Earnings release
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Investor Relations & Media Contact: Erin Linnihan Tel: 224.661.7431 investorrelations@itw.com | mediarelations@itw.com PRESS RELEASE 155 Harlem Avenue, Glenview, Illinois 60025 ITW Reports Third Quarter 2026 Results Revenue of $4.24 billion increased +4% with organic growth of +4%; +5% ex-Welding tornado impact Record operating income of $1.18 billion increased +6% Operating margin of 27.8% expanded 40 bps with favorable price/cost income and margin impact GAAP EPS of $3.00 grew +7% Operating cash flow of $953 million and free cash flow conversion of 100% of net income Full Year 2026 GAAP EPS guidance raised $0.05 at the midpoint to a narrowed range of $11.45 to $11.55 per share, representing +10% growth year-over-year at the midpoint GLENVIEW, Ill., October 27, 2026 - Illinois Tool Works Inc. (NYSE: ITW) today reported its third quarter 2026 results and raised full year 2026 guidance. “The ITW team delivered strong operational execution and financial performance in the third quarter, including organic growth of 4 percent (5 percent excluding the impact of a tornado affecting our Welding segment), 40 basis points of operating margin expansion to 27.8 percent, and a 7 percent increase in GAAP earnings per share to $3.00,” said Christopher A. O’Herlihy, President and Chief Executive Officer. “Our top-line results reflect accelerating demand in our capex-related segments, Welding and Test & Measurement and Electronics, continued strength in Polymers & Fluids segment, and a meaningful increase in the contribution to revenue growth from our Customer-Back Innovation efforts. We entered the fourth quarter with strong operational momentum and are raising our EPS guidance for the year. As we continue to advance our enterprise strategy priorities, including our goal of 3 percent-plus Customer-Back Innovation yield, we are positioning ITW to deliver consistent, above-market organic growth while further expanding profitability and margins,” O’Herlihy concluded. Third Quarter 2026 Results Third quarter revenue of $4.24 billion increased by 4.4 percent. Organic revenue growth was 3.8 percent, led by 6.0 percent growth in North America. Foreign currency translation increased revenue by 0.3 percent, and an acquisition added 0.3 percent.
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GAAP EPS grew 6.8 percent to $3.00, while operating income increased 5.9 percent to $1.18 billion, a quarterly record for the company. Operating margin expanded by 40 basis points to 27.8 percent as enterprise initiatives contributed 130 basis points. In the quarter, price increases and other actions more than offset rising raw material costs, resulting in a favorable impact on both operating income and margin. Operating cash flow was $953 million, and free cash flow was $851 million, representing a 100 percent conversion of net income. During the quarter, the company repurchased $187 million of its own shares and raised its dividend 7 percent, bringing the annualized payout to $6.88 per share. This increase marks the 63rd consecutive year of dividend increases. The effective tax rate for the quarter was 24.4 percent. Tornado damage to two Welding facilities in late July reduced third-quarter revenue by an estimated $40 million. Excluding this impact, the company estimates that the Welding organic revenue growth rate would have been approximately 15 percent, resulting in total company organic growth of approximately 5 percent. The associated loss of operating income was largely offset by business interruption insurance. The impact going forward is expected to be immaterial. 2026 Guidance ITW is raising its full year 2026 GAAP EPS guidance by $0.05 at the midpoint to a narrowed range of $11.45 to $11.55 per share, representing 10 percent growth at the midpoint. Based on current demand levels and prevailing foreign exchange rates, the company is raising revenue growth guidance to 4.5 to 5.5 percent and reaffirming its organic growth guidance of 3 to 4 percent. Operating margin is projected to be in the range of 26.5 to 27.5 percent, with enterprise initiatives contributing more than 100 basis points. Free cash flow is projected to be approximately 100 percent of net income, and the company expects to repurchase approximately $1.5 billion of its own shares. The projected effective tax rate is 23 to 24 percent. Non-GAAP Measures This earnings release contains certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures is included in the attached supplemental reconciliation schedule. The estimated guidance of free cash flow to net income conversion rate is based on assumptions that are difficult to predict, and estimated guidance for the most directly comparable GAAP measure and a reconciliation of this forward-looking estimate to its most directly comparable GAAP estimate have been omitted due to the unreasonable efforts required in connection with such a reconciliation and the lack of reliable forward-looking cash flow information. For the same reasons, the company is unable to address the potential significance of the unavailable information, which could be material to future results.
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Forward-looking Statements This earnings release contains forward-looking statements within the meaning of U.S. federal securities laws, including the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements regarding supply chain challenges, expected impact of inflation including raw material inflation and rising interest rates, the potential impact of tariffs, the Company’s projected pricing actions, the impact of enterprise initiatives, future financial and operating performance, free cash flow and free cash flow to net income conversion rate, organic and total revenue, contribution from Customer-Back Innovation to revenue growth, operating and incremental margin, price/cost impact, statements regarding diluted earnings per share, after-tax return on average invested capital, effective tax rates, exchange rates, expected timing and amount of share repurchases, end market economic and regulatory conditions, and the Company’s 2026 guidance. These statements are subject to certain risks, uncertainties, assumptions, and other factors, which could cause actual results to differ materially from those anticipated. Important risks that could cause actual results to differ materially from the Company’s expectations include those that are detailed in ITW’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and subsequent reports filed with the U.S. Securities and Exchange Commission. Except as required by law, the Company undertakes no obligation to update or revise any forward-looking statement to reflect new information, future events, changed circumstances, or otherwise. About ITW: Founded in 1912, Illinois Tool Works Inc. (NYSE: ITW) is a Fortune 300 global multi-industry manufacturing leader with revenue of $16 billion in 2025. The company’s seven industry-leading segments leverage the unique ITW Business Model to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required. ITW’s approximately 43,000 dedicated colleagues around the world thrive in the company’s decentralized and entrepreneurial culture. To learn more, please visit www.itw.com.
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF INCOME (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, In millions except per share amounts 2026 2025 2026 2025 Operating Revenue $ 4,236 $ 4,059 $ 12,553 $ 11,951 Cost of revenue 2,326 2,253 6,985 6,685 Selling, administrative, and research and development expenses 717 676 2,174 2,075 Amortization and impairment of intangible assets 16 18 50 60 Operating Income 1,177 1,112 3,344 3,131 Interest expense (83) (75) (235) (217) Other income (expense) 37 12 69 28 Income Before Taxes 1,131 1,049 3,178 2,942 Income Taxes 276 228 740 666 Net Income $ 855 $ 821 $ 2,438 $ 2,276 Net Income Per Share: Basic $ 3.00 $ 2.82 $ 8.51 $ 7.79 Diluted $ 3.00 $ 2.81 $ 8.49 $ 7.77 Cash Dividends Per Share: Paid $ 1.61 $ 1.50 $ 4.83 $ 4.50 Declared $ 1.72 $ 1.61 $ 4.94 $ 4.61 Shares of Common Stock Outstanding During the Period: Average 284.6 290.8 286.4 292.2 Average assuming dilution 285.3 291.7 287.1 293.0
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) In millions September 30, 2026 December 31, 2025 Assets Current Assets: Cash and equivalents $ 809 $ 851 Trade receivables 3,516 3,227 Inventories 1,823 1,659 Prepaid expenses and other current assets 450 463 Total current assets 6,598 6,200 Net plant and equipment 2,254 2,230 Goodwill 5,073 5,098 Intangible assets 543 591 Deferred income taxes 492 519 Other assets 1,537 1,510 $ 16,497 $ 16,148 Liabilities and Stockholders' Equity Current Liabilities: Short-term debt $ 2,219 $ 2,286 Accounts payable 623 522 Accrued expenses 1,635 1,636 Cash dividends payable 490 465 Income taxes payable 133 217 Total current liabilities 5,100 5,126 Noncurrent Liabilities: Long-term debt 7,153 6,683 Deferred income taxes 168 154 Other liabilities 934 959 Total noncurrent liabilities 8,255 7,796 Stockholders' Equity: Common stock 6 6 Additional paid-in-capital 1,866 1,771 Retained earnings 31,177 30,150 Common stock held in treasury (28,190) (26,875) Accumulated other comprehensive income (loss) (1,718) (1,827) Noncontrolling interest 1 1 Total stockholders' equity 3,142 3,226 $ 16,497 $ 16,148
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED) Three Months Ended September 30, 2026 Dollars in millions Total Revenue Operating Income Operating Margin Automotive OEM $ 814 $ 163 20.1 % Food Equipment 698 208 29.8 % Test & Measurement and Electronics 819 235 28.7 % Welding 513 186 36.3 % Polymers & Fluids 477 149 31.3 % Construction Products 472 141 29.9 % Specialty Products 447 140 31.4 % Intersegment (4) — — % Total Segments 4,236 1,222 28.9 % Unallocated — (45) — % Total Company $ 4,236 $ 1,177 27.8 % Nine Months Ended September 30, 2026 Dollars in millions Total Revenue Operating Income Operating Margin Automotive OEM $ 2,491 $ 521 20.9 % Food Equipment 2,027 553 27.3 % Test & Measurement and Electronics 2,303 592 25.7 % Welding 1,569 527 33.6 % Polymers & Fluids 1,405 415 29.6 % Construction Products 1,424 427 30.0 % Specialty Products 1,346 423 31.4 % Intersegment (12) — — % Total Segments 12,553 3,458 27.5 % Unallocated — (114) — % Total Company $ 12,553 $ 3,344 26.6 %
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED) Q3 2026 vs. Q3 2025 Favorable/(Unfavorable) Operating Revenue Automotive OEM Food Equipment Test & Measurement and Electronics Welding Polymers & Fluids Construction Products Specialty Products Total ITW Organic (2.1) % 0.5 % 15.8 % 6.9 % 8.2 % (0.8) % (1.2) % 3.8 % Acquisitions/ Divestitures — % — % 1.8 % — % — % — % — % 0.3 % Translation 0.3 % 0.2 % (0.3) % 0.4 % (0.1) % 0.8 % 0.1 % 0.3 % Operating Revenue (1.8) % 0.7 % 17.3 % 7.3 % 8.1 % — % (1.1) % 4.4 % Q3 2026 vs. Q3 2025 Favorable/(Unfavorable) Change in Operating Margin Automotive OEM Food Equipment Test & Measurement and Electronics Welding Polymers & Fluids Construction Products Specialty Products Total ITW Operating Leverage (40) bps 10 bps 370 bps 130 bps 140 bps (10) bps (20) bps 80 bps Changes in Variable Margin & OH Costs (150) bps 40 bps (50) bps 220 bps 100 bps (200) bps (90) bps (60) bps Total Organic (190) bps 50 bps 320 bps 350 bps 240 bps (210) bps (110) bps 20 bps Acquisitions/ Divestitures — — (60) bps — — — — (10) bps Restructuring/Other 20 bps 10 bps 70 bps 20 bps 40 bps 40 bps 20 bps 30 bps Total Operating Margin Change (170) bps 60 bps 330 bps 370 bps 280 bps (170) bps (90) bps 40 bps Total Operating Margin % * 20.1% 29.8% 28.7% 36.3% 31.3% 29.9% 31.4% 27.8% * Includes unfavorable operating margin impact of amortization expense from acquisition- related intangible assets 20 bps — 110 bps 10 bps 70 bps 10 bps 10 bps 40 bps ** ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.04) on GAAP earnings per share for the third quarter of 2026.
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED) YTD 2026 vs. YTD 2025 Favorable/(Unfavorable) Operating Revenue Automotive OEM Food Equipment Test & Measurement and Electronics Welding Polymers & Fluids Construction Products Specialty Products Total ITW Organic (1.1) % (0.7) % 10.3 % 9.0 % 5.8 % — % (1.4) % 2.9 % Acquisitions/ Divestitures — % — % 1.6 % — % — % — % — % 0.3 % Translation 2.3 % 2.0 % 1.2 % 0.8 % 1.6 % 2.6 % 1.7 % 1.8 % Operating Revenue 1.2 % 1.3 % 13.1 % 9.8 % 7.4 % 2.6 % 0.3 % 5.0 % YTD 2026 vs. YTD 2025 Favorable/(Unfavorable) Change in Operating Margin Automotive OEM Food Equipment Test & Measurement and Electronics Welding Polymers & Fluids Construction Products Specialty Products Total ITW Operating Leverage (20) bps (10) bps 260 bps 140 bps 110 bps — (30) bps 60 bps Changes in Variable Margin & OH Costs (10) bps (50) bps 10 bps (40) bps 80 bps (70) bps (60) bps (30) bps Total Organic (30) bps (60) bps 270 bps 100 bps 190 bps (70) bps (90) bps 30 bps Acquisitions/ Divestitures — — (50) bps — — — — (10) bps Restructuring/Other 40 bps 10 bps 30 bps (20) bps 10 bps 10 bps 30 bps 20 bps Total Operating Margin Change 10 bps (50) bps 250 bps 80 bps 200 bps (60) bps (60) bps 40 bps Total Operating Margin % * 20.9% 27.3% 25.7% 33.6% 29.6% 30.0% 31.4% 26.6% * Includes unfavorable operating margin impact of amortization expense from acquisition- related intangible assets 20 bps — 120 bps — 80 bps 10 bps 20 bps 50 bps ** ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.13) on GAAP earnings per share for the first nine months of 2026.
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED) AFTER-TAX RETURN ON A VERAGE INVESTED CAPITAL (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, Dollars in millions 2026 2025 2026 2025 Numerator: Net Income $ 855 $ 821 $ 2,438 $ 2,276 Discrete tax benefit related to the first quarter 2026 — — (34) — Net discrete tax benefit related to the third quarter 2025 — (27) — (27) Discrete tax benefit related to the first quarter 2025 — — — (21) Interest expense, net of tax (1) 63 57 178 165 Other (income) expense, net of tax (1) (28) (10) (52) (22) Operating income after taxes $ 890 $ 841 $ 2,530 $ 2,371 Denominator: Invested capital: Cash and equivalents $ 809 $ 924 $ 809 $ 924 Trade receivables 3,516 3,255 3,516 3,255 Inventories 1,823 1,725 1,823 1,725 Net plant and equipment 2,254 2,203 2,254 2,203 Goodwill and intangible assets 5,616 5,568 5,616 5,568 Accounts payable and accrued expenses (2,258) (2,175) (2,258) (2,175) Debt (9,372) (8,942) (9,372) (8,942) Other, net 754 651 754 651 Total net assets (stockholders' equity) 3,142 3,209 3,142 3,209 Cash and equivalents (809) (924) (809) (924) Debt 9,372 8,942 9,372 8,942 Total invested capital $ 11,705 $ 11,227 $ 11,705 $ 11,227 Average invested capital (2) $ 11,728 $ 11,293 $ 11,587 $ 10,863 Net income to average invested capital (3) 29.1 % 29.1 % 28.1 % 27.9 % After-tax return on average invested capital (3) 30.3 % 29.8 % 29.1 % 29.1 % (1) Effective tax rate used for interest expense and other (income) expense for the three months ended September 30, 2026 and 2025 was 24.4% and 24.3%, respectively. Effective tax rate used for interest expense and other (income) expense for the nine months ended September 30, 2026 and 2025 was 24.3% in both periods. (2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within each of the periods presented. (3) Returns for the three months ended September 30, 2026 and 2025 were converted to an annual rate by multiplying the calculated return by 4. Returns for the nine months ended September 30, 2026 and 2025 were converted to an annual rate by dividing the calculated return by 3 and multiplying it by 4.
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A reconciliation of the tax rate for the nine month period ended September 30, 2026, excluding the first quarter 2026 discrete tax benefit of $34 million primarily related to the resolution of a U.S. tax audit, is as follows: Nine Months Ended September 30, 2026 Dollars in millions Income Taxes Tax Rate As reported $ 740 23.3 % Discrete tax benefit related to the first quarter 2026 34 1.0 % As adjusted $ 774 24.3 % A reconciliation of the tax rate for the three and nine month periods ended September 30, 2025, excluding the third quarter 2025 net discrete tax benefit of $27 million, which included a favorable discrete tax benefit of $43 million related to the estimated U.S. federal tax liability for 2024, partially offset by a $16 million discrete tax expense related primarily to the resolution of a foreign tax audit, and excluding the first quarter 2025 discrete tax benefit of $21 million related to the reversal of a valuation allowance on net operating loss carryforwards, is as follows: Three Months Ended Nine Months Ended September 30, 2025 September 30, 2025 Dollars in millions Income Taxes Tax Rate Income Taxes Tax Rate As reported $ 228 21.8 % $ 666 22.7 % Net discrete tax benefit related to the third quarter 2025 27 2.5 % 27 0.9 % Discrete tax benefit related to the first quarter 2025 — — % 21 0.7 % As adjusted $ 255 24.3 % $ 714 24.3 %
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AFTER-TAX RETURN ON A VERAGE INVESTED CAPITAL (UNAUDITED) Twelve Months Ended Dollars in millions December 31, 2025 Numerator: Net income $ 3,066 Net discrete tax benefit related to the third quarter 2025 (27) Discrete tax benefit related to the first quarter 2025 (21) Interest expense, net of tax (1) 222 Other (income) expense, net of tax (1) (32) Operating income after taxes $ 3,208 Denominator: Invested capital: Cash and equivalents $ 851 Trade receivables 3,227 Inventories 1,659 Net plant and equipment 2,230 Goodwill and intangible assets 5,689 Accounts payable and accrued expenses (2,158) Debt (8,969) Other, net 697 Total net assets (stockholders' equity) 3,226 Cash and equivalents (851) Debt 8,969 Total invested capital $ 11,344 Average invested capital (2) $ 10,959 Net income to average invested capital 28.0 % After-tax return on average invested capital 29.3 % (1) Effective tax rate used for interest expense and other (income) expense for the year ended December 31, 2025 was 23.9%. (2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within the period presented. A reconciliation of the 2025 effective tax rate, excluding the third quarter 2025 net discrete tax benefit of $27 million, which included a favorable discrete tax benefit of $43 million related to the estimated U.S. federal tax liability for 2024, partially offset by a $16 million discrete tax expense related primarily to the resolution of a foreign tax audit, and excluding the first quarter 2025 discrete tax benefit of $21 million related to the reversal of a valuation allowance on net operating loss carryforwards, is as follows:
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Twelve Months Ended December 31, 2025 Dollars in millions Income Taxes Tax Rate As reported $ 900 22.7 % Net discrete tax benefit related to the third quarter 2025 27 0.7 % Discrete tax benefit related to the first quarter 2025 21 0.5 % As adjusted $ 948 23.9 % FREE CASH FLOW (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, Dollars in millions 2026 2025 2026 2025 Net cash provided by operating activities $ 953 $ 1,021 $ 2,299 $ 2,163 Less: Additions to plant and equipment (102) (117) (289) (314) Free cash flow $ 851 $ 904 $ 2,010 $ 1,849 Net income $ 855 $ 821 $ 2,438 $ 2,276 Net cash provided by operating activities to net income conversion rate 111 % 124 % 94 % 95 % Free cash flow to net income conversion rate 100 % 110 % 82 % 81 %