Document

“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.

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 63rd 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.

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.

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.

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.

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.


	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


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


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	%


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

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

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.


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

30 bps

20 bps

Total Operating
Margin Change

10 bps

(50) bps

250 bps

80 bps

200 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.


	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		%

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	%


	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		%

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:


	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		%