Earnings Recap — Q3 FY2026
CY Q3 2026 · Reported August 4, 2026 · Beat 6 of last 6 quarters
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Emerson's results underscore the accelerating AI infrastructure buildout, with power generation and semiconductor demand driving 27% growth in growth verticals. The company's Ovation orders up 31% and a growing project funnel in power and LNG signal sustained capital investment in electrification and data center infrastructure. The appointment of a Chief Technology and AI Officer reinforces Emerson's focus on AI-enabled automation, positioning it to benefit from the broader AI infrastructure cycle.
Emerson delivered a strong third quarter with underlying sales up 6%, led by Software & Systems up 11% and growth verticals up 27%. Adjusted EPS of $1.71 beat expectations, and free cash flow of $1.3 billion was up 36%. The company raised full-year guidance for sales, EPS, and cash flow, citing robust demand in power and semiconductor markets. The Middle East conflict had a $25 million revenue headwind in the quarter, better than the reduced expectations set in May. Management also announced the appointment of Rudy Sengupta as Chief Technology and AI Officer, effective August 15.
Management raised full-year guidance, now expecting 5% GAAP sales growth and 3.5% underlying growth, with adjusted EPS of approximately $6.55 and free cash flow of approximately $3.6 billion. Adjusted segment EBITDA margin is still expected to be approximately 28%. The second half is expected to accelerate as the software contract renewal dynamic laps and project shipments execute from a growing backlog. Power and semiconductor demand remain robust, with Ovation orders up 31% and Test & Measurement orders up 19%, and the project funnel grew to $12.4 billion. The Middle East conflict is expected to remain a headwind of approximately $25 million in Q4, with conditions likely to persist into early fiscal 2027. Management expressed confidence in continued ACV growth of 10%+ for the year and a solid 2027.
“We are raising our full year guidance, reflecting strong third quarter results and healthy demand trends.”
on Guidance raise
“We are seeing a continuation of the unprecedented investment in power generation with orders in our Ovation business up 31%.”
on Power demand
“The power generation build-out is accelerating with substantial demand for both utility and behind-the-meter power.”
on Power demand
How much of the semiconductor and power growth was underlying market versus share gains or new products?
Ram Krishnan noted that while the underlying markets are strong, Emerson is driving significant participation gains in power (Ovation, behind-the-meter, DGM) and in Test & Measurement with new products in RF and mixed-signal.
Is the funnel increasingly long-dated, and any change in conversion to orders?
Lal Karsanbhai said the timing of awards remains consistent, with ~$400 million won in the quarter, similar to Q2. The funnel now has nearly 1,000 projects in LNG and power, and it's a 3-4 year view, not 10 years.
What are the lead times for Ovation orders?
Lal Karsanbhai confirmed they are taking orders well into the fourth quarter of 2027 and reaching into 2028, indicating high visibility.