Illinois Tool Works (ITW) Q3 2025 earnings summary

Executive summary

• Achieved record financial and operational performance in Q3 2025, with revenue up 2–3% (1% organic), strong margin expansion, and robust free cash flow, outpacing end-market declines.

• GAAP EPS was $2.81, up 6% year-over-year excluding prior-year divestiture gain; operating margin reached a record 27.4%, up 90 bps.

• Enterprise initiatives and pricing actions contributed to margin gains and offset tariff impacts.

• Announced a 7% dividend increase, marking the 62nd consecutive annual increase, and repurchased over $1.1 billion in shares year-to-date.

• Progressed on strategic growth priorities, including customer-backed innovation and product line simplification.

Financial highlights

• Q3 2025 revenue was $4.1 billion, up 2–3% year-over-year, with 1% organic growth and a 2% FX benefit, partially offset by a 1% reduction from product line simplification.

• Operating income for Q3 2025 was $1.1 billion, up 5.7–6% year-over-year; operating margin expanded 90 bps to 27.4%.

• Free cash flow grew 15% to over $900 million in Q3, with a 110% conversion rate; YTD free cash flow was $1.85 billion.

• Effective tax rate for Q3 was 21.8%; projected full-year rate is approximately 23%.

• After-tax ROIC for Q3 2025 was 29.1% annualized.

Outlook and guidance

• Full-year 2025 GAAP EPS guidance narrowed to $10.40–$10.50, up 3% at midpoint, reflecting confidence despite macroeconomic uncertainty.

• Projected 2025 revenue growth of 1–3%, with organic growth expected at 0–2%; operating margin guidance unchanged at 26–27%.

• Enterprise initiatives expected to contribute at least 125 bps to full-year operating margins.

• Free cash flow expected to be approximately 100% of net income; $1.5 billion in share repurchases planned.

• Projected effective tax rate for 2025 is approximately 23%; Q4 expected at 24–25%.