The company’s backlog and order growth reflect increased customer investment in data center and building control infrastructure.
Johnson Controls (Nasdaq: JCI) reported a strong start to fiscal 2026, with results underscoring accelerating demand in data centers and other mission-critical environments that rely heavily on advanced building controls, energy management, and integrated systems. Management emphasized that disciplined execution, service growth, and technology differentiation are aligning to support customers operating in increasingly complex and security-sensitive facilities.
During the February 4 earnings call, CEO Joakim Weidemanis said the quarter reflected both market demand and internal changes in how the company executes. “Our first quarter performance reflects the progress we've been making with strong revenue growth, meaningful margin expansion and broad-based strength across the enterprise,” he said. Orders rose nearly 40% year over year, building on a strong prior-year comparison, while revenue grew 6%.
Data centers anchor security-adjacent growth
Data centers emerged as the clearest driver of demand, reflecting broader investment in AI, high-density compute, and hybrid architectures. While the earnings call focused heavily on thermal management and HVAC, the implications extend into physical security, building automation, and operational resilience.
“As compute becomes more powerful, rack densities rise, hybrid architectures evolve and control systems become more advanced, data centers now require increasingly energy-efficient and precise operating conditions,” Weidemanis said. He noted that regardless of architecture, “they all share the same fundamental requirements, significantly greater thermal and energy management supported by more sophisticated controls.”
Those requirements align closely with security and building systems that must operate continuously with minimal downtime. Johnson Controls said its growing data center backlog reflects both expansion with existing customers and traction with new operators deploying AI-driven infrastructure.
CFO Marc Vandiepenbeeck reinforced that point, noting that “demand was led by data centers projects where customers are accelerating investment to support higher-density workloads and AI-driven growth.” In the Americas, orders grew 56%, driven largely by large-scale data center projects.
Connected systems and service models
Beyond equipment, executives highlighted a shift toward connected, insight-driven systems and recurring service relationships. The company’s new “Smart Ready” connected platforms are designed to provide deeper operational visibility from day one, supporting proactive service and reduced downtime.
“These capabilities allow us to shift more customers into proactive recurring service relationships that improve reliability, reduce unplanned downtime and lower life cycle costs,” Weidemanis said.
Service growth was a consistent theme across regions, with enterprise-wide service revenue up 9% year over year. For security integrators and enterprise end users, this reinforces the trend toward outcome-based contracts tied to uptime, performance, and lifecycle management rather than one-time system deployments.
Precision environments beyond data centers
Johnson Controls also pointed to growth opportunities in other mission-critical environments where security, life safety, and environmental controls intersect. Advanced manufacturing and pharmaceutical facilities, for example, depend on “strict control of temperature, humidity, pressurization and air purity,” Weidemanis said. Large research campuses and universities face similar demands as they support sensitive research and high-occupancy environments.
“Our customers have real unmet needs for technology innovation and service-based solutions that help them manage energy more efficiently and deliver outcomes in their mission-critical operating conditions,” he said, adding that these needs guide where the company concentrates investment and innovation.
Execution and delivery reliability
Management repeatedly emphasized improvements in execution, delivery, and consistency — areas that directly affect large, security-sensitive projects. Weidemanis cited improvements in factory on-time delivery at a key chiller facility, now sustaining 95% to 100% performance. “This level of performance combined with our now competitively advantaged lead time is driving higher win rates with our customers, especially in data centers,” he said.
Vandiepenbeeck said those execution gains are translating into financial performance. Segment EBIT margins expanded across all regions, with APAC margins up 290 basis points as volumes increased and factory absorption improved. The company’s backlog grew 20% year over year to $18 billion, providing visibility into continued project conversion.
With momentum carrying into the second quarter, Johnson Controls raised its full-year adjusted EPS outlook to approximately $4.70, representing roughly 25% growth. Management said the guidance reflects confidence in backlog conversion, service expansion, and continued operational discipline.
*This article was created with the help of generative AI tools and edited by our content team for clarity and accuracy.