Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 5, 2026 · Beat 5 of last 7 quarters
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Regal Rexnord's data center exposure continues to accelerate, with AMC orders up 17% and switchgear sales expected to grow to ~$240-250M in 2027. The company's ePOD modular power solutions are ramping toward first revenue in Q4, positioning it to benefit from the shift to modular data center construction. However, price-cost headwinds from inflation and tariffs, along with rare earth magnet constraints, could temper margin expansion in the near term.
Q2 adjusted EPS of $2.99 beat consensus, but included $0.39 of IEEPA tariff refunds; ex-refunds EPS was $2.60, up 5% YoY. Organic sales grew 3.3% (6.1% ex-residential HVAC/pool), with AMC up 15.6%, IPS up 2%, and PES down 6.6%. Orders were strong across all segments, with AMC up 17.1% and IPS up 6.7%, while PES orders rose 3.5% on commercial HVAC strength. Adjusted EBITDA margin was 23.5% (21.5% ex-refunds), with AMC margin improving 40 bps YoY. The company recorded $32M of IEEPA tariff refunds in the quarter and expects $8M in each of Q3 and Q4.
Management raised AMC's full-year organic sales growth outlook to low double digits from high single digits, citing strong order momentum and the addition of $15M of ePOD revenue in Q4. IPS and PES growth outlooks were trimmed to low single digits and flat-to-low-single-digit decline, respectively, reflecting project timing and weak residential HVAC/pool markets. Adjusted EBITDA margin guidance was lowered to 21.3% (ex-refunds) from ~22.2%, driven by slower productivity realization, price-cost lag, and mix. Adjusted EPS guidance was narrowed to $10.35–$10.85 (midpoint $10.60, unchanged), with FCF guidance cut to $600M. Management expects net debt leverage below 3x in H2 and sees AMC margins stabilizing with further expansion into 2027.
“Orders in the quarter on a daily basis were up 8.8% versus the prior year or 8.1% excluding data center.”
on Order growth
“We are very encouraged by the positive order momentum we're seeing, which is broad-based with growth in all 3 segments.”
on Order momentum
“We have zero instances of service levels declining though.”
on Service levels
Can you help put in context when orders and revenue numbers can start converging? Any moving pieces that will prevent you from getting there as we exit this year into next year?
Rob Rehard said order strength is broad-based and July orders were up 7%. IPS large project timing is an 'air pocket' that frees up in 2027, with shippable backlog for 2027 up 20% YoY. PES order rates are improving, and AMC is seeing strong momentum. No visible obstacles beyond macro.
Do you feel like you're losing any share because your service levels are lighter? Are you seeing those service level issues outside of AMC?
Rob Rehard clarified service levels are not declining; productivity programs are being slowed to protect service levels amid strong growth, particularly in AMC. Outside AMC, it's conservatism on timing. Aamir Paul added that given higher-than-projected growth, they chose to reset timing on some planned footprint consolidation.
Why haven't we seen more conversion on the data center switchgear pipeline over the last couple of quarters?
Rob Rehard said switchgear is growing at market levels with the funnel unchanged. They expect ~$180M in switchgear sales this year, rising to ~$240-250M next year. ePOD orders were not expected this year; first ePOD revenue of $15M is now expected in Q4.