Eaton Corporation plc

11/03/2026 | Press release | Distributed by Public on 11/03/2026 11:08

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Amounts are in millions of dollars or shares unless indicated otherwise (per share data assume dilution). Columns and rows may not add and the sum of components may not equal total amounts reported due to rounding.
FORWARD-LOOKING STATEMENTS
This Form 10-Q Report contains "forward-looking statements" within the meaning of federal securities laws. These forward-looking statements are based upon management's current expectations, predictions, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, litigation, expected capital expenditures, future dividend payments, anticipated share repurchases, liquidity, the successful integration of recent acquisitions, the anticipated separation and divestiture of the Mobility business, the anticipated closing of COL Group, anticipated capital deployment, and expected restructuring program charges and benefits. These statements may also discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to the Company. These statements are not guarantees of future performance, and actual results may differ materially. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as "aim," "anticipate," "believe," "could," "develop," "endeavor," "estimate," "expect," "forecast," "goal," "guidance," "intend," "may," "outlook," "plan," "possible," "potential," "predict," "project" "seek," "should," "target," "will," "would" or other similar words, phrases or expressions. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside of our control.
There are certain factors that could cause actual results to differ materially from those in the forward-looking statements, including, among others: the impact of acquisitions, joint ventures, and investments and the integration of acquired entities; disruptions by natural disasters, labor strikes, wars, geopolitical instability and/or conflict, political unrest, terrorist activity, economic upheaval, or public health concerns that impact our production facilities; significant inflation or shortages of raw materials, energy, components, and/or labor, or similar challenges for our customers; reliance on suppliers to provide raw materials, components and services; the development and use of artificial intelligence in our business operations, including potential impacts on compliance with law and our reputation; service interruptions, data corruption, loss or impairment, network security and related operational impacts due to cybersecurity attacks; weather disruptions and regulatory, market and social reactions to such disruptions; our ability to identify, attract, develop, engage and retain qualified employees; our ability to complete the anticipated separation of our Mobility business and its merger with Dana or within the anticipated timeframe or at all; stock price and end market impacts due to technology disruptions; volatility of end markets; continued successful research, development and marketing of new or improved products; geopolitical, economic or other risks arising from worldwide or regional economic conditions; the global nature of Eaton's business and exposure to economic and political instability, including war or armed conflict, changes in governmental laws, regulations and policies; changes in countries' trade policies, including the imposition of sanctions or tariffs; changes in our tax rates or tax laws and regulations applicable to our business; rules, regulations, audits and investigations and related compliance risks associated with being a governmental contractor; our ability to protect our intellectual property; litigation and environmental regulations impacting our business; and the other risk factors discussed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and other reports filed by the Company with the SEC. We disclaim any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.
COMPANY OVERVIEW
Eaton Corporation plc (Eaton or the Company) is an intelligent power management company dedicated to protecting the environment and improving the quality of life for people everywhere. We make products for the data center, utility, industrial, commercial, machine building, residential, aerospace and mobility markets. We are capitalizing on the megatrends of the electrification, digitalization, and the reindustrialization of and growth of megaprojects in North America and increased global infrastructure spending, all of which are expanding our end markets and positioning Eaton for growth for years to come. We are strengthening our participation across the entire electrical power value chain and benefiting from momentum in the data center and utility end markets as well as a growth cycle in the commercial aerospace and defense markets. We are guided by our commitment to operate sustainably and with the highest ethical standards. Our work is helping to solve the world's most urgent power management challenges and building a more sustainable society for people today and for future generations.
Founded in 1911, Eaton has continuously evolved to meet the changing and expanding needs of our stakeholders. With revenues of $27.4 billion in 2025, the Company serves customers in 180 countries.
During the first quarter of 2026, Eaton re-segmented certain business segments due to a reorganization of the Company's businesses. The new segment is Mobility, which consists of the legacy Vehicle and eMobility segments. Historical segment information has been recast to reflect this change.
Portfolio Changes
The Company continues to actively manage its portfolio of businesses to deliver on its strategic objectives. The Company is focused on deploying its capital toward businesses that provide opportunities for above-market growth and strong returns, and that align with secular trends and its power management strategies. During 2025 and 2026, Eaton completed several transactions to strengthen its portfolio.
Acquisitions of businesses Date of acquisition Business segment
Fibrebond Corporation April 1, 2025 Electrical Americas
A U.S. based designer and builder of pre-integrated modular power enclosures for data center, industrial, utility and communications customers.
Resilient Power Systems, Inc. August 6, 2025 Electrical Americas
A leading North American developer and manufacturer of innovative energy solutions, including solid-state transformer-based technology.
Ultra PCS Limited
January 23, 2026
Aerospace
Producer of electronic controls, sensing, stores ejection and data processing solutions with operations in the U.K. and U.S.
Boyd Thermal
March 12, 2026
Electrical Global
A U.S. based global leader in thermal components, systems, and ruggedized solutions for data center, aerospace and other end-markets.
Agreement to Acquire COL Group
On September 25, 2026, Eaton signed an agreement to acquire COL Group, a leader in medium-voltage electrical distribution solutions, including SF₆-free switchgear, grid automation technologies and modular power systems. COL Group has approximately 400 employees and facilities in Turin, Milan, Bergamo, and Catania, Italy. Under the terms of the agreement, Eaton will pay €810 million ($921 million, translated at the September 30, 2026 exchange rate) for COL Group. The transaction is subject to customary closing conditions and regulatory approvals and is expected to close in the first quarter of 2027. COL Group will be reported within the Electrical Global business segment.
Planned Separation of Mobility Business
On January 26, 2026, Eaton announced its intention to separate its Mobility business segment from the rest of Eaton via a spin-off. On June 10, 2026, Eaton entered into definitive agreements with Dana Incorporated (Dana), and on October 16, 2026, entered into a supplemental letter agreement, whereby Eaton will separate the Mobility business and combine it with Dana in a Reverse Morris Trust (RMT) transaction (collectively referred to as the Transaction). As part of the Transaction, Eaton will distribute the Mobility business (other than certain assets and liabilities that will be sold directly to Dana in a concurrent asset sale) to Eaton shareholders through an exchange offer (split-off), in which Eaton shareholders will have the opportunity to tender their Eaton shares in exchange for shares of Mobility (USA) Corporation, a wholly owned subsidiary of Eaton (SpinCo), followed, if necessary, by a clean-up pro rata distribution. Immediately thereafter, a two-step merger will take place. In the first merger step, a direct, wholly owned corporation subsidiary of SpinCo will merge with and into Dana, with Dana surviving such first merger as a direct, wholly owned subsidiary of SpinCo. Then immediately following the first merger, Dana will merge with and into a direct, wholly owned limited liability company subsidiary of SpinCo (the Second Merger Sub), with the Second Merger Sub surviving as a direct, wholly owned subsidiary of SpinCo. Following completion of the Transaction, Eaton shareholders are expected to own 50.1% of the combined company's outstanding shares. Certain of Eaton's subsidiaries will also receive a cash distribution of approximately $1.1 billion prior to completion of the Transaction, subject to a customary cash and indebtedness adjustment and tax payments to various global jurisdictions and transaction related adjustments. Eaton expects to use the cash distribution consistent with its capital allocation framework, including repayment of outstanding indebtedness.
The RMT transaction is intended to be tax-free for U.S. federal income tax purposes to Eaton and Eaton's shareholders and is expected to close in the first four months of 2027, subject to Dana stockholder approval, regulatory approvals, and customary closing conditions. Until the Transaction closes, the Mobility business segment will continue to operate as a business segment of Eaton and its financial results reported in Eaton's continuing operations. In the event the Transaction is not consummated, Eaton intends to separate its Mobility business segment in a spin-off.
Additional information related to acquisitions and divestiture of businesses is presented in Note 2.
RESULTS OF OPERATIONS
Non-GAAP Financial Measures
The following discussion of Consolidated Financial Results includes certain non-GAAP financial measures. These financial measures include adjusted earnings and adjusted earnings per ordinary share, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of adjusted earnings and adjusted earnings per ordinary share to the most directly comparable GAAP measure is included in the Consolidated Financial Results table below. Management believes that these financial measures are useful to investors because they provide additional meaningful financial information that should be considered when assessing our business performance and trends, and they allow investors to more easily compare Eaton's financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton.
Acquisition and Divestiture Charges
Eaton incurs integration charges and transaction costs to acquire and integrate businesses, and transaction, separation and other costs to divest and exit businesses. Eaton also recognizes gains and losses on the sale of businesses. A summary of these Corporate items is as follows:
Three months ended
September 30 		Nine months ended
September 30
(In millions except for per share data) 2026 2025 2026 2025
Acquisition integration, divestiture charges and transaction costs $ 128 $ 55 $ 391 $ 135
Income tax expense (benefit) (12) (11) 3 (30)
Total after income taxes $ 116 $ 44 $ 394 $ 105
Per ordinary share - diluted $ 0.30 $ 0.11 $ 1.01 $ 0.27
Acquisition integration, divestiture charges and transaction costs in 2026 and 2025 are primarily related to the following:
•The acquisitions of Fibrebond Corporation, Resilient Power Systems Inc., Ultra PCS Limited, Boyd Thermal, and Exertherm, the anticipated separation of the Mobility business, transactions completed prior to 2023, and other charges to acquire and exit businesses.
•Employee transaction and retention award compensation expense related to the acquisition of Fibrebond of $12 million and $52 million in the third quarter and the first nine months of 2026, respectively, and $16 million and $64 million in the third quarter and the first nine months of 2025, respectively.
•Employee incentive compensation expense related to the acquisition of Resilient of $4 million and $20 million in the third quarter and first nine months of 2026, respectively, and $4 million in the third quarter of 2025.
Charges in 2026 and 2025 were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other expense - net. In Business Segment Information in Note 15, the charges were included in Other expense - net.
Additionally, during the second quarter of 2026, Eaton incurred $52 million of withholding taxes related to funding the acquisition of Boyd Thermal, which are included in Income tax expense (benefit) in the table above for the nine months ended September 30, 2026.
Restructuring Program
During the first quarter of 2024, Eaton implemented a multi-year restructuring program to accelerate opportunities to optimize its operations and global support structure. These actions will better align the Company's functions to support anticipated growth and drive greater effectiveness throughout the Company. Since the inception of the program, the Company has incurred charges of $394 million. This restructuring program is expected to be completed in 2026 and is expected to incur additional expenses related to workforce reductions of $20 million and plant closing and other costs of $16 million, resulting in total estimated charges of $430 million for the entire program. The Company expects mature year benefits of $415 million when the multi-year program is fully implemented.
Additional information related to these restructuring programs is presented in Note 14.
Intangible Asset Amortization Expense
Intangible asset amortization expense is as follows:
Three months ended
September 30 		Nine months ended
September 30
(In millions except for per share data) 2026 2025 2026 2025
Intangible asset amortization expense $ 314 $ 130 $ 709 $ 365
Income tax benefit 72 28 159 77
Total after income taxes $ 242 $ 102 $ 550 $ 287
Per ordinary share - diluted $ 0.62 $ 0.26 $ 1.41 $ 0.74
Consolidated Financial Results
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September 30 		Increase (decrease)
(In millions except for per share data) 2026 2025 2026 2025
Net sales $ 8,947 $ 6,988 28 % $ 24,929 $ 20,393 22 %
Gross profit 3,105 2,675 16 % 8,611 7,719 12 %
Percent of net sales 34.7 % 38.3 % 34.5 % 37.9 %
Income before income taxes 1,370 1,275 7 % 3,620 3,637 - %
Net income 1,079 1,010 7 % 2,769 2,958 (6) %
Less net income for noncontrolling interests (1) (1) (4) (3)
Net income attributable to Eaton ordinary shareholders 1,078 1,010 7 % 2,765 2,955 (6) %
Excluding acquisition and divestiture charges, after-tax 116 44 394 105
Excluding restructuring program charges (income), after-tax (2) 43 46 75
Excluding intangible asset amortization expense, after-tax 242 102 550 287
Adjusted earnings $ 1,433 $ 1,199 20 % $ 3,755 $ 3,423 10 %
Net income per share attributable to Eaton ordinary shareholders - diluted $ 2.77 $ 2.59 7 % $ 7.10 $ 7.54 (6) %
Excluding per share impact of acquisition and divestiture charges, after-tax 0.30 0.11 1.01 0.27
Excluding per share impact of restructuring program charges (income), after-tax (0.01) 0.11 0.12 0.19
Excluding per share impact of intangible asset amortization expense, after-tax 0.62 0.26 1.41 0.74
Adjusted earnings per ordinary share $ 3.68 $ 3.07 20 % $ 9.64 $ 8.74 10 %
Net Sales
Changes in Net sales: Three months ended September 30, 2026 Nine months ended September 30, 2026
Organic growth 19 % 14 %
Acquisitions of businesses
8 % 7 %
Foreign currency 1 % 1 %
Total increase in Net sales 28 % 22 %
The increase in organic sales in the third quarter of 2026 was due to strength in data center, machine OEM, and commercial & institutional end-markets in the Electrical Americas business segment, broad-based strength in end-markets of the Electrical Global business segment, strength in commercial OEM and commercial aftermarket in the Aerospace business segment, and strength in the North American and European regions in the Mobility business segment, partially offset by weakness in military aftermarket in the Aerospace business segment.
The increase in organic sales in the first nine months of 2026 was due to strength in data center, machine OEM, and commercial & institutional end-markets in the Electrical Americas business segment, broad-based strength in end-markets of the Electrical Global business segment, and strength in commercial OEM and commercial aftermarket in the Aerospace business segment, partially offset by weakness in utility and residential end-markets in the Electrical Americas business segment.
Gross Profit
Gross profit margin decreased from 38.3% in the third quarter of 2025 to 34.7% in the third quarter of 2026. Material factors affecting this decrease were a 360 basis point decline from higher commodity and wage inflation and a 210 basis point decline from higher intangible asset amortization, partially offset by a 200 basis point increase from higher sales.
Gross profit margin decreased from 37.9% in the first nine months of 2025 to 34.5% in the first nine months of 2026. Material factors affecting this decrease were a 380 basis point decline from higher commodity and wage inflation and a 140 basis point decline from higher intangible asset amortization, partially offset by a 160 basis point increase from higher sales.
Income Taxes
The effective income tax rate for the third quarter and first nine months of 2026 was expense of 21.3% and 23.5%, respectively, compared to expense of 20.7% and 18.7% for the third quarter and first nine months of 2025. The increase in the effective tax rate in the third quarter and first nine months of 2026 was primarily due to greater levels of income in higher tax jurisdictions and withholding tax expense related to funding the acquisition of Boyd Thermal.
Net Income
Changes in Net income attributable to Eaton ordinary shareholders and Net income per share attributable to Eaton ordinary shareholders - diluted are summarized as follows:
Three months ended Nine months ended
(In millions except for per share data) Dollars Per share Dollars Per share
September 30, 2025
$ 1,010 $ 2.59 $ 2,955 $ 7.54
Business segment results of operations
Operational performance 411 1.06 789 2.04
Foreign currency (4) (0.01) (2) (0.01)
Corporate
Interest expense - net (104) (0.27) (271) (0.69)
Intangible asset amortization expense (139) (0.36) (262) (0.67)
Restructuring program charges 45 0.12 29 0.07
Acquisition and divestiture charges (72) (0.19) (288) (0.74)
Other corporate items (70) (0.18) (77) (0.20)
Tax rate impact 2 - (108) (0.28)
Impact of shares 0.01 0.04
September 30, 2026
$ 1,078 $ 2.77 $ 2,765 $ 7.10
Business Segment Results of Operations
The following is a discussion of Net sales, operating profit and operating margin by business segment. Additionally, the Company uses the following metrics as indicators of customer demand and future revenue expectations in the Electrical Americas, Electrical Global, and Aerospace business segments. The Company believes these metrics are useful to investors for the same reasons.
•Backlog: Includes orders to which customers are firmly committed
•Organic change in backlog: Percentage change in backlog, excluding (1) the impact of foreign currency, (2) divestitures, and (3) firm orders in place prior to closing of business acquisitions
•Organic change in customer orders: Percentage change in firm customer orders on a trailing twelve month basis, excluding (1) the impact of foreign currency, (2) divestitures, and (3) firm orders in place prior to closing of business acquisitions
•Book-to-bill: Average of the ratio of firm customer orders to Net sales for the last four quarters
Electrical Americas
Three months ended
September 30 		Increase (decrease) Nine months ended
September 30 		Increase (decrease)
($ in millions) 2026 2025 2026 2025
Net sales $ 4,172 $ 3,410 22 % $ 11,723 $ 9,770 20 %
Operating profit $ 1,243 $ 1,034 20 % $ 3,253 $ 2,926 11 %
Operating margin 29.8 % 30.3 % 27.7 % 29.9 %
Changes in Net sales:
Organic growth 22 % 18 %
Acquisitions of businesses
- % 1 %
Foreign currency - % 1 %
Total increase in Net sales 22 % 20 %
Change from September 30
Performance metrics: September 30, 2026 September 30, 2025 2026 vs. 2025 2025 vs. 2024
Backlog $ 15,993 $ 12,009 33 % 20 %
Organic change in backlog 33 % 9 %
Organic change in customer orders 39 % 7 %
Book-to-bill 1.3 1.1
The increase in organic sales in the third quarter of 2026 was due to strength in data center, machine OEM, and commercial & institutional end-markets. The increase in organic sales in the first nine months of 2026 was due to strength in data center, machine OEM, and commercial & institutional end-markets, partially offset by weakness in utility and residential end-markets.
The operating margin decreased from 30.3% in the third quarter of 2025 to 29.8% in the third quarter of 2026. Material factors affecting this decrease were a 250 basis point decline from higher commodity and wage inflation and a 100 basis point decline from higher costs to support growth initiatives, partially offset by a 300 basis point increase from higher sales. The operating margin decreased from 29.9% in the first nine months of 2025 to 27.7% in the first nine months of 2026. Material factors affecting this decrease were a 390 basis point decline from higher commodity inflation and a 90 basis point decline from higher costs to support growth initiatives, partially offset by a 250 basis point increase from higher sales.
Electrical Global
Three months ended
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September 30 		Increase (decrease)
($ in millions) 2026 2025 2026 2025
Net sales $ 2,727 $ 1,724 58 % $ 7,189 $ 5,086 41 %
Operating profit $ 576 $ 330 75 % $ 1,449 $ 983 47 %
Operating margin 21.1 % 19.1 % 20.2 % 19.3 %
Changes in Net sales:
Organic growth 27 % 18 %
Acquisition of a business 31 % 21 %
Foreign currency - % 2 %
Total increase in Net sales 58 % 41 %
Change from September 30
Performance metrics: September 30, 2026 September 30, 2025 2026 vs. 2025 2025 vs. 2024
Backlog $ 4,381 $ 1,983 121 % 7 %
Organic change in backlog 77 % 6 %
Organic change in customer orders 51 % 2 %
Book-to-bill 1.1 1.0
The increase in organic sales in the third quarter of 2026 was due to broad-based strength in end-markets, with particular strength in data center, machine OEM, and utility end-markets. The increase in organic sales in the first nine months of 2026 was due to broad-based strength in end-markets, with particular strength in data center and machine OEM end-markets. Additionally, the increase in organic sales in the third quarter and first nine months of 2026 was due to broad-based strength in all regions, with particular strength in the Asia Pacific region.
The operating margin increased from 19.1% in the third quarter of 2025 to 21.1% in the third quarter of 2026. Material factors affecting this increase were a 330 basis point increase from higher sales, a 150 basis point increase from the acquisition of Boyd Thermal, and a 150 basis point increase from operating efficiencies, partially offset by a 410 basis point decline from higher commodity and wage inflation. The operating margin increased from 19.3% in the first nine months of 2025 to 20.2% in the first nine months of 2026. Material factors affecting this increase were a 260 basis point increase from higher sales, a 150 basis point increase from operating efficiencies, an 80 basis point increase from the acquisition of Boyd Thermal, and an 80 basis point increase from favorable mix, partially offset by a 440 basis point decline from higher commodity and wage inflation.
Aerospace
Three months ended
September 30 		Increase (decrease) Nine months ended
September 30 		Increase (decrease)
($ in millions) 2026 2025 2026 2025
Net sales $ 1,196 $ 1,079 11 % $ 3,558 $ 3,138 13 %
Operating profit $ 298 $ 280 6 % $ 881 $ 746 18 %
Operating margin 24.9 % 25.9 % 24.7 % 23.8 %
Changes in Net sales:
Organic growth 6 % 7 %
Acquisition of a business 5 % 5 %
Foreign currency - % 1 %
Total increase in Net sales 11 % 13 %
Change from September 30
Performance metrics: September 30, 2026 September 30, 2025 2026 vs. 2025 2025 vs. 2024
Backlog $ 5,601 $ 4,197 33 % 15 %
Organic change in backlog 23 % 14 %
Organic change in customer orders 20 % 11 %
Book-to-bill 1.2 1.1
The increase in organic sales in the third quarter of 2026 was due to strength in commercial OEM and commercial aftermarket, partially offset by weakness in military aftermarket. The increase in organic sales in the first nine months of 2026 was due to strength in commercial OEM and commercial aftermarket.
The operating margin decreased from 25.9% in the third quarter of 2025 to 24.9% in the third quarter of 2026. Material factors affecting this decrease were a 230 basis point decline from higher commodity and wage inflation and a 100 basis point decline from unfavorable mix, partially offset by a 160 basis point increase from operating efficiencies and a 110 basis point increase from higher sales. The operating margin increased from 23.8% in the first nine months of 2025 to 24.7% in the first nine months of 2026. Material factors affecting this increase were a 150 basis point increase from higher sales, a 90 basis point increase from the sale of a facility in the first quarter of 2026, a 70 basis point increase from favorable mix, and a 60 basis point increase from operating efficiencies, partially offset by a 280 basis point decline from higher commodity and wage inflation.
Mobility
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September 30 		Increase (decrease)
(In millions) 2026 2025 2026 2025
Net sales $ 852 $ 775 10 % $ 2,460 $ 2,399 3 %
Operating profit $ 146 $ 105 39 % $ 345 $ 299 15 %
Operating margin 17.2 % 13.5 % 14.0 % 12.5 %
Changes in Net sales:
Organic growth 9 % - %
Foreign currency 1 % 3 %
Total increase in Net sales 10 % 3 %
The increase in organic sales in the third quarter of 2026 was due to strength in the North American and European regions. Organic sales were flat in the first nine months of 2026 compared to the first nine months of 2025 due to strength in the North American and European regions, offset by weakness in the Asia Pacific region.
The operating margin increased from 13.5% in the third quarter of 2025 to 17.2% in the third quarter of 2026. Material factors affecting this increase were a 270 basis point increase from favorable mix, a 250 basis point increase from operating efficiencies and a 140 basis point increase from higher sales, partially offset by a 320 basis point decline from higher commodity and wage inflation. The operating margin increased from 12.5% in the first nine months of 2025 to 14.0% in the first nine months of 2026. Material factors affecting this increase were a 260 basis point increase from favorable mix and a 240 basis point increase from operating efficiencies, partially offset by a 250 basis point decline from higher commodity and wage inflation.
Corporate Expense
Three months ended
September 30 		Increase (decrease) Nine months ended
September 30 		Increase (decrease)
(In millions) 2026 2025 2026 2025
Intangible asset amortization expense $ 314 $ 130 142 % $ 709 $ 365 94 %
Interest expense - net 198 67 196 % 505 171 195 %
Pension and other postretirement benefits expense (income) 4 (4) (200) % (2) (15) (87) %
Restructuring program charges (income) (3) 55 (105) % 59 97 (39) %
Other expense - net 380 226 68 % 1,035 698 48 %
Total corporate expense $ 893 $ 474 88 % $ 2,306 $ 1,316 75 %
The material factors affecting the increase in Total corporate expense in the third quarter and first nine months of 2026 were higher Intangible asset amortization expense, Interest expense - net, and Other expense - net, partially offset by lower Restructuring program charges (income). The increase in Other expense - net is primarily due to higher acquisition and divestiture costs.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
Liquidity and Financial Condition
Eaton's objective is to finance its business through operating cash flow and an appropriate mix of equity and long-term and short-term debt. By diversifying its debt maturity structure, Eaton reduces liquidity risk.
On February 6, 2026, Eaton Corporation, a subsidiary of Eaton, exercised a $1,000 million upsize of the existing $3,000 million five-year revolving credit agreement, increasing the total facility size to $4,000 million. The facility's maturity date remains unchanged at September 27, 2030. The revolving credit facility is used to support commercial paper borrowings and is fully and unconditionally guaranteed by Eaton and certain of its direct and indirect subsidiaries on an unsubordinated, unsecured basis. There were no borrowings outstanding under the revolving credit facility at September 30, 2026. Also on February 6, 2026 the Company increased its commercial paper program from $3,000 million to $4,000 million. The Company maintains access to the commercial paper markets through its $4,000 million commercial paper program, of which $1,592 million was outstanding on September 30, 2026, used primarily to manage fluctuations in working capital and to partially fund acquisitions closed during 2026.
On March 6, 2026, Eaton Corporation, a subsidiary of Eaton, issued notes (2026 U.S. Notes) with an aggregate face amount of $8,500 million. The 2026 U.S. Notes are comprised of six tranches: 3.850% notes due 2028 in the amount of $1,500 million; 3.950% notes due 2029 in the amount of $1,500 million; 4.200% notes due 2031 in the amount of $1,500 million; 4.500% notes due 2033 in the amount of $1,000 million; 4.800% notes due 2036 in the amount of $2,000 million; and 5.450% notes due 2056 in the amount of $1,000 million. Interest is payable semi-annually. The issuer received proceeds totaling $8,421 million from the 2026 U.S. Notes issuance, net of financing costs and discounts. The 2026 U.S. Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The 2026 U.S. Notes contain customary optional redemption and par call provisions. The 2026 U.S. Notes also contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2026 U.S. Notes at a purchase price of 101% of the principal amount plus accrued and unpaid interest. The capitalized deferred financing fees are amortized in Interest expense - net over the respective terms of the 2026 U.S. Notes. The 2026 U.S. Notes are subject to customary non-financial covenants.
On March 10, 2026, Eaton Capital Unlimited Company, a subsidiary of Eaton, issued Euro denominated notes (2026 Euro Notes) with an aggregate face amount of €1,200 million ($1,390 million). The 2026 Euro Notes are comprised of two tranches of €600 million each, which mature in 2034 and 2038, with interest payable annually at a respective rate of 3.550% and 4.000% per annum. The issuer received proceeds totaling €1,191 million ($1,379 million) from the 2026 Euro Notes issuance, net of financing costs and discounts. The 2026 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The 2026 Euro Notes contain customary optional redemption and par call provisions. The 2026 Euro Notes also contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2026 Euro Notes at a purchase price of 101% of the principal amount plus accrued and unpaid interest. The capitalized deferred financing fees are amortized in Interest expense - net over the respective terms of the 2026 Euro Notes. The 2026 Euro Notes are subject to customary non-financial covenants.
On March 6, 2026, Eaton Corporation, a subsidiary of Eaton, terminated the $8,000 million senior unsecured delayed-draw term loan facility (Term Credit Agreement) entered into on February 6, 2026. No loans were outstanding as of the date of termination and the Company incurred no fees or penalties in connection with the termination. The Term Credit Agreement was terminated in connection with the issuance of the 2026 U.S. Notes and 2026 Euro Notes.
Concurrently with the execution of the definitive agreements with Dana on June 10, 2026 to separate the Mobility business and combine it with Dana in a RMT transaction, Mobility (USA) Corporation, a wholly owned subsidiary of Eaton, and Dana entered into a senior unsecured bridge facility (Bridge Facility) with an initial aggregate principal amount of $2.6 billion. Subsequently, Mobility (USA) Corporation and Dana became a party to a $350 million senior secured term loan A (Term A Facility) commitment and a $1.2 billion senior secured revolving credit facility (Revolving Credit Facility) commitment. The commitments under the Bridge Facility were reduced by $350 million simultaneously with the execution of the Term A Facility commitment. The aggregate proceeds of the Bridge Facility, to the extent not reduced or replaced by any additional permanent financing (the Additional Permanent Financing), the Term A Facility, and/or any Additional Permanent Financing are expected to be used by Mobility (USA) Corporation and Dana to fund the cash distribution to certain of Eaton's subsidiaries (excluding Eaton, Mobility (USA) Corporation, and each subsidiary of Mobility (USA) Corporation) prior to completion of the Transaction described in Note 2, refinance certain existing indebtedness of Dana, refinance or replace the Bridge Facility, and/or pay fees and expenses related to the Transaction. Mobility (USA) Corporation has not drawn on any of the Bridge Facility, the Term A Facility, or the Revolving Credit Facility, and amounts are not available to be drawn prior to the cash distribution or Transaction closing, as applicable.
Over the course of a year, cash, short-term investments, and short-term debt may fluctuate in order to manage global liquidity. As of September 30, 2026 and December 31, 2025, Eaton had cash of $528 million and $622 million, short-term investments of $290 million and $181 million, and short-term debt of $1,594 million and $1 million, respectively. Eaton believes it has the operating flexibility, cash flow, cash and short-term investment balances, availability under the existing revolving credit facility, and access to capital markets in excess of the liquidity necessary to meet future operating needs of the business, fund capital expenditures and acquisitions of businesses, as well as scheduled payments of long-term debt, for at least the next 12 months and the foreseeable future thereafter.
On April 1, 2025, the Company paid $1.43 billion, net of cash acquired, to acquire Fibrebond Corporation. On August 6, 2025, the Company acquired Resilient Power Systems Inc. for $86 million, including $55 million of cash paid at closing and an initial estimate of $31 million for the fair value of contingent future consideration. On January 23, 2026, the Company paid $1.53 billion, net of cash acquired, to acquire Ultra PCS Limited and on March 12, 2026, the Company paid $9.55 billion, net of cash acquired, to acquire Boyd Thermal. Additionally, the Company expects to close the acquisition of COL Group in the first quarter of 2027 for €810 million ($921 million, translated at the September 30, 2026 exchange rate). On January 15, 2026, Eaton invested $75 million in SPAN for a stake of approximately 7 percent.
Eaton is in compliance with each of its debt covenants for all periods presented.
Cash Flows
A summary of cash flows is as follows:
Nine months ended
September 30
Change
from 2025
(In millions) 2026 2025
Net cash provided by operating activities $ 2,943 $ 2,507 $ 436
Net cash used in investing activities (12,007) (783) (11,224)
Net cash provided by (used in) financing activities 8,951 (1,812) 10,763
Effect of currency on cash 19 (138) 157
Total decrease in cash $ (94) $ (227)
Operating Cash Flow
Net cash provided by operating activities increased by $436 million in the first nine months of 2026 compared to 2025. The material factor affecting this increase was working capital balances being $263 million lower.
Investing Cash Flow
Net cash used in investing activities increased by $11,224 million in the first nine months of 2026 compared to 2025. Material factors affecting this increase were an increase in cash paid for business acquisitions of $11,079 million in 2026 compared to $1,504 million in 2025, purchases of short-term investments of $122 million in 2026 compared to sales of short-term investments of $1,287 million in 2025, and an increase in capital expenditures for property, plant and equipment to $721 million in 2026 from $527 million in 2025.
Financing Cash Flow
Net cash provided by financing activities increased by $10,763 million in the first nine months of 2026 compared to 2025. Material factors affecting this increase were an increase in proceeds from borrowings of $9,871 million in 2026 compared to $1,058 million proceeds from borrowings in 2025, no repurchase of shares in 2026 compared to repurchase of shares of $1,669 million in 2025, and an increase in net proceeds of short-term debt of $1,592 million in 2026 from $761 million in 2025, partially offset by an increase in payments on borrowings of $1,145 million in 2026 from $714 million in 2025.
Uses of Cash
Capital Expenditures
Capital expenditures were $721 million and $527 million in the first nine months of 2026 and 2025, respectively. The Company plans to increase capital expenditures over the next several years to expand production capacity across various markets to support anticipated growth. As a result, Eaton expects approximately $1.15 billion in capital expenditures in 2026.
Dividends
Cash dividend payments were $1,285 million and $1,222 million in the first nine months of 2026 and 2025, respectively. Payment of quarterly dividends in the future depends upon the Company's ability to generate net income and operating cash flows, among other factors, and is subject to declaration by the Eaton Board of Directors. The Company intends to continue to pay quarterly dividends in 2026.
Share Repurchases
On February 23, 2022, the Eaton Board of Directors adopted a share repurchase program for repurchases of ordinary shares up to $5.0 billion to be made during the three-year period commencing on that date (2022 Program). On February 27, 2025, the Eaton Board of Directors renewed the 2022 Program by providing authority for up to $9.0 billion in repurchases to be made during the three-year period commencing on that date (2025 Program). Under the 2025 Program, the ordinary shares are expected to be repurchased over time, depending on market conditions, the market price of ordinary shares, capital levels, and other considerations. During the three and nine months ended September 30, 2026, no ordinary shares were repurchased. During the three and nine months ended September 30, 2025, 1.0 million and 5.2 million ordinary shares, respectively, were repurchased under the 2025 or 2022 Programs in the open market at a total cost of $355 million and $1,661 million, respectively. The Company does not intend to pursue share repurchases in 2026 due to the acquisition of Boyd Thermal on March 12, 2026.
Acquisition of Businesses and Investments in Nonmarketable Securities
The Company paid cash of $11,079 million and $1,504 million to acquire businesses in the first nine months of 2026 and 2025, respectively. Additionally, the Company paid $92 million in the first nine months of 2026 for investments in nonmarketable securities. There were no investments in nonmarketable securities in the first nine months of 2025. The Company will continue to focus on deploying its capital toward businesses that provide opportunities for higher growth and strong returns, and align with secular trends and its power management strategies.
Debt
The Company manages a number of short-term and long-term debt instruments, including commercial paper. At September 30, 2026, the Company had Short-term debt of $1,594 million, Current portion of long-term debt of $710 million, and Long-term debt of $17,802 million. The Company believes it has the operating flexibility, cash flow, and access to capital markets to meet scheduled payments of long-term debt. For additional information on financing transactions and debt see Note 8.
Supply Chain Finance Program
A third-party financial institution offers a voluntary supply chain finance (SCF) program that enables certain of the Company's suppliers, at the supplier's sole discretion, to sell receivables due from the Company to the financial institution on terms directly negotiated with the financial institution. The SCF program does not have a significant impact on the Company's liquidity as payments by the Company to participating suppliers are paid to the financial institution on the invoice due date, regardless of whether an individual invoice is sold by the supplier to the financial institution. For additional information on the SCF program, see Note 7.
Guaranteed Debt
Issuers, Guarantors and Guarantor Structure
Eaton Corporation has issued senior notes pursuant to indentures dated April 1, 1994 (the 1994 Indenture), November 20, 2012 (the 2012 Indenture), September 15, 2017 (the 2017 Indenture), August 23, 2022 (as supplemented by the First and Second Supplemental Indentures of the same date and the Third Supplemental Indenture dated May 18, 2023, the 2022 Indenture), and May 9, 2025 (as supplemented by the First and Second Supplemental Indentures of the same date, the Third Supplemental Indenture dated March 6, 2026, and the Fourth Supplemental Indenture dated March 10, 2026, the 2025 Indenture). Eaton Capital Unlimited Company, a subsidiary of Eaton, is the issuer of six outstanding series of debt securities sold in offshore transactions under Regulation S promulgated under the Securities Act (the Eurobonds) and Registered Senior Notes (as defined below) issued under the 2025 Indenture. The senior notes issued under the 1994, 2012, 2017, 2022, and 2025 Indentures are registered under the Securities Act of 1933, as amended (the Registered Senior Notes). The Eurobonds and the Registered Senior Notes (together, the Senior Notes) comprise substantially all of Eaton's long-term indebtedness.
Substantially all of the Senior Notes (with limited exceptions), together with the credit facilities described above under Liquidity and Financial Condition (the Credit Facilities), are guaranteed by Eaton and 17 of its subsidiaries. Accordingly, they rank equally with each other. However, because these obligations are not secured, they would be effectively subordinated to any existing or future secured indebtedness of Eaton and its subsidiaries. As of September 30, 2026, Eaton has no material, long-term secured debt. The guaranteed Registered Senior Notes are also structurally subordinated to the liabilities of Eaton's subsidiaries that are not guarantors. Except as described below under Future Guarantors, Eaton is not obligated to cause its subsidiaries to guarantee the Registered Senior Notes.
The table set forth in Exhibit 22 filed with the Form 10-Q filed on August 5, 2025 (10-Q Exhibit 22) details the primary obligors and guarantors with respect to the guaranteed Registered Senior Notes.
Terms of Guarantees of Registered Securities
Payment of principal and interest on the Registered Senior Notes is guaranteed, on an unsecured, unsubordinated basis by the subsidiaries of Eaton set forth in the table referenced in the 10-Q Exhibit 22. Each guarantee is full and unconditional, and joint and several. Each guarantor's guarantee is an unsecured obligation that ranks equally with all its other unsecured and unsubordinated indebtedness. The obligations of each guarantor under its guarantee of the Registered Senior Notes are subject to a customary savings clause or similar provision designed to prevent such guarantee from constituting a fraudulent conveyance or otherwise legally impermissible or voidable obligation.
Though the terms of the indentures vary slightly, generally, each guarantee of the Registered Senior Notes by a guarantor that is a subsidiary of Eaton Corporation provides that it will be automatically and unconditionally released and discharged under certain circumstances, including, but not limited to:
(a)the consummation of certain types of transactions permitted under the applicable indenture, including one that results in such guarantor ceasing to be a subsidiary; and
(b)for Registered Senior Notes issued under the 2022 and 2025 Indentures, when such guarantor is a guarantor or issuer of indebtedness in an aggregate outstanding principal amount of less than 25% of our total outstanding indebtedness.
Further, each guarantee by a direct or indirect parent of Eaton Corporation (other than Eaton) provides that it will also be released if:
(c)such guarantee (so long as the guarantor is not obligated under any other U.S. debt obligations), becomes prohibited by any applicable law, rule or regulation or by any contractual obligation; or
(d)such guarantee results in material adverse tax consequences to Eaton or any of its subsidiaries (so long as the applicable guarantor is not obligated under any other U.S. debt obligation).
The guarantee of Eaton does not contain any release provisions.
Future Guarantors
The 2012 and 2017 Indentures generally provide that, with certain limited exceptions, any subsidiary of Eaton must become a guarantor if it becomes obligated as borrower or guarantor under any series of debt securities or a syndicated credit facility. Further, the 2012 and 2017 Indentures provide that any entity that becomes a direct or indirect parent entity of Eaton Corporation and holds any material assets, with certain limited exceptions, or owes any material liabilities must become a guarantor. The 2022 and 2025 Indentures provide only that, with certain limited exceptions, any subsidiary of Eaton must become a guarantor if it becomes obligated as borrower or guarantor under indebtedness with an aggregate outstanding principal amount in excess of 25% of the Parent and its Subsidiaries' then-outstanding indebtedness.
The 1994 Indenture does not contain provisions with respect to future guarantors.
Summarized Financial Information of Guarantors and Issuers
(In millions) September 30, 2026 December 31, 2025
Current assets $ 4,666 $ 4,075
Noncurrent assets 13,705 13,439
Current liabilities 6,744 4,598
Noncurrent liabilities 19,863 10,788
Amounts due to subsidiaries that are non-issuers and non-guarantors - net 5,333 9,499
(In millions) Nine months ended
September 30, 2026
Net sales $ 14,211
Sales to subsidiaries that are non-issuers and non-guarantors 852
Cost of products sold 10,087
Expense from subsidiaries that are non-issuers and non-guarantors - net 454
Net income 847
The financial information presented is that of the issuers and the guarantors, which includes Eaton Corporation plc, on a combined basis and the financial information of non-issuer and non-guarantor subsidiaries has been excluded. Intercompany balances and transactions between the issuers and guarantors have been eliminated, and amounts due from, amounts due to, and transactions with non-issuer and non-guarantor subsidiaries have been presented separately.
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