What Management Said
Read the full Q1 2026 transcript ↗During today's call, we will discuss ITW's first quarter 2026 financial results and provide an update on our outlook for full year 2026. In the first quarter, we continued to outperform our underlying end markets, delivering revenue growth of 5% and a 12% increase in GAAP EPS to $1.66. Through disciplined operational execution, we expanded operating margin by 60 basis points to 25.4%. We continued to capitalize on positive demand trends in our CapEx-related segments, with organic growth in Welding up 6% and Test & Measurement and Electronics up 5%.
Our enterprise initiatives contributed 120 basis points to the bottom line, driving that 60 basis point overall margin improvement. We were equally encouraged by our continued progress on ITW's organic growth agenda, specifically on Customer-Back Innovation, or CBI as we call it. We are positioning the company to consistently deliver 3% plus CBI contribution to revenue by 2030. As we've noted before, this is the key driver of our ability to consistently deliver 4%+ high-quality organic growth at the enterprise level.
As we look ahead and based on our solid Q1 results, we are raising our full year GAAP EPS guidance by $0.10. Our new guidance midpoint of $11.30 incorporates a slightly lower tax rate and represents 8% year-over-year growth. Our full year organic growth projection of 1% to 3% remains unchanged, reflecting current demand levels adjusted for seasonality. For the full year, we expect operating margin expansion of approximately 100 basis points, powered by our enterprise initiatives.
What went well
- ITW delivered a solid start to 2026 with revenue growth of 5% and a 12% increase in GAAP EPS to $1.66, in line with expectations.
- Operating margin expanded 60 basis points to 25.4%, with enterprise initiatives contributing 120 basis points and incremental margins of approximately 40% in the quarter.
- CapEx-related segments performed strongly: Welding grew 6% organically, and Test & Measurement and Electronics grew 5% organically (10% total revenue), the segment's highest growth rate in three years, with semi-related businesses up more than 15%.
- Management raised full-year GAAP EPS guidance by $0.10 to a midpoint of $11.30, representing 8% year-over-year growth, on the strength of Q1 results and a slightly lower tax rate.
- All seven segments are projected to deliver positive organic growth and margin expansion in 2026, and order activity in CapEx and semi-related segments is running meaningfully higher than Q1 organic growth rates.
- The company generated 6% free cash flow growth and repurchased $375 million of shares during the quarter.
What went wrong
- Consumer-facing businesses faced challenging end-market dynamics, with Food Equipment organic revenue down 3% (equipment down 6%) on a slow January start, particularly weak institutional/education demand in North America.
- Automotive OEM organic revenue declined 1% and Construction Products declined 1% organically amid weak builds and soft residential/European markets; China auto builds were down 10% in Q1.
- Specialty Products organic revenue fell 5%, with product line simplification (PLS) activity and delayed Middle East aerospace sales reducing the segment's organic growth by about three points.
- PLS efforts and delayed Middle East sales reduced overall company organic growth by approximately one percentage point.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| GAAP EPS (midpoint) | FY2026 | $11.30 (raised $0.10 (~8% YoY growth)) |
| Organic revenue growth | FY2026 | 1%-3% (unchanged) |
| Total revenue growth | FY2026 | 2%-4% (unchanged) |
| Operating margin expansion | FY2026 | ~100 bps (unchanged) |
| Enterprise initiatives margin contribution | FY2026 | ~100 bps (volume-independent) |
| Incremental margins | FY2026 | mid-to-high 40s% (unchanged) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Revenue growth (total) | 5% (4.6%) | 0.4% organic, 3.9% from foreign currency translation, and 0.3% from an acquisition. |
| GAAP EPS | +12% to $1.66 | Margin expansion from enterprise initiatives and operational execution plus a slightly lower tax rate. |
| Operating margin | +60 bps to 25.4% | Enterprise initiatives (strategic sourcing and 80/20 Front-to-Back) contributed 120 bps. |
| Test & Measurement and Electronics organic | +5% (10% total revenue) | Sustainable recovery with semi-related businesses up more than 15% on rising fab utilization and new products. |
| Welding organic | +6% | Broad-based strength led by North America (up 8%), new products, and strong order activity across industrial and commercial. |
| Automotive OEM organic | -1% | Weak global auto builds (down more than 3%), but ITW outperformed; margin improved 170 bps to 21%. |
| Food Equipment organic | -3% | Slow institutional/education start in January (NA down 5%), partially offset by service (+3%) and double-digit QSR growth. |
| Specialty Products organic | -5% | PLS activities and delayed Middle East aerospace sales; margin still expanded 40 bps to 31.3%. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Customer-Back Innovation (CBI) | 2025 delivered 40 bps of CBI yield improvement | Tracking to incremental improvement in 2026 toward 3%+ contribution by 2030; patent filings up 9% in 2025 after 18% in 2024 | Improving |
| CapEx vs. consumer-facing demand split | Green shoots discussed last quarter | Industrial/CapEx and semi markets strong with rising orders; consumer-facing markets challenged but improving, ITW outgrowing both | Improving |
| Enterprise initiatives margin engine | Most impactful margin driver since 2012 | 120 bps contribution in Q1, on track for ~100 bps full year, advancing toward 30% margin goal by 2030 | Stable/improving |
| Pricing and price/cost | Original plan assumption for price and price/cost | Slightly more price expected, starting in Q2 and carrying through H2, in response to inflationary pressures | Increasing |
| China automotive recovery | — | China builds down 10% in Q1, projected flat in Q2 with double-digit EV growth where ITW is well-positioned | Improving |
Q&A Summary
Are CapEx businesses (Test & Measurement, Welding) trending ahead of expectations while Consumer/Specialty/Food Equipment lag, netting out?
Roughly yes. All seven segments are expected to show positive organic growth this year. CapEx-related segments are strong with semi/electronics up more than 15% and Welding up 6% on broad-based strength now extending into commercial; consumer-facing markets remain challenged but ITW is outgrowing them (e.g., a couple hundred bps over auto markets).
On margin and incrementals in the mid-to-high 40s for the year, are you getting there differently given weak Food Equipment, and is inflation an impact?
Incremental and operating margin assumptions are unchanged; expect ~100 bps operating margin improvement in 2026. Q1 is seasonally lower and improves sequentially. Food Equipment margin weakness was an isolated, January-driven institutional anomaly that improved through Feb/Mar/Apr.
What is your confidence level on short-cycle momentum given macro/geopolitical uncertainty, and the CBI contribution outlook for 2026?
More confident today than last call; guidance is based on current demand, with Welding and Test & Measurement order rates running meaningfully above Q1 organic growth (not in guidance). On CBI, strong momentum across all segments, building new-product pipeline, and patent filings up 9% in 2025, tracking toward 3%+ by 2030 or sooner.
How does the proliferation of GLP-1 drugs affect long-term Food Equipment demand from restaurants/hospitality?
Not a significant focus; GLP-1 is early days. Restaurants and especially QSR are a smaller portion of Food Equipment (institutional is the largest), so direct impact is limited, and innovation is expected to offset any pressure.
Is the QSR market turning, or is the strong QSR growth ITW-specific?
Hard to say the market is turning; much of the QSR growth is driven by ITW innovation addressing customer pain points like energy, water, and labor savings, supported by the stable annuity-like service business.
Given Q1 organic was just over flat versus ~2% midpoint for the year, is anything (like price) driving growth up later in 2026?
Q1 was in line with plan and the year unfolds on typical seasonality. Divisions have reacted to inflation with a bit more price, coming primarily in Q2 and carrying into H2. Demand trends in two segments are positive; April is trending toward the high end of the 1%-3% range.
More on Illinois Tool Works Inc
Reported 2026-04-30 · figures from the Illinois Tool Works Inc Q1 2026 earnings call.
See how Top Bucket AI works for your firm
Request DemoTop Bucket AI Research
Stay ahead of private markets
Research and market intelligence for private-markets professionals.
✓
You're subscribed.
Thanks for signing up.