Eaton Powers Forward in Q2

Eaton’s overall Q2 results highlighted a 8% organic sales growth, at the high end of guidance with quarterly record sales of $7.028 billion, and a strong year-over-year backlog growth of 15% in Electrical.

Eaton had record segment margins of 23.9%, at the high end of guidance. In addition, twelve-month rolling average orders accelerated, in Electrical Americas, to up 2%, driven by data center momentum.

Eaton Electrical Up 16% (12% organically!)

Sales for the Electrical Americas segment were a record $3.4 billion, up 16% from 2Q 2024. The sales increase consisted of 12% growth in organic sales and 5% growth from acquisitions, which was partially offset by 1% from negative currency translation. Operating profits were a record $987 million, up 15% over 2Q 2024, and operating margins in the quarter were 29.5%. In addition, the book-to-bill ratio was 1.1 on a rolling 12-month basis and backlog is up 17% year-over-year.

Notably, Eaton closed the acquisition of Fibrebond and signed an agreement to acquire Resilient Power Systems.

• Fibrebond is a designer and builder of pre-integrated modular power enclosures that Eaton acquired for $1.4 billion. Eaton’s CEO, Mike Yelton, stated that this move positions Eaton as a one-stop shop for rapidly deploying power infrastructure, enhancing their offerings for data center, industrial, and utility customers.
• Resilient Power Systems strengthens Eaton’s power distribution offering for data centers and other DC applications such as EV charging and battery storage. Resilient’s solid-state transformer technology replaces traditional copper windings with power electronics for medium voltage to low voltage power conversion in a smaller footprint than comparable solutions.

Note that while Eaton does not publish a specific breakdown of US-only revenue within its Electrical Americas Segment, based on company disclosures and industry reporting, the vast majority of the Electrical Americas Segment’s business is in the United States. Recent investor materials and third-party analysis consistently state that the US typically represents about 85–90% of the Electrical Americas Segment’s revenues.

For the full year 2025, the company anticipates organic growth of 8.5-9.5% and segment margins of 24.1-24.5%.

Of interest was the following chart where Eaton shared the percentage of sales various end-user markets represent.

Given Eaton’s performance and its two acquisitions this quarter, the focus, and opportunity, is data centers. While the commercial and residential markets are important, collectively they are “down” to 26% of the business with “infrastructure (data centers + utilities) now representing 28% of the business (and what percentage of this business is direct versus through distribution?)

Concerns

Shareholder concerns following Eaton’s Q2 2025 earnings conference focus on several key areas, despite headline results showing record revenue, and robust margin performance.

• One major concern centered around the cautious guidance and Q3 outlook, which could be interpreted as a signal for increased uncertainty for the remainder of the year.
• This, combined with tough comparables for comparison, and a tepid margin outlook, were the primary issue.
• Also of concern, and noted in other earnings calls, was that demand tailwinds in data centers and aerospace could moderate if economic or policy conditions change.
• Shareholders are watching whether Eaton can sustain margin expansion at the same pace given rising investments and cost pressures.

Analysts also were concerned that Eaton is investing heavily to expand production (notably transformers and data center products), which brings execution and integration risks. Some analysts question the pace of margin recovery and whether the company can efficiently absorb new capacity while maintaining profitability, especially in the face of fluctuating demand cycles.

Take Aways

• As in other earnings reports, data centers, data centers and data centers.
• Eaton is also well positioned for utilities and infrastructure.
• The “up 12% (organic)” is very good, however, from a distributor perspective, how does this relate for distribution-centric opportunities and brands. Impact, or future impact, of pricing and tariffs? Commodity price driven impact (steel, aluminum, etc)? Percentage of data center business through distribution? Access to product offerings of acquisitions?

Congratulations to Eaton on a strong quarter.