Rockwell Automation, Inc. (ROK) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights sequential improvement in sales, margin expansion, and strong demand in several segments. Although there are concerns about tariffs and cautious oil spending, the positive outlook in Logix, hybrid industries, and strong margins in Software & Control support a positive sentiment. The Q&A reflects confidence in productivity initiatives and market demand, despite some cautious responses on big projects and AI impact.
Key Financial Performance
Q1 Sales Reported sales were up 12% year-over-year, with 2 points of growth from currency and 3 points from price (half from underlying price realization and half from tariff-based pricing). The increase was driven by strong demand across core offerings and verticals, particularly in logics and motion.
Annual Recurring Revenue Grew 7% year-over-year, driven by strong performance in recurring software across automotive, life sciences, and energy verticals. Notable wins included RH Shepherd and Hindalco Industries.
Intelligent Devices Organic Sales Increased 16% year-over-year, with strong performance in drives and motion. Growth was broad-based, supported by strategic wins in food and beverage, CPG, and entertainment.
Software & Control Organic Sales Grew 17% year-over-year, driven by strong momentum in Logix (North American sales up over 25%). Growth was supported by adoption of next-generation software offerings and AI-enabled solutions.
Lifecycle Services Organic Sales Declined 6% year-over-year, attributed to delays and narrowing of larger project scopes due to trade policy uncertainties.
Segment Margin Total company segment margin was 20.7%, up 360 basis points year-over-year, driven by higher volume, favorable mix, and strong productivity.
Adjusted EPS $2.75, exceeding expectations, driven by higher sales volume, favorable mix, and productivity. The adjusted effective tax rate was 17%, contributing to the EPS increase.
Free Cash Flow $170 million, down $123 million year-over-year due to changes in working capital and incentive compensation payments.
Discrete Sales Up low double digits year-over-year, led by over 60% growth in e-commerce and warehouse automation. Growth was driven by labor shortages, network modernization, and sustainability focus.
Hybrid Sales Up high single digits year-over-year, with double-digit growth in food and beverage and home and personal care. Growth was driven by operational efficiency and some greenfield projects.
Life Sciences Sales Declined low single digits year-over-year due to project delays in North America, though the pipeline continues to expand.
Process Industries Sales Increased 10% year-over-year, with strong growth in chemicals, water, and energy. Growth was supported by modernization projects and greenfield wins.
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Operating Highlights
Plex platform: Delivered its strongest quarter yet with significant customer wins, including RH Shepherd, a U.S.-based Tier 1 commercial vehicle supplier, using the platform for operational control and scalable expansion.
L9 controller: Off to a strong start with benefits like higher performance, simplified architecture, and faster data throughput.
FactoryTalk Design Studio: Gaining momentum with its copilot functionality.
Emulate3D: Seeing growing adoption for creating digital twins.
North America: Strongest region with significant investments, including a new manufacturing facility in Southeastern Wisconsin and the purchase of the Mequon, Wisconsin facility.
E-commerce and warehouse automation: Sales grew over 60% year-over-year, driven by labor shortages, network modernization, and sustainability focus.
Hybrid industries: Sales up high single digits, led by double-digit growth in food and beverage and home and personal care.
Process Industries: Sales up 10% year-over-year, with strong growth in chemicals, water, and energy.
Structural productivity actions: Focused on commercial spend, direct material, and supply chain efficiency with AI adoption providing additional opportunities.
Segment margin: Improved to 20.7%, driven by higher volume, favorable mix, and strong productivity.
Lifecycle Services: Organic sales declined 6% year-over-year, but margins improved due to productivity.
Sensia joint venture dissolution: On track for April 1 close, returning the profitable process automation business to full Rockwell control.
Factory of the future initiatives: Positioned to lead as customers accelerate autonomous operations and digital transformation.
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Risk or Challenges
Geopolitical Uncertainty: Heightened geopolitical uncertainty around trade, regional conflict, and supply chain risk adds complexity to operations and strategic planning.
Capital Expenditure Environment: Large capital expenditure investments are on hold for many customers, delaying potential growth opportunities.
Lifecycle Services Sales Decline: Lifecycle Services organic sales declined 6% year-over-year, with customers delaying and narrowing the scope of larger projects due to trade policy uncertainties.
Life Sciences Sales Decline: Sales in Life Sciences declined low single digits year-over-year, driven by project delays in North America.
Supply Chain Risk: Ongoing supply chain risks, exacerbated by geopolitical tensions, could impact operational efficiency and delivery timelines.
Economic Uncertainty: Macroeconomic fluidity and subdued CapEx environment create challenges in forecasting and strategic execution.
Tariff Impact: Tariffs, while neutral in Q1, remain a potential risk to margins and cost structures.
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Guidance & Outlook
Fiscal 2026 Organic Sales Growth: Maintaining an organic sales growth outlook of 2% to 6%, with the midpoint assuming gradual sequential improvement through the year.
Recurring Revenue Growth: Expected to grow at high single digits for fiscal 2026.
Segment Margin Expansion: Full year segment margin expansion expected to exceed 100 basis points.
Adjusted EPS Guidance: Midpoint of adjusted EPS increased to $11.80, reflecting discrete tax benefits.
Free Cash Flow Conversion: Expected to be approximately 100% for fiscal 2026.
Second Quarter Sales and Margins: Overall company sales expected to be slightly up sequentially, with modest sequential improvement in total segment operating margin.
Capital Expenditures: CapEx for fiscal 2026 targeted at about 3% of sales.
Impact of Sensia Dissolution: Annualized reduction in sales of approximately $250 million and an annualized improvement of approximately 50 basis points for total company segment margin, with no significant impact on adjusted EPS.
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Shareholder Return Plan
share repurchase: We are targeting approximately $500 million of shares repurchased during the year.
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Key Q&A
Q:Do you think people will underspend their CapEx budgets or push spending to the back half of the year?
A:Blake Moret stated that the overarching term would be 'prudent.' While there is optimism in certain areas and discussions about CapEx plans, there hasn't been a broad-based release of orders yet. Short-term indicators like PMI and industrial production are being monitored, but more evidence is needed before centering on the higher end of the guide.
Q:Are distributors still cautious and not restocking yet?
A:Blake Moret mentioned that stock levels are back to normal globally at distribution and machine builders. Distributors are optimistic, but everyone is taking a prudent approach.
Q:How do you see margin drivers playing out across segments for Q2?
A:Blake Moret explained that there is slight sequential improvement expected in sales across all segments. Modest margin expansion is anticipated for Intelligent Devices and Software & Control. Lifecycle Services had a better-than-expected Q1, and maintaining around 14% margin is the goal. Merit increases in Q2 will be a factor, and year-over-year, mid-single-digit growth and about 100 basis points of segment margin expansion are expected.
Q:What is the outlook for Logix and hybrid industries for the year?
A:Blake Moret stated that Logix continues to perform well with strong demand for existing and new products. For the full year, unit volumes are expected to be at or slightly above pre-pandemic levels. Hybrid industries like food and beverage showed double-digit growth in Q1, and this is expected to continue. Life Sciences was down but is expected to improve, and there is strong interest in autonomous mobile robots and integrated technologies.
Q:Could incrementals creep up for the year if Logix stays strong?
A:Christian Rothe noted that Logix has strong flow-through profitability, and if its mix changes, it could impact flow-through. However, the company is focusing on broad-based productivity initiatives and cost reductions. Gross margin expansion has been strong, and the organization is leveraging its productivity muscle memory.
Q:What is the outlook for discrete markets, particularly semiconductors?
A:Blake Moret explained that Q1 had a tough comp for semiconductors, but there is good demand in areas like wafer transport and energy management. AI-related CapEx is concentrated among specific players, and while there is strong investment in regions like Taiwan, the semiconductor environment remains volatile.
Q:Are you seeing positive momentum in shorter-cycle products and big project orders?
A:Blake Moret mentioned good demand for modernizations and brownfield investments, which are heavier on the product side. New capacity business showed strong year-over-year growth, but big project orders have not yet ramped up to raise the organic guide for the year.
Q:Does the rest of the year guide include incremental cost-out opportunities?
A:Christian Rothe confirmed that productivity remains central to the plans, with good performance in Q1. However, tariff-based costs are a headwind, and the full-year flow-through is expected to be around 40%.
Q:What drove the strong margins in Software & Control?
A:Christian Rothe stated that the strong performance was broad-based across categories, including software, ASEM products, and networks. Blake Moret added that software ARR, particularly with Plex, was higher than average, complementing hardware portions of the business.
Q:Why was cash flow down year-over-year despite strong earnings growth?
A:Christian Rothe explained that incentive payouts from fiscal '25 performance occurred in Q1 '26, unlike the previous year. Additionally, working capital was a slight use of cash in Q1 '26 compared to being a source in Q1 '25.
Q:What is the outlook for process markets, particularly chemicals?
A:Blake Moret noted strong performance in process markets, with energy being the largest contributor. Specialty chemicals showed resilience, and there were competitive conversions in the quarter. However, oil prices remain low, and capital spending in oil and gas is cautious.
Q:Are you seeing any signs of inflection in orders or macro barometers?
A:Blake Moret stated that sentiment is slightly up, but orders remain stable. While PMI is encouraging, industrial production is a longer-term metric, and more objective proof in orders is needed before raising the guide.
Q:Are AI features potentially more impactful to your numbers sooner than expected?
A:Blake Moret emphasized that AI is being applied for specific applications to simplify workflows and improve efficiency. Examples include Vision AI for pattern recognition and Logix AI for control loop efficiency. The focus is on complementing existing systems rather than introducing disruptive changes.
Q:Why are food and beverage and automotive markets performing well for you compared to others?
A:Blake Moret attributed the performance to differentiated technology, such as mobile robots and software tools like Emulate3D. Automotive tends to be earlier cycle, and food and beverage benefits from both packaging and process elements. There were also some favorable comps in Q1.
Q:Has anything changed in North American automotive spending?
A:Blake Moret noted positive sentiment and a positive Q1 for automotive, but tariffs remain a concern. While there are modernization investments and some EV work, more orders are needed to confirm a change.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer to questions about big project orders ramping up and the impact of AI features on near-term numbers. Responses were cautious and lacked specific details or commitments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
India
Industries
Mequon Wisconsin
Motion
SLB
Sales
Sensia dissolution
Tier
adoption
asset liability
balance sheet
beverage CPG
carbon capture
chemical
comp payment
cost productivity
digit outlook
downtime
expansion basis
line expectation
material
modernization
momentum
outlook sale
packaging OEM
platform
point expectation
point segment
power
rate tax
sale line
standout win
start
tax benefit
team
transaction
ROK Transcript
Rockwell Automation, Inc. (ROK) Q1 2026 Earnings Call Transcript
Positive2-5
The earnings call highlights sequential improvement in sales, margin expansion, and strong demand in several segments. Although there are concerns about tariffs and cautious oil spending, the positive outlook in Logix, hybrid industries, and strong margins in Software & Control support a positive sentiment. The Q&A reflects confidence in productivity initiatives and market demand, despite some cautious responses on big projects and AI impact.
Rockwell Automation, Inc. (ROK) Q4 2025 Earnings Call Transcript
Positive11-6
The earnings call highlights strong financial metrics, including a 10% sales growth in the process segment and a 7% increase in adjusted EPS. The Q&A session reveals cautious optimism, with management addressing concerns like Sensia's dissolution and margin expansion. The commitment to market expansion and improved margins, along with a high free cash flow conversion, supports a positive outlook. Although management avoided setting new margin targets, the overall sentiment is positive, suggesting a likely stock price increase of 2% to 8%.
Rockwell Automation, Inc. (ROK) Presents At Morgan Stanley's 13th Annual Laguna Conference (Transcript)
Neutral9-11
Rockwell Automation, Inc. (ROK) Q3 2025 Earnings Call Transcript
Unknown8-6
The earnings call summary presents mixed signals: strong discrete and hybrid sales contrast with declining process industry sales. Margins in Intelligent Devices and Lifecycle Services are down, though Software & Control margins improved significantly. The Q&A reveals strategic investments for growth and margin expansion, but concerns about CapEx spending and delays in U.S. capacity projects persist. Overall, the mixed financial performance, combined with strategic initiatives and market uncertainties, suggests a neutral stock price movement in the short term.
ROK Slides
ROK Report
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