Ingersoll Rand Inc. (IR) | The Buildout — AI Infrastructure
The Verdict
Ingersoll Rand makes flow-creation equipment - compressors, vacuum pumps, blowers, pumps and dosing systems - that industrial plants, semiconductor lines and power infrastructure depend on to move air, gas and liquids. It reaches the AI buildout indirectly. Its compressors serve power generation and electricity infrastructure, its pumps and blowers serve closed-loop data-center water and aeration, and its vacuum pumps serve semiconductor air separation and fab process work. Management never uses the term "AI" in prepared remarks across the two quarters in the evidence, and the company does not disclose how much revenue comes from data-center or AI demand. The business is deliberately broad across end markets, so any AI demand arrives as one thread inside a much larger industrial portfolio.
| Market Cap | — |
| Revenue (TTM) | $7.9B |
| Revenue Growth | +7.8% |
| EBITDA Margin (TTM) | 27.9% |
| Net Debt | $3.7B |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Broad-based, volume-led demand: Q2 2026 revenue was $2,048.8M, up 9% year over year with 4% organic growth, and every main region grew organically.
- PST is the quality engine: Q2 orders rose 11% year over year (7% organic) and adjusted EBITDA margin expanded 200 basis points to 31.5%, with the mid-30s margin target "in sight."
- Aftermarket and recurring mix: aftermarket was 36% of Q2 revenue; recurring revenue "exceeded $450 million last year" against a $1.1 billion backlog of future revenue.
- Balance sheet and capital returns: about $3.8B of liquidity, 1.7x leverage, a Moody's upgrade to Baa1, $110M deployed to acquisitions and roughly $248M returned to shareholders in Q2.
- Disciplined M&A flywheel: 11 transactions under LOI, over 200 companies in the funnel and more than 90% internally sourced; Lone Star Blowers closed (about $50M annual revenue) and Fai Filtri was signed (about $30M).
What We’re Watching
- ITS margin: 26.8% in Q2, down year over year again after Q1 was flagged as the fifth straight quarter of decline; the full-year ITS margin guide was lowered to slightly below FY2025.
- China pricing: organic revenue up low double digits there, but pricing called the "most challenged"; management frames it as transitory overcapacity while competitor Air Products describes China as "hypercompetitive."
- Order momentum versus peers: Q2 book-to-bill of 1.0x and organic orders of +2% lagged Dover (1.06), IDEX (+28% organic), Graco (six-week bookings +14%) and Flowserve (bookings +26%).
- RWI and ILC Dover ambiguity: a $187.5M insurance recovery was disclosed alongside a same-period refusal to characterize ILC Dover's operating performance, and the 10-Q calls the timing of any recovery uncertain.
The thesis reads as mixed rather than broken. Demand is broad and the precision segment is compounding, and management raised the revenue guide on volume rather than price. Offset against that: the larger segment's margin has declined year over year for at least five consecutive quarters, the full-year ITS margin guide was lowered, and IR's order growth lagged four direct competitors in Q2. The open question is whether the July order inflection persists and whether the Q4 2026 ITS exit margin lands at or above the prior-year exit rate.
Earnings Beat
Q2 2026 revenue was $2,048.8M, up 9% year over year with 4% organic growth and positive organic growth in every main region. Gross margin was 42.1%. On the call, management reported the adjusted EBITDA margin down 160 basis points year over year to 25.4%, with China pricing named the single biggest driver. Adjusted EPS was $0.86, up 7%, and free cash flow was $269M, up about 28% and including $25M collected on the RWI recovery.
| 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% |
| Book-to-bill | 1.0x | n/a | n/a | — |
| Aftermarket % of revenue | 36% | 37.4% | n/a | — |
as power prices have moved up, the payback on replacing an older, less efficient machine is getting shorter— Vicente Reynal, 2026-07-31
Management tone: Management's tone shifted more positive than the prior quarter on long-cycle demand and more defensive on China pricing. On the Q2 call they confirmed the July order inflection and then explicitly declined to extrapolate it. They were direct on the drivers of the margin decline and on walking away from a roughly $1 billion deal on valuation, and they framed China pricing as transitory overcapacity rather than a structural loss of pricing power.
Management Guidance
For FY2026, management raised revenue growth guidance to 4.5%-6.5%, 200 basis points higher at the midpoint and driven primarily by organic volume, with organic about 1%-3%, M&A about 2.5% and FX about 1%. It maintained adjusted EBITDA at $2.13B-$2.19B and adjusted EPS at $3.45-$3.57, with results expected "near the high end," and held free cash flow conversion at about 95%. Both the adjusted EBITDA and adjusted EPS ranges exclude any benefit from IEEPA tariff refunds expected in H2 2026, and the RWI recovery cash is excluded from free cash flow guidance. At segment level, ITS full-year margin is now "trending a little bit below" FY2025 with a Q4 exit at or slightly above the prior-year exit rate, and PST H2 margin is guided to the "32% type range."
Trajectory
Revenue moves in a jagged line on long-cycle timing: $1,955M in Q3 FY2025, $2,091M in Q4 FY2025, $1,847M in Q1 FY2026 and $2,049M in Q2 FY2026, with trailing-four-quarter growth of about 7.8%. Margins are where the pressure shows. Gross margin was 42.1% in Q2, and management reported the adjusted EBITDA margin down 160 basis points year over year to 25.4%, with China pricing named the single biggest driver. The two segments are running in opposite directions: ITS, the larger segment, posted a 26.8% margin, down year over year after Q1 was flagged as the fifth straight quarter of decline, while PST expanded 200 basis points to 31.5%. Cash conversion is strong - trailing-twelve-month free cash flow is 127% of net income.
The Model
The model projects FY+1 revenue of $8,140M with EBITDA of $2,165M (26.6%), and FY+2 revenue of $8,700M with EBITDA of $2,410M (27.7%). That implies roughly 6.9% revenue growth into FY+2 and about 110 basis points of EBITDA margin expansion. The near term rests on the short-to-medium-cycle demand that drove the Q2 revenue raise; the FY+2 step-up depends on the ITS margin recovery management has pointed to and on PST sustaining its above-peer order growth.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $7.7B | $8.1B | $8.7B |
| YoY Growth | — | +6.4% | +6.9% |
| EBITDA | $1.9B | $2.2B | $2.4B |
| EBITDA Margin | 25.1% | 26.6% | 27.7% |
Projections are the median of 5 independent model runs. The model’s revenue sits 5.1% above analyst consensus.
For FY2026, management raised revenue growth guidance to 4.5%-6.5%, 200 basis points higher at the midpoint and driven primarily by organic volume, with organic about 1%-3%, M&A about 2.5% and FX about 1%. It maintained adjusted EBITDA at $2.13B-$2.19B and adjusted EPS at $3.45-$3.57, with results expected "near the high end," and held free cash flow conversion at about 95%. Both the adjusted EBITDA and adjusted EPS ranges exclude any benefit from IEEPA tariff refunds expected in H2 2026, and the RWI recovery cash is excluded from free cash flow guidance. At segment level, ITS full-year margin is now "trending a little bit below" FY2025 with a Q4 exit at or slightly above the prior-year exit rate, and PST H2 margin is guided to the "32% type range."
What Could Go Right — and Wrong
- The July order inflection persists, with organic order growth holding near the low-double-digit-to-mid-teens rate and converting into a 2027 backlog build.
- Q4 2026 ITS exit margin lands at or above the prior-year exit rate, validating the framing of China pressure as transitory and opening the path toward "approaching that 30% EBITDA margin profile."
- PST keeps compounding from Q2's orders +11% and 31.5% margin toward the long-stated mid-30s EBITDA margin target.
- Fai Filtri closes in Q4 2026 (about $30M annual revenue) and the 11 LOIs convert, keeping the M&A flywheel toward the 400-500 basis points of annualized inorganic revenue targeted for 2026.
- Excluded upside lands: the remaining $162.5M of RWI recovery is collected during 2026 and IEEPA tariff refunds are received, prompting the promised guidance update.
- China pricing proves structural rather than transitory, removing one leg of the H2 margin ramp; competitor Air Products' "hypercompetitive" overcapacity language challenges the transience view.
- The July order spike turns out to be delayed-project catch-up rather than a new trend - management itself declined to extrapolate the rate.
- The H2 margin ramp misses, either because the corporate incentive true-up recurs or because direct-material productivity does not land in Q4 as it historically does.
- The relative-momentum gap widens: IR's PST organic orders stay in the single digits while IDEX HST organic orders (+47%) and Graco semiconductor bookings (+58%) compound.
- M&A cadence slows - the walk-away from a roughly $1 billion deal shows pipeline conversion risk, and quality aftermarket assets may get more expensive with Dover, IDEX, Graco, Flowserve, Caterpillar and DXP all active acquirers.
Looking Ahead
Over the next twelve months the tests are dated and specific. Management has staked credibility on a Q4 2026 ITS exit margin at or slightly above the prior-year exit rate and on PST H2 margins in the "32% type range." The delayed long-cycle orders booked in July, with their 6-to-18-month duration, mostly convert to revenue in 2027. Fai Filtri is expected to close in Q4 2026, the remaining $162.5M of RWI recovery is expected during 2026, and IEEPA tariff refunds are expected in H2 2026 with a guidance update on material receipt. Biopharma facility investment could arrive in H2 2026 or 2027. Any quantified data-center or AI disclosure would be new information - today that exposure is undisclosed.
- September 9, 2026Investor conference fireside chat — Reynal and Kini at the Vertical Research Partners Industrials Conference.
- H2 2026IEEPA tariff refunds expected — Excluded from guidance; management to update once materially received.
- H2 2026PST margin target — Management guides H2 PST margin to the "32% type range."
- Q4 2026Fai Filtri acquisition closes — Italy-based filter maker, about $30M annual revenue, aftermarket-focused.
- Q4 2026ITS exit margin test — Q4 ITS margin guided at or slightly above the prior-year exit rate.
- 2027July orders convert to revenue — Long-cycle orders run 6-to-18 months; mostly a 2027 backlog build.
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 | $2.2B | +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 | $1.2B | — |
| 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 describes itself in its 10-K as "a diversified, global provider of mission-critical flow creation products, and industrial and life science solutions." It makes air and gas compression equipment, vacuum and blower products, fluid transfer equipment, loading systems, power tools and lifting equipment, plus precision dosing, dispensing, gas compression, gas sampling and powder handling gear. The 10-K says it manufactures "one of the broadest and most complete ranges of compressor, pump, vacuum and blower products in our markets," sold under "more than 90 market-leading brands, including Ingersoll Rand and Gardner Denver." In the AI buildout its role is indirect: compressors for power generation and electricity infrastructure, pumps and blowers for closed-loop data-center water and aeration, and vacuum pumps for semiconductor air separation and fab process work.
IR reports in two segments. Industrial Technologies and Services (ITS) is the larger, with compressors "upwards of 65% of the revenue base" per the CFO. Precision and Science Technologies (PST) is built on positive displacement pumps, controls and software, robotics and automated liquid handling, and powder and liquid handling and containment systems. IR does not build greenfield capacity on this record; it adds manufacturing through bolt-on acquisitions, and it runs an operating system called IRX that management calls "the backbone." Aftermarket was 36% of Q2 2026 revenue, and management has said roughly 75% of the business is shorter cycle with about 25% longer-cycle project work. Regionally, the Americas are about 50% of revenue, EMEA about one-third and Asia Pacific about 15%, of which China is about 10%.
Business Segments
Competitive Landscape
IR competes in flow control against a long list of named rivals. The 10-K names Atlas Copco, Flowserve, IDEX Corporation, Kaeser Compressors, Kaishan Group and Elgi Equipments as principal competitors in compression, vacuum and blower products, and Dover, Graco, IDEX, KNF Neuberger, Netzsch, NOV, Sartorius, SPX Flow, Thermo Fisher Scientific and Watson-Marlow in precision and science. The source does not describe IR as a sole-source or dominant player in these markets. The neighbor read flags that IR's Q2 organic order growth and book-to-bill lagged several of these competitors while IR's margin contracted as theirs expanded, but the source is explicit that this is a flagged gap rather than a concluded share loss.
- Atlas CopcoNamed in the 10-K as a principal ITS competitor in compression, vacuum and blower products.
- Dover (DOV)Named in the 10-K as a PST competitor. Its Q2 2026 book-to-bill was 1.06, adjusted EBITDA margin rose 80 bps, and its Pumps & Process segment margin was 35% - a benchmark against IR's 31.5% PST margin.
- IDEX Corporation (IEX)Named in the 10-K as a competitor in both ITS and PST. Its Q2 organic orders rose 28% overall, with HST organic orders up 47% and data center, semiconductor and space/defense now over one-third of HST revenue year to date.
- Graco (GGG)Named in the 10-K as a PST competitor. Its most recent six-week bookings were up 14% and semiconductor bookings up 58% in the quarter, at a 30% operating margin.
- Flowserve (FLS)Named in the 10-K as an ITS competitor. Its Q2 bookings rose 26% to $1.35B and aftermarket bookings set a record near $700M, up 12%.
Supply Chain
IR sits mid-chain in flow control: it buys castings, motors and engineered components and sells compressors, vacuum pumps, blowers and pumps to industrial, power, semiconductor and life-science customers. Its data-center and fab customer links are wiring-map inference, not documented quotes.
More on IR: Earnings recap