Johnson Controls International plc sells cooling equipment, building controls, fire and security systems, and the services that keep them working. In the fiscal year ended September 30, 2026, its continuing business generated substantially more profit and cash as demand for commercial cooling strengthened. Management now plans about $900 million of capital spending in fiscal 2027, nearly twice the latest annual amount, to help deliver a $23 billion backlog. The next business test is whether factories, installation teams and customer payments can keep pace with those commitments.
Research cutoff: November 13, 2026, New York date. Financial results cover fiscal 2026; the latest filing reviewed is dated November 12, 2026.
Source: Johnson Controls FY2026 Form 10-K, Item 1, pp. 3–5; Item 7, pp. 36–38.
1. The continuing business improved much more than total net income suggests
Johnson Controls earned more from the businesses it still operates, despite a decline in total net income. The apparent conflict comes from the July 2025 sale of its residential and light-commercial heating and cooling business. The previous year included that business’s earnings and the gain on its sale. Those amounts largely disappeared in fiscal 2026.
Profit attributable to Johnson Controls from continuing operations rose 67.3% to $2.880 billion. Total profit attributable to the company fell 13.3% to $2.853 billion because discontinued operations changed from a $1.570 billion profit to a $27 million loss. Comparing the continuing business across all three years gives a clearer picture of its operating progress.
| Consolidated results, US$ million except percentages and per-share amounts | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Revenue from continuing operations | 22,952 | 23,596 | 25,666 |
| Gross profit | 8,077 | 8,592 | 9,515 |
| Gross margin, calculated | 35.2% | 36.4% | 37.1% |
| Operating profit, calculated from reported accounts | 1,906 | 2,282 | 3,694 |
| Operating margin, calculated | 8.3% | 9.7% | 14.4% |
| Continuing profit attributable to Johnson Controls | 1,407 | 1,721 | 2,880 |
| Total profit attributable to Johnson Controls | 1,705 | 3,291 | 2,853 |
| Diluted earnings per share (EPS), continuing operations, US$ | 2.08 | 2.63 | 4.72 |
Reporting basis: Continuing-operation rows use the same presentation for all three years in the FY2026 filing. Calculated operating profit is gross profit less selling, general and administrative expenses and restructuring and impairment costs. It excludes financing charges and profit or loss from investments the company does not control. Diluted EPS divides profit among the average shares outstanding, including potential shares from employee awards.
Source: FY2026 Form 10-K, consolidated income statements, p. 49; Note 2, pp. 63–64. Calculations use the reported inputs shown above.
Sales growth accelerated from 2.8% in fiscal 2025 to 8.8% in fiscal 2026. Management’s sales reconciliation attributes $1.988 billion of the latest increase to organic growth, which excludes currency changes and business purchases and sales. Currency translation added $215 million, while acquisitions and divestitures together reduced sales by $133 million. Growth therefore came mainly from the existing business, particularly applied HVAC—the large heating and cooling systems used in commercial and industrial buildings—including data centers.
Services also made an important contribution. Service revenue rose 6.6% to $7.965 billion, while its reported cost of sales fell slightly. The resulting gross profit rose by $500 million, accounting for just over half of the company’s $923 million increase in gross profit. Service gross margin rose from 40.3% to 44.1%: after the costs assigned to delivering those services, Johnson Controls retained about $44 from each $100 of service revenue, before overhead, financing and tax.
The equipment side was less favorable on this measure. Products and systems revenue rose 9.8%, but its cost of sales rose faster, reducing gross margin from 34.6% to 33.9%. Management attributes the company-wide gross-profit improvement to sales growth, productivity and spreading operating costs over more business. The filing does not divide those benefits precisely between service productivity, pricing and changes in the mix of work. Service work therefore supplied a larger share of the improvement than its share of sales alone would suggest.
Source: FY2026 Form 10-K, Item 7, pp. 31–32; consolidated income statements, p. 49; Note 3, p. 65.
Reported profit also benefited from items outside ordinary sales growth. Pretax insurance recoveries for firefighting-foam claims increased from $39 million to $149 million. Selling the ADT Mexico business produced a $70 million pretax gain. Restructuring and impairment charges fell from $546 million to $311 million, although they remained a substantial cost.
Management’s adjusted continuing profit rose 28.1%, less than the reported 67.3% increase. The reconciliation in the calculation notes removes both gains and expenses, with their tax effects. It still supports a substantial improvement, but ongoing transformation spending remains a real cost of changing the company.
Sources: FY2026 Form 10-K, Item 7, pp. 32–36; Notes 2 and 19. October 27, 2026 earnings release, footnotes 2 and 6, annual reconciliation, pp. 8–9 and 14.
2. The Americas supplies most of the growth—and most of the delivery challenge
The Americas generated about three-quarters of the annual sales increase and holds most of the backlog. That concentration matters because successful delivery there will have the largest effect on the company’s next year.
Sales in the Americas rose by $1.567 billion, led by applied HVAC, including data centers. The segment’s profit grew faster than sales as the company spread operating costs over more revenue. Asia Pacific also benefited from greater equipment volumes and productivity. Europe, the Middle East and Africa grew more slowly: management says conflict in the Middle East constrained growth, while productivity and favorable pricing improved profit.
| Segment, US$ million except margins | FY2025 sales | FY2026 sales | FY2025 segment EBIT margin | FY2026 segment EBIT margin |
|---|---|---|---|---|
| Americas | 15,831 | 17,398 | 16.0% | 17.7% |
| Europe, Middle East and Africa | 4,968 | 5,119 | 11.7% | 13.7% |
| Asia Pacific | 2,797 | 3,149 | 16.5% | 18.7% |
Reporting basis: Segment EBIT means segment earnings before interest and taxes, the profit measure management uses for each region. It excludes financing, tax, corporate expenses and specified items such as restructuring and divestiture gains. It includes amortization—the gradual expensing of purchased technology and other intangible assets. These margins are calculated from the filing’s segment EBIT and sales; they are not consolidated operating margins. The reconciliation to consolidated pretax profit appears in the calculation notes.
Source: FY2026 Form 10-K, Item 7, pp. 34–36; Note 17, pp. 91–93.
The Americas ended September with $17.8 billion of backlog, compared with $3.1 billion in Europe, the Middle East and Africa and $2.1 billion in Asia Pacific. Total backlog increased 43%, excluding currency movements, acquisitions and divestitures. Backlog means work booked but not yet delivered under the company’s definition; it is a useful indicator of future activity, rather than sales already earned.
The annual filing reports $29.7 billion of orders, up 35% on its stated currency- and transaction-adjusted basis. However, the earnings release says orders before fiscal 2026 excluded certain equipment-only projects; backlog was restated. The order-growth figure therefore crosses a definition change. The restated backlog comparison is the stronger measure of the increase in work awaiting delivery.
The accounting measure of remaining contractual work is broader in some ways and narrower in others. Johnson Controls reported $29.3 billion of remaining performance obligations and expects to recognize approximately 73% as revenue over the next two years. That measure includes the full term of some long service commitments, but excludes certain short contracts and contracts cancellable without a substantial penalty. The two measures cannot be added together or treated as next-year revenue.
Sources: FY2026 Form 10-K, Item 7, p. 36; Note 3, p. 65. October 27 earnings release, “Fiscal Q4 Segment Results,” pp. 1–2, for the order-definition change.
The order book also creates a customer-financing risk. The filing says a growing share of revenue and backlog comes from data centers. Some developers have limited operating histories or depend on financing for individual projects. If funding is delayed, Johnson Controls may have materials, people and factory space ready before a customer is ready to accept and pay for equipment.
The company does not disclose a separate data-center revenue or profit total in the annual accounts. Its disclosed regional results establish the size of the Americas’ contribution, but they do not measure how much of its profit depends on any one customer group. That makes delivery schedules and collections especially important as capacity expands.
Source: FY2026 Form 10-K, Item 1A, pp. 10–11; Item 7, pp. 35–36.
3. Management is buying cooling technology and expanding factories while removing older costs
The investment plan directly addresses the larger backlog, while the restructuring plan seeks to lower the cost of serving it. Management plans about $900 million of fiscal 2027 capital spending, compared with $465 million spent in fiscal 2026. Its stated purposes are to expand global thermal-management capacity, shorten lead times and improve delivery. This is a $435 million increase in planned cash spending on long-lived assets.
The company is also adding technology closer to the source of heat. It paid a combined $291 million, net of acquired cash, for Alloy Enterprises and Nantum AI in fiscal 2026. Alloy makes advanced direct-liquid-cooling components; Nantum expands the OpenBlue building-software business. Management says Alloy’s technology complements its existing cooling equipment and can improve heat transfer. The commercial purpose is to serve more of a customer’s cooling needs, from components near computing equipment to the systems that remove heat from the building.
The purchase price is combined for the two businesses; it is not a disclosed standalone price for Alloy. The filing records $127 million of acquired developed technology, to be expensed over 15 years, and $181 million of goodwill after a purchase-accounting adjustment. These are investments in future business benefits, while their contribution to current-year sales and profit is not separately disclosed.
Sources: FY2026 Form 10-K, Item 7, p. 38; Note 2, p. 63. Johnson Controls’ May 13, 2026 Alloy acquisition announcement, transaction completion and intended technology benefits.
Johnson Controls has a practical advantage in connecting equipment sales with installation and later service. Its direct sales and service organization already works inside customers’ facilities. That creates opportunities to maintain, repair and replace the systems it installs. Services represented 31% of fiscal 2026 revenue, providing a substantial business alongside new equipment projects.
But cooling demand is attracting capable competitors. Trane Technologies reported 20% organic order growth in the quarter ended September 2026 and a $12.5 billion backlog, up 73%. Those figures cover Trane’s own business mix and definitions, so they are evidence of broader industry demand rather than a market-share comparison. Trane also demonstrated an 800-volt direct-current chiller with Eaton and Danfoss in September. It was a laboratory proof of concept, but it shows that competitors are working on the same customer problem: leaving more of a data center’s available electricity for computing.
Johnson Controls’ own YORK products address water use and limited site space. The company describes the YDAM as an air-cooled system designed to operate without water consumption. Together, these developments suggest customers will judge suppliers on delivery, energy use, reliability and the ability to integrate equipment.
Sources: FY2026 Form 10-K, Item 1, pp. 4–5, and Item 1A, p. 11. Trane’s October 29, 2026 results, highlights. Trane’s September 30 technology announcement, proof-of-concept description. Johnson Controls’ October 6 product overview, YORK YDAM description.
A development after the financial year-end provides a concrete example of the delivery strategy. On November 11, Johnson Controls and Armada announced that a Dublin manufacturing operation had begun producing modular computing infrastructure. The first Dublin-built Leviathan was destined for Fossefall in Norway. The partners targeted at least 500 megawatts of capacity in 2027. That is a manufacturing target, not recognized Johnson Controls revenue; the announcement does not disclose the company’s sales or profit from the project.
Source: Armada and Johnson Controls’ November 11, 2026 announcement, production launch, customer destination and 2027 target.
Management is simultaneously shrinking activities that fit less closely with this direction. It sold ADT Mexico and ADT Spain during fiscal 2026. The UK residential-security business remained held for sale at September 30, with completion expected in fiscal 2027. An October agreement to sell Global Intrusion Products to Truelink Capital is expected to close in the first half of calendar 2027, subject to approvals and other conditions. That agreement did not change the September financial statements.
The expanded restructuring program is intended to consolidate manufacturing and warehouses and streamline support functions, including costs left behind by earlier business sales. Its expected cost is now approximately $750 million over fiscal 2025–2028, with about $400 million still expected in fiscal 2027–2028. Management targets approximately $1.1 billion of annual savings when the plan is fully completed. That is the total program target, not an additional $1.1 billion promised for next year.
Fiscal 2026 included $190 million of restructuring-related expense under the plan and $114 million of cash payments. The business benefit depends on moving production and simplifying support without disrupting the work already promised to customers. Expanding needed cooling capacity while closing less useful facilities can be consistent, but execution must connect those two actions.
Source: FY2026 Form 10-K, Item 7, p. 32; Note 2, pp. 63–64; Note 15, pp. 84–85.
4. Higher profit produced more cash, helped by customer and supplier timing
The continuing business generated enough cash to cover fiscal 2026 capital spending, dividends and share repurchases. Operating cash flow rose from $2.554 billion to $3.872 billion. After cash purchases of property and equipment, free cash flow was $3.407 billion. This definition leaves acquisitions, debt repayments and discontinued-operation cash flows outside free cash flow.
| Cash generated and allocated, US$ million | FY2025 | FY2026 |
|---|---|---|
| Continuing operating cash flow | 2,554 | 3,872 |
| Capital spending, cash outflow | 434 | 465 |
| Free cash flow, calculated | 2,120 | 3,407 |
| Cash dividends paid | 976 | 976 |
| Cash share repurchases and retirements | 5,991 | 1,505 |
| Remainder after these uses, calculated | -4,847 | 926 |
Calculation notes: Free cash flow equals continuing operating cash flow less capital expenditures. The final row subtracts paid dividends and repurchases from free cash flow. A positive remainder is available for other uses; it is not the change in the cash balance.
Source: FY2026 Form 10-K, consolidated cash-flow statements, p. 52.
The profit increase was the main starting point, but the timing of customer and supplier payments materially affected the result. Receivables absorbed $1.096 billion of operating cash, compared with $211 million a year earlier. Customers had not yet paid for more of the revenue already recorded. At year-end, receivables were $7.316 billion, up 16.7%, faster than sales.
Within receivables, $2.510 billion related to work performed but not yet billed, up from $2.178 billion. For some projects, Johnson Controls records revenue as work progresses, using costs incurred relative to estimated total costs. Cash may arrive later, according to the customer’s contract. This makes accurate project-cost estimates and prompt billing important to both reported profit and collections. The auditor identified revenue recognition on certain contracts as its critical audit matter.
Source: FY2026 Form 10-K, consolidated balance sheets and cash-flow statements, pp. 51–52; Notes 1 and 3, pp. 58 and 65; auditor’s report, p. 48.
Other payment timing worked in the company’s favor. The cash-flow line for accounts payable and accrued liabilities contributed $1.714 billion, up from $695 million. The balance sheet shows both more money owed to suppliers and more advance customer billings or payments. Accounts payable rose by $767 million, while current deferred revenue rose by $900 million. Deferred revenue represents amounts collected or unconditionally billable before Johnson Controls has finished the promised work; it carries a future delivery obligation.
Supplier financing is part of this picture. Suppliers can sell approved invoices to financial institutions and receive money before Johnson Controls pays on its usual terms, generally 90–120 days. Confirmed obligations in these programs rose from $835 million to $994 million and remained included in accounts payable. They are not included again in the company’s financing-debt total. Continued access to those payment terms helps fund operations; faster supplier payments would use more cash.
Inventory also required funding. Raw materials and supplies increased by $201 million, while finished goods decreased by $31 million. This explains most of the $179 million increase in total inventory. The balance is consistent with more resources awaiting production, but the filing does not assign the increase to particular data-center contracts.
Source: FY2026 Form 10-K, pp. 51–52; Notes 3, 4 and 8, pp. 65–66 and 69–70. Balance-sheet changes include effects beyond cash movements and are not a separate cash-flow reconciliation.
Taxes need a combined reading. The cash-flow statement subtracts a $798 million deferred-tax benefit already included in profit, then adds $679 million for changes in accrued income taxes. Together, those two adjustments reduce cash relative to profit by $119 million. Reading only the positive accrued-tax line would overstate how much taxes helped cash generation. The comparable combined adjustment was a $361 million reduction in fiscal 2025.
The year also benefited from the absence of a large prior-year legal payment. The final $415 million installment of the water-system firefighting-foam settlement was paid in December 2024, within fiscal 2025. Improved cash flow therefore reflects both better operations and the timing of obligations. The detailed profit-to-cash calculation appears below.
Source: FY2026 Form 10-K, consolidated cash-flow statements, p. 52; Note 19, p. 97.
Management used the earlier business sale to return capital to shareholders. Its August 2025 announcement said the $5 billion accelerated repurchase would return sale proceeds, and its subsequent SEC filing confirmed those proceeds funded the program. The cash was paid in fiscal 2025; final share settlement occurred in fiscal 2026. This year’s cash-flow statement separately records $1.505 billion of repurchases and retirements.
Sources: August 1, 2025 sale announcement, capital-allocation purpose; August 7, 2025 Form 8-K, Item 8.01, funding; FY2026 Form 10-K, Item 5, p. 29, and cash-flow statements, p. 52.
A simple funding illustration shows what the new factory budget changes. If operating cash flow, dividends and buybacks stayed at fiscal 2026 amounts, replacing $465 million of capital spending with the planned $900 million would reduce the remainder after those uses from $926 million to $491 million. That is a sensitivity calculation, not a forecast. Acquisitions, debt repayments and other cash needs would still have to be met from that remainder, available cash or financing.
Source: FY2026 Form 10-K, Item 5, p. 29; Item 7, pp. 37–38; consolidated cash-flow statements, p. 52. Calculation: $3,872 million − $900 million − $976 million − $1,505 million = $491 million.
5. Debt fell, but the company still relies on cash generation and borrowing access
Johnson Controls reduced financing debt while increasing the obligations that support day-to-day operations. Financing debt declined by $603 million to $9.277 billion, and unrestricted cash rose to $618 million. Yet total liabilities increased because customer, supplier and other obligations grew.
| Consolidated financial position, US$ million | September 30, 2025 | September 30, 2026 |
|---|---|---|
| Cash and cash equivalents | 379 | 618 |
| Total financing debt | 9,880 | 9,277 |
| Debt due within one year, including short-term borrowings | 1,289 | 1,744 |
| Current assets | 10,162 | 11,678 |
| Current liabilities | 10,941 | 12,919 |
| Total assets | 37,939 | 40,147 |
| Total liabilities, calculated | 24,985 | 26,501 |
| Total equity, including minority owners | 12,954 | 13,646 |
Reporting basis: Financing debt includes short-term debt and current and noncurrent long-term debt. Operating leases, supplier payables and customer advance obligations remain separate. Cash excludes restricted cash.
Source: FY2026 Form 10-K, consolidated balance sheets, p. 51; Item 7, pp. 37–39. Total liabilities are current plus noncurrent liabilities.
Current liabilities exceeded current assets by $1.241 billion. Part of that gap comes from advance customer obligations, which are normally fulfilled by delivering equipment or services rather than immediately returning cash. Nevertheless, the $618 million cash balance alone does not cover the $1.744 billion of financing debt due within a year. Operations and borrowing access are important parts of the funding plan.
The company had an undrawn $2.5 billion revolving credit facility expiring in December 2028. It reported compliance with its borrowing covenants. The facility requires at least $3.5 billion of company-attributable equity, calculated with specified accounting exclusions, and limits certain debt secured by assets. Reported company-attributable equity was $13.611 billion; that accounting balance should not be mistaken for the exact covenant calculation.
Long-term principal maturities are spread over several years, with $1.066 billion due in fiscal 2027 and $5.059 billion after 2031. The 2027 obligations include euro and yen borrowings, including a low-coupon euro bond. Refinancing that bond at a higher rate would increase interest costs, but the eventual rate and financing choice are not yet known. Contractual interest on long-term debt is $305 million over the next twelve months and approximately $3.0 billion thereafter.
Source: FY2026 Form 10-K, Item 7, pp. 38–39; Note 9, pp. 70–72.
Leases add another set of scheduled payments. The company has $1.377 billion of recorded operating-lease liabilities and $359 million of undiscounted lease payments due in fiscal 2027. It also discloses approximately $2.0 billion of purchase commitments payable within twelve months and $21 million of expected pension and postretirement contributions. Purchases and lease payments help run the business and are normally reflected in operating cash needs; adding them again to a forecast already based on operating cash flow would double-count costs.
The asset side shows why debt reduction alone is an incomplete measure of flexibility. Goodwill and other intangible assets totaled $20.122 billion, about half of total assets. These balances mainly represent acquired businesses, technology, customer relationships and brands. They do not provide cash to meet a maturity.
Goodwill was nearly unchanged because additions from acquisitions were offset by currency and other changes, including allocations to security businesses sold or held for sale. Other intangible assets fell by $131 million; $351 million of annual amortization reduced their book value, partly offset by additions and other movements. Net property and equipment fell by $87 million despite new capital spending. The original recorded cost of subscriber systems fell by $303 million, alongside increases in machinery and buildings, as the business portfolio changed. The filing does not split total capital spending between replacing existing assets and expanding capacity.
Sources: FY2026 Form 10-K, Item 7, p. 38; Notes 2 and 5–9, pp. 63–72.
Share repurchases helped earnings per share rise faster than profit. Average diluted shares fell from 654 million to 611 million, while continuing diluted EPS rose 79.5%. The cash used to retire shares reduces future share count, but it also competes with capacity investment and debt repayment. Employee awards added approximately 2 million shares to the diluted average in each year, a much smaller effect than the reduction from repurchases.
Company-attributable equity rose $684 million to $13.611 billion. Its retained-earnings balance nevertheless remained zero because profit was offset by declared dividends and amounts charged to retained earnings when shares were retired. The separate equity reconciliation below explains why a zero balance does not mean the company failed to earn a profit.
Source: FY2026 Form 10-K, consolidated equity statements, p. 53; Note 12, p. 76; Item 5, p. 29.
6. Old legal claims and tax estimates can still change the cash available for expansion
The completed water-system settlement did not close all of Johnson Controls’ firefighting-foam exposure. The $750 million settlement covers a defined group of public water systems. It excludes systems that opted out, certain later contamination claims and other categories of litigation, including personal-injury claims.
The company recorded $149 million of insurance recoveries in fiscal 2026, which helped reported pretax profit. It cannot predict the amount or timing of future recoveries. It also cannot estimate its ultimate financial exposure from the remaining foam cases beyond the settlement already described, and says that exposure could be material. A recovery this year therefore does not establish that the remaining claims will fund themselves through insurance.
Separately, environmental reserves were $163 million, down from $187 million, for obligations that may be paid over as long as 20 years. Much of the reserve relates to contamination around the Marinette, Wisconsin facilities. These reserves are not an estimate of the total remaining firefighting-foam litigation bill. Asbestos liabilities were $401 million, supported by $341 million of restricted assets and insurance receivables, leaving a calculated net exposure of $60 million on the recorded balances.
Source: FY2026 Form 10-K, Note 19, pp. 94–100, especially the settlement exclusions, insurance discussion and asbestos tables.
Tax accounting is another material influence on profit and assets. The continuing-business tax provision rose to $536 million, an effective rate of 15.6%, from $245 million and 12.4%. The fiscal 2026 provision combines $1.334 billion of current tax expense with a $798 million benefit from accounting for future taxes. The country-by-country reconciliation includes benefits and charges from business reorganizations as well as different national tax rates.
Deferred-tax assets reported within other noncurrent assets rose by $812 million to $2.589 billion. These represent future tax benefits recognized in the accounts, not cash deposited in a bank. The company also maintained $6.356 billion of valuation allowances against tax assets it may not be able to use, up from $6.256 billion. Realizing the recognized benefits depends on the tax rules and taxable income in the relevant countries.
Unrecognized tax benefits—amounts associated with tax positions that may not survive review—declined from $1.927 billion to $1.768 billion. Tax audits and appeals remain open in several jurisdictions. These balances do not provide a timetable for cash payments, but they show why a single year’s effective tax rate is not a dependable forecast of future cash taxes.
Source: FY2026 Form 10-K, Note 16, pp. 86–90. Effective tax rates above are calculated from reported provisions and continuing pretax income.
Asset values also need monitoring as the portfolio changes. The annual goodwill review produced no new goodwill impairment, but three trademarks with a combined $609 million carrying value had estimated values only consistent with their book values. That leaves little disclosed cushion if the associated businesses weaken. A write-down would mainly reduce accounting profit and equity initially, while the underlying cause—less customer demand or lower expected cash earnings—would be the more important business development.
Operating risks remain relevant alongside those older obligations. Management says tariffs and claimed refunds did not materially affect the periods presented and that it largely mitigated enacted tariffs. Additional costs that cannot be recovered through pricing would make the factory expansion less profitable. The company’s ability to recover or offset those costs remains part of the delivery challenge.
Source: FY2026 Form 10-K, Note 6, pp. 67–68; Item 7, p. 31.
7. The next step is to turn a stronger business into dependable delivery and collections
Johnson Controls enters fiscal 2027 with stronger operating earnings, more cash generation and a larger workload to deliver. Its installed equipment and service network provide a practical way to sell, install and maintain cooling systems for customers whose facilities cannot tolerate interruptions. The larger capital budget addresses that opportunity directly.
Management forecasts 11%–12% organic sales growth in fiscal 2027. Achieving that outlook will require the larger backlog to move through manufacturing and installation on time. The accompanying cash test is equally concrete: invoices must turn into collections while suppliers are paid, new capacity is built and restructuring work continues.
The strongest evidence against a purely optimistic reading is already in the accounts. Receivables grew faster than sales, products-and-systems gross margin declined, and the higher capital budget will leave less cash for other purposes unless cash generation rises. Remaining foam claims and tax matters can also change available funding. Conversely, stronger collections, effective use of the new capacity and delivery of the restructuring savings would allow the growing order book to support both higher earnings and greater financial flexibility.
Sources: FY2026 Form 10-K, Items 1 and 7; consolidated accounts; Notes 15, 16 and 19. October 27 earnings release, “Fiscal 2027 Guidance,” p. 4. The assessment of delivery and funding conditions is derived from the evidence discussed above.
Reporting basis and calculation notes
Reporting basis: Johnson Controls International plc, CIK 0000833444; SEC Form 10-K; accession 0000833444-26-000108; filed November 12, 2026; fiscal year October 1, 2025–September 30, 2026. The analysis uses the company and its subsidiaries’ consolidated U.S. GAAP accounts, rather than the separate summarized accounts of the debt-issuing entities. Comparative fiscal years also end September 30. Unless specified otherwise, dollar amounts are U.S. dollars and financial tables use millions.
The supplied complete filing text was the foundation. SEC submission metadata and relevant SEC XBRL facts were checked against that accession, with annual duration facts separated from year-end balances. Monetary facts in dollars were converted to millions. The current filing’s presentation of discontinued operations and segments governs the comparisons. The source notes identify the original documents and their printed page numbers.
Research is limited to information available by November 13, 2026, New York date. The company’s November 11 production announcement and November 12 filing are the latest dated primary operating and filing materials used here. The cutoff does not assert that every possible announcement through that date was reviewed.
Sources: SEC submission history; SEC company financial facts; FY2026 Form 10-K, cover, Note 1 and consolidated statements.
Calculation notes: Profit comparisons and management’s adjustments. Growth equals the change divided by the prior-year amount. Margins equal the relevant profit divided by revenue. Thus fiscal 2026 revenue growth is ($25,666 − $23,596) ÷ $23,596 = 8.8%. Operating profit is $9,515 − $5,510 − $311 = $3,694 million; the fiscal 2025 equivalent is $8,592 − $5,764 − $546 = $2,282 million. Fiscal 2024 is $8,077 − $5,661 − $510 = $1,906 million.
The regional profit measure leaves out several company-wide costs and gains. This table puts them back to reach consolidated profit before tax.
| Regional profit to consolidated pretax profit, US$ million | FY2025 | FY2026 |
|---|---|---|
| Total segment EBIT | 3,568 | 4,377 |
| Corporate expenses | -767 | -653 |
| Restructuring and impairment | -546 | -311 |
| Insurance recoveries | +39 | +149 |
| Financing charges | -319 | -279 |
| Divestiture gain | 0 | +70 |
| Net mark-to-market gain or loss | -6 | +73 |
| Reported continuing pretax profit | 1,969 | 3,426 |
Source: FY2026 Form 10-K, Item 7, p. 36.
The following bridge starts with continuing profit attributable to Johnson Controls. A positive adjustment adds back a cost; a negative adjustment removes a benefit. Operating adjustments are pretax; the last two rows before the result account for taxes.
| Annual profit reconciliation, US$ million | FY2025 | FY2026 |
|---|---|---|
| Reported continuing profit | 1,721 | 2,880 |
| Mark-to-market adjustments | +6 | -73 |
| Divestiture gain | 0 | -70 |
| Restructuring and impairment | +546 | +311 |
| AFFF insurance recoveries | -39 | -149 |
| Transaction/separation costs | +39 | +73 |
| Accelerated ERP depreciation | +102 | 0 |
| Transformation costs | +180 | +292 |
| Discrete tax items | -36 | -79 |
| Related tax effects | -57 | -32 |
| Management-adjusted continuing profit, non-GAAP | 2,462 | 3,153 |
AFFF is the firefighting foam involved in the water-system claims. ERP refers to enterprise business software. Mark-to-market adjustments revalue pension-related amounts and restricted asbestos investments. Amortization and stock compensation remain in this adjusted profit measure.
Sources: FY2026 Form 10-K, pp. 36 and 49; October 27 earnings release, footnotes 2 and 6, pp. 8–9 and 14. The fiscal 2025 adjustment rows sum to $2,462 million; fiscal 2026 rows sum to $3,153 million.
Calculation notes: From profit to operating cash. This table uses continuing profit including minority owners, matching the cash-flow statement. Positive adjustments increase cash relative to profit; negative adjustments reduce it. Depreciation, amortization and noncash impairment reduce accounting profit without being current-period cash payments. The customer and supplier rows reflect changes in amounts owed and other operating balances.
| Continuing profit-to-cash reconciliation, US$ million | FY2025 | FY2026 |
|---|---|---|
| Continuing profit, including minority owners | 1,724 | 2,890 |
| Depreciation and amortization | +865 | +654 |
| Pension and postretirement adjustments | -41 | -115 |
| Deferred-tax adjustment | +195 | -798 |
| Noncash restructuring and impairment | +427 | +195 |
| Equity-based compensation adjustment | +140 | +124 |
| Other noncash/reconciling items, net | -28 | -87 |
| Receivables: revenue awaiting collection | -211 | -1,096 |
| Inventory funding | -75 | -210 |
| Other operating assets | -581 | -78 |
| Accounts payable and accrued liabilities | +695 | +1,714 |
| Accrued income-tax changes | -556 | +679 |
| Continuing operating cash flow | 2,554 | 3,872 |
Continuing investing activities used $468 million in fiscal 2026. Capital spending used $465 million, acquisitions used $291 million and other net investing used $43 million; business sales returned $331 million. These amounts reconcile as $465 + $291 + $43 − $331 = $468 million.
Continuing financing activities used $3,048 million. Net borrowing repayments used $484 million, share repurchases used $1,505 million, dividends used $976 million and other net financing used $83 million. Net borrowing repayments comprise $170 million repaid on very short-term borrowings plus $859 million of other repayments, less $545 million of new debt proceeds.
The next table explains the change in cash held by the company, including cash restricted for specific obligations. Positive amounts add cash; negative amounts use cash or remove it from this reported balance.
| Opening cash to closing cash, US$ million | FY2025 | FY2026 |
|---|---|---|
| Opening cash including restricted cash | 767 | 398 |
| Continuing operating cash flow | +2,554 | +3,872 |
| Continuing investing cash flow | -412 | -468 |
| Continuing financing cash flow | -6,784 | -3,048 |
| Discontinued operations, all cash flows | +4,787 | -253 |
| Currency effects | -259 | +129 |
| Change in cash classified with businesses held for sale | -255 | 0 |
| Closing cash including restricted cash | 398 | 630 |
| Restricted cash deducted | -19 | -12 |
| Balance-sheet cash and cash equivalents | 379 | 618 |
Discontinued investing activities provided $6,546 million in fiscal 2025. They used $155 million in fiscal 2026, primarily for the residential-business sale’s final price adjustments. Those investing flows are included within the discontinued-operation totals in the table.
Source: FY2026 Form 10-K, consolidated cash-flow statements, p. 52; Notes 2 and 11, pp. 64 and 74. All arithmetic uses one consistent unit: US$ million.
Calculation notes: Debt payments and balance-sheet checks. The maturity schedule below covers gross long-term debt principal, including its current portion. It excludes the separate $678 million of short-term debt, interest and leases.
| Principal payment year | US$ million at September 30, 2026 |
|---|---|
| FY2027 | 1,066 |
| FY2028 | 681 |
| FY2029 | 700 |
| FY2030 | 625 |
| FY2031 | 500 |
| After FY2031 | 5,059 |
| Total gross long-term principal | 8,631 |
Subtract $34 million of issuance costs and $33 million of unamortized discount, then add $35 million of purchase-accounting adjustments, to reach the $8,599 million carrying amount. Add $678 million of short-term debt to reach total financing debt of $9,277 million. Issuance costs and discounts reflect the cost of raising debt; purchase-accounting adjustments reflect how acquired debt was recorded. The amount contractually owed therefore differs from its accounting balance.
The balance sheets reconcile as follows: fiscal 2026 assets of $40,147 million equal liabilities of $26,501 million plus total equity of $13,646 million. Fiscal 2025 assets of $37,939 million equal liabilities of $24,985 million plus total equity of $12,954 million.
Sources: FY2026 Form 10-K, consolidated balance sheets, p. 51; Note 9, pp. 70–72.
Calculation notes: Equity and shares. This reconciliation uses equity attributable to Johnson Controls, excluding minority owners. Declared dividends enter equity when declared; the cash-flow statement separately reports dividends when paid.
| FY2026 company-attributable equity reconciliation | US$ million |
|---|---|
| Opening equity | 12,927 |
| Net income | +2,853 |
| Dividends declared | -969 |
| Repurchases and retirements, net equity effect | -1,505 |
| Shares withheld for employee taxes | -69 |
| Share compensation credited to capital | +98 |
| Other capital changes, including option exercises | +28 |
| Other comprehensive income | +248 |
| Closing equity | 13,611 |
Paid-in capital rose from $14,865 million to $15,370 million: $98 million of share compensation, a $379 million credit associated with repurchases and retirements, and $28 million of other changes. Retained earnings stayed at zero because $2,853 million of profit was offset by $969 million of declared dividends and $1,884 million charged for repurchases and retirements. The $379 million capital credit and $1,884 million retained-earnings charge together equal the $1,505 million net reduction in equity.
Treasury shares’ cost increased by $69 million to $1,371 million because of shares withheld for employee taxes. This is separate from open-market shares that were immediately retired. Accumulated other comprehensive loss narrowed by $248 million, from $642 million to $394 million; currency translation added $282 million, partly offset by $34 million of other changes. These gains increased equity without being part of net income.
Issued shares declined from 641.632 million to 632.395 million. Subtracting treasury shares of 30.502 million and 31.083 million gives approximately 611.130 million and 601.312 million shares outstanding at the respective year-ends. These date-specific counts differ from the 654 million and 611 million weighted-average diluted shares used in annual EPS. Rounded published share counts may not reproduce EPS to the cent.
Source: FY2026 Form 10-K, consolidated balance sheets and equity statements, pp. 51 and 53; Notes 12 and 13, pp. 76–77.
This analysis is for general information and education. It is not investment advice or a recommendation to trade any security.