tapebrief
IR · Q3 2025

IR · Q4 2025 Earnings

Cautious

Ingersoll Rand

Reported February 12, 2026

30-second summary

Ingersoll Rand closed FY25 with $3.34 in non-GAAP EPS, above the lowered Q3 guide of $3.25–$3.31, and Q4 organic revenue turned positive at +2.9% — both watch-list resolutions in the company's favor. But the FY26 guide tells the more important story: organic revenue of flat-to-2% (decelerating from FY25's 2.9%), total revenue growth of 2.5–4.5% leaning on +1.5% M&A and +1% FX, and Adjusted EBITDA growth of just 2–5%. Management raised EPS to $3.45–$3.57 (+3–7% YoY), but the quality of that growth is lower than FY25, and the H1 2026 "muted margins" framing from last quarter is now codified as flat full-year EBITDA margins.

Headline numbers

EPS

Q4 FY2025

$0.96

Revenue

Q4 FY2025

$2.09B

+10.2% YoY

Gross margin

Q4 FY2025

42.6%

Free cash flow

Q4 FY2025

$0.46B

Operating margin

Q4 FY2025

18.7%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$2.09B+10.2%$1.96B+7.0%
EPS$0.96—$0.86+11.6%
Gross margin42.6%—43.7%-110bps
Operating margin18.7%—19.2%-50bps
Free cash flow$0.46B—$0.33B+41.7%

Guidance

FY2025 beat EPS and revenue guidance; FY2026 guidance raises EPS but projects marked deceleration in organic growth (flat to 2%) and revenue growth (2.5% to 4.5%), with acceleration reliant on M&A (+1.5%) and currency (+1.0%).

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
Adjusted EPSFY2025$3.25 to $3.31$3.34+$0.03 to +$0.09 above guideBeat
RevenueFY20254% to 6% growth$7.651B (5.7% YoY)+5.7% actual vs. 4–6% guided range, within guideBeat
Adjusted EBITDAFY2025$2,060M to $2,090MNot explicitly stated; inferred from +2% to +4% YoY growth guidance contextIn-line with +2% to +4% YoY growth rangeMet

New guidance

MetricPeriodGuideYoY
Adjusted EPSFY2026$3.45 to $3.57+3% to +7% YoY
RevenueFY2026$3.915B (implied midpoint)+2.5% to +4.5% YoY
Adjusted EBITDAFY2026$2,130M to $2,190M+2% to +5% YoY
Organic Revenue GrowthFY2026flat to 2%—

Segment KPIs

Q4 FY2025
SegmentQ4 FY2025YoY
Industrial Technologies and Services$1.672B+10.7%
Precision and Science Technologies$0.419B+8.1%
IT&S Segment Adjusted EBITDA Margin28.9%—
P&ST Segment Adjusted EBITDA Margin30.4%—

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Orders$1,952M
Organic Revenue Growth2.9%
Adjusted EBITDA Margin27.7%
Free Cash Flow Margin22.1%
Liquidity$3.8B
Net Debt to Adjusted EBITDA1.7x

Management tone

Q1 anchor: backlog-and-M&A defense → Q2 anchor: tariff-driven guidance cut → Q3 anchor: explicit cut with 2026 caution → Q4 anchor: organic inflection delivered, but FY26 organic guide concedes the demand thesis remains broken.

The Q4 margin "high watermark" thesis from two quarters ago quietly disappeared without acknowledgment. In Q2 management anchored confidence in Q4 as the margin peak; in Q3 that thesis was already broken by the implied guide; this quarter the FY26 framework codifies essentially flat full-year EBITDA margins. The anchor was abandoned, not revisited. From the release: "we expect EPS to grow at a similar mid-single-digit growth rate in both the first and second half of the year" — a measured, sequential framing that replaces the prior peak-and-recover narrative. The signal: management has given up on a near-term margin recovery story and is now selling a steady-state EPS algorithm.

China shifted from drag to proof point across four quarters. Q1/Q2 framed China as a headwind; Q3 noted sequential improvement; this quarter management led with: "This marks the third quarter in a row where we saw organic water growth in China, underscoring our agility through the effective use of IRX and the success of our demand generation activities delivering consistent growth in what remains a very challenging market." The reframe is meaningful — China is now positioned as evidence the operating model works, not as a problem to manage. But note the hedge: "remains a very challenging market." Management is selling the methodology, not the market.

Recurring revenue went from initiative to operating pillar. Two quarters ago recurring revenue was discussed as a developmental target; this quarter management quantified it as $450M run-rate (up from $200M two years ago) with a $1.1B contracted backlog. From the release: "This is a clear demonstration of how we continue to make great progress towards achieving our recurring revenue target." This is the most concrete bull-case data point of the year — and it is structural, not cyclical.

M&A repositioned from opportunistic to systematic. Across the four prior quarters M&A was framed as bolt-on optionality with occasional ILC Dover-scale deals. This quarter management disclosed 9 transactions under LOI with "a couple potentially reaching ~$1B purchase price." From the release: "we're off to a great start heading into 2026 with nine additional transactions currently on their LOI." The pipeline is now the headline growth driver — which is also a tell that organic growth confidence is constrained.

Macro language moved from confident-offset to readiness-to-adapt. Q3 framed tariffs as a quantifiable headwind being managed through pricing; this quarter management writes about "maintain agility and readiness to adapt to ongoing changes in the global market landscape." That is reactive language, not confident-offset language. The hidden message is that the FY26 guide is built on current conditions and management is signaling it may need to flex.

Recurring themes management leaned on this quarter:

Recurring revenue as durable growth pillar ($450M run rate, $1.1B backlog)China market stabilization through demand generation and IRX agilityM&A value creation flywheel driving above-market growth (9x pre-synergy multiple, 16 deals in 2025)Margin resilience despite tariff headwinds and intentional commercial investmentsBalance sheet strength enabling capital deployment (sub-2x leverage, $3.8B liquidity)Positive momentum trajectory exiting 2025 supporting 2026 guidance

Risks management surfaced:

Tariff impacts diluting segment margins (explicit pressure in ITS and PST)Tough first-half 2025 comparisons (acknowledged as driver of full-year negative organic revenue)Global market landscape volatility requiring ongoing adaptationChina market remains very challenging despite sequential improvementFX headwinds (partially offset by 1% tailwind assumed in guidance)

Q&A highlights

Mike Halloran · Baird

What end market trajectory is embedded in guidance? What are leading indicators for short-cycle businesses showing signs of change?

Management indicated 40% of revenue is aftermarket (stable), life sciences improving with mid-teens order growth in Q4, medical device strong in China, general industrial more stable. PMI turned positive in January but management cautious about calling inflection on one data point. Guidance assumes current trajectory continues, not embedded recovery.

40% of revenue is aftermarket/recurringLife sciences orders up mid-teens in Q4US PMI above 50 for first time in 38 months (January)China turning organic growth positive for three quarters

Julian Mitchell · Barclays

What is the seasonality and breakdown of organic growth through the year? How does EBITDA margin guidance work with price-cost dynamics?

Q1 expected roughly flat to slightly down organic; Q2-Q4 expected low single-digit growth. EBITDA margins flattish full year. First half margins pressured by tariff annualizations (price-cost neutral); second half expects expansion from pricing actions and productivity. Price-cost expected positive for full year.

Q1 organic: flat to slightly downQ2-Q4 organic: low single-digit growthFull year EBITDA margins: flattishH1 price-cost: neutral

Jeff Sprague · Vertical Research

Are you seeing actual pickup in short-cycle pockets beyond PMI? Does guidance anticipate volumes turning positive in H2 2026?

Management seeing pickup in short-cycle momentum in Q4 orders continuing into January. Volume expected to improve H2 vs H1, approaching flattish realm by year-end, but no meaningful recovery baked into guidance. Capital deployment includes $1B annualized share repurchase, no material interest expense change.

Short-cycle order momentum continuing into 2026Q1 volumes: pressuredH2 volumes: flattish improvement expected$1B share repurchase annualized

Joe O'Day · Wells Fargo

What is the composition of the M&A pipeline for 400-500 bps revenue contribution? What is driving recurring revenue growth from $200M to $450M?

Pipeline characterized as bolt-on with 9 companies under LOI; couple potentially reaching ~$1B purchase price. Already completed Synomics acquisition. Recurring revenue reached $450M with $1.1B in future revenue 'in the bank' from existing contracts. Long-term investor day target update to be provided.

9 companies under LOISynomics acquisition completedPotential couple of ~$1B deals in pipelineRecurring revenue: $450M (up from $200M two years ago)

Nathan Jones · Stifel

Does guidance embed cost actions or productivity gains given flat volume growth? What expectations for cost-out initiatives?

Guidance includes restructuring savings from H2 2025 actions continuing into 2026 with historical payback periods. Normal course productivity on direct materials and I2V following revenue phasing. Targeted pricing actions taken business-by-business, region-by-region through the year. Combined offset of tariff headwinds and commercial reinvestments.

Restructuring from H2 2025 carrying into 2026Normal productivity follows revenue phasing (second-half weighted)Targeted pricing actions ongoingDirect material and I2V productivity included

Answers to last quarter's watch list

Q4 Adjusted EBITDA margin vs. Q3's 27.9%. Q4 came in at 27.7% — down 20bps sequentially, marginally below management's "approximately flat" guidance but inside any reasonable noise band. The "high watermark" thesis from Q2 remains broken, but execution this quarter was on-anchor.
Resolved positively
Whether organic revenue turns positive in Q4. Yes — Q4 organic revenue grew 2.9%, the first positive print after two consecutive quarters of decline. This delivered the inflection management committed to in Q2 and missed in Q3. Full-year organic landed at -1%, inside the (2)–0% framework.
Resolved positively
Tariff exposure quantum vs. the "$100M+" disclosure. Not explicitly re-quantified in the release. In Q&A, management framed the tariff impact via H1 2026 price-cost neutrality and H2 2026 positive price-cost, implying ongoing carryover but no fresh escalation. The exposure appears to be stabilizing into a pricing-mitigation framework rather than expanding.
Continue monitoring
2026 framework on the Q4 call — magnitude of H1 muted margins and H2 recovery. Codified: full-year EBITDA margins now expected flattish, H1 price-cost neutral, H2 price-cost positive with margin expansion. The "muted H1" language has become "flat full year" — worse than the Q3 setup implied. EPS growth of +3–7% on flat margins is achieved via M&A, restructuring carryover, and buybacks, not operating leverage.
Resolved negatively
M&A pace and the missing $375M FY contribution disclosure. 16 deals closed in 2025, 9 under LOI heading into 2026, "a couple potentially reaching ~$1B purchase price." FY26 M&A contribution disclosed as +1.5% of revenue (~$115M run-rate contribution embedded). The bolt-on flywheel is intact and pipeline visibility is the best in any quarter this year.
Resolved positively
Free cash flow conversion in Q4. Q4 FCF was $462M (22.1% margin), driving FY FCF to $1.22B (15.9% FY margin). The Q4 catch-up was strong but the FY conversion remains below where management has historically targeted, consistent with working-capital absorption tied to elevated backlog.
Continue monitoring

What to watch into next quarter

Whether Q1 2026 organic revenue is "flat to slightly down" as guided in Q&A. A second consecutive quarter of positive organic growth would suggest the FY26 organic guide of flat-to-2% is conservative; a return to organic decline would compound the demand-thesis credibility hit.

Whether H2 2026 price-cost actually turns positive. This is the load-bearing assumption for full-year EBITDA reaching $2,130–$2,190M. If H1 price-cost slips negative rather than neutral, the FY EBITDA midpoint becomes unreachable.

M&A pace and whether any of the "couple of ~$1B" deals close. A $1B-scale acquisition would meaningfully reshape the FY26 revenue algorithm and the leverage profile from current 1.7x.

Recurring revenue progression toward and beyond $450M. This is the cleanest structural growth disclosure — watch whether the $1.1B backlog converts on the implied multi-year schedule.

ITS Adjusted EBITDA margin recovery from 28.9%. Tariff dilution was explicitly cited as the driver of YoY compression. Whether pricing actions and restructuring savings restore the segment toward 30%+ is the central margin question for FY26.

China sustainability — fourth consecutive quarter of organic growth would convert the current "demand-generation proof point" framing into a structural reframe.

Sources

  1. Ingersoll Rand Q4 2025 earnings press release, SEC filing — https://www.sec.gov/Archives/edgar/data/1699150/000162828026007710/ir2025q4ex991.htm
  2. Tapebrief Q3-2025 and Q2-2025 IR briefs (prior-quarter guidance baselines, tone trajectory, and watch-list resolution)

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