01—Abstract
Summary
Summary of the 10-K filed February 26, 2026. Cited figures are marked; the original filing is the authoritative source.
Eaton (ETN) reported 2025 net sales of $27.4 billiona, up 10% year over year, with organic growth of 8% driven by data center demand in Electrical Americas and Electrical Global, plus broad strength in Aerospace.
Net income attributable to Eaton shareholders rose 8% to $4.09 billionb, and diluted EPS was $10.45, up 10%. Adjusted EPS, which excludes acquisition charges, restructuring and intangible amortization, reached $12.07, up 12%. Gross margin contracted to 37.6% from 38.2% due to commodity and wage inflation, while Electrical Americas operating margin stayed near 30%.
Operating cash flow was $4.47 billionc and capex was $919 million, with management guiding to roughly $1.1 billion of capex in 2026. The filing is dominated by two portfolio moves. Eaton closed the $1.53 billion Ultra PCS acquisition in January 2026 and has agreed to acquire Boyd Thermal for $9.5 billion, expected to close in Q2 2026.
To fund Boyd, Eaton secured an $8.0 billiond delayed-draw term loan and expanded its revolver to $4.0 billion, and management has said it will not pursue buybacks in 2026. Eaton also announced a planned spin-off of its Mobility business (Vehicle and eMobility) by the end of Q1 2027, which carries execution and tax-qualification risk. Balance sheet metrics remain solid, with long-term debt of $9.9 billion, cash plus short-term investments of $803 million, and an A-/A3 credit rating.
Key risks include integration of several acquisitions, a sizable Boyd-related debt load, inflation in commodities and labor, and ongoing IRS tax disputes with unrecognized tax benefits of $1.3 billion. Ernst & Young flagged unrecognized income tax benefits as a critical audit matter. Investors will look for Mobility segment financials in the Q1 2026 10-Q and for evidence that Boyd and Ultra PCS integrate as planned.
02—Key points
Key Highlights
- 2025 net sales rose 10% to $27.4 billion, with 8% organic growth led by data center end markets, and Electrical Americas operating margin held near 30% at 29.9%.
- Diluted EPS grew 10% to $10.45; adjusted EPS grew 12% to $12.07, while gross margin declined about 60 basis points to 37.6% on commodity and wage inflation.
- Eaton agreed to acquire Boyd Thermal for $9.5 billion (expected close Q2 2026), funded by an $8.0 billion delayed-draw term loan, and closed the $1.53 billion Ultra PCS acquisition in January 2026.
- Planned spin-off of the Mobility business (Vehicle and eMobility) targeted by end of Q1 2027; the filing notes risk that the spin may be delayed or fail to qualify as tax-free.
- Operating cash flow was $4.47 billion in 2025 and capex was $919 million, with about $1.1 billion of capex expected in 2026.
- Share repurchases remaining authorization was $7.6 billion, but management does not intend to repurchase shares in 2026 because of the Boyd acquisition; the quarterly dividend was raised 6% to $1.10.
- Goodwill rose to $15.8 billion and total assets to $41.3 billion; $1.3 billion of gross unrecognized tax benefits remain tied to ongoing IRS and Brazilian tax disputes.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2025filed February 26, 2026Financial Statements
FY2025 against FY2024
| Line item | FY2025FY2024 | Change |
|---|---|---|
| Revenue | $27.45B$24.88B | +10.3% |
| Cost of Revenue | $17.13B$15.38B | +11.4% |
| Gross Profit | $10.32B$9.50B | +8.6% |
| R&D Expenses | $797.00M$794.00M | +0.4% |
| SG&A Expenses | $4.31B$4.08B | +5.7% |
| Net Income | $4.09B$3.80B | +7.7% |
| EPS (Basic) | $10.48$9.54 | +9.9% |
| EPS (Diluted) | $10.45$9.50 | +10.0% |
| Shares Outstanding (Basic) | 389.90M397.60M | −1.9% |
| Shares Outstanding (Diluted) | 391.20M399.40M | −2.1% |
05—Questions
Frequently Asked Questions
Why is Eaton taking on significant new debt in 2026?
Eaton secured an $8.0 billion delayed-draw term loan on February 6, 2026 to help finance the $9.5 billion Boyd Thermal acquisition, and it expanded its revolving credit facility to $4.0 billion and its commercial paper program to $4.0 billion. The term loan is due December 31, 2026 unless terminated earlier, and the company has not yet drawn on it.
What is the Mobility spin-off and when is it expected?
Eaton announced on January 26, 2026 its intention to spin off Mobility, consisting of its legacy Vehicle and eMobility segments, into an independent public company. The target is completion by the end of Q1 2027, subject to regulatory approvals and a Form 10 registration, and the company intends for the transaction to be tax-free to shareholders.
What drove the 2025 growth and margin pressure?
Revenue growth came from data center demand in the Electrical segments, machine OEM and residential strength, broad aerospace growth, and acquisitions that contributed about 2 points. Gross margin fell 60 basis points to 37.6% because commodity and wage inflation (about 280 basis points) outweighed the benefit of higher sales. Vehicle sales declined 10% on weak North American truck and light vehicle markets.
How much capital is Eaton returning to shareholders?
In 2025 Eaton paid $1.63 billion in dividends and repurchased $1.86 billion of stock. It declared a Q1 2026 quarterly dividend of $1.10 per share, up 6%. Management does not plan buybacks in 2026 while it funds the Boyd Thermal acquisition, although $7.6 billion remains available under the 2025 program.
What are the main risks flagged in the filing?
Key risks include integration of multiple acquisitions (Fibrebond, Resilient, Ultra PCS, and Boyd if completed), supply chain and commodity inflation, dependence on data center and utility demand, cybersecurity and AI-related exposures, and tariffs and trade policy. The company also faces tax disputes with the IRS and Brazilian authorities, with $1.3 billion of gross unrecognized tax benefits, and the auditor identified this as a critical audit matter.
06—Continue