Ingersoll Rand Inc. (IR) | The Buildout — AI Infrastructure
The Verdict
Ingersoll Rand makes mission-critical flow-creation equipment — compressors, pumps, vacuum systems, and blowers. The AI connection is indirect: its equipment sits in power generation, electricity infrastructure, semiconductor air separation and process vacuum, and data center cooling and water systems rather than inside the compute rack. The company does not disclose AI-specific revenue or orders.
| Market Cap | — |
| Revenue (TTM) | $7.9B |
| Revenue Growth | +7.8% |
| EBITDA Margin (TTM) | 27.9% |
| Net Debt | $3.6B |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Q2 2026 revenue was approximately $2.0 billion, up 9% year over year; organic revenue rose 4% with every main region positive.
- July organic order growth was low double digit to mid-teens through the first four weeks, versus Q2 organic orders of +2%.
- PST adjusted EBITDA margin expanded 200 bps year over year to 31.5%; Life Sciences organic orders rose low double digits.
- Aftermarket reached 36% of Q2 revenue; management targets a $1 billion recurring-revenue run rate by end of 2027.
- M&A continues: Lone Star Blower closed with about $50 million annual revenue, Fai Filtri signed with about $30 million, and 11 LOIs remain.
What We’re Watching
- July order strength may be catch-up rather than a new run rate; management explicitly cautioned against annualizing one month.
- ITS adjusted EBITDA margin remains down year over year for multiple consecutive quarters; Q4 exit is expected in line or slightly above prior year.
- China is the biggest margin variable; pricing pressure is called transient but has not yet reversed in reported margin.
- Fai Filtri is expected to close in Q4 2026; conversion of the 11 LOIs and receipt of IEEPA refunds remain open.
The demand side strengthened in Q2: revenue guidance was raised and July orders suggest long-cycle softness was timing rather than cancellations. The margin side remains the weaker part, with ITS and total adjusted EBITDA margins still down year over year. The open question is whether management's promised back-half margin ramp materializes, especially in ITS and China.
Earnings Beat
Ingersoll Rand's Q2 2026 revenue was $2.05 billion, up 9% year over year, with gross margin of 42.1%. Management's adjusted EBITDA was $520 million, up 2% year over year, and adjusted EBITDA margin was 25.4%, down 160 basis points year over year.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $2.0B | $1.8B | $1.9B | +8.5% |
| Gross margin | 42.1% | 42.9% | 43.7% | -160bps |
| EBITDA | $513M | $397M | $197M | +160.6% |
| EPS | $0.66 | $0.49 | $-0.29 | −327.6% |
| Aftermarket revenue % of total | 36% | 37% | n/a | — |
We now expect revenue growth of 4.5% to 6.5%, 200 basis points higher at the midpoint, driven primarily by organic volume, reflecting a strong first half and healthy demand, particularly in the short to medium-cycle side of the business.— Vicente Reynal, 2026-07-31
Management tone: Management's tone shifted from Q1's stabilization frame to a firmer Q2 stance: it raised full-year revenue guidance, pointed adjusted EPS toward the high end, and disclosed strong July orders while cautioning not to treat one month as a new run rate.
Management Guidance
Management raised FY2026 revenue growth guidance to 4.5%–6.5%, 200 bps higher at the midpoint, assuming 1%–3% organic growth, about 2.5% M&A, and about 1% FX. Adjusted EBITDA was maintained at $2.13B–$2.19B and adjusted EPS at $3.45–$3.57, with EPS expected near the high end; free cash flow conversion was kept at about 95%. IEEPA tariff refunds expected in H2 2026 are excluded and treated as upside.
Trajectory
Trailing revenue reached $7,942 million, up 7.8% year over year, and the revenue trajectory is stable. Sequential revenue moved from $1,847 million in Q1 2026 to $2,049 million in Q2 2026, but gross margin compressed to 42.1% from 42.9%. Management's adjusted EBITDA margin fell 160 bps year over year; cash conversion remains healthy at 127% of trailing net income. The demand-side recovery in July orders has not yet shown up in a margin inflection.
The Model
The model projects FY+1 revenue of $7,950 million and EBITDA of $2,170 million (27.3% margin), rising to FY+2 revenue of $8,450 million and EBITDA of $2,391 million (28.3% margin). The near-term anchor is trailing revenue plus continued M&A contribution; the FY+2 step assumes long-cycle backlog conversion and continued aftermarket and PST margin progress.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $7.7B | $8.0B | $8.4B |
| YoY Growth | — | +3.9% | +6.3% |
| EBITDA | $1.9B | $2.2B | $2.4B |
| EBITDA Margin | 25.1% | 27.3% | 28.3% |
Projections are the median of 5 independent model runs. The model’s revenue sits 1.9% above analyst consensus.
Management raised FY2026 revenue growth guidance to 4.5%–6.5%, 200 bps higher at the midpoint, assuming 1%–3% organic growth, about 2.5% M&A, and about 1% FX. Adjusted EBITDA was maintained at $2.13B–$2.19B and adjusted EPS at $3.45–$3.57, with EPS expected near the high end; free cash flow conversion was kept at about 95%. IEEPA tariff refunds expected in H2 2026 are excluded and treated as upside.
What Could Go Right — and Wrong
- July's organic order growth extends into Q3 and Q4, proving a sustained order inflection rather than one-month catch-up.
- ITS adjusted EBITDA margin inflects positive in H2 2026 and Q4 exits in line or slightly above the prior-year rate.
- PST margin reaches 32% or better in H2 2026, moving toward the mid-30s target management describes as in sight.
- The 11 LOIs convert into signed or closed deals in 2026, building on Lone Star and Fai Filtri.
- Management quantifies AI/data center exposure or the early carbon capture win expands into follow-on orders.
- July was catch-up; Q3 and Q4 organic orders revert to low single digits and book-to-bill remains near 1.0x.
- ITS margin ramp misses and China pricing pressure proves structural rather than transient.
- EMEA and Middle East long-cycle delays turn into cancellations rather than 2027 backlog.
- IEEPA tariff refunds or the remaining $162.5 million ILC Dover insurance recovery slip into 2027 or shrink.
Looking Ahead
The next 12 months center on whether the back-half margin ramp shows up and whether July's order strength carries into Q3 and Q4. Management has committed to close Fai Filtri in Q4 2026, recover delayed long-cycle orders in the back half, and receive IEEPA refunds and the remaining ILC Dover insurance recovery during 2026. Longer-term items include the $1 billion recurring-revenue run rate target by end of 2027 and the Garrett Motion oil-free compressor partnership milestones.
- Q3 2026Q3 orders and margin — Tests whether July organic order pace persists and ITS margin gap closes.
- H2 2026IEEPA tariff refunds — Guidance excludes refunds; management will update once materially received.
- Q4 2026Fai Filtri acquisition close — Expected to add about $30 million annual revenue via filtration.
- Q4 2026ITS Q4 exit margin — Management expects exit in line or slightly above prior-year rate.
- 2026ILC Dover insurance recovery — Remaining $162.5 million expected; possible recovery beyond $187.5 million.
- End 2027$1B recurring revenue run rate — Management targets about $1 billion recurring revenue by end of 2027.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $7.2B | $7.7B | $7.9B | +5.7% |
| Gross Margin | 43.8% | 39.0% | 37.9% | 480bps |
| EBITDA | $1.8B | $1.9B | $10.5B | +7.9% |
| EBITDA Margin | 24.6% | 25.1% | 27.9% | +50bps |
| Net Income | $839M | $581M | $959M | -30.7% |
| Free Cash Flow | $1.3B | $1.2B | $7.3B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)37.9%
- EBITDA Margin (TTM)27.9%
- Net Margin (TTM)12.1%
- ROIC9.8%
- FCF Conversion55.1%
- SBC / Revenue0.7%
The Company
Ingersoll Rand is a diversified, global provider of mission-critical flow-creation products and industrial and life-science solutions. It manufactures a broad range of compressor, pump, vacuum, and blower products across two segments: Industrial Technologies and Services (ITS) and Precision and Science Technologies (PST).
ITS covers air and gas compression, vacuum and blower products, fluid transfer, power tools, lifting equipment, and aftermarket; PST covers precision dosing, liquid and solid transfer, gas sampling, robotics, and powder handling. The 10-K discloses single-source supply for certain castings, motors, and other select engineered components. Service revenue is less than 10% of consolidated revenue, and Q2 aftermarket was 36% of total revenue. No greenfield or brownfield factory expansion was disclosed; capacity additions are currently visible mainly through M&A.
Business Segments
Competitive Landscape
The 10-K separates competitors by segment. For ITS, principal competitors named are Atlas Copco, Flowserve, IDEX Corporation, Kaeser Compressors, Kaishan Group, and Elgi Equipments. For PST, primary competitors include Dover, Graco, IDEX, KNF Neuberger, Netzsch, NOV, Sartorius, SPX Flow, Thermo Fisher Scientific, and Watson-Marlow.
- Atlas CopcoNamed as an ITS principal competitor; not discussed in the intel file.
- FlowserveNamed as an ITS competitor in the 10-K.
- IDEX CorporationNamed in both ITS and PST competitor sets in the 10-K.
- DoverNamed as a PST competitor in the 10-K.
- GracoNamed as a PST competitor in the 10-K.
Supply Chain
Ingersoll Rand sits between engineered-component suppliers and fragmented industrial, life-science, power, semiconductor, and water end markets. The 10-K discloses single-source supply for castings, motors, and other select engineered components, with supplier names undisclosed.
More on IR: Earnings recap