Carrier Global Corporation

Company Overview

Business Model: Carrier Global Corporation is a global leader in intelligent climate and energy solutions, providing differentiated, digitally-enabled lifecycle solutions. The Company's portfolio includes industry-leading brands such as Carrier, Viessmann, Toshiba, Automated Logic, and Carrier Transicold, offering innovative heating, cooling, and cold chain solutions. Revenue is generated through the sale of products and a broad array of related building services, including audit, design, installation, system integration, repair, maintenance, and monitoring. For the year ended December 31, 2025, new equipment comprised 72% and parts and service comprised 28% of net sales.

Market Position: The Company holds a global leadership position in intelligent climate and energy solutions, leveraging its industry-leading brands and a track record of innovation. It is well-positioned to capitalize on favorable secular mega-trends, including urbanization, population growth and demographic shifts, food security and safety, electrification, increasing demand for climate control, and accelerated digitalization. Following a portfolio transformation, the Company operates as a pure-play climate and energy solutions provider, aiming to strengthen its global leadership in end-markets.

Recent Strategic Developments:

• Portfolio Transformation: In 2024, the Company completed a significant portfolio transformation to become a pure-play climate and energy solutions provider. This included the acquisition of the climate solutions business (the "VCS Business") of Viessmann Group GmbH & Co. KG on January 2, 2024, expanding its residential and light commercial HVAC offerings in Europe.
• Divestitures: During 2024, the Company divested its Commercial and Residential Fire, Access Solutions, and Industrial Fire businesses (reported as discontinued operations), and its Commercial Refrigeration business ("CCR").
• Riello Divestiture: On December 16, 2025, the Company entered into an agreement to sell its Riello business to Ariston Group for expected gross proceeds of approximately $430 million, with the transaction anticipated to close in the first half of 2026.
• Innovation & Digitalization: Continued investment in product and technology innovation, including the development of Carrier Energy for intelligent climate and energy management, and digitally-enabled lifecycle solutions such as Abound (a cloud-based building platform) and the Lynx digital platform (for cold chain management in collaboration with Amazon Web Services). The Company also developed Carrier QuantumLeap for data center cooling.

Geographic Footprint: The Company operates globally, with international operations (including U.S. export sales) representing approximately 52% of its net sales for 2025. Its approximately 47,000 employees are distributed across more than 52 countries, with 34% in the Americas, 36% in Europe, and 30% in Asia Pacific, Middle East & Africa. Key operational regions include the United States, Europe, and Asia Pacific.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 25.9% (2025) vs. 26.6% (2024)
• Operating Margin: 10.0% (2025) vs. 11.8% (2024)
• Net Margin (from continuing operations): 7.2% (2025) vs. 5.4% (2024)

Investment in Growth:

• R&D Expenditure: $625 million (2.9% of revenue) in 2025, compared to $686 million (3.1% of revenue) in 2024.
• Capital Expenditures: $392 million in 2025, compared to $519 million in 2024.
• Strategic Investments: The acquisition of the VCS Business in 2024 for a total consideration of $14.2 billion ($11.2 billion cash and 58,608,959 shares of common stock). The Company also invests in Carrier Energy and Carrier Ventures to accelerate sustainable innovations and disruptive technologies.

Business Segment Analysis

Climate Solutions Americas (CSA)

Financial Performance:

• Revenue: $10.5 billion (-1% YoY)
• Operating Margin: 20.5% (2025) vs. 20.4% (2024)
• Key Growth Drivers: Organic revenue decreased by 1% due to volume reductions in certain end-markets. Residential business volumes were down 9% due to reduced demand and distributor destocking, and light commercial business volumes decreased by 20%. These declines were partially offset by 23% growth in the commercial business, driven by ongoing customer demand and improved pricing. Operational profit decreased by 7% due to volume reductions, lower equity method investment earnings, and higher selling, general, and administrative expenses, partially offset by productivity initiatives and favorable product mix.

Product Portfolio: Provides products, controls, services, and solutions for heating, cooling, and ventilation needs of residential and commercial customers in North and South America, focusing on enhancing building performance, health, energy efficiency, and sustainability.

Market Dynamics: Characterized by reduced demand and destocking in residential and light commercial markets, while the commercial sector experienced growth driven by sustained customer demand and pricing improvements.

Climate Solutions Europe (CSE)

Financial Performance:

• Revenue: $5.0 billion (+1% YoY)
• Operating Margin: 8.8% (2025) vs. 9.4% (2024)
• Key Growth Drivers: Organic revenue decreased by 3% due to ongoing challenges in certain end-markets. Residential and light commercial business volumes decreased by 5% due to economic conditions, inflationary cost pressures, and regulatory uncertainty. This was partially offset by 2% growth in the commercial business from end-market demand and improved pricing. Operational profit decreased by 8% due to volume reductions, unfavorable product and geographical mix, partially offset by productivity initiatives, business integration synergies from the VCS Business acquisition, and lower selling, general, and administrative costs.

Product Portfolio: Offers heating, cooling, and ventilation products, controls, services, and solutions for residential and commercial customers in Europe. This segment includes the VCS Business, which provides heat pumps, boilers, photovoltaic systems, home battery storage, and digital solutions. The Riello business, which manufactures thermal solutions, is expected to be divested in H1 2026.

Market Dynamics: Faced challenges in residential and light commercial markets due to economic conditions and regulatory uncertainty, while the commercial sector showed resilience and growth.

Climate Solutions Asia Pacific, Middle East & Africa (CSAME)

Financial Performance:

• Revenue: $3.3 billion (-5% YoY)
• Operating Margin: 13.4% (2025) vs. 13.3% (2024)
• Key Growth Drivers: Organic revenue decreased by 5% due to volume reductions in certain end-markets. Results in China decreased by 12% as residential end-markets faced economic challenges impacting both demand and price. Commercial end-markets in China remained flat. These were partially offset by ongoing end-market demand in other geographies within the region. Operational profit decreased by 7% due to volume reductions, unfavorable price and product mix, partially offset by productivity initiatives, lower selling, general, and administrative expenses, and higher equity method investment earnings.

Product Portfolio: Provides heating, cooling, and ventilation products, controls, services, and solutions for residential and commercial customers across Asia Pacific, the Middle East, and Africa.

Market Dynamics: Experienced significant volume reductions in China's residential market due to economic challenges, while other parts of the region maintained end-market demand.

Climate Solutions Transportation (CST)

Financial Performance:

• Revenue: $2.9 billion (-17% YoY)
• Operating Margin: 15.6% (2025) vs. 14.0% (2024)
• Key Growth Drivers: Organic revenue increased by 4%, primarily driven by volume growth in certain end-markets. Container results increased by 31% due to ongoing end-market demand and improved pricing. This growth was partially offset by a 3% decline in the global truck and trailer business, as lower end-market demand in Asia and Europe outweighed modest growth in North America. The divestiture of the Commercial Refrigeration business significantly impacted the year-over-year revenue comparison. Operational profit decreased by 7% due to volume reductions and warranty-related costs, partially offset by productivity initiatives, lower selling, general, and administrative costs, and higher volumes in certain end-markets (though these higher volumes led to an unfavorable mix).

Product Portfolio: Offers global transport refrigeration and monitoring products, services, and digital solutions for trucks, trailers, shipping containers, intermodal, and rail applications. Brands include Carrier Transicold and Sensitech.

Market Dynamics: Strong demand in the container segment contrasted with softer demand in the global truck and trailer business, particularly in Asia and Europe.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: In 2025, the Company repurchased 44.8 million shares of common stock for an aggregate purchase price of $2.9 billion. Since February 2021, the Company has repurchased 114.9 million shares for $6.8 billion.
• Dividend Payments: Paid $772 million in dividends on common stock in 2025 ($0.90 per share), compared to $670 million in 2024 ($0.795 per share).
• Future Capital Return Commitments: Approximately $5.3 billion remains under the current share repurchase authorization as of December 31, 2025.

Balance Sheet Position:

• Cash and Equivalents: $1.6 billion as of December 31, 2025, with approximately 94% held by foreign subsidiaries.
• Total Debt: $11.8 billion as of December 31, 2025.
• Net Cash Position: The Company had a net debt position of $10.3 billion as of December 31, 2025.
• Credit Rating: Standards & Poor's Global Inc.: BBB+ (Stable outlook); Moody's Investors Service Inc.: Baa1 (Positive outlook).
• Debt Maturity Profile: Scheduled long-term debt maturities (excluding discount amortization) are $108 million in 2026, $1.3 billion in 2027, $903 million in 2028, $43 million in 2029, $2.0 billion in 2030, and $7.2 billion thereafter. The weighted-average interest rate on total borrowings is approximately 3.7%.

Cash Flow Generation:

• Operating Cash Flow: Net cash provided by operating activities was $2.5 billion in 2025, a significant increase from $563 million in 2024, primarily driven by increased net earnings and distributions from equity method investments.

Operational Excellence

Production & Service Model: The Company operates under a performance-driven culture, utilizing the "Carrier Excellence" continuous improvement framework to drive operational, financial, and commercial excellence. Its model encompasses audit, design, installation, system integration, repair, maintenance, and monitoring services.

Supply Chain Architecture:

• Key Suppliers & Partners: Relies on suppliers and commodity markets for raw materials (copper, aluminum, steel) and components (motors, valves, semiconductors, other electronic components). A central strategic sourcing group consolidates purchases. The Company focuses on supply chain resilience through automation, dual sourcing of critical components, and localized manufacturing.
• No specific company names for suppliers are disclosed.

Facility Network:

• Manufacturing: Operates approximately 850 sites globally, totaling about 36 million square feet of productive space. Key manufacturing sites (over 100,000 sq ft) account for 27 million sq ft. Approximately 34% of these significant properties are leased, and 29% are located in the U.S.
• Research & Development: Engages in research and development activities focused on new product development and technology innovation.
• Distribution: Utilizes a global distribution network.

Operational Metrics:

• Total Recordable Incident Rate (TRIR): 0.35 in 2025.
• Lost Time Incident Rate (LTIR): 0.13 in 2025.

Market Access & Customer Relationships

Go-to-Market Strategy:

• Distribution Channels: Products and services are sold directly to building contractors and owners, and indirectly through joint ventures, independent sales representatives, distributors, wholesalers, dealers, and retail outlets.
• Channel Partners: Key partnerships include Carrier Enterprise joint ventures with Watsco, Inc., AHI-Carrier FZC (a United Arab Emirates-based joint venture), and various joint ventures with members of the Midea Group.
• Digital Platforms: Leverages digital platforms like Abound, a cloud-based building platform for healthy, sustainable, and intelligent indoor spaces, and the Lynx digital platform, developed in collaboration with Amazon Web Services, for cold chain visibility and efficiency.

Customer Portfolio: Serves a diverse range of customers across residential, commercial, education, healthcare, technology, retail, hospitality, data center, and infrastructure markets. The Company states that the loss of any individual contract or customer would not have a material adverse effect on its results.

Geographic Revenue Distribution:

• United States Operations: $10.5 billion (48.1% of total revenue) in 2025.
• International Operations: $11.2 billion (51.5% of total revenue) in 2025, comprising:
  • Europe: $6.1 billion (28.0% of total revenue)
  • Asia Pacific: $3.8 billion (17.7% of total revenue)
  • Other: $678 million (3.1% of total revenue)
• Growth Markets: Sales to emerging markets are expected to continue to account for a significant portion of total sales.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The Company operates in a highly competitive global environment, facing competition from regional, specialized, and larger public or private companies. Key competitive factors include technology differentiation, product performance, service, delivery schedule, price, brand reputation, and quality.

Competitive Positioning Matrix:

Direct Competitors

The filing does not explicitly name primary direct competitors beyond general statements about the competitive landscape.

Emerging Competitive Threats: The Company acknowledges that customers or existing/future competitors may introduce non-traditional business models or disruptive technologies and products, leading to increased competition and new industry dynamics.

Competitive Response Strategy: The Company's strategy is to drive organic growth by enhancing innovation, designing smarter and more connected systems, and strengthening relationships with channel partners and customers by offering solutions focused on energy efficiency, emissions reduction, air quality, electrification, lower global warming potential refrigerants, and noise reduction.

Risk Assessment Framework

Strategic & Market Risks

• Market Dynamics: Exposure to economic conditions, financial market conditions, inflationary cost pressures, commodity price fluctuations, interest rates, foreign currency exchange rates, end-market demand in construction, weather conditions, pandemic health issues, natural disasters, and the financial health of customers and suppliers.
• Technology Disruption: Risks associated with challenges in developing, producing, delivering, and realizing benefits from advanced technologies and new products. Regulatory changes may render existing technology non-compliant or obsolete.
• Customer Concentration: While the Company states no single customer loss would be material, it acknowledges customer concentration as a general risk factor.

Operational & Execution Risks

• Supply Chain Vulnerabilities: Reliance on suppliers for raw materials and components, with some key parts available from single or limited sources, exposing the Company to supply and pricing risks, capacity constraints, quality issues, and disruptions from climate events or geopolitical factors.
• Geographic Concentration: International operations account for 52% of net sales, exposing the Company to local economic and political conditions, exchange rate fluctuations, and trade policies. Sales to emerging markets represent a significant portion of revenue.
• Capacity Constraints: Risk of disruption if a single factory manufactures a specific product or product line, potentially impacting manufacturing capabilities.

Financial & Regulatory Risks

• Market & Financial Risks: Risks related to future credit availability, capital structure, credit ratings, and the ability to service approximately $11.8 billion in outstanding debt. Defined benefit pension plans are subject to financial market risks.
• Regulatory & Compliance Risks: Subject to rapid changes in legislation and regulations globally, including those related to refrigerants, noise levels, product safety, emissions, and chemical use. Compliance with U.S. Foreign Corrupt Practices Act, antitrust, anti-money laundering, and export control laws is critical.
• Legal Proceedings: Involved in various litigation, including asbestos-related claims and Aqueous Film Forming Foam (AFFF) litigation. The Company recorded a $565 million liability in 2024 for AFFF settlements, expecting insurance proceeds up to $2.4 billion to cover the amount paid.

Geopolitical & External Risks

• Geopolitical Exposure: Operations are sensitive to political and economic instability, changes in foreign national priorities, and government budgets. Ongoing military conflicts (e.g., Russia-Ukraine, Middle East) can impact the global economy, commodity prices, and supply chains.
• Trade Relations: Uncertainty in U.S. trade policy, including tariffs and trade agreements, can adversely affect business and financial results.
• Sanctions & Export Controls: Compliance with import/export laws and sanctions regulations, such as those leading to the suspension of business operations in Russia, can limit business activities.

Innovation & Technology Leadership

Research & Development Focus:

• Core Technology Areas: Focuses on intelligent climate and energy solutions, electrification, energy-efficient solutions, environmentally friendly refrigerants, and connected ecosystems. Investments are directed towards new product development and digital controls technologies.
• Innovation Pipeline: Includes Carrier Energy for home energy management and grid flexibility, Abound for intelligent building management, Lynx digital platform for cold chain optimization, and Carrier QuantumLeap for data center cooling.

Intellectual Property Portfolio:

• Patent Strategy: Maintains a broad portfolio of approximately 11,000 active patents and pending patent applications worldwide to protect R&D investments and competitive advantages.
• IP Litigation: Takes actions to protect intellectual property rights against third-party infringement.

Technology Partnerships: Collaborates with partners such as Amazon Web Services for the Lynx digital platform. Carrier Ventures, a wholly-owned venture capital subsidiary, invests in high-growth organizations to accelerate sustainable innovations and disruptive technologies.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company emphasizes attracting, retaining, and developing a high-performance, customer-centric executive management team and fostering succession planning through annual leadership development reviews.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 47,000 employees worldwide as of December 31, 2025.
• Geographic Distribution: 34% in the Americas, 36% in Europe, and 30% in Asia Pacific, Middle East & Africa.
• Skill Mix: Acknowledges limitations in the availability of skilled labor for product design, production, and service delivery.

Talent Management:

• Acquisition & Retention: Focuses on continuously evaluating and enhancing recruitment and retention strategies, prioritizing "Build Best Teams" cultural behavior.
• Employee Value Proposition: Total rewards philosophy aligns compensation with individual and company performance, offering market-competitive rewards to attract, retain, and motivate employees.

Diversity & Development:

• Diversity Metrics: Inclusion is a core value, aiming for an inclusive culture where employees feel they belong and can contribute fully. No specific diversity metrics are disclosed.
• Development Programs: Promotes learning and development through technical and leadership programs, tuition assistance, online platforms, strategic partnerships, and on-site technical training centers. Conducts annual leadership development reviews and offers internships and early career rotational programs.
• Culture & Engagement: Guided by "The Carrier Way," "Leading People The Carrier Way," and "Carrier Excellence." Employee engagement is measured through three company-wide "Pulse" surveys annually.

Labor Relations: As of December 31, 2025, 78% of approximately 3,800 U.S. production and maintenance employees are covered by six collective bargaining agreements (expiring 2026-2029). In Europe, approximately 16,500 employees are represented by a European Works Council and local works councils/unions. Relations are generally positive.

Environmental & Social Impact

Environmental Commitments:

• Climate Strategy: Committed to ambitious sustainability goals by 2030, including investing over $4 billion to develop intelligent climate and energy solutions that reduce environmental impacts, avoiding more than 1 gigaton of customer greenhouse gas emissions, achieving carbon neutral operations, and reducing energy intensity by 10% across operations.
• Carbon Neutrality: Aims to achieve carbon neutral operations by 2030.
• Renewable Energy: Plans to transition energy consumption from fossil fuels to renewable energy and expand fleet vehicle electrification.

Social Impact Initiatives:

• Community Investment: Promotes sustainability and positively impacts communities and its workforce through education, partnerships, programs, and volunteering.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Demand for HVAC products and services is seasonal, influenced by weather conditions. Sales to residential HVAC customers are historically higher in the second and third quarters in the Northern Hemisphere.
• Economic Sensitivity: Financial performance is affected by changes in building and remodeling activity, as well as the production and utilization of transport equipment, including truck production cycles in North America and Europe.

Regulatory Environment & Compliance

Regulatory Framework:

• Industry-Specific Regulations: Operations are subject to rapid changes in legislation and government policies globally, particularly concerning refrigerants, noise levels, product and fire safety, hydrofluorocarbon emissions, fluorinated gases, hazardous substances, and electric/electronic equipment waste. Regulations also target building energy and cold chain efficiency and a shift away from fossil fuels.
• International Compliance: Faces a divergent regulatory environment due to varying international mandates (e.g., Paris Agreement) and U.S. federal/local regulations, leading to increased compliance costs and the need for country-specific product variants.

Trade & Export Controls: Must comply with U.S. Foreign Corrupt Practices Act, antitrust, anti-money laundering, anti-corruption, and anti-collusion laws, as well as import and export regulations (e.g., Export Administration Regulations, sanctions regulations).

Legal Proceedings:

• Asbestos Matters: Named as a defendant in lawsuits alleging personal injury from asbestos in past products or premises. Liabilities are accrued based on actuarial estimates and historical experience, with insurance recoveries recorded.
• Aqueous Film Forming Foam Litigation: Named in over 17,000 lawsuits related to AFFF. Kidde-Fenwal, Inc. (KFI), a former subsidiary, filed for Chapter 11 bankruptcy in 2023. The Company entered into Proposed Settlement Agreements in October 2024, agreeing to pay $615 million in cash over five years, contribute KFI net sale proceeds ($115 million estimated), and the first $125 million of up to $2.4 billion in insurance proceeds. A $565 million liability was recorded in 2024 for these settlements.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 13.4% in 2025, significantly lower than 46.7% in 2024 and 26.1% in 2023. The 2025 decrease was driven by a $64 million net tax benefit from German rate changes, a $49 million benefit from a Japanese subsidiary reorganization, and a $16 million benefit from investment tax credit purchases. The 2024 rate was impacted by a $650 million tax charge related to a VCS Business reorganization and an $86 million non-deductible loss on hedging contracts.
• Geographic Tax Planning: Implementing changes to its corporate structure, including a reorganization of a Swiss subsidiary, which could lead to a partial release of a $1.4 billion valuation allowance against a tax credit.
• Tax Reform Impact: No longer intends to reinvest certain undistributed foreign earnings due to the Tax Cuts and Jobs Act and is subject to tax on net CFC tested income under the One Big Beautiful Bill Act.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Maintains self-insurance for various risks (workers’ compensation, general liability, property, healthcare) with coverage for amounts exceeding individual and aggregate loss limits. Expects insurance proceeds to cover AFFF settlement amounts.
• Risk Transfer Mechanisms: Utilizes cross currency swaps to manage foreign currency translation risk and previously used interest rate swaps to mitigate interest rate exposure on forecasted debt. Employs fixed price contracts with suppliers to manage commodity price exposure.