Skip to content
    CARR
    Earnings call· Dec 2025(Q4 FY25)

    CARRIER GLOBAL Q4 FY25 earnings call CARR

    Feb 5, 2026 Source

    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

    5

    • 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

    5

    • 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

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

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    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

    Operational metrics

    30
    Cost savings
    over $100 million
    FY26

    The cost actions that we executed into 2025 will deliver over $100 million of savings in 2026.

    Chillers connected
    over 70,000up from 17,000 three years ago
    current

    Three years ago, we had 17,000 chillers connected. Today, it is over 70,000.

    CSA attachment rate
    close to 60%grew more than 3x last year
    last year

    Our attachment rate in CSA grew more than 3x last year and is now close to 60%.

    Global chiller service coverage
    110,000
    current

    And our global coverage, that is chillers covered by service agreements, is up to 110,000, including Toshiba.

    High-complexity chiller service contract coverage
    70% to 80%
    current

    We estimate that 70% to 80% of our high-complexity chillers are under service contracts.

    Modifications and upgrades sales growth
    20%
    last year

    Sales last year were up 20%.

    Grid capacity freed by HEMS
    nearly 13%
    peak hours

    If our integrated heat pump battery solution were in every home and building that Carrier currently serves, we would free up nearly 13% of grid capacity during peak hours.

    Battery-powered heat pump operation
    up to 4 hours
    peak hours

    Through field trials in carrier employee homes, we have been demonstrating that we can consistently provide up to 4 hours of battery-powered heat pump operation during peak hours.

    System Profi installers sales growth
    double digits
    last year

    Our System Profi installers... drove their sales up double digits last year.

    Lynx paid subscriptions
    over 220,000
    current

    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.

    Residential industry units (typical year)
    around 9 million
    typical year

    In this market, we estimate demand in a typical year to be around 9 million units.

    Residential industry units (2020-2024 average)
    9.7 million
    2020-2024

    Between '20 and 2024, our industry averaged 9.7 million units for a cumulative overage, so to speak, of about 3.5 million units.

    Residential industry units (2025 estimate)
    about 7.5 million
    FY25

    Last year, we estimate our industry delivered about 7.5 million units.

    Residential industry overage absorbed (2025)
    about 45%
    FY25

    So we absorbed about 45% of that overage.

    Total company organic sales growth
    down about 1%
    FY25

    For the full year, you can see that our organic sales were down about 1% due to weakness in our shorter-cycle businesses, which represent over 50% of our portfolio.

    Total company reported sales
    $4.8 billion
    Q4 FY25

    For the quarter, reported sales were $4.8 billion.

    Adjusted operating profit
    $455 milliondown 33% YoY
    Q4 FY25

    Adjusted operating profit was $455 million and adjusted EPS was $0.34. ... Adjusted operating profit was down 33%, mainly reflecting lower organic sales and the unfavorable business mix I just referred to as well as much lower manufacturing output, partially offset by strong productivity.

    Adjusted EPS
    $0.34
    Q4 FY25

    Adjusted operating profit was $455 million and adjusted EPS was $0.34.

    CSA Residential field inventories
    down roughly 30%year-over-year
    year-end FY25

    At year-end, field inventories for Resi were down roughly 30% year-over-year, in line with our expectations, and we believe that field destocking is now substantially behind us.

    CSA Light Commercial distributor inventories
    down 25%year-over-year
    year-end FY25

    Similarly, Light Commercial distributor inventories were down 25% year-over-year.

    China sales decline
    about 20%
    Q4 FY25

    Overall sales in China were down about 20% with resi and light commercial down about 30%, where we intentionally reduced distributor inventory during the quarter, while commercial in China was down mid-single digits.

    Riello revenue headwind
    roughly $350 millionyear-over-year
    FY26

    This includes a roughly $350 million year-over-year revenue headwind from the exit of Riello, mainly reported in the CSE segment.

    CSA Q1 operating margins
    close to about 15%
    Q1 FY26

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

    CSA Residential sales decline
    about 20% to 25%
    Q1 FY26

    we expect resi sales in Q1 in the Americas to be down about 20% to 25%.

    Q1 FY26 tax rate benefit
    about $0.10versus Q4
    Q1 FY26

    And then in Q1, because of the 0% effective tax rate, there is about a $0.10 benefit versus Q4.

    CSA Residential field inventory
    down about 32%year-over-year
    January

    we ended January versus January of last year, down about 32%.

    Commodity headwind
    about $60 million
    FY26

    As of today, we have about a $60 million headwind related to copper, steel and aluminum headwind for this year, and that is net of our blocking position.

    Headcount reduction
    3,000 heads
    2025

    we did have to reduce 3,000 heads last year, mostly in the second half of last year.

    Incremental investments
    about $100 million
    FY26

    Our current guide includes about $100 million of incremental investments. Throughout this period, we continue to invest in sales resources and digital capabilities.

    Q4 FY25 Decremental Margin (ex-currency)
    50%
    Q4 FY25

    If you yank out currency, which is about $150 million in sales with no earnings, our decrementals are 50%, still really high, but not, of course, close to 70%.

    Industry KPIs

    10
    MetricValueDetails
    Price costlow single-digit%
    Regional exposure—
    Vertical revenue breadth—
    Data center hvac exposure$1 billionUSD
    Organic operating leverage—
    Service aftermarket attachdouble digits%
    Residential vs commercial split—
    Order lead times placement horizon—
    Orders bookings growth by verticalup over 15%%
    Manufacturing footprint domestic share—

    Orderbook & backlog

    9
    Total company ordersup over 15%Q4 FY25

    YoY

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

    Commercial HVAC ordersup over 45%Q4 FY25

    YoY

    Globally, with particular strength in CSA.

    CSA Commercial ordersincreased 80%Q4 FY25

    YoY

    Reflecting some large data center wins.

    CSA Commercial Applied ordersmore than tripledQ4 FY25

    YoY

    Compared to last year.

    Light Commercial ordersup 70%Q4 FY25

    YoY

    Residential ordersabout flatQ4 FY25

    YoY

    Data center revenuearound $1 billionFY25

    Reached this level in 2025.

    Data center ordersup more than 4xQ4 FY25

    YoY

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

    Data center revenue target$1.5 billionFY26

    Guided for this year.

    Product announcements

    3
    ProductTypeDetails
    Higher capacity CDUs (3MW and 5MW)roadmap
    Integrated Heat Pump Battery Solution (HEMS)launch
    Maglev bearing air-cooled chillerslaunch

    Deals & partnerships

    1
    Net Feasainvestment

    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

    2
    Commercial HVAC Engineering Lab & Chiller Manufacturing Capacity Expansionunderway
    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 Expansionunderway

    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

    6
    Softening residential and light commercial marketsH2 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 weaknessQ4 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 facilitiesQ4 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 EuropeFY26

    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 ChinaQ4 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 aluminumFY26

    About $60 million headwind for FY26

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

    Q&A highlights

    6

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.