ITW Reports Third Quarter 2026 Results

Test & Measurement and Electronics organic revenue grew 15.8%, while Automotive OEM organic revenue fell 2.1%.

Rhea-AI Summary

Illinois Tool Works (NYSE: ITW) raised its full-year earnings outlook after third-quarter revenue increased 4.4% from a year earlier. Revenue reached $4.24 billion, including 3.8% organic growth, which excludes acquisition and currency effects. GAAP earnings per share rose 6.8% to $3.00. Operating income increased 5.9% to $1.18 billion, while operating margin expanded 40 basis points to 27.8%.

Operating cash flow was $953 million; free cash flow of $851 million equaled 100% of net income. ITW raised its dividend 7% to an annualized $6.88 per share. Tornado damage reduced quarterly Welding revenue by an estimated $40 million. ITW now expects full-year GAAP EPS of $11.45 to $11.55, up $0.05 at the midpoint, and revenue growth of 4.5% to 5.5%. It reaffirmed organic growth guidance of 3% to 4% and projects operating margin of 26.5% to 27.5%.

25 points · 1 major

PositiveiHow this balance works

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0 major · 14 points

Hollow bars mark forward-looking points. How the balance works

Positive

• Major point. Forward-looking: it has not happened yet and may not happen.Full-year GAAP EPS guidance raised $0.05 at the midpoint to $11.45–$11.55, representing 10% midpoint growth.
• Moderate pointThird-quarter revenue increased 4.4% to $4.24 billion year over year, including 3.8% organic growth.
• Moderate pointThird-quarter GAAP EPS rose 6.8% to $3.00 year over year.
• Moderate pointThird-quarter operating income increased 5.9% to $1.18 billion, a quarterly company record.
• Moderate pointThird-quarter operating margin expanded 40 basis points to 27.8%; enterprise initiatives contributed 130 basis points.
• Moderate pointThird-quarter free cash flow of $851 million equaled 100% of net income.
• Moderate pointDividend increased 7% to an annualized $6.88 per share, the 63rd consecutive annual increase.
• Moderate point. Forward-looking: it has not happened yet and may not happen.ITW expects approximately $1.5 billion in 2026 share repurchases; third-quarter repurchases totaled $187 million. 1.9% of market cap
• Moderate point. Forward-looking: it has not happened yet and may not happen.ITW projects full-year operating margin of 26.5%–27.5%, with enterprise initiatives contributing more than 100 basis points.
• Moderate pointTest & Measurement and Electronics Q3 revenue grew 17.3% to $819 million, including 15.8% organic growth.
• Moderate pointTest & Measurement and Electronics Q3 operating margin increased 330 basis points to 28.7%.
• Moderate pointWelding Q3 revenue grew 7.3% to $513 million, including 6.9% organic growth.
• Moderate pointWelding Q3 operating margin increased 370 basis points to 36.3%.
• Moderate pointPolymers & Fluids Q3 revenue grew 8.1% to $477 million, including 8.2% organic growth.
• Moderate pointPolymers & Fluids Q3 operating margin increased 280 basis points to 31.3%.

10 minor points

• Minor pointPrice increases and other actions more than offset rising raw material costs in the quarter.
• Minor point. Forward-looking: it has not happened yet and may not happen.Full-year revenue growth guidance raised to 4.5%–5.5%; organic growth guidance reaffirmed at 3%–4%.
• Minor point. Forward-looking: it has not happened yet and may not happen.ITW projects full-year free cash flow at approximately 100% of net income.
• Minor pointFood Equipment Q3 revenue grew 0.7% to $698 million, including 0.5% organic growth.
• Minor pointFood Equipment Q3 operating margin increased 60 basis points to 29.8%.
• Minor pointFirst-nine-month revenue grew 5.0% to $12,553 million, including 2.9% organic growth.
• Minor pointFirst-nine-month diluted EPS increased to $8.49 from $7.77 a year earlier.
• Minor pointFirst-nine-month operating income increased to $3,344 million from $3,131 million a year earlier.
• Minor pointFirst-nine-month operating margin expanded 40 basis points to 26.6%.
• Minor pointShort-term debt declined to $2,219 million from $2,286 million at December 31, 2025.

Negative

• Moderate pointAutomotive OEM Q3 revenue fell 1.8% to $814 million, with organic revenue down 2.1%.
• Moderate pointAutomotive OEM Q3 operating margin declined 170 basis points to 20.1%.
• Moderate pointConstruction Products Q3 operating margin declined 170 basis points to 29.9%.
• Minor pointTornado damage reduced Q3 Welding revenue by an estimated $40 million; insurance largely offset lost operating income.
• Minor pointConstruction Products Q3 organic revenue fell 0.8%; total revenue remained unchanged at $472 million.

9 minor points

• Minor pointSpecialty Products Q3 revenue fell 1.1% to $447 million, with organic revenue down 1.2%.
• Minor pointSpecialty Products Q3 operating margin declined 90 basis points to 31.4%.
• Minor pointFirst-nine-month organic revenue fell 1.1% in Automotive OEM, 0.7% in Food Equipment and 1.4% in Specialty Products.
• Minor pointFood Equipment first-nine-month operating margin declined 50 basis points to 27.3%.
• Minor pointConstruction Products first-nine-month operating margin declined 60 basis points to 30.0%.
• Minor pointSpecialty Products first-nine-month operating margin declined 60 basis points to 31.4%.
• Minor pointThird-quarter interest expense increased to $83 million from $75 million a year earlier.
• Minor pointCash and equivalents declined to $809 million from $851 million at December 31, 2025.
• Minor pointLong-term debt increased to $7,153 million from $6,683 million at December 31, 2025.

News Explained

ITW repurchased $187 million of its own shares in Q3 and expects approximately $1.5 billion of repurchases for 2026; the Q3 purchases are complete, but the full-year amount remains a forecast.

Key Figures

Q3 revenue: $4.24 billion; +4.4% Organic revenue growth: 3.8% GAAP EPS: $3.00; +6.8% +5 more

Q3 revenue

$4.24 billion; +4.4%

Third quarter 2026

Organic revenue growth

3.8%

Third quarter 2026

GAAP EPS

$3.00; +6.8%

Third quarter 2026

Operating income

$1.18 billion; +5.9%

Third quarter 2026

Operating margin

27.8%; +40 bps

Third quarter 2026

FY2026 GAAP EPS guidance

$11.45–$11.55 per share; midpoint raised $0.05

Full-year guidance

Revenue growth guidance

4.5–5.5%

Full-year 2026; guidance raised

Free cash flow conversion

100% of net income

Third quarter 2026

Previous Earnings Reports

3 past events · Latest: Jul 28

Same Type 3 events

1. Jul 28

   Q2 earnings results

   24h Move

   +3.6%

   Reported Q2 revenue and EPS growth, then raised full-year revenue and EPS guidance.

2. Apr 30

   Q1 earnings results

   24h Move

   -2.9%

   Reported Q1 revenue and EPS growth and raised full-year EPS guidance.

3. Feb 03

   FY2025 earnings results

   24h Move

   +5.6%

   Set initial 2026 EPS guidance after reporting fourth-quarter and full-year 2025 results.

24h Move is the share-price change in the day after each event; other market factors may also have contributed.

Key Terms

gaap, non-gaap, free cash flow, foreign currency translation

4 terms

gaap financial

"GAAP EPS grew 6.8 percent to $3.00"

GAAP, or Generally Accepted Accounting Principles, are a set of standardized rules and guidelines that companies follow when preparing their financial statements. They ensure consistency, transparency, and comparability across different companies, making it easier for investors to understand and compare financial information accurately. This helps investors make informed decisions based on trustworthy and uniform financial reports.

View in glossary

non-gaap financial

"This earnings release contains certain non-GAAP financial measures."

Non-GAAP refers to financial measures that companies use to show their earnings or performance without including certain expenses or income that are often added back to give a different picture. It matters because it can make a company's results look better or more favorable, but it may also hide important costs, so investors need to look at both GAAP (official rules) and non-GAAP numbers to get a full understanding.

View in glossary

free cash flow financial

"Operating cash flow was $953 million, and free cash flow was $851 million"

Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.

View in glossary

foreign currency translation financial

"Foreign currency translation increased revenue by 0.3 percent"

Foreign currency translation is the process of converting financial statements prepared in one currency into another currency so they can be combined or compared. Investors care because exchange rate swings can change reported revenue, profit and asset values even when a company’s underlying business hasn’t changed — like converting vacation spending back to your home money and seeing the total rise or fall depending on the day’s exchange rate.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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• 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., Oct. 27, 2026 (GLOBE NEWSWIRE) -- 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.

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 63^rd 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.

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.

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

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

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	%

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.

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.

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)
AFTER-TAX RETURN ON AVERAGE 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.

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	%

AFTER-TAX RETURN ON AVERAGE 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:

	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	%

Investor Relations & Media Contact:
Erin Linnihan
Tel: 224.661.7431

investorrelations@itw.com | mediarelations@itw.com

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What is ITW's updated 2026 earnings guidance?

ITW expects full-year GAAP earnings per share of $11.45 to $11.55, a narrowed range with a $0.05 increase at the midpoint. The midpoint represents 10% year-over-year growth.

How much did ITW increase its dividend?

ITW increased its dividend 7%, bringing the annualized payout to $6.88 per share. This marks its 63rd consecutive year of dividend increases.

How did the tornado affect ITW's Welding business and future outlook?

Business interruption insurance largely offset the operating income lost after tornado damage to two Welding facilities, and ITW expects the impact going forward to be immaterial. Excluding the damage, ITW estimates third-quarter Welding organic revenue growth would have been approximately 15%, with total company organic growth of approximately 5%.