01—Abstract
Summary
Summary of the 10-Q filed May 7, 2026. Cited figures are marked; the original filing is the authoritative source.
Illinois Tool Works Inc. (ITW) reported a solid first quarter for 2026, demonstrating resilience and continued execution of its business model in a dynamic global environment.
The company achieved a 4.6% increase in operating revenue, reaching $4.02 billiona, driven by a combination of organic growth, favorable foreign currency translation, and a recent acquisition in the Test & Measurement and Electronics segment. Profitability saw a notable improvement, with operating income rising by 7.2% to $1.02 billion. This was supported by a 60 basis point expansion in operating margin to 25.4%, attributed to the company's ongoing enterprise initiatives and efficiencies, partially offset by increased employee-related expenses.
Diluted Earnings Per Share (EPS) also saw a healthy increase of 11.8% to $2.66b. The company continued its commitment to shareholder returns, repurchasing approximately $375 million in stock during the quarter, alongside consistent dividend payments.
02—Key points
Key Highlights
- Operating revenue increased by 4.6% to $4.02 billion, driven by organic growth, foreign currency tailwinds, and a strategic acquisition.
- Operating income grew by 7.2% to $1.02 billion, with operating margin expanding by 60 basis points to 25.4% due to enterprise initiatives and efficiencies.
- Diluted Earnings Per Share (EPS) rose by 11.8% to $2.66, reflecting improved profitability.
- The Test & Measurement and Electronics segment showed strong performance with a 9.6% revenue increase and a 150 bps margin expansion.
- Automotive OEM segment revenue grew 4.4% and saw a significant 170 bps margin improvement, outperforming industry auto build declines.
- The company generated strong free cash flow of $528 million, supporting its capital allocation priorities.
- ITW repurchased approximately $375 million of its common stock during the quarter, underscoring its commitment to shareholder returns.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Illinois Tool Works Inc kept $0.19.
- Revenue$4.02B100.0%
- Cost of revenue−$2.26B56.2%
- Gross profit$1.76B43.8%
- Operating costs−$740.0M18.4%
- Operating income$1.02B25.4%
- Interest, other & tax−$252.0M6.3%
- Net income$768.0M19.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed May 7, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $4.02B$3.84B | +4.6% |
| Cost of Revenue | $2.26B$2.16B | +4.4% |
| Gross Profit | $1.76B$1.68B | +4.9% |
| Operating Income | $1.02B$951.00M | +7.3% |
| Net Income | $768.00M$700.00M | +9.7% |
| EPS (Basic) | $2.66$2.39 | +11.3% |
| EPS (Diluted) | $2.66$2.38 | +11.8% |
| Shares Outstanding (Basic) | 288.30M293.60M | −1.8% |
| Shares Outstanding (Diluted) | 289.10M294.50M | −1.8% |
05—Questions
Frequently Asked Questions
What was the main driver of revenue growth in the first quarter of 2026?
Revenue growth was primarily driven by a combination of factors including favorable foreign currency translation, a modest increase in organic revenue across several segments, and the impact of a recent acquisition in the Test & Measurement and Electronics segment. While overall organic revenue growth was modest, the company highlighted specific segment strengths that contributed positively.
How did ITW manage its operating expenses and improve profitability?
ITW improved its operating margin through continued execution of its enterprise initiatives, which yielded efficiency benefits. These were partially offset by higher employee-related expenses. The company also benefited from lower restructuring expenses and, in some segments, positive operating leverage, contributing to the overall margin expansion.
What is ITW's approach to capital allocation, and how did it return capital to shareholders?
ITW's capital allocation priorities include internal investments for growth, dividend payments, strategic acquisitions, and share repurchases. In the first quarter, the company paid dividends and repurchased approximately $375 million of its common stock. The company also generated strong free cash flow of $528 million, which provides financial flexibility for these priorities.
Are there any significant concerns or headwinds mentioned in the report?
The report notes continued uncertainty in the external environment, including potential impacts from global supply chain challenges and U.S. trade policies, though the company believes it is well-positioned to mitigate tariff impacts. Certain segments experienced modest organic revenue declines, and increased employee-related expenses were a recurring factor impacting profitability across segments.
06—Continue