Carrier Global (NYSE:CARR) executives said the company exited 2025 with strong momentum in its long-cycle commercial and aftermarket businesses, even as residential and light commercial demand weakened more than expected in the back half of the year. On the company’s fourth-quarter 2025 earnings call, leadership also outlined a 2026 outlook that assumes continued softness in short-cycle markets while commercial HVAC and aftermarket continue to grow at double-digit rates.
Management highlights: data centers, aftermarket, and systems
Chairman and CEO David Gitlin called 2025 “an important year” that included “meaningful progress on our strategic priorities,” despite a significant downturn in the short-cycle residential and light commercial markets in the second half. Gitlin said Carrier grew its data center business to “around $1 billion” and emphasized continued investment in engineering labs, chiller manufacturing capacity, and technician headcount.
Aftermarket was another key focus. Gitlin said the number of connected chillers increased to “over 70,000” from 17,000 three years ago, and that CSA attachment rates grew more than 3x last year to “close to 60%.” He said global service agreement coverage rose to “110,000, including Toshiba,” and estimated “70%-80%” of high-complexity chillers are under service contracts. Gitlin highlighted “modifications and upgrades” as a major growth opportunity, noting that sales in that area were up 20% last year.
On systems, Gitlin discussed the company’s U.S. home energy management system (HEMS) offering, saying field trials in employee homes demonstrated “up to four hours of battery-powered heat pump operation during peak hours,” with a market launch planned later in 2026. In Europe, Gitlin said qualified “System-Profi” installers drove double-digit sales growth, and Carrier plans to double the number of qualified installers in 2026.
Fourth-quarter results: volume and mix pressure offset by productivity
CFO Patrick Goris reported fourth-quarter sales of $4.8 billion, adjusted operating profit of $455 million, and adjusted EPS of $0.34. Goris said the year-over-year declines were “largely due to much lower volumes in our higher-margin CSA residential and light commercial businesses,” contributing to a 9% decline in organic growth in the quarter, partially offset by a 3% tailwind from foreign currency translation.
Total company orders rose over 15% in the quarter, driven by strength in CSA commercial. Adjusted operating profit fell 33%, which Goris attributed to lower organic sales, unfavorable mix, and “much lower manufacturing output,” partially offset by “strong productivity.”
Free cash flow was about $900 million in the fourth quarter, reflecting reductions in inventories and accounts receivable. Full-year free cash flow was about $2.1 billion, which Goris said was in line with expectations.
Segment performance: CSA residential slump, commercial strength, and transportation growth
Goris described CSA as having “a very difficult quarter,” with organic sales down 17%. Within CSA:
- Commercial sales rose 12%.
- Residential sales fell close to 40%, with volume down “over 40%,” partially offset by regulatory mix and price.
- Light commercial sales declined 20%.
CSA segment operating margin was “just under 9%,” down about 10 points year over year, with Goris citing under-absorption in residential manufacturing facilities running at “less than half the output” versus the prior-year quarter. At year-end, field residential inventories were down “roughly 30%” year over year and light commercial distributor inventories were down 25%.
In Europe (CSE), organic sales declined 2% with commercial up mid-single digits offset by mid-single-digit declines in residential and light commercial. Goris said the residential heating market remained challenging, particularly in Germany, but segment operating profit and margin improved due to cost actions.
In Asia Pacific (CSAP), sales fell 9% as weakness in China offset strength in India and Australia. Goris said sales in China were down about 20% overall, with residential and light commercial down about 30% amid intentional channel inventory reductions. Segment operating margin rose about 100 basis points to roughly 12%, driven by productivity.
Transportation (CST) posted 10% organic sales growth, driven by “continued exceptional growth in container,” while global truck and trailer was flat. Segment margins expanded 30 basis points year over year.
Orders and 2026 outlook: commercial and aftermarket to grow, residential still pressured
Goris said total company orders rose 16% in the quarter, with global commercial HVAC up over 45%. CSA commercial orders increased 80%, reflecting “some large data center wins,” and applied orders within CSA commercial “more than tripled.” Light commercial orders were up 70% and residential orders were about flat.
For 2026, Carrier guided to flat to low mid-single-digit organic growth and reported sales of approximately $22 billion. The outlook includes an estimated $350 million year-over-year revenue headwind from the planned exit of Riello, with the company assuming the transaction closes at the end of the first quarter.
Carrier expects adjusted operating profit of about $3.4 billion and free cash flow of approximately $2 billion, which Goris said would be second-half weighted due to seasonality. The company also said it intends to repurchase about $1.5 billion in shares in 2026, following $3.7 billion returned to shareholders in 2025 through buybacks and dividends.
Adjusted EPS is expected to be approximately $2.80, up high single digits versus 2025, driven by increased operating profit, a lower tax rate, and a lower share count, partially offset by higher net interest expense, non-controlling interest, and the exit of Riello.
Residential assumptions and first-quarter preview
Gitlin and Goris said the company’s 2026 residential outlook assumes little change in macro conditions such as mortgage rates, consumer confidence, and home sales. Under that scenario, Carrier assumes total U.S. industry units down 10%-15% for the year, with Carrier’s CSA residential sales expected to be down high single digits, helped by the absence of second-half destocking seen in 2025 and low single-digit price realization. Management said Q4 residential “movement” (sell-out) was down about 30%.
For the first quarter of 2026, Goris guided to total company revenue of about $5 billion, with organic revenue down high single digits and CSA residential down over 20%. The company expects operating margin of about 10% and adjusted EPS of about $0.50, including a benefit from a 0% effective tax rate due to a discrete tax item in the quarter. Free cash flow is expected to be a use of a few hundred million dollars, consistent with normal seasonal cadence.
In Q&A, management said CSA margins in Q1 are expected to be “close to about 15%,” and discussed commodity exposure, noting a roughly $60 million headwind tied to copper, steel, and aluminum (net of hedging), with the company “a little over 50% blocked” for the full year. Gitlin also said Carrier announced a price increase “of up to 5 or 6” effective in March, with expected realization in the low single-digit range.
Gitlin closed by saying the company “took the opportunity to learn” from 2025’s second-half short-cycle downturn and believes those actions position Carrier for “a tremendous year in 2026,” while continuing to emphasize cost discipline, productivity, and investment in growth areas such as data centers, aftermarket, and connected solutions.
About Carrier Global (NYSE:CARR)
Carrier Global Corporation is a leading global provider of heating, ventilation and air conditioning (HVAC), refrigeration, fire and security, and building automation solutions. The company designs, manufactures and sells a broad portfolio of products that includes air conditioners, furnaces, heat pumps, chillers, rooftop units, commercial refrigeration systems, fire and smoke detection and suppression systems, security sensors and access controls, and a range of building controls and analytics software.
