Johnson Controls surges on data center demand, guidance raise
Building solutions giant raises FY26 EPS outlook to $4.70 as orders jump 39%
Johnson Controls International reported stronger-than-expected first-quarter earnings and raised its full-year outlook, as the building solutions giant capitalizes on surging demand for data center infrastructure driven by the artificial intelligence boom.
The Ireland-based company posted adjusted earnings per share of $0.89 for the quarter ended December, surpassing analyst estimates of $0.84, with sales climbing 7% to $5.8 billion against projections of $5.64 billion. according to the company's earnings release. The stock, which has gained 84% over the past 12 months, was trading higher in early Wednesday trading.
Perhaps more striking than the headline numbers was the explosive growth in new business. Orders surged 39% organically year-over-year, while backlog reached $18.2 billion, up 20% from the prior year. The company's backlog growth provides visibility into future revenue, with the data center market emerging as a key catalyst.
"Our nearly 40% order growth highlights strong customer demand in our core end markets, where our technology leadership and enviable field presence continues to differentiate us," said Joakim Weidemanis, chief executive officer. The company noted in its release that "the increase in backlog and orders was primarily due to demand led by customers' accelerated investments in data center projects."
Buoyed by the strong quarter and robust order book, management lifted its fiscal 2026 adjusted EPS guidance to approximately $4.70, up from the previous outlook of $4.55. The company maintained its forecast for mid-single-digit organic sales growth and approximately 50% operating leverage for the full year.
Johnson Controls, which specializes in HVAC systems, fire safety equipment, and building automation technologies, has become an unlikely beneficiary of the AI infrastructure build-out. Data centers require sophisticated cooling systems to manage the immense heat generated by high-performance computing chips, and Johnson Controls' expertise in thermal management positions it as a critical supplier in the data center supply chain.
The company has recently expanded its portfolio of cooling solutions for high-density data centers, including the YORK YDAM air-cooled magnetic bearing centrifugal chiller. It has also released thermal management reference design guides specifically for gigawatt-scale AI data centers, underscoring its strategic focus on this rapidly growing market.
Analysts remain broadly optimistic on the stock. Johnson Controls currently carries a "Moderate Buy" consensus rating, with 11 analysts recommending the stock and 10 advising investors to hold, according to MarketBeat data. The consensus price target stands at $126.61, implying modest upside from current levels around $124.
The strong quarterly performance comes as Johnson Controls continues its strategic transformation. Last year, the company announced plans to sell its Residential and Light Commercial HVAC business to focus on higher-margin commercial building solutions, positioning itself more directly in the data center and enterprise building markets.
Looking ahead, investors will be watching whether the company can maintain its order momentum and convert its substantial backlog into revenue and earnings growth. The data center market remains in an early innings of expansion, with major technology companies continuing to announce massive capital expenditure plans to build out AI infrastructure.
For the second quarter, Johnson Controls forecast organic sales growth of approximately 5% and adjusted EPS of about $1.11. With its elevated guidance and robust order book, the company appears well-positioned to deliver on its promises, even as some investors question whether the pace of data center investment can be sustained.