Emerson (EMR) Q2 FY26 earnings call: guidance and Q&A

Is the ~1 point of lost Middle East revenue permanently gone, or recoverable?

Baughman said ~$50M of disruption hit the quarter and another ~$100M is expected ahead, with capacity currently ~75%; he does not view the revenues as lost and sees longer-term opportunity, but prudently baked a full-year 1-point top-line cut given six months left and an uncertain situation. Rebuild/restart will unfold over ~6 quarters.

“I don't think there are revenues that are lost. And in fact, over the longer term, there should be opportunity.”

asked by Scott Davis · answered by Michael Baughman

Why was China down 9% — is it chemical-related?

Karsanbhai confirmed the driver is Emerson's exposure to China's chemical industry, which remains overcapacitized and weak on spend, leading the company to cut its full-year China view to down mid-single digits from low single digits.

“Our exposure to the chemical industry in China, an industry that continues to be overcapacitized and very weak in terms of spend.”

asked by Scott Davis · answered by Surendralal Karsanbhai

Isn't the $100M rebuild figure far too low given the scale of damage (e.g., Ras Laffan)?

Krishnan clarified the ~$100M reflects only near-term life-cycle-services disruption tied to damage on the 47 impacted sites; the ~17% of LNG capacity taken offline is a 'much bigger' opportunity that Emerson has not yet scoped or quantified.

“the capacity that was taken offline as that comes online, that's a much bigger number but we're not in a position to quantify it at this point.”

asked by Andrew Obin · answered by Ram Krishnan

Can mid-single-digit order growth be sustained, and how are you offsetting inflation while pricing?

Karsanbhai called it a very strong quarter ex-Middle East (led by U.S. and India, all growth verticals above mid-teens orders) and said mid-single-digit orders are sustainable through FY26, setting up H1 2027. Krishnan attributed margin resilience to disciplined pricing, cost reductions, favorable mix, productivity and supply-chain mitigation.

“mid-single-digit orders are sustainable for us as we navigate through the remainder of 2026.”

asked by Andrew Kaplowitz · answered by Surendralal Karsanbhai

With revenue trimmed but the EPS floor up and margin unchanged, what's driving it, and how does mix play out?

Baughman said margin is unchanged fundamentally ('in the roundings'); the ~$50M plus ~$100M of back-half Middle East impact sits in a lower-margin region, so mix improves only a little as back-half growth is project/backlog-weighted. Ex the software-renewal and FX effects, full-year leverage exceeds 40%, implying back-half acceleration; ACV growth reiterated at 10%+.

“if you take that out, we'll be over 40% leverage on the year -- full year.”

asked by Julian Mitchell · answered by Michael Baughman

The war may be contained but economic impacts aren't — how are you framing feedstock, energy-cost and China chemical spillovers?

Karsanbhai said guidance assumes the conflict stays contained to the Arabian Peninsula/Gulf region; they have accounted for known downstream effects (feedstock pricing/supply, Southeast Asia electricity curtailments) but have NOT assumed a significant deterioration in India or Southeast Asian economic conditions that a deeper conflict could bring.

“we have not assumed a significant deterioration in economic conditions or growth, for example, in India or any of the countries in Southeast Asia”

asked by Jeff Sprague · answered by Surendralal Karsanbhai

What's the visibility on power (+23%), and will high oil prices cause refiners to defer MRO?

Krishnan described broad-based power strength (modernizations plus building greenfield and behind-the-meter, flowing to valves/instruments and digital grid management/T&D), led by North America with momentum in Mexico, Asia, China and some Europe. Karsanbhai said running assets hard tends to increase MRO opportunities in stringent applications; no negative MRO trend seen outside the Middle East sites.

“we tend to see when you run things that hard, the opportunities for MRO to actually increase for us, particularly in stringent applications of high pressure, high temperatures.”

asked by Deane Dray · answered by Ram Krishnan

What have you learned intra-quarter on AI product adoption, and when does it contribute to growth?

Krishnan cited strong customer interest across Nigel (NI), Ovation, DeltaV and AspenTech, with upcoming user conferences to reveal adoption pace. He called AI a genuine differentiator with heavy Ovation quoting activity, but said it is too early to translate into meaningful revenue; value is being captured via disciplined tiered pricing, and he expects it to be a major differentiator into 2027 and beyond.

“we don't have meaningful impact on revenue as we sit here today. But I think as we progress into 2027 and beyond, I think it will be a huge differentiator for us.”

asked by Andrew Buscaglia · answered by Ram Krishnan

Is project capital broadening/accelerating beyond the core growth verticals?

Karsanbhai said the funnel grew to $11.2B driven entirely by the growth verticals (power leading), with no broadening beyond the five core verticals; win rates remain consistent. Krishnan added new capital formation in power, LNG, life sciences, semiconductors and ADG continues to accelerate, while core energy/refining/petrochem is stable-to-muted.

“It continues to be those 5 core verticals that are driving not just the activity but also the feeding of the funnel.”

asked by Joe O'Dea · answered by Surendralal Karsanbhai