Why did GAAP EPS decline sharply even though sales and Adjusted EPS grew?

GAAP results absorbed several one-time or non-cash items in Q4 FY2025: a $110 million net impairment from the Sensia joint venture, a $136 million legacy asbestos charge ($91 million from a change in accounting method for defense costs and $45 million from an indemnity accrual increase), and a Q4 GAAP effective tax rate of 52.4%. Together these reduced diluted EPS by $1.88 for the year. Adjusted EPS excludes legacy asbestos and environmental charges and the Sensia impairment, so it shows the underlying operating trend.

What is the Sensia dissolution and how does it affect Rockwell?

Rockwell and its joint venture partner SLB agreed to pursue an orderly dissolution of Sensia following a strategic review. Rockwell will assume ownership of the process automation business it originally contributed. The transaction is expected to close in the first half of fiscal 2026, subject to customary conditions. FY2026 guidance excludes the anticipated impact of the dissolution, so the final financial effect remains to be quantified.

Is the change to the Adjusted EPS definition a concern for investors?

Investors should be aware of it. Starting in Q4 FY2025, Rockwell excludes legacy asbestos and environmental charges from Adjusted Income and Adjusted EPS, and prior periods were recast. Management argues these costs relate to products sold many years ago and are not reflective of core operations. This makes Adjusted EPS growth look stronger than it would under the prior definition, so GAAP EPS and cash flow are important cross-checks. Legacy asbestos and environmental charges totaled $154 million for FY2025 versus $21 million in FY2024.

What drove the strong cash flow and what is the outlook for FY2026?

Operating cash flow of $1,544 million and free cash flow of $1,358 million were driven by cost reduction and margin expansion, no payout of FY2024 incentive compensation in Q1 FY2025, and lower tax payments, partly offset by a $70 million voluntary pension contribution. For FY2026, management guided to reported sales growth of 3% to 7%, Adjusted EPS of $11.20 to $12.20 and GAAP diluted EPS of $10.40 to $11.40, with a seasonally low first quarter and gradual improvement through the year. Guidance assumes an effective tax rate of about 20%.

Which segments are driving growth and which are lagging?

Software & Control is the growth engine, with FY2025 sales up 9% to $2,383 million and segment operating margin up to 29.7%, and Q4 sales up 31%. Intelligent Devices was roughly flat to down, with FY2025 sales down 1% and margin down to 18.0% due to lower volume and higher compensation. Lifecycle Services declined 3% for the year, and its segment margin fell to 14.5% from 16.1%. Total ARR grew 8%, indicating continued momentum in recurring revenue.

ROK 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed November 6, 2025. Cited figures are marked; the original filing is the authoritative source.

Rockwell Automation (ROK) reported fiscal Q4 and full-year 2025 results on November 6, 2025, with headline reported sales up 14% in Q4 (organic up 13%) and full-year sales up a modest 1% to $8,342 million^a.

Reported GAAP earnings were weak: Q4 diluted EPS fell 41% to $1.23^b and full-year diluted EPS fell 7% to $7.67, driven by a $110 million net impairment tied to the Sensia joint venture, a $136 million legacy asbestos charge (accounting method change plus indemnity accrual increase), and a 52.4% Q4 GAAP tax rate. Management's preferred Adjusted EPS, which now excludes legacy asbestos and environmental charges, rose 32% in Q4 to $3.34 and 7% for the year to $10.53, with segment operating margin expanding to 20.4% for the year. Note that the definitional change to Adjusted EPS flatters the comparison, so investors should weigh GAAP results alongside the non-GAAP figures.

Cash generation was a clear bright spot. Operating cash flow rose 79% to $1,544 million and free cash flow more than doubled to $1,358 million^c, aided by cost reductions, no incentive payout in Q1 FY25, and lower tax payments. Software & Control was the standout segment, with Q4 sales up 31% and full-year sales up 9%, while Intelligent Devices declined 1% for the year and Lifecycle Services fell 3%.

Total ARR grew 8%, supporting the recurring-revenue story. For fiscal 2026, Rockwell guided to reported sales growth of 3% to 7%, organic growth of 2% to 6%, GAAP diluted EPS of $10.40 to $11.40^d, and Adjusted EPS of $11.20 to $12.20. Guidance excludes the expected effects of the Sensia dissolution, which the company and SLB agreed to pursue and expects to close in the first half of fiscal 2026, with Rockwell assuming the process automation business it originally contributed.

02—Key points

Key Highlights

Q4 FY2025 reported sales rose 14% to $2,316 million (organic +13%), with Software & Control up 31% and Intelligent Devices up 15%.
GAAP diluted EPS fell to $1.23 in Q4 (down 41%) and $7.67 for FY2025 (down 7%), weighed down by $1.88 per share of accounting adjustments and one-time charges.
Adjusted EPS rose 32% to $3.34 in Q4 and 7% to $10.53 for FY2025, but the definition now excludes legacy asbestos and environmental charges, so the comparison is not like-for-like with prior reporting.
Free cash flow more than doubled to $1,358 million (up 113%) on operating cash flow of $1,544 million; FCF conversion reached 114% of Adjusted Income.
Sensia joint venture dissolution announced with SLB; a $110 million net non-cash impairment was recorded in Q4 and Rockwell will take over the process automation business, with closing expected in 1H FY2026.
FY2026 guidance calls for reported sales growth of 3% to 7% and Adjusted EPS of $11.20 to $12.20, excluding any Sensia dissolution impact, with a seasonally weak Q1 and gradual sequential improvement.
Software & Control segment margin expanded sharply to 29.7% for FY2025 (from 24.2%), while Lifecycle Services margin fell to 14.5% (from 16.1%) on higher compensation costs; ARR grew 8% and $927 million remains under the buyback authorization.

03—Questions

Frequently Asked Questions

Why did GAAP EPS decline sharply even though sales and Adjusted EPS grew?
GAAP results absorbed several one-time or non-cash items in Q4 FY2025: a $110 million net impairment from the Sensia joint venture, a $136 million legacy asbestos charge ($91 million from a change in accounting method for defense costs and $45 million from an indemnity accrual increase), and a Q4 GAAP effective tax rate of 52.4%. Together these reduced diluted EPS by $1.88 for the year. Adjusted EPS excludes legacy asbestos and environmental charges and the Sensia impairment, so it shows the underlying operating trend.
What is the Sensia dissolution and how does it affect Rockwell?
Rockwell and its joint venture partner SLB agreed to pursue an orderly dissolution of Sensia following a strategic review. Rockwell will assume ownership of the process automation business it originally contributed. The transaction is expected to close in the first half of fiscal 2026, subject to customary conditions. FY2026 guidance excludes the anticipated impact of the dissolution, so the final financial effect remains to be quantified.
Is the change to the Adjusted EPS definition a concern for investors?
Investors should be aware of it. Starting in Q4 FY2025, Rockwell excludes legacy asbestos and environmental charges from Adjusted Income and Adjusted EPS, and prior periods were recast. Management argues these costs relate to products sold many years ago and are not reflective of core operations. This makes Adjusted EPS growth look stronger than it would under the prior definition, so GAAP EPS and cash flow are important cross-checks. Legacy asbestos and environmental charges totaled $154 million for FY2025 versus $21 million in FY2024.
What drove the strong cash flow and what is the outlook for FY2026?
Operating cash flow of $1,544 million and free cash flow of $1,358 million were driven by cost reduction and margin expansion, no payout of FY2024 incentive compensation in Q1 FY2025, and lower tax payments, partly offset by a $70 million voluntary pension contribution. For FY2026, management guided to reported sales growth of 3% to 7%, Adjusted EPS of $11.20 to $12.20 and GAAP diluted EPS of $10.40 to $11.40, with a seasonally low first quarter and gradual improvement through the year. Guidance assumes an effective tax rate of about 20%.
Which segments are driving growth and which are lagging?
Software & Control is the growth engine, with FY2025 sales up 9% to $2,383 million and segment operating margin up to 29.7%, and Q4 sales up 31%. Intelligent Devices was roughly flat to down, with FY2025 sales down 1% and margin down to 18.0% due to lower volume and higher compensation. Lifecycle Services declined 3% for the year, and its segment margin fell to 14.5% from 16.1%. Total ARR grew 8%, indicating continued momentum in recurring revenue.

04—Continue

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