Johnson Controls Reports Strong FY25, Record Backlog

Johnson Controls (NYSE: JCI) closed fiscal 2025 with solid top-line growth, expanding margins and record backlog, driven by demand in mission-critical verticals such as data centers, advanced manufacturing and large campus environments.

“As we close out our 140th year as a company, the opportunity in front of us is clear, significant and achievable,” CEO Joakim Weidemanis told investors during a Nov. 6 earnings call, pointing to HVAC, controls and digital as the core engines of long-term growth.

Mission-critical demand and record backlog

Weidemanis framed fiscal 2025 as “a year of strong execution and momentum,” with sales up 6%, segment margins expanding 100 basis points and adjusted EPS increasing 17%. Free cash flow conversion reached 102%, supported by disciplined working capital management.

Orders grew 7% for the year and backlog expanded 13% to $15 billion, which Weidemanis called “a record $15 billion,” adding that the sustained demand “highlights the value our customers place in our solutions and the strength of our portfolio.”

CFO Marc Vandiepenbeeck noted that Q4 organic revenue grew 4% with segment margin improving to 18.8%, up 20 basis points, and adjusted EPS rising 14% to $1.26. At the regional level, orders grew 9% in the Americas “supported by strength in data centers,” 3% in EMEA and were down 1% in APAC as lower systems orders offset mid-single-digit service growth.

Across the enterprise, he said Johnson Controls is seeing “strong customer engagement and healthy demand for our solution across key verticals,” citing mission-critical segments such as data centers, biologics and advanced manufacturing.

Data centers: advanced thermal as a growth engine

AI-driven compute demand is reshaping Johnson Controls’ thermal strategy and capital allocation, particularly around data centers.

“Johnson Controls continues to strengthen its leadership in advanced thermal management,” Weidemanis said. “With AI-driven demand for high-density data centers pushing cooling technology to new limits, we are well positioned across the thermal management or cooling chain as well as with our integrated offering of digital monitoring and controls.”

During the quarter, the company launched its coolant distribution unit (CDU) offering, which Weidemanis described as “a major milestone in our differentiated data cooling center strategy.” CDUs are “critical enablers of liquid cooling, which is rapidly becoming essential, as AI chips are becoming more powerful and generating more heat.”

The CDU launch builds on Johnson Controls’ existing platforms, including “our award-winning YVAM magnetic-bearing chillers, absorption chillers and now our strategic investment in Accelsius,” positioning the company to deliver “a comprehensive and integrated portfolio that addresses the full thermal management spectrum from chip to ambient, covering the entire heat capture, removal and regen journey.”

Business system, AI and operating leverage

A central theme of the call was Johnson Controls’ proprietary business system, which combines 80/20 discipline, lean methodologies and digital/AI tools to drive productivity in the field and factories.

The system is built on three pillars, Weidemanis said: “simplify, apply 80/20 principles to focus on what matters the most; accelerate, use lean methodologies to remove waste and accelerate execution and scale, leverage digital and AI approaches to amplify impact across the enterprise.”

More than 700 colleagues are engaged across priority areas and the company has conducted “over 50 kaizens to date” and trained 200 leaders through activation boot camps.

Weidemanis stressed that “this isn’t about putting a playbook on a shelf, it’s about fundamentally changing how we work,” by going “narrow and deep, countermeasuring root causes and engaging the teams impacted.”

The company is embedding these efforts into its long-term financial model. Vandiepenbeeck said Johnson Controls is updating its growth algorithm to target mid-single-digit organic revenue growth, “operating leverage of 30% or better, double-digit adjusted EPS growth and approximately 100% free cash flow conversion.”

For fiscal 2026, the company expects operating leverage “in the 50s or above,” reflecting both traditional volume leverage and benefits from restructuring and transformation. “We feel very comfortable that our operating leverage will be in the 50s or above,” he said, noting that EMEA and APAC will be key contributors to margin improvement.

Decarbonization and district energy projects

Beyond data centers, Johnson Controls is using heat pump and energy recovery technologies to support large-scale decarbonization, particularly in Europe.

In a major district energy project, the company will “provide green heat to the city of Zurich through a landmark waste incineration project.” Weidemanis said the deployment “more than doubles the heat capacity of our previous largest project and ranks amongst the largest heat pump installations globally to utilize the zero GWP refrigerant ammonia.”

The heat pumps will “recover energy from flue gases and feed it into the district heating network, supplying heat to approximately 15,000 homes, about 15% of the city’s total district heating demand.”

Weidemanis framed Zurich as “another powerful example of how Johnson Controls is enabling critical industries, institutions and now cities to transition to sustainable heating solutions, while maintaining reliability and performance,” adding that in 2024, the company’s heat pumps “enable customers to cut energy costs by 50% and emissions by 60%.”

Service and lifecycle support as differentiators

For mission-critical facilities, Johnson Controls is positioning its global service organization as a key differentiator.

“The strength of our service model lies in the combination of customer intimacy, technical depth and global reach,” Weidemanis said. With direct service operations across the globe, the company provides lifecycle support in “mission-critical verticals such as data centers, advanced manufacturing, life science manufacturing and large hospital and university research centers.”

“Our ability to deliver consistent service across the global footprints of hyperscalers is a unique differentiator,” he added. “Our view is that customers will always demand high-touch, high availability service, and that is an unparalleled differentiator for Johnson Controls.”

Outlook and guidance

Looking to fiscal 2026, Johnson Controls expects mid-single-digit organic sales growth and adjusted EPS of approximately $4.55 per share, “which is over 20% growth,” according to Vandiepenbeeck. The company anticipates operating leverage of about 50% and free cash flow conversion of roughly 100%, supported by a record backlog and recurring service revenue.

Weidemanis reiterated that the strategy is to “leverage our strengths, particularly in HVAC, Controls and Digital to deliver differentiated value and long-term growth,” especially in mission-critical and decarbonization projects backed by a large service footprint.

“With a culture focused on customers and centered around our proprietary business system,” he concluded, “I’m confident we’ll continue winning with our customers and delivering value to our shareholders.”

*This article was created with the help of generative AI tools and edited by our content team for clarity and accuracy.