Sought understanding of the full-year CSA residential guidance, market pricing discipline, and Carrier's expected volume share gain relative to the market decline.

David Gitlin explained the forecast assumes flat macro conditions, with industry units down 20-25% in H1 and flat in H2, leading to a full-year industry decline of 10-15%. Carrier's sales are expected down high single digits, benefiting from the absence of destocking in H2 and low single-digit price realization. “the net result of all of this is that we expect our sales and our volume to be down high single digits year-over-year with our sales including about a low single-digit benefit from pricing.”

Asked about the current level of CSA residential channel inventory relative to normal and historical levels.

David Gitlin stated that field inventories for Resi were down about 32% year-over-year in January, reaching 2018-type levels. He believes destocking is substantially behind them. “we ended January versus January of last year, down about 32%. So we did go to great lengths with our channel partners to end at the field inventory levels that we had said. And that's putting us at like 2018 type levels.”

Inquired about the year-over-year increase in total inventory despite Q-on-Q reduction, and questioned the conservatism of the 6.5 million unit industry average for residential given historical replacement rates.

Patrick Goris explained the year-over-year inventory increase was due to keeping US resi manufacturing facilities running at minimal levels, which is expected to liquidate through the year. David Gitlin defended the residential market forecast as based on current macro conditions and triangulation with historical overages, aiming for a realistic plan. “we decided last year to keep our U.S. resi manufacturing facilities running at minimal levels because it was more economical than shutting them down for several months and then having a cold start. As a result, there is a couple of hundred million more inventory on our books at the end of the year than we otherwise would.”

CARR

Carrier Global (CARR) Q4 FY25 earnings call: guidance and Q&A

Q: Asked for clarification on Q1 CSA margins, noting a perceived 10% overall operating margin, and drivers like fixed cost absorption and raw material impacts.

Patrick Goris clarified that CSA margins are expected to be close to 15% in Q1, with overall company Q1 operating margin around 10%. The improvement from Q4 is due to less headwind from residential sales (down 20-25% vs 40% in Q4) and a 0% effective tax rate providing a $0.10 EPS benefit. “We expect them to be close to about 15% in Q1.”

Earnings call· Dec 2025 (Q4 FY25)· Industrials· Feb 5, 2026

Source: earnings call transcript

Executive summary

Carrier Global Corporation Q4 FY25 — Data Center Growth and Cost Actions Offset Short-Cycle Weakness

Carrier Global navigated a challenging Q4 FY25 marked by significant softening in short-cycle residential and light commercial markets, which led to a 1% organic sales decline for the full year. Despite these headwinds, the company achieved strong double-digit growth in its data center and aftermarket businesses, alongside robust commercial HVAC performance. Strategic cost actions and investments in technology differentiation are positioning Carrier for stronger incremental margins and outsized gains when short-cycle markets eventually recover.

Highlights

Data center business grew to approximately $1 billion in 2025, with Q4 orders up over 4x.
Commercial HVAC grew double digits for the fifth consecutive year, with full-year sales up 14%.
Aftermarket sales were up double digits for the fifth consecutive year, with 70,000 chillers connected.
Cost actions in 2025 are expected to deliver over $100 million in savings in 2026.
Distributed $3.7 billion to shareholders through buybacks and dividends in 2025.

Concerns

Short-cycle residential and light commercial markets softened more than expected in H2 2025, with CSA residential down nearly 10% and light commercial down about 20% for the full year.
Total company organic sales were down about 1% for the full year.
Adjusted operating profit was down 33% in Q4, mainly due to lower organic sales and unfavorable business mix.
CSA segment operating margin declined by 10 points to just under 9% in Q4 due to lower sales and significant under-absorption in Resi manufacturing.
Expected continued softness in higher-margin short-cycle businesses (CSA residential and light commercial) to largely offset growth in 2026, leading to a mix headwind.

Guidance & targets

Category	Target	Timeline	Confidence
Total company organic growth	flat to low mid-single-digit high materiality	FY26	High
Total company reported sales	approximately $22 billion high materiality	FY26	High
Data center revenue growth	up about 50% medium materiality	FY26	High
Aftermarket growth	double-digit medium materiality	FY26	High
Commercial HVAC growth	double-digit medium materiality	FY26	High
Total company adjusted operating profit	approximately $3.4 billion high materiality	FY26	High
Total company free cash flow	approximately $2 billion high materiality	FY26	High
Share repurchases	about $1.5 billion high materiality	FY26	High
Total company adjusted EPS	approximately $2.80 high materiality	FY26	High
Total company Q1 revenues	about $5 billion medium materiality	Q1 · FY26	High
Total company Q1 operating margin	about 10% medium materiality	Q1 · FY26	High
Total company Q1 adjusted EPS	about $0.50 medium materiality	Q1 · FY26	High
Total company Q1 free cash flow	a use of a few hundred million dollars low materiality	Q1 · FY26	High
CSA Residential sales	down high single digits medium materiality	FY26	High
CSA Residential industry units	down 10% to 15% medium materiality	FY26	High
CSE Residential sales	flat medium materiality	FY26	High
CSE Europe heating market units	down mid- to high single digits medium materiality	FY26	High
CSAME China sales	down about high single digits medium materiality	FY26	High
CSAME Rest of Asia sales	grow high single digits low materiality	FY26	High
CSAME Japan EBIT ROS	mid-teens low materiality	FY26	High
Total company price realization	close to 1 point low materiality	FY26	High
Incremental operating profit	about $100 million medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
CSA Q4 organic sales significantly impacted by lower Resi and Light Commercial sales. Segment operating margin declined 10 points due to lower sales and significant under-absorption in Resi manufacturing. Full year commercial strength helped mitigate short-cycle declines. Commercial sales growth: 12% (Q4)Residential sales decline: close to 40% (Q4)Residential volume decline: over 40% (Q4)Light Commercial sales decline: 20% (Q4)Full year Commercial sales growth: over 25%Full year Residential sales decline: 9%Full year Light Commercial sales decline: 20%	—	-17%	—	just under 9%
CSE Organic sales declined due to challenging residential heating market in Europe, particularly Germany. Operating profit and margin improved due to cost actions. Commercial sales growth: mid-single digits (Q4)Residential/Light Commercial sales decline: mid-single digits (Q4)Heat pump sales growth: double digitsBoiler sales decline: low to mid-single digits	—	-2%	—	up year-over-year
CSAME Strength in India and Australia offset by weakness in China, especially residential and light commercial where distributor inventory was intentionally reduced. Operating margin improved 100 bps due to strong productivity. China overall sales decline: about 20% (Q4)China residential/light commercial sales decline: about 30% (Q4)China commercial sales decline: mid-single digits (Q4)India and Australia strength	—	-9%	—	about 12%
Transportation Strong organic sales growth driven by container business. Operating margins expanded due to strong productivity, partially offset by business mix. Container growth: exceptional (Q4)Global Truck & Trailer sales: flat (Q4)North America Truck & Trailer growthEurope and Asia Truck & Trailer weakness	—	10%	—	expanded by 30 basis points

CARR operating KPIs by quarter

CARR operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Mar 2025 Q1 FY25	Sep 2025 Q3 FY25	This call Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Employees	50K Patrick, thank you, and thanks to our 50,000 team members globally. Source: earnings call transcript	50K Let me start by thanking our 50,000 teammates for delivering another strong quarter. Source: earnings call transcript	50K And let me just close by thanking you all for joining the call, and thanks to our 50,000 colleagues globally. Source: earnings call transcript	<50K So my thanks to our nearly 50,000 teammates around the world, and thanks to our investors for your continued confidence. Source: earnings call transcript	—	50K And I want to thank our 50,000 team members around the world. Source: earnings call transcript	—
Paid subscriptions Lynx	—	—	~210K Paid subscriptions for Lynx, our digital platform for transportation, were up 40% in the quarter to about 210,000. Source: earnings call transcript	220K+ Today, we have over 220,000 paid Lynx subscriptions with over 110,000 on containers, including 6 of the world's top 10 shipping lines. Source: earnings call transcript	<240K Our Lynx subscriptions cover nearly 240,000 units, and we expect to triple this number in the next few years. Source: earnings call transcript	—	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Total company orders up over 15% Q4 FY25

YoY

Driven by strength in CSA Commercial, underscoring continued strong demand.

Commercial HVAC orders up over 45% Q4 FY25

YoY

Globally, with particular strength in CSA.

CSA Commercial orders increased 80% Q4 FY25

YoY

Reflecting some large data center wins.

CSA Commercial Applied orders more than tripled Q4 FY25

YoY

Compared to last year.

Light Commercial orders up 70% Q4 FY25

YoY

Residential orders about flat Q4 FY25

YoY

Data center revenue around $1 billion FY25

Reached this level in 2025.

Data center orders up more than 4x Q4 FY25

YoY

Original transcript said '5x (sic) [ 4x ]'.

Data center revenue target $1.5 billion FY26

Guided for this year.

Product announcements

Product	Type	Timeline
Higher capacity CDUs (3MW and 5MW)	roadmap	later this year (2026)
Integrated Heat Pump Battery Solution (HEMS)	launch	later this year (2026)
Maglev bearing air-cooled chillers	launch	recently introduced

Deals & partnerships

Net Feasa investment

Carrier recently invested in Net Feasa, which provides enhanced wireless IoT connectivity on cargo ships. This combines with Lynx applications to enable AI-driven reefer health algorithms.

Capital programs

Commercial HVAC Engineering Lab & Chiller Manufacturing Capacity Expansion underway

Start: over the past couple of years

Benefit:expanded engineering lab and chiller manufacturing capacity globally, added hundreds of technicians

Over the past couple of years, we have expanded our commercial HVAC engineering lab and chiller manufacturing capacity globally and have added hundreds of technicians. These multiyear investments have positioned us to outgrow the commercial HVAC market.

System Profi Installers Program Expansion underway

Benefit:double our number of qualified Profi installers

We plan to double our number of qualified Profi installers in 2026, driving strong growth for them and us.

Risks & headwinds

Softening residential and light commercial markets H2 2025, expected to continue into FY26

CSA residential down nearly 10% (FY25), light commercial down about 20% (FY25); total company organic sales down about 1% (FY25)

Mitigation:Reduced channel inventory, lowered overhead, aggressive cost and pricing actions, investments in technology differentiation, salespeople, and technicians.

Unfavorable business mix due to short-cycle weakness Q4 FY25, FY26

Adjusted operating profit down 33% in Q4 FY25; expected to be a headwind in FY26

Mitigation:Cost actions from 2025 expected to deliver over $100 million in savings in 2026; focus on controlling controllables.

Significant under-absorption in Resi manufacturing facilities Q4 FY25, primarily Q1 FY26

CSA segment operating margin declined 10 points in Q4 FY25; Resi manufacturing output less than half of Q4 FY24

Mitigation:Kept facilities running at minimal levels to be more economical than cold starts; expects sequential margin improvement in Q2-Q3 FY26 as seasonal build occurs.

Continued softness in total heating market in Europe FY26

CSE organic sales down 2% in Q4 FY25; industry overall in Europe expected down mid- to high single digits in FY26

Mitigation:Growth initiatives and cost actions in the segment; benefit from mix-up (heat pumps up double digits, boilers down low to mid-single digits).

Ongoing weakness in residential and light commercial in China Q4 FY25, FY26

Overall sales in China down about 20% in Q4 FY25; resi and light commercial down about 30% in Q4 FY25; China sales expected down high single digits in FY26

Mitigation:Intentionally reduced distributor inventory in Q4 FY25; strength in other CSAME regions (India, Australia) offsets declines.

Commodity headwind from copper, steel, and aluminum FY26

About $60 million headwind for FY26

Mitigation:Net of blocking position; about 50% blocked for the full year.

Q&A highlights

Asked for clarification on Q1 CSA margins, noting a perceived 10% overall operating margin, and drivers like fixed cost absorption and raw material impacts.

Patrick Goris clarified that CSA margins are expected to be close to 15% in Q1, with overall company Q1 operating margin around 10%. The improvement from Q4 is due to less headwind from residential sales (down 20-25% vs 40% in Q4) and a 0% effective tax rate providing a $0.10 EPS benefit.

“We expect them to be close to about 15% in Q1.”

asked by Nigel Coe · answered by Patrick Goris

2 min read 6 chapters

Detailed narrative

Data Center Expansion and Innovation

Carrier's data center business reached approximately $1 billion in 2025, with Q4 orders surging over 4x. The company has expanded its portfolio to address all major data center chiller applications, increasing its share of water-cooled chillers 4x since spin-off. New maglev bearing air-cooled chillers and planned higher-capacity CDUs up to 5 megawatts in 2026 are key differentiators, alongside investments in engineering labs and manufacturing capacity.

Aftermarket Growth and Digitalization

The aftermarket segment demonstrated double-digit growth for the fifth consecutive year, driven by a successful playbook. Connected chillers increased from 17,000 to over 70,000 in three years, with a CSA attachment rate near 60%. Modifications and upgrades, which grew 20% last year, are identified as the highest growth potential area for the next five years.

Home Energy Management Systems (HEMS)

Carrier is making significant strides in HEMS, particularly with its integrated heat pump battery solution. Field trials have demonstrated up to 4 hours of battery-powered heat pump operation during peak hours, with a market launch planned for later in 2026. In Europe, the System Profi installer program, offering complete home energy solutions, saw double-digit sales growth, with plans to double qualified installers in 2026.

Container Solutions and IoT

The CST business, particularly its container segment, is leveraging end-to-end solutions. The Lynx platform now has over 220,000 paid subscriptions, including 110,000 on containers for major shipping lines. Recent investment in Net Feasa enhances wireless IoT connectivity, enabling AI-driven reefer health monitoring and predictive maintenance, which is expected to smooth container cycles and provide recurring revenues.

Residential Market Dynamics and Inventory

The short-cycle residential market softened significantly in 2025, with industry units estimated at 7.5 million, absorbing 45% of the cumulative overage from 2020-2024. Carrier reduced field inventories for residential by roughly 30% year-over-year by Q4 2025, reaching 2018 levels. The company anticipates absorbing the remaining overage in 2026, with industry units projected down 10-15% for the year.

Cost Actions and Productivity

Despite market challenges, Carrier implemented aggressive cost and pricing actions, achieving strong material productivity and decisive overhead cost reductions. These actions, including a reduction of 3,000 heads in 2025, are expected to deliver over $100 million in savings in 2026 and position the company for stronger incremental margins when short-cycle markets recover. The company is also embracing AI to drive further productivity.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.