PPG Industries, Inc. (PPG) | The Buildout — AI Infrastructure
The Verdict
PPG Industries makes paints, coatings and specialty products for industrial, transport, packaging, architectural and consumer end-uses. Its AI-infrastructure link sits at the construction layer: the Protective & Marine business inside Performance Coatings supplies fire-protection coatings, structural steel coatings, flooring, and insulative and dielectric coatings into data center projects. That makes PPG a supplier to the buildings that house compute, not to the compute itself, and management's AI commentary is limited to a pipeline description plus using AI internally on formulation costs. The company's stated priorities are aerospace growth, pricing recovery against input-cost inflation, and self-help cost actions such as European plant closures.
| Market Cap | — |
| Revenue (TTM) | $16.4B |
| Revenue Growth | +12.3% |
| EBITDA Margin (TTM) | 15.8% |
| Net Debt | $5.9B |
| Earnings Beats | 3 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Sixth consecutive quarter of organic growth: +4% in Q2 2026, split equally between volume and price, with all three segments and eight of nine businesses growing.
- Aerospace carries a roughly $2 billion qualified-product portfolio and a capacity program of more than $0.5 billion, including a ~$380 million plant under construction in Shelby, North Carolina.
- Price/cost execution pulled forward: about 90% of COGS inflation was covered with pricing in Q2, and management expects 100% coverage by Q4 2026, a quarter ahead of its prior commitment.
- Share gains are converting to revenue — roughly $25 million of new Industrial Coatings business wins per quarter are hitting the P&L, about 40% of them in auto OEM.
- Balance sheet: $1.6 billion of cash and short-term investments at quarter-end, with net debt at 1.9x adjusted EBITDA, down more than $400 million from a year earlier.
What We’re Watching
- Automotive Refinish: management says U.S. destocking is behind it and guides volumes up low-single-digit in Q3 and Q4 2026, while competitor 3M says its auto aftermarket business is still expected to be soft in the back half.
- Industrial Coatings second-half 2026 EBITDA margin is guided to compress on index-pricing timing — a downward revision from the prior call, which had pointed to sequential improvement.
- The four European architectural plant closures slipped to Q4 2026/Q1 2027, pushing the roughly $25 million fixed-cost reduction into 2027.
- Data-center revenue is not disclosed; the AI-adjacent sales sit inside a Protective & Marine business that PPG does not break out, alongside marine, infrastructure, energy and maintenance.
PPG is a peripheral, unquantified participant in the AI buildout, and nothing in the record changes that. What does move is the underlying coatings business: organic growth broadened to +4% in Q2 2026 with all three segments growing, and pricing execution arrived a quarter early against a worse-than-planned cost backdrop. Against that, the profitability translation is deferred — Q3 2026 company margin is guided flat to down 100 basis points, Industrial margin is guided to compress, and the largest structural self-help lever has slipped to 2027. The open question is whether the guided Automotive Refinish recovery prints with volume, because that business is described as one of PPG's top-margin operations and a verified competitor reads the same end market as still soft.
Earnings
PPG reported Q2 2026 net sales of $4,495 million, up 7% from $4,195 million a year earlier. Gross margin was 40.2%, down from 42.0% in Q2 2025, and EBITDA margin was 17.1% versus 18.7%. Organic sales rose 4% — the sixth consecutive quarter of organic growth — split equally between volume and price, with all three segments and eight of nine businesses growing and the company saying it outpaced the industry by 300 basis points. Management said it covered about 90% of cost-of-goods inflation with pricing in the quarter and expects 100% coverage by Q4 2026.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $4.5B | $3.9B | $4.2B | +7.2% |
| Gross margin | 40.2% | 42.1% | 42.0% | -180bps |
| EBITDA | $770M | $657M | $785M | −1.9% |
| EPS | $1.95 | $1.70 | $1.98 | −1.2% |
| Organic sales growth | +4% | +1% | n/a | — |
| Aerospace order backlog | ~$300M | ~$350M | n/a | — |
I am proud of this progress, which is one quarter ahead of our commitment made just 90 days.— Tim Knavish, Chairman and CEO, 2026-07-29
Management tone: Management's tone on the Q2 2026 call was more confident and more specific than on the Q1 2026 call. Organic growth broadened from 1% to 4% and the consecutive-quarter streak extended to six; the price-cost coverage commitment was pulled forward a quarter; and management said it was confident the U.S. destocking in Automotive Refinish was behind it, where the prior call had only said it anticipated second-half volume growth. Management also volunteered a negative: Industrial Coatings second-half EBITDA margin is now guided to compress, versus an expectation of sequential improvement three months earlier. Jamie Beggs joined as CFO and this was her first earnings call; Vince Morales retired after more than 40 years.
Management Guidance
PPG reaffirmed full-year 2026 adjusted EPS guidance of $7.70 to $8.10. For Q3 2026, management guided organic sales growth of a low-single-digit to mid-single-digit percentage and company adjusted EBITDA margin flat to a decline of 100 basis points year-over-year, including corporate expenses. By segment, Q3 organic guidance is flat to positive low-single-digit for Global Architectural, mid- to high-single-digit for Performance Coatings, and flat to positive low-single-digit for Industrial Coatings. Management expects 100% coverage of cost-of-goods inflation with pricing by Q4 2026 and estimates COGS inflation of a mid-single-digit to high-single-digit percentage between the second and fourth quarters of 2026. Operating free cash flow is guided to be north of 10% of sales for the year, and capex approximately $650 million to $700 million.
Trajectory
Revenue is lumpy quarter to quarter but the trend is up: Q1 2026 net sales were $3,930 million, Q2 2026 net sales were $4,495 million, and Q2 organic growth of 4% was the sixth consecutive positive quarter, split equally between volume and price. Gross margin was 40.2% in Q2 2026 versus 42.0% a year earlier, and EBITDA margin was 17.1% versus 18.7%, as cost-of-goods inflation outran pricing — management covered about 90% of that inflation in the quarter and expects 100% by Q4 2026. Mix is doing part of the work: Automotive Refinish, described as one of PPG's top-margin businesses, declined double-digit and drove almost all of the 300 basis point year-over-year decline in Performance Coatings EBITDA margin, while Aerospace, Protective & Marine and Packaging grew double-digit. The computed signals read company revenue as decelerating, the earnings bar as very easy, and operating and EBITDA margins as expanding across the trailing window.
The Model
The model projects FY+1 revenue of $16,850 million and EBITDA of $2,679 million, a 15.9% margin, and FY+2 revenue of $17,699 million and EBITDA of $3,080 million, a 17.4% margin. The near-term anchor is pricing recovery, roughly $25 million per quarter of new Industrial Coatings business wins reaching the P&L through 2026 and into 2027, and the ~$120 million Aerospace debottlenecking program that is already adding output. FY+2 carries the larger margin step-up, consistent with the ~$380 million Shelby aerospace plant's build toward a 2028 output step change and a structurally normalized Automotive Refinish business that management points to by Q1 2027.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $15.9B | $16.9B | $17.7B |
| YoY Growth | — | +6.1% | +5.0% |
| EBITDA | $2.5B | $2.7B | $3.1B |
| EBITDA Margin | 16.0% | 15.9% | 17.4% |
Projections are the median of 5 independent model runs. The model’s revenue sits 2.8% above analyst consensus.
PPG reaffirmed full-year 2026 adjusted EPS guidance of $7.70 to $8.10. For Q3 2026, management guided organic sales growth of a low-single-digit to mid-single-digit percentage and company adjusted EBITDA margin flat to a decline of 100 basis points year-over-year, including corporate expenses. By segment, Q3 organic guidance is flat to positive low-single-digit for Global Architectural, mid- to high-single-digit for Performance Coatings, and flat to positive low-single-digit for Industrial Coatings. Management expects 100% coverage of cost-of-goods inflation with pricing by Q4 2026 and estimates COGS inflation of a mid-single-digit to high-single-digit percentage between the second and fourth quarters of 2026. Operating free cash flow is guided to be north of 10% of sales for the year, and capex approximately $650 million to $700 million.
What Could Go Right — and Wrong
- Organic growth stays broad and the pace holds: eight of nine businesses grew in Q2 2026, and share-gain wins keep launching, with about $25 million per quarter of new Industrial business expected through 2026 and into 2027.
- Price/cost coverage reaches and holds 100% into 2027, resetting the margin base higher as Aerospace and Refinish mix improves.
- Automotive Refinish prints the guided turnaround — volumes up low-single-digit in Q3 and Q4 2026, with one large MSO already converted and another still to convert.
- Aerospace capacity converts to output: the ~$120 million debottlenecking program is already improving output, and the ~$380 million Shelby plant is aimed at a step change around 2028.
- Data-center protective coatings move from an unquantified pipeline into a disclosed revenue line.
- Automotive Refinish recovery fails to appear: competitor 3M says its auto aftermarket business is still expected to be soft, with repair claims expected to be down in the back half.
- Cost-of-goods inflation stays elevated or re-accelerates while price increases meet volume elasticity; competitor RPM expects raw-material inflation of 5%–6% in the first quarter of 2027 and as high as 6%–8% in the second.
- Industrial Coatings index-pricing timing proves structural rather than one-off, turning second-half margin compression into a persistent drag on a segment guided to grow revenue.
- The Aerospace order backlog keeps falling from about $350 million in Q1 2026 to around $300 million in Q2 2026, if the move reflects demand rather than conversion.
- European architectural plant-closure savings slip again, pushing the roughly $25 million fixed-cost benefit beyond 2027.
Looking Ahead
Over the next 12 months the question is whether revenue momentum converts to margin. Management guides Q3 2026 organic sales growth of a low-single-digit to mid-single-digit percentage with company adjusted EBITDA margin flat to down 100 basis points year-over-year, then expects 100% coverage of COGS inflation with pricing by Q4 2026. Performance Coatings is guided to return to EBITDA margin expansion in the second half, while Industrial Coatings is guided to modest organic growth with margin compression on index-based pricing timing. Beyond that, four European architectural plants are slated to close around Q4 2026/Q1 2027 with about $25 million of fixed-cost savings landing in 2027, and further Industrial share-gain wins are expected to launch in 2027.
- Q3 2026Q3 2026 results — Tests whether Refinish volumes turn positive and segment margin expands
- Q3–Q4 2026Auto Refinish returns to growth — Tests the destocking call against a competitor's softer end-market view
- Q4 2026100% price/cost coverage — Tests whether pricing fully covers COGS inflation a quarter early
- Q4 2026/Q1 2027European plant closures — Four architectural plants close; ~$25M of savings land in 2027
- Q1 2027Refinish structural normalization — Tests whether Refinish margin recovery holds beyond easy comparisons
- 2027Industrial wins launch — About $100M of new Industrial business begins reaching the P&L
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $15.3B | $15.9B | $16.4B | +3.9% |
| Gross Margin | 40.5% | 40.5% | 40.1% | 5bps |
| EBITDA | $2.7B | $2.5B | $2.6B | -7.3% |
| EBITDA Margin | 18.0% | 16.0% | 15.8% | 193bps |
| Net Income | $1.1B | $1.6B | $1.6B | +41.2% |
| Free Cash Flow | $699M | $1.2B | $1.4B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)40.1%
- EBITDA Margin (TTM)15.8%
- Net Margin (TTM)9.6%
- ROIC11.3%
- FCF Conversion54.4%
- SBC / Revenue0.2%
The Company
PPG Industries makes and distributes paints, coatings and specialty products. Its customers span industrial equipment and components, packaging material, aircraft and marine equipment, automotive original equipment, automotive refinish and aftermarket, pavement marking, and architectural paint sold to contractors and directly to consumers. In the AI buildout, PPG's role is at the construction layer: its Protective & Marine business, inside the Performance Coatings segment, sells hydrocarbon and cellulosic fire-protection coatings plus structural steel, flooring, insulative and dielectric coatings into data center work. It does not sell cooling, power, networking, chips or software into AI, and management does not treat AI as a strategic theme or a named end market.
PPG runs three reportable segments, a structure established in 2025: Global Architectural Coatings, built around DIY, trade and retail paint brands and distribution networks; Performance Coatings, which serves aftermarket and select OEM customers with aerospace, automotive refinish, pavement marking and Protective & Marine products; and Industrial Coatings, which sells direct-to-factory coatings, adhesives, sealants, pretreatments and paint films, plus TESLIN substrate, OLED materials, optical lens materials and photochromic dyes. The 10-K lists principal manufacturing plants across Europe, North America, Latin America and Asia — including Huntsville, Alabama and Mojave, California in Performance Coatings — along with R&D centers such as Allison Park, Pennsylvania and Tianjin, China, which is both an Industrial Coatings plant and an R&D site. Industrial Coatings is the largest segment by revenue at $1.8 billion in Q2 2026, Performance Coatings is the highest-margin segment, and Global Architectural is the most geographically concentrated.
Business Segments
Competitive Landscape
PPG's 10-K names global competitors in each of its three segments, and the field is broad: Akzo Nobel, Sherwin-Williams, Nippon Paint, the Jotun Group, Hempel, Axalta, BASF, Kansai Paints, RPM International and 3M appear across the segment lists. The company's own framing of its edge rests on highly specified, qualified products — a roughly $2 billion aerospace portfolio of qualified products and services, and coatings formulations management says are hard to duplicate or reverse engineer. The evidence also shows where stickiness is weaker: management describes Automotive Refinish share as shifting among body shops daily. Two coatings peers, RPM and 3M, are documented competitors whose own commentary the source treats as direct competitive evidence.
- Documented Performance Coatings competitor; its own commentary puts raw-material inflation at 5%-6% in the first quarter of 2027 and as high as 6%-8% in the second, and puts data centers at about 1%-2% of its business.
- Documented Performance Coatings competitor; says its auto aftermarket business is still expected to be soft and repair claims are expected to be down in the back half.
- The Sherwin-Williams CompanyNamed in filings; not discussed.
- Akzo Nobel N.V.Named in filings; not discussed.
- Axalta Coating Systems Ltd.Named in filings; not discussed.
Supply Chain
PPG sits upstream: it converts pigments, resins and solvents into coatings sold to construction, industrial and aftermarket buyers. Its 10-K discloses no sole-source suppliers and names no customers. Neighbor tapes carry no direct mention of PPG.
Related companies
See all Construction companies → · How this layer works: Chapter 4, The Building →
More on PPG: Earnings recap