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    TT
    Earnings call· Sep 2025(Q3 FY25)

    Trane Technologies plc TT

    Oct 30, 2025 Source

    Executive summary

    Trane Technologies Q3 FY25 — Record Bookings and Strong Commercial HVAC Performance

    Trane Technologies delivered a strong Q3 FY25, marked by record bookings and robust Commercial HVAC performance globally, particularly in the Americas, which significantly offset headwinds in the Residential and Transport markets. The company's purpose-driven strategy, innovation, and direct sales force are driving market outgrowth, especially in high-growth verticals like data centers, and positioning it for continued strong growth into 2026 and beyond, underpinned by an elevated backlog and expanding services portfolio.

    Highlights

    5

    • Record quarterly bookings of $6 billion, representing 13% organic growth year-over-year.

    • Adjusted operating margin expanded by 170 basis points.

    • Adjusted EPS grew by 15% year-over-year.

    • Americas Commercial HVAC bookings reached an all-time high, surging 30% year-over-year, with applied bookings more than doubling.

    • Total backlog ended Q3 at $7.2 billion, with Americas and EMEA Commercial HVAC backlog increasing by over $800 million or approximately 15% from year-end 2024.

    Concerns

    4

    • Residential bookings declined approximately 30% and revenues declined approximately 20%, consistent with prior updates.

    • Americas Transport revenues were flat despite end markets being down over 25%, with Q4 revenues expected to be down approximately 10%.

    • The combined revenue impact from Residential and Transport headwinds for FY25 is a reduction of approximately $250 million ($100 million in Q3 and $150 million in Q4).

    • EMEA Adjusted EBITDA margins declined by 60 basis points due to year-1 M&A-related integration costs.

    Guidance & targets

    12
    CategoryTargetConfidence
    Full-year 2025 Organic Revenue Growth
    approximately 6%
    high materiality
    High
    Full-year 2025 Adjusted EPS
    $12.95 to $13.05
    high materiality
    High
    Full-year 2025 Organic Leverage
    30% plus
    medium materiality
    High
    Full-year 2025 Free Cash Flow Conversion
    100% or greater
    medium materiality
    High
    Q4 2025 Organic Revenue Growth
    approximately 3%
    medium materiality
    High
    Q4 2025 Organic Revenue Growth (excluding Residential)
    approximately 7%
    medium materiality
    High
    Q4 2025 Organic Leverage
    approximately 30%
    medium materiality
    High
    Q4 2025 Adjusted EPS
    $2.75 to $2.85
    high materiality
    High
    2026 Commercial HVAC Growth
    continued strong growth
    high materiality
    High
    2026 Residential Market Performance
    challenging first half, followed by improvement in the second half
    medium materiality
    Medium
    2026 Americas Transport Market Performance
    soft markets in the first half and recovery in the second
    medium materiality
    Medium
    2027 Americas Transport Market Growth
    exceeding 40%
    low materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Americas
    Organic revenue growth driven by strong Commercial HVAC volume and positive price realization, offset by significant Residential volume decline. Adjusted EBITDA margins improved due to strong productivity and cost management, while sustaining high business reinvestment.
    Adjusted EBITDA margins: up 90 bpsCommercial HVAC bookings: up 30% YoYApplied solutions bookings growth: over 100%Commercial HVAC revenue growth (equipment): low teensCommercial HVAC revenue growth (services): low double digitsCommercial HVAC 3-year stack revenue growth: approximately 50% (Q1-Q3 2025, expected Q4)Residential bookings: declined approximately 30%Residential revenues: declined approximately 20%Transport refrigeration bookings: up low teensTransport refrigeration revenues: flat
    		—4%—over 23%
    EMEA
    Organic revenue growth primarily from volume in Commercial HVAC and Transport. Adjusted EBITDA margins declined as expected due to year-1 M&A-related integration costs, but improved sequentially from Q2. Intensified channel investments and M&A are impacting near-term margins but strengthening the business for long-term growth.
    Adjusted EBITDA margins: declined 60 bpsCommercial HVAC bookings: increased high teensCommercial HVAC revenues: grew mid-single digitsTransport bookings: rose high single digitsTransport revenues: declined low single digits
    		—3%——
    Asia Pacific
    Organic revenue increased due to strong volume growth and price realization. Adjusted EBITDA margins improved significantly, driven by strong volume growth in China (rebounding from prior year's credit tightening anniversary) and productivity across the segment. Sustained high levels of business reinvestment.
    Adjusted EBITDA margins: improved 230 bpsCommercial HVAC bookings: up mid-30sCommercial HVAC revenues: grew low teens
    		—9%——

    Operational metrics

    15
    Capital deployed year-to-date
    $2.4B
    YTD through October

    Excludes $260M M&A and $100M share repurchases from FY24 targets.

    Share repurchase authorization remaining
    $5B
    current

    Provides significant share repurchase optionality.

    Services revenue as % of total enterprise revenues
    1/3
    current

    Key driver underpinning growth.

    Services Compound Annual Growth Rate
    low teens
    2020-2025

    Very strong and consistent growth.

    Connected buildings
    over 65,000
    current

    Includes Trane Connected business and BrainBox AI acquisition.

    Chiller capacity expansion
    4x
    since 2023

    Investment to meet demand, particularly in data centers.

    FY25 Revenue Headwinds
    $250M
    FY25

    Combined impact of Residential and Transport market slowdowns.

    FY25 Revenue Headwinds impact on growth
    2 percentage points
    FY25

    Total impact on 2025 organic revenue growth.

    Price contribution to revenue growth
    3 percentage points
    Q3, FY25 guide

    Tracking around 3 percentage points in H1, expected for full year.

    Volume contribution to revenue growth
    3 percentage points
    FY25 guide

    Expected for full year, alongside price contribution.

    Residential revenue decline
    approximately 20%
    Q3, Q4 expected

    Consistent with September update.

    Residential volume decline
    roughly 30%
    Q3

    Implied by revenue decline and price/mix impact.

    Residential price/mix impact
    10 points favorable
    Q3

    Favorable impact offsetting volume decline.

    M&A EPS headwind
    $0.20
    FY25

    Expected to be less of a headwind in 2026.

    Tax rate
    20%
    FY25

    Very confident to achieve 20% for the full year, implying favorable tax in Q4.

    Industry KPIs

    8
    MetricValueDetails
    Price cost3 percentage points%
    Order backlog$7.2BUSD
    Book to bill ratio—
    Data center hvac exposure—
    Organic operating leverage30%+%
    Service aftermarket attach1/3%
    Order lead times placement horizon—
    Orders bookings growth by vertical13%%

    Orderbook & backlog

    5
    Total Backlog$7.2BQ3 FY25 end
    Americas and EMEA Commercial HVAC Backlogup over $800MQ3 FY25 end

    up approximately 15% from year-end 2024

    Positioning well for continued strong growth in 2026 and beyond.

    Commercial HVAC Americas Backlogup nearly $500MQ3 FY25 end

    YoY

    Enterprise Backlogroughly flattishQ3 FY25 end

    YoY

    Mix continues to shift more towards Commercial HVAC.

    Thermo King and Residential Backlogdown about $300MQ3 FY25 end

    YoY

    Product announcements

    1
    ProductTypeDetails
    Thermal Management System for NVIDIAroadmap

    Deals & partnerships

    1
    BrainBox AIAcquisition of an AI-powered building optimization company.

    Acquisition of BrainBox AI, which uses Agentic AI to optimize building operations. Demonstrated energy cost savings of over 30% in a pilot program with a convenience store chain. Expected to be a fast grower with accretive margins.

    Risks & headwinds

    4
    Residential Market SlowdownQ3 FY25, Q4 FY25, H1 FY26

    Q3 bookings down approximately 30%, revenues down approximately 20%. FY25 revenue impact of $250 million ($100M in Q3, $150M in Q4).

    Mitigation: Managing all parts of the P&L, implementing cost controls, industry maintaining price discipline, expecting channel inventory to normalize by year-end 2025 or Q1 2026.

    Americas Transport Market SofteningQ4 FY25, H1 FY26

    End markets down over 25%, Q4 revenues expected down approximately 10%.

    Mitigation: Outperforming end markets, investing heavily in innovation, expecting market to bottom in H1 2026 and recover in H2 2026.

    EMEA M&A Integration CostsFY25

    60 basis points decline in Adjusted EBITDA margin in Q3.

    Mitigation: These M&A transactions are important for future growth opportunities; margins expected to grow and accelerate into 2026 as integration progresses and investments anniversary.

    Timing of Customer DeliveriesQ4 FY25

    $100 million revenue shift from Q4 FY25 to 2026.

    Mitigation: Considered normal noise in shipment patterns, not a trend; demand remains extremely strong, and the product will ship when job sites are ready.

    What to watch in Q4 FY25

    5

    Residential Channel Inventory Normalization

    Q4 FY25 / Q1 FY26
    CurrentInventory build-up due to unusual 2025 market dynamics
    TargetBurned down by year-end 2025 or Q1 2026

    Why it matters

    Impacts residential sales and overall revenue growth; normalization is key for market recovery.

    Our plan is, hopefully💬, it's burned down by the end of the -- at least by the end of the year. If not, it will certainly be burned down by the first quarter. But we'll give you an update on that, Andy, when we present our fourth quarter earnings.

    Q&A highlights

    6

    Are there opportunities for service incremental margins to improve, given investments in technology and fixed assets replacing variable human costs?

    Americas margins were strong in Q3, with operating income margins at nearly 22%. Service margins are higher than the segment average and equipment margins. Investments in front-end tools, service technicians, sales account managers, and training centers are expected to lead to continued margin expansion and increased technician productivity.

    “Operating income margins were nearly 22%, up 120 basis points on a year-over-year basis. And when you think about service, we've described service margins to be higher than the segment average. They're higher than equipment margins. And we continue to invest strongly in that space across front-end tools, service technicians, sales account managers. And I think we like the path that those margins should be ongoing forward. There's absolutely an opportunity for those margins to expand.”

    asked by Christopher Snyder · answered by Christopher Kuehn

    2 min read5 chapters

    Detailed Narrative

    01

    Purpose-Driven Strategy and Market Demand

    Trane Technologies is leveraging its purpose-driven strategy to capitalize on the growing demand for sustainable and resilient infrastructure, particularly in the U.S. where the AI revolution and industrial reshoring are driving significant transformation. The company's high-efficiency solutions are designed to help customers save energy and reduce operational costs, aligning environmental benefits with financial performance. This strategic focus positions Trane Technologies at the heart of evolving market needs, ensuring continued relevance and growth.

    02

    Commercial HVAC Outperformance and Backlog Strength

    The Commercial HVAC businesses globally, especially in the Americas, are performing strongly, consistently outperforming end markets. The Americas Commercial HVAC business achieved a 3-year stack revenue growth of approximately 50% in Q1 through Q3 2025, with similar expectations for Q4. This consistent performance is supported by a robust backlog, which is elevated and growing, up over $800 million from year-end 2024 for Americas and EMEA Commercial HVAC, providing strong visibility for future revenue.

    03

    Residential Market Dynamics and Inventory Normalization

    The Residential market experienced an unusual year in 2025, influenced by pre-buys, refrigerant change issues, and a short summer, leading to channel inventory build-up. Residential bookings and revenues declined approximately 30% and 20% respectively in Q3, consistent with prior updates. Management expects channel inventory to normalize by the end of 2025 or Q1 2026, with the industry maintaining price discipline despite the volume challenges.

    04

    Data Center Innovation and Capacity Expansion

    Trane Technologies is a leader in the data center vertical, actively collaborating with key influencers like NVIDIA to develop innovative thermal management solutions. The company has significantly expanded its chiller capacity by four times since 2023 to meet the robust demand in this high-growth sector. The innovation developed for data centers is also being applied back into core markets, creating additive benefits across the portfolio.

    05

    Services Business as a Durable Growth Driver

    The Services business, constituting approximately one-third of total enterprise revenues, continues to be a durable and consistent growth driver, boasting a low-teens compound annual growth rate since 2020. Investments in front-end tools, service technicians, and training, including a new training center, enhance productivity and support the growing installed base. The acquisition of BrainBox AI further strengthens connected services, with over 65,000 connected buildings and significant energy cost savings demonstrated in pilot programs, indicating accretive margins from subscription-based software.

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