Johnson Controls powers ahead with discipline, and digital and AI approaches

CORK, Ireland—Johnson Controls delivered robust financial results for fiscal year 2025 while laying out the foundation for a transformation that blends operational discipline with cutting-edge technology. 

Strong financial performance 

The fourth quarter capped a year of consistent execution, company officials say. Organic revenue grew 4%, segment margin expanded 20 basis points to 18.8%, and adjusted EPS rose 14% year-over-year, exceeding guidance. 

For the full year, sales increased 6%, segment margins improved by 100 basis points, and adjusted EPS surged 17%. Free cash flow conversion reached 102%, supported by rigorous working capital management and strong earnings quality. 

CFO Marc Vandiepenbeeck highlighted balance sheet strength. “We ended the quarter with approximately $400 million in available cash, and net debt declined to 2.4 times, within our long-term target range,” he said.  

Orders grew 6% in the quarter, led by 9% growth in the Americas, driven by data center demand. Europe, the Middle East and Africa (EMEA) posted 3% growth, with double-digit gains in service, while Asia-Pacific (APAC) saw a modest decline due to lower volumes in China. 

Across the enterprise, service delivered mid-single-digit growth, reinforcing Johnson Controls’ recurring revenue strategy. 

Proprietary business system: A growth engine 

Beyond the numbers, Johnson Controls is reshaping its operating model through a proprietary business system introduced last quarter. This framework combines 80/20 principles, lean methodologies, and digital and AI capabilities to simplify processes, accelerate execution, and scale impact. 

“Our proprietary business system is taking shape as our growth engine, combining 80/20 and lean principles with digital and AI approaches to create a more customer-centric and continuous improvement-oriented organization,” said CEO Joakim Weidemanis. 

Unpacking mid-single-digit growth 

Johnson Controls is revising its long-term growth algorithm to reflect its strengthened position, which includes mid-single-digit top-line growth, enhanced operating leverage, double-digit adjusted EPS growth, and a 100% free cash flow conversion target.  

One investor sought clarity on the company’s mid-single-digit organic growth guidance for fiscal 2026, with Weidemanis pointing to strong visibility.  

“Our backlog grew by 13%,” he said. “We have a record backlog going into our fiscal year - $15 billion. Of course, not all of that is shippable in this year, but the vast majority is. On top of that, we have a very significant part of our Service business that is recurring, so we actually have pretty good predictability for the year already.” 

Vandiepenbeeck added that all regions will fall within mid-single digits in fiscal 2026, with EMEA slightly above average, and Americas and APAC near the enterprise level. By domain, he noted that its Applied and HVAC business is expected to grow faster than mid-single digits, supported by high-growth verticals like data centers. 

However, Vandiepenbeeck forecasted that Fire and Security will probably be on the “lower hand of that enterprise guide” and bring “some contribution to growth,” but not as much as the domain highly supported by those high-growth verticals, he said.