Third-quarter orders rose 40% and data-center orders more than doubled, while operating margin widened to 20.8%. Net income fell 2%, which ABB attributes mainly to the revaluation of a currency hedge tied to its Rotork acquisition. Separately, it is paying about $495 million for 51% of a business Mitsubishi Electric is spinning out.
ABB's quarter answered the question investors have been asking about AI infrastructure demand. It did not answer the one they asked about earnings.
The Swiss electrification and automation group said on Tuesday that orders rose 40% to $12.06 billion in the third quarter, a record, with orders in its data-center segment more than doubling. Orders exceeded revenue by a ratio of 1.24. Revenue rose 14% to $9.70 billion. Operational EBITA, ABB's preferred measure of operating profit, rose to $2.03 billion, a margin of 20.8%, up 1.6 percentage points from a year earlier.
Net income attributable to ABB was $1.18 billion, down 2%, and basic earnings per share were 65 cents, also down 2%. ABB said the flat result reflected mainly higher net finance expense from a non-cash revaluation of a deal-contingent currency hedge tied to its announced acquisition of Rotork.
ABB shares were down about 5.7% in Zurich at about 6 a.m. Eastern.
Against expectations
The company publishes a consensus compiled from analysts' estimates, and the quarter lands on both sides of it depending on the line. Revenue was about 0.4% below the $9.74 billion consensus. Operational EBITA was about 1.3% above the $2.00 billion expected, and the margin beat by 0.3 points. Net income was about 17% below the $1.42 billion consensus, and earnings per share of 65 cents were about 18% below the 79 cents expected.
The operating lines that measure the business beat. The reported lines that include the hedge missed. Because the hedge charge is non-cash and tied to a single transaction, whether it recurs until Rotork closes will determine how much of the gap is temporary.
What management said
"ABB delivered record order intake, and improved operational performance with strong cash flow and return on capital," Chief Executive Morten Wierod said. Free cash flow was $1.6 billion and cash from operations rose 5%. In an interview with CNBC on Tuesday, he said he sees no slowdown in data-center construction in the coming years, and that orders would still be growing at a double-digit rate without data centers.
The outlook was steady to slightly firmer. ABB now expects comparable revenue growth in the "low teens" for 2026, narrowing a range that in July ran from low double digits to the low teens, and an improvement of at least 2.7 percentage points in its operational EBITA margin. It expects the margin to soften from the third quarter to the fourth, though by less than the usual seasonal pattern.
The Mitsubishi Electric deal
Separately, ABB agreed to take control of a low-voltage power distribution business that Mitsubishi Electric is spinning out, paying about $495 million for a 51% stake in a venture aimed at Asian markets. The deal is expected to close in the second half of 2027.
The wider tape
ABB fell on a day when European data-center suppliers were broadly lower. Siemens Energy fell about 2.6%, and Asian and European chip stocks sold off. Schneider Electric fell about 3%, though it is also raising about €6 billion of new equity to fund its purchase of PTC. ABB's decline came despite its record orders, which suggests the market was weighing the earnings miss and the sector mood more heavily than the demand signal.
Market implications
One reading is that the quarter is stronger than the stock suggests. Orders, margin and cash flow all beat or improved, the earnings shortfall stems from a non-cash item tied to one acquisition, and management sees data-center demand continuing.
A second reading is that the reported numbers are what count. Net income was 17% below consensus, revenue fell slightly short, the fourth-quarter margin is set to soften, and the Rotork hedge could keep weighing on reported earnings until that deal closes.
What to watch
Any further detail on the size and timing of the Rotork hedge charge; data-center order growth in the fourth quarter; the sequential margin decline; terms of the Mitsubishi Electric venture; and results from Schneider Electric and other suppliers to data centers. A second quarter of triple-digit data-center order growth would make the demand case hard to dispute.