some products that we are leveraging. So something that was good, I would say, excellent is supposed to be even better for the company.

I appreciate that. When you guys look within your data center business, can you talk about how you see AI versus maybe some more of that traditional enterprise cloud developing, whether it's growth share of the business, anything you could share there?

Yes. So of course, everyone talks about AI all the time, and it's important. It's growing really fast, but still it's not the majority of the data center business we see. It's moving fast, as I said. Last year, for example, 15% of our orders were AI-related. This year, it's 30%. It's growing. Well, the cloud is also growing and still 70%, right? So there is a lot coming that way. AI gets all the headlines understandably, is exciting, but there is more to it.

Yes. So as we kind of move to AI, you talked about the content per megawatt opportunity increasing. I guess kind of -- so are you having conversations with customers on that side of the business yet or on that specific white place? And then is that what makes AI so compelling to you guys is the ability to play on both sides?

Yes. So the answer is yes to both. We are having the right conversations, not only the hyperscalers that we always had. We improved a lot with the multi-tenant through acquisitions and relationships. PDI, which was a small business we acquired 4 years ago, we tripled that business. But that business also helped us pull a lot of other Eaton solutions and products through the multi-tenant data center channel. So we improved our relationships there.

And then as we start to be more of a solution provider, we were recognized by the likes of NVIDIA as a company they want to partner with and put in their road maps of the next chip. So we work ahead of the game to make whatever they're trying to put on the market possible inside the white and the gray space.

I appreciate that. Maybe kind of talking about the ability to serve all of this demand. You guys have talked about $1.25 billion of incremental growth CapEx to kind of serve all the demand that's out there. Is there any updates you can share on that? On the CapEx?

Yes. So those -- we have a dozen projects in U.S. today that are under implementation. They are going well. Of course, for a business to stomach 12 expansions in a year is not a small feat. I think the business is doing well, and I'm proud of my team there. In terms of completion, that's the background of your question, Out of the $1.25 billion, we plan to finish $700 million of that investment this year, and the remainder will be mostly next year, a little bit going to '27. But between this year and the next, the bulk of it will be done.

And we're seeing -- if we kind of look at you guys, you guys incurred some margin pressure in Q2. I think there are some tariffs, but also some related to this ramp. But then we're also seeing a call for acceleration as the year goes on as that capacity brings new volumes to the business. So can you talk about both the margin and top line implications from these capacity adds, both in '25, and if you could share anything on '26 there.

Yes. So I'm not going to give you '26 guidance, if that's what you're looking for. No, we're excited about the exit rate. I -- jokes aside, I will be disappointed if the Electrical Americas business cannot meet the long-term average growth we committed in March, which was 10%. I think we should be there, if not north of it. But again, guidance will be shared later.

If you think about -- you talked about the margin pressure in Q2, we calculate those investments we are making and inefficiencies that come with it to be around 100 basis points, right, of margin pressure. And on top of that, in Q2, we had the cost of the tariffs and none of the pricing because we implemented prices in May. So this has come in the second half. So we saw all the pressure in Q2. And if all of that the margin eroded 40 bps. So you load the business of 100 basis points, you load with all the tariff pressure and still the business absorbed the vast majority of it.

And so we remain confident. We believe we're going to continue to operate well. And as soon as those expansions are done and those inefficiencies start to go away, we can push the team to continue to operate better under the execute for growth umbrella.

Yes. I appreciate that. And maybe I could follow-up on the tariff impact on Americas margins. So clearly, you guys were getting hit with tariff costs and that pressured the margin. And you guys have a lot of backlog. So maybe it takes longer to realize the price. But I think, the question is, do you guys feel confident that when you go out to the market and get new orders that they're coming through at kind of a post-tariff price level?

Yes. We do.

Happy to hear that. I guess on the topic of orders, the Q2 accelerated, I mean faster than I thought. When I tried to isolate Q2, it seemed like it was in that 20% kind of plus range. Can you talk about what drove that improvement, whether it was data center and others? And then you also talked about Q3 being better again. So any update there that you could share?

Yes. So the way to think about it -- first of all, we are proud of the team and the results in Q2. A good way to think about it, we shared with the investor community, we had a large, large order in Q1 last year that we are anniversarying now over $1 billion in one single order. So with that huge bulky order gone, the team managed to compensate for that with -- I wouldn't say bread and butter business, but not so large orders and stay at the same level over time.

Having said that, I'm confident the book-to-bill will be larger than 1. Making order forecast is very difficult because we have several large deals, we are discussing and negotiating, especially on the data center space. And I cannot forecast when they're going to land. They can land in Q3, they can land in Q4, they can land in Q1.

What doesn't change is when it's going to be invoiced and delivered to the customer. So what matters to me is that our backlog is at record levels. We expect to have book-to-bill higher than 1, and our negotiation pipeline is actually 31% higher than last year. So that gives me the lead indicator. When the orders will fall, they will fall.

Yes. One thing that I think is kind of interesting is over the last year, the view was that when Eaton or other companies with a lot of backlog, as capacity comes online, though, I thought orders go down because lead times compress. We obviously saw orders accelerate. Do you think bringing capacity to market and maybe being able to serve customers quicker could be a catalyst or a driver of share gain in the market?

Definitely because you said, of course, the loss of economy would say if you reduce your lead time, you're probably going to see less orders and less backlog. That hasn't happened. That shows that demand is strong. As we bring capacity in and we keep trying to drive lead times down, I think it will be a competitive advantage for sure.

Yes. And then just kind of on that point, you guys are calling for, I guess, depending on where you're in the guide, but Americas organic growth to get to improve in the back half versus the first half. Is that just -- you're bringing the capacity online, so that's all just like incremental volumes flowing through. Is that also just prices coming through on a bit of a lag because that has to work through the backlog?

Yes, we definitely have both. We have the pricing that's going to hit the second half. But if you look at the bulk of the growth, the vast majority is volume.

Yes. Yes. Maybe moving over to Electrical Global. I guess, what signs of improvement are you seeing there? And I guess anything particular you want to share on Europe? And then beyond just the top line, what's your plan for margin improvement there? I don't think anyone ever expects Global to do an Americas margin, but can there be a narrowing of the gap?

Yes. So we're definitely working towards that. If I am to use the strategic framework to give you my answer. So we look at the European business, and we thought about the lead for growth. And we decided we didn't have the right team to win. So we decided to bring a leader from the Electrical Americas group, who knows exactly how we run Electrical Americas is leading our European business. He started now this year. He is bringing the best of the industry to support him. So that's under the lead for growth.

He has also the mission with his team to not jeopardize the MOEM and the resi business we have there that is the flow business, which is good. But to build on top of that, the systems business that we have in Electrical Americas that make us win in data centers, it makes us win also in utilities.

Under invest for growth, what we are doing there is organically, we are getting our products ready to the European codes and standards, and we are working on partnerships, how we can beat our systems and our assemblies. And we decided to invest in the UAE. So we have an investment that we kicked off beginning of this year to create an engineering center and also to have highly automated manufacturing to serve the growing data center market in the Middle East. So that's the invest part.

Under none of this is showing our numbers yet. It's coming up. But if you look at execute, we're also running our factories better in EMEA. So if you compare this year to last year already, the number for Global is 100 basis points of margin improvement already year-over-year.

Now there is a long run to get to the Americas level. And we committed in the long run, this business could go up to 23%. That's our commitment.

Yes. Is it -- when we kind of think about getting growth out of Global, is the biggest driver there, just data center spreading beyond America? Or are there other end markets or verticals where you think you could show improvement?

In Europe or Global?

Global.

I think if you see what the Asian team is doing is fantastic, right? They are growing double digits in this market today.

Really?

Yes. So it's fantastic, leveraging the JVs they made over time, growing organically great work. Now can we emulate that in Europe? We can. We take some time, but we'll do it.

Yes, absolutely. Maybe moving over to Aerospace, the 2030 margin target of 27%. How do you think -- what do you see kind of there -- in the pathway there to get to that margin level?

So of all, I shared with you in the past that we are not happy with our operational performance in Electrical Global, especially in EMEA, right, and also in Aerospace. So we started taking actions there. I talked about the margin improvement in Global year-over-year, 100 basis points. Aerospace improvement already 70 bps. So we see some green shoots. The business starts to run better. That also gave us the confidence to raise our growth guidance for the year by 200 basis points. So we see our positions in the platforms are there, right? So it's about execution in the short term.

Over the longer term, we also have opportunities to win more in retrofits, especially in the defense side, especially with the acquisitions we made. And we can also changed the margin profile there. So economies of scale with the incrementals over time, running the place better and then a push for aftermarket retrofits.

Ultra PCS specifically, can you kind of talk about how that plays into there? And then specifically also how it relates to the margin?

Yes. This is a very neat business, a fantastic small business. Around $250 million in revenue, growing mid -- strong double digits, I would say, on the teens and with EBITDA margins north of 30%. So it's accretive, not only to Aerospace, it is accretive to Eaton overall on growth and margins. And where they play is 75% defense, 25% commercial. And they open up a number of opportunities for us in the U.S. but also in Europe, where they're quite strong.

Yes. Maybe kind of shifting back to the home market, the U.S. When I think about the Trump policy, it feels like the first angle is that it could drive more investment into the U.S. But then I think maybe the second derivative angle is that it couldn't change the competitive landscape in places, whether it's big international companies or even kind of smaller players in the market. I guess, do you think there's been any impact in the competitive landscape or any kind of outlook there.

So I'm not mentioning here that I like tariffs. But if there's someone benefiting from tariffs today, it's Eaton in this environment, right? Because we had the strongest footprint in North America and in the U.S. for a very long period of time. And even before tariffs, we decided to come with the $1.25 billion of additional investments. So we are ahead of the curve we didn't need the tariffs to make a business case for those investments, but we already started. So the tariffs are only making our business case stronger.

If your question is that some other players might pause their investments and decide not to come to the U.S.? It could well be. I just cannot affirm that. It's logically possible. But today is benefiting Eaton a bit, and we didn't need the tariffs to protect us. We could compete without them, but they just create additional protection for the company today.

I'd be interested to hear what your philosophy on pricing is because when I hear the stat earlier that the backlog went from a data center with $100 billion of $450 billion, just like wild numbers. And there also could be some competitive tailwinds. It feels like the company would have the ability to push, I won't say as much price as you want, but a lot of price. Clearly, that's not always the best way to run a business and maintain relationships. So kind of how do you think about kind of throttling that back and forth?

Yes. We always try to think about generating value and claiming part of the value as pricing. So if you just want to push pricing on the same solution or product as anybody else, you probably don't deserve it. You don't get it. So we're always looking for opportunities. And in data centers, what we did in the past, we created products dedicated to it, think about IP we have where we put 3 pieces of equipment in one box. It's a transformer, it is a switch gear, it is the control tower in one box. So the hyperscalers love that.

We give them a lot of value back because less footprint is a cheaper solution than 3 pieces of equipment, but our margins are also higher. So that's the way we think about prices. Of course, we can push because the demand is high. We always reclaim, but we also try to create value for our customers, so we can claim more than a fair share of it.

Yes. No, perfectly reasonable. Maybe going back to the portfolio and M&A conversation. What do you -- I guess, how -- you guys have announced some -- what I would consider very attractive deals when you talk about the growth rate and the multiples paid. Is there anything that you can provide about how big is the pipeline or the opportunity set for you to go out there and find growth accretive businesses at maybe a multiple below your own or whatever that threshold may be?

So we -- again, I think we need to be very intentional. So we look at the areas where we decided to play, and there are not so many. So when then you decide where to play, then you can start browsing the market and look for it. So we do that very intentionally. I don't want to share the number of targets because that would not tell you anything.

The one thing I wanted to tell you is that we don't want to strike any transformational deals. It's not what I want to do. It's not the right time, especially with the new CEO in place. But we can stomach good bolt-on acquisitions where the value creation is evident and we are the best home for the business because then we can create a good arbitrage between the multiple paid, that will be always equal lower than our own multiple. But on top of that, the after synergy is a much lower number. So that's the way we are thinking.

What about on Americas versus Global? Because on one hand, I would think your ability to add value to a new business is the strongest in Americas because you could bring them into the home turf and leverage all the great stuff you do here. But on the other hand, I would think maybe Global could benefit from more scale and more touch points coming in. How do you think about that?

So it's part of our equation as well. As I said before, we believe with a new team in place, we start to run the house better. We can potentially look for deals. That's the reality. But we are not in a rush. We don't need to do a deal for the sake of doing a deal. That's not the way we acquire. So if you find a good business that will accelerate our organic ambitions, and we can prove, once again, to my original point that we can create synergies and it's a better home for business versus stand-alone or any one of our competitors, then we'll not be shy to move. But once again, bolt-ons, easy integration and then also higher returns. That discipline is going to continue there.

Yes. Well, it looks like we're up on time. But thank you so much. Really enjoy the time.

I enjoyed it. Thank you so much.

Thank you. Thank you so much. That was great.