Eaton Corp plc (ETN)
SIC breadcrumb: Manufacturing > Industrial And Commercial Machinery And Computer Equipment > SIC 3590 Misc Industrial & Commercial Machinery & Equipment
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1551182. Latest filing source: 0001551182-26-000007.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 27,448,000,000 | USD | 2025 | 2026-02-26 |
| Net income | 4,087,000,000 | USD | 2025 | 2026-02-26 |
| Assets | 41,251,000,000 | USD | 2025 | 2026-02-26 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-26. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001551182.json. Derived margins are computed from the extracted annual SEC facts.
| Metric | 2011 | 2012 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 19,747,000,000 | 20,404,000,000 | 21,609,000,000 | 21,390,000,000 | 17,858,000,000 | 19,628,000,000 | 20,752,000,000 | 23,196,000,000 | 24,878,000,000 | 27,448,000,000 | ||
| Net income | 1,350,000,000 | 1,217,000,000 | 2,145,000,000 | 2,211,000,000 | 1,410,000,000 | 2,144,000,000 | 2,462,000,000 | 3,218,000,000 | 3,794,000,000 | 4,087,000,000 | ||
| Diluted EPS | 4.20 | 6.68 | 4.91 | 5.25 | 3.49 | 5.34 | 6.14 | 8.02 | 9.50 | 10.45 | ||
| Assets | 30,476,000,000 | 32,623,000,000 | 31,092,000,000 | 32,805,000,000 | 31,824,000,000 | 34,027,000,000 | 35,014,000,000 | 38,432,000,000 | 38,381,000,000 | 41,251,000,000 | ||
| Stockholders' equity | 14,954,000,000 | 17,253,000,000 | 16,107,000,000 | 16,082,000,000 | 14,930,000,000 | 16,413,000,000 | 17,038,000,000 | 19,036,000,000 | 18,488,000,000 | 19,425,000,000 | ||
| Cash and cash equivalents | 543,000,000 | 561,000,000 | 283,000,000 | 370,000,000 | 438,000,000 | 297,000,000 | 294,000,000 | 488,000,000 | 555,000,000 | 622,000,000 | ||
| Net margin | 9.93% | 10.34% | 7.90% | 10.92% | 11.86% | 13.87% | 15.25% | 14.89% |
Financial Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
Latest 10-K MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Amounts are in millions of dollars or shares unless indicated otherwise (per share data assume dilution). Columns and rows may not add and the sum of components may not equal total amounts reported due to rounding.
COMPANY OVERVIEW
Eaton Corporation plc (Eaton or the Company) is an intelligent power management company dedicated to protecting the environment and improving the quality of life for people everywhere. We make products for the data center, utility, industrial, commercial, machine building, residential, aerospace and mobility markets. We are capitalizing on the megatrends of the electrification, digitalization, and the reindustrialization of and growth of megaprojects in North America and increased global infrastructure spending, all of which are expanding our end markets and positioning Eaton for growth for years to come. We are strengthening our participation across the entire electrical power value chain and benefiting from momentum in the data center and utility end markets as well as a growth cycle in the commercial aerospace and defense markets. We are guided by our commitment to operate sustainably and with the highest ethical standards. Our work is helping to solve the world’s most urgent power management challenges and building a more sustainable society for people today and for future generations.
Founded in 1911, Eaton has continuously evolved to meet the changing and expanding needs of our stakeholders. With revenues of $27.4 billion in 2025, the Company serves customers in 180 countries.
During the first quarter of 2026, Eaton re-segmented certain reportable operating segments due to a reorganization of the Company's businesses. The new reportable segment is Mobility, which consists of the legacy Vehicle and eMobility segments. Financial information for this new reportable segment has not been provided as the re-segmentation occurred subsequent to the year ended December 31, 2025. The Company expects to provide financial information for this new reportable segment in the Quarterly Report on Form 10-Q for the period ended March 31, 2026.
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Portfolio Changes
The Company continues to actively manage its portfolio of businesses to deliver on its strategic objectives. The Company is focused on deploying its capital toward businesses that provide opportunities for above-market growth, strong returns, and align with secular trends and its power management strategies. Over the past three years and continuing in 2026, Eaton completed several transactions to strengthen its portfolio.
Acquisitions of businesses and investments in associate companies
Date of acquisition
Business segment
Jiangsu Ryan Electrical Co. Ltd.
April 23, 2023
Electrical Global
A 49 percent stake in Jiangsu Ryan Electrical Co. Ltd., a manufacturer of power distribution and sub-transmission transformers in China.
Exertherm
May 20, 2024
Electrical Americas
A U.K. based provider of thermal monitoring solutions for electrical equipment.
NordicEPOD AS
May 31, 2024
Electrical Global
A 49 percent stake in NordicEPOD AS, which designs and assembles standardized power modules for data centers in the Nordic region.
Fibrebond Corporation
April 1, 2025
Electrical Americas
A U.S. based designer and builder of pre-integrated modular power enclosures for data center, industrial, utility and communications customers.
Resilient Power Systems, Inc.
August 6, 2025
Electrical Americas
A leading North American developer and manufacturer of innovative energy solutions, including solid-state transformer-based technology.
Ultra PCS Limited
January 23, 2026
Aerospace
Producer of electronic controls, sensing, stores ejection and data processing solutions with operations in the U.K. and U.S.
On November 2, 2025, Eaton signed an agreement to acquire Boyd Thermal, a U.S. based global leader in thermal components, systems, and ruggedized solutions for data center, aerospace and other end-markets. Boyd Thermal employs more than 5,000 people with manufacturing sites across North America, Asia, and Europe. Under the terms of the agreement, Eaton will pay $9.5 billion for Boyd Thermal. The transaction is subject to customary closing conditions and regulatory approvals and is expected to close in the second quarter of 2026.
On January 26, 2026, Eaton announced its intention to pursue a spin-off of its Mobility business, which consists of its legacy Vehicle and eMobility operating segments, into an independent, publicly traded company. Eaton expects to complete the anticipated spin-off by the end of the first quarter of 2027, subject to customary legal and regulatory requirements and approvals, including final approval of the Company’s Board of Directors and effectiveness of a Form 10 registration statement filed with the Securities and Exchange Commission. The planned spin-off is expected to be completed in a manner that is tax-free to Eaton ordinary shareholders for U.S. federal income tax purposes.
Additional information related to acquisitions of businesses is presented in Note 2.
Summary of Results of Operations
A summary of Eaton’s Net sales, Net income attributable to Eaton ordinary shareholders, and Net income per share attributable to Eaton ordinary shareholders - diluted is as follows:
(In millions except for per share data)
2025
2024
2023
Net sales
$
27,448
$
24,878
$
23,196
Net income attributable to Eaton ordinary shareholders
4,087
3,794
3,218
Net income per share attributable to Eaton ordinary shareholders - diluted
$
10.45
$
9.50
$
8.02
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RESULTS OF OPERATIONS
Non-GAAP Financial Measures
The following discussion of Consolidated Financial Results includes certain non-GAAP financial measures. These financial measures include adjusted earnings and adjusted earnings per ordinary share, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of adjusted earnings and adjusted earnings per ordinary share to the most directly comparable GAAP measure is included in the Consolidated Financial Results table below. Management believes that these financial measures are useful to investors because they provide additional meaningful financial information that should be considered when assessing our business performance and trends, and they allow investors to more easily compare Eaton’s financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton.
Acquisition and Divestiture Charges
Eaton incurs integration charges and transaction costs to acquire and integrate businesses, and transaction, separation and other costs to divest and exit businesses. Eaton also recognizes gains and losses on the sale of businesses. A summary of these Corporate items is as follows:
(In millions except for per share data)
2025
2024
2023
Acquisition integration, divestiture charges and transaction costs
$
183
$
36
$
54
Income tax benefit
38
10
15
Total after income taxes
$
145
$
26
$
39
Per ordinary share - diluted
$
0.37
$
0.06
$
0.10
Acquisition integration, divestiture charges and transaction costs in 2025 are primarily related to the following:
•The acquisitions of Fibrebond Corporation, Resilient Power Systems Inc., Ultra PCS Limited, and Exertherm, the expected acquisition of Boyd Thermal, transactions completed prior to 2023, and other charges to acquire and exit businesses.
•Employee transaction and retention award compensation expense related to the acquisition of Fibrebond of $82 million
•Employee incentive compensation expense related to the acquisition of Resilient of $10 million
Acquisition integration, divestiture charges and transaction costs in 2024 and 2023 are primarily related to acquisitions completed prior to 2023, and include other charges and income to acquire and exit businesses, and the reduction in fair value of contingent future consideration from the Green Motion SA acquisition. Costs in 2023 also include certain indemnity claims associated with the sale of 50% interest in the commercial vehicle automated transmission business in 2017.
Charges in 2025, 2024, and 2023 were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other expense (income) - net. In Business Segment Information in Note 18, the charges were included in Other expense - net.
Restructuring Programs
In the second quarter of 2020, Eaton initiated a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to initially respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company incurred expenses of $199 million for workforce reductions and $184 million for plant closing and other costs, resulting in total charges of $382 million through December 31, 2023. This restructuring program was substantially complete at the end of 2023 and mature year benefits from the program of approximately $265 million were realized in 2024.
During the first quarter of 2024, Eaton implemented a multi-year restructuring program to accelerate opportunities to optimize its operations and global support structure. These actions will better align the Company's functions to support anticipated growth and drive greater effectiveness throughout the Company. Since the inception of the program, the Company has incurred charges of $335 million. This restructuring program is expected to be completed in 2026 and is expected to incur additional expenses related to workforce reductions of $102 million and plant closing and other costs of $38 million, resulting in total estimated charges of $475 million for the entire program. The Company expects mature year benefits of $375 million when the multi-year program is fully implemented.
Additional information related to these restructuring programs is presented in Note 16.
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Intangible Asset Amortization Expense
Intangible asset amortization expense is as follows:
(In millions except for per share data)
2025
2024
2023
Intangible asset amortization expense
$
486
$
425
$
450
Income tax benefit
101
91
98
Total after income taxes
$
384
$
335
$
353
Per ordinary share - diluted
$
0.99
$
0.84
$
0.89
Consolidated Financial Results
(In millions except for per share data)
2025
Change
from 2024
2024
Change
from 2023
2023
Net sales
$
27,448
10
%
$
24,878
7
%
$
23,196
Gross profit
10,317
9
%
9,503
13
%
8,434
Percent of net sales
37.6
%
38.2
%
36.4
%
Income before income taxes
4,932
8
%
4,566
19
%
3,827
Net income
4,090
8
%
3,798
18
%
3,223
Less net income for noncontrolling interests
(3)
(4)
(5)
Net income attributable to Eaton ordinary shareholders
4,087
8
%
3,794
18
%
3,218
Excluding acquisition and divestiture charges, after-tax
145
26
39
Excluding restructuring program charges, after-tax
103
160
46
Excluding intangible asset amortization expense, after-tax
384
335
353
Adjusted earnings
$
4,720
9
%
$
4,314
18
%
$
3,657
Net income per share attributable to Eaton ordinary shareholders - diluted
$
10.45
10
%
$
9.50
18
%
$
8.02
Excluding per share impact of acquisition and divestiture charges, after-tax
0.37
0.06
0.10
Excluding per share impact of restructuring program charges, after-tax
0.26
0.40
0.11
Excluding per share impact of intangible asset amortization expense, after-tax
0.99
0.84
0.89
Adjusted earnings per ordinary share
$
12.07
12
%
$
10.80
18
%
$
9.12
Net Sales
Changes in Net sales:
2025
2024
Organic growth
8
%
8
%
Acquisitions of businesses
2
%
—
%
Foreign currency
—
%
(1)
%
Total increase in Net sales
10
%
7
%
2025: Organic sales increased 8% in 2025 due to strength in data center end-markets in the Electrical Americas and Electrical Global business segments, strength in machine OEM and residential end-markets in the Electrical Global business segment, and broad-based strength across all markets in the Aerospace business segment, partially offset by weakness in industrial end-markets in the Electrical Americas and Electrical Global business segments, weakness in the North American truck and light vehicle markets in the Vehicle business segment, and weakness in the North American region in the eMobility business segment.
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2024: Organic sales increased 8% in 2024 due to strength in commercial & institutional end-markets in the Electrical Americas business segment, strength in utility end-markets in the Electrical Global business segment, strength in data center end-markets in the Electrical Americas and Electrical Global business segments, strength in commercial OEM, commercial aftermarket, and military OEM in the Aerospace business segment, and strength in the European region in the eMobility business segment, partially offset by weakness in residential end-markets in the Electrical Americas and Electrical Global business segments and weakness in the North American and European regions in the Vehicle business segment.
Additionally, during 2024, certain facilities in the Electrical Americas business segment were impacted by Hurricane Helene, and the Aerospace business segment was impacted by industry related labor strikes. These events had a negative impact on Net sales in 2024 of $128 million.
Gross Profit
2025: Gross profit margin decreased from 38.2% in 2024 to 37.6% in 2025. Material factors affecting this decrease were a 280 basis point decline from higher commodity and wage inflation and a 50 basis point decline from higher acquisition and divestiture charges, partially offset by a 260 basis point increase from higher sales.
2024: Gross profit margin increased from 36.4% in 2023 to 38.2% in 2024. Material factors affecting this increase were a 290 basis point increase from higher sales and a 90 basis point increase from operating efficiencies, partially offset by a 100 basis point decline from higher commodity and wage inflation and a 70 basis point decline from higher costs to support growth initiatives.
Income Taxes
During 2025, income tax expense of $841 million was recognized (an effective tax rate of 17.1%) compared to income tax expense of $768 million in 2024 (an effective tax rate of 16.8%) and income tax expense of $604 million in 2023 (an effective tax rate of 15.8%). The increase in the effective tax rate from 16.8% in 2024 to 17.1% in 2025 was primarily due to greater levels of income earned in higher tax jurisdictions. The increase in the effective tax rate from 15.8% in 2023 to 16.8% in 2024 was due to greater levels of income earned in higher tax jurisdictions, partially offset by a larger impact from the excess tax benefits recognized for employee share-based payments and the reduction of valuation allowances on foreign tax attributes.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the United States. The OBBBA extends and modifies certain provisions of the 2017 Tax Cuts and Jobs Act and has multiple effective dates, with some provisions beginning in 2025. The OBBBA did not have a material impact on the Company’s consolidated financial statements in 2025. The Company will continue to assess the impact of OBBBA and does not expect the OBBBA to have a material impact on its effective tax rate in future periods.
Net Income
Changes in Net income attributable to Eaton ordinary shareholders and Net income per share attributable to Eaton ordinary shareholders - diluted are summarized as follows:
2025
2024
(In millions except for per share data)
Dollars
Per share
Dollars
Per share
Prior year
$
3,794
$
9.50
$
3,218
$
8.02
Business segment results of operations
Operational performance
601
1.55
730
1.82
Foreign currency
22
0.06
(7)
(0.02)
Corporate
Intangible asset amortization expense
(50)
(0.16)
18
0.05
Restructuring program charges
57
0.14
(114)
(0.29)
Acquisition and divestiture charges
(119)
(0.31)
13
0.04
Other corporate items
(207)
(0.52)
(21)
(0.05)
Tax rate impact
(11)
(0.03)
(45)
(0.11)
Impact of shares
0.22
0.04
Current year
$
4,087
$
10.45
$
3,794
$
9.50
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Business Segment Results of Operations
The following is a discussion of Net sales, operating profit (loss) and operating margin by business segment. Additionally, the Company uses the following metrics as indicators of customer demand and future revenue expectations in the Electrical Americas, Electrical Global, and Aerospace business segments. The Company believes these metrics are useful to investors for the same reasons.
•Backlog: Includes orders to which customers are firmly committed
•Organic change in backlog: Percentage change in backlog, excluding (1) the impact of foreign currency, (2) divestitures, and (3) firm orders in place prior to closing of business acquisitions
•Organic change in customer orders: Percentage change in firm customer orders on a trailing twelve month basis, excluding (1) the impact of foreign currency, (2) divestitures, and (3) firm orders in place prior to closing of business acquisitions
•Book-to-bill: Average of the ratio of firm customer orders to Net sales for the last four quarters
Electrical Americas
(In millions)
2025
Change
from 2024
2024
Change
from 2023
2023
Net sales
$
13,276
16
%
$
11,436
13
%
$
10,098
Operating profit
$
3,972
15
%
$
3,455
29
%
$
2,675
Operating margin
29.9
%
30.2
%
26.5
%
Changes in Net sales:
2025
2024
Organic growth
12
%
13
%
Acquisitions of businesses
4
%
—
%
Total increase in Net sales
16
%
13
%
Change from December 31
Performance metrics:
December 31, 2025
December 31, 2024
2025 vs. 2024
2024 vs. 2023
Backlog
$
13,246
$
10,141
31
%
28
%
Organic change in backlog
19
%
29
%
Organic change in customer orders
16
%
16
%
Book-to-bill
1.2
1.2
The increase in organic sales in 2025 was due to strength in data center end-markets, partially offset by weakness in industrial end-markets. The increase in organic sales in 2024 was due to strength in data center and commercial & institutional end-markets, partially offset by weakness in residential end-markets.
The operating margin decreased from 30.2% in 2024 to 29.9% in 2025. Material factors affecting this decrease were a 380 basis point decline from higher commodity and wage inflation and a 70 basis point decline from higher costs to support growth initiatives, partially offset by a 380 basis point increase from higher sales. The operating margin increased from 26.5% in 2023 to 30.2% in 2024. Material factors affecting this increase were a 560 basis point increase from higher sales and a 150 basis point increase from operating efficiencies, partially offset by a 190 basis point decline from higher costs to support growth initiatives and a 130 basis point decline from higher commodity and wage inflation.
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Electrical Global
(In millions)
2025
Change
from 2024
2024
Change
from 2023
2023
Net sales
$
6,815
9
%
$
6,248
3
%
$
6,084
Operating profit
$
1,323
15
%
$
1,149
(2)
%
$
1,176
Operating margin
19.4
%
18.4
%
19.3
%
Changes in Net sales:
2025
2024
Organic growth
7
%
4
%
Foreign currency
2
%
(1)
%
Total increase in Net sales
9
%
3
%
Change from December 31
Performance metrics:
December 31, 2025
December 31, 2024
2025 vs. 2024
2024 vs. 2023
Backlog
$
2,034
$
1,704
19
%
12
%
Organic change in backlog
13
%
16
%
Organic change in customer orders
6
%
4
%
Book-to-bill
1.0
1.1
The increase in organic sales in 2025 was due to strength in data center, machine OEM, and residential end-markets, partially offset by weakness in industrial end-markets. Additionally, the increase in organic sales in 2025 was due to strength in the Asia Pacific and European regions and in the Global Energy Infrastructure Solutions (GEIS) business. The increase in organic sales in 2024 was due to strength in data center and utility end-markets, partially offset by weakness in residential end-markets. Additionally, the increase in organic sales in 2024 was due to strength in the Asia Pacific and European regions.
The operating margin increased from 18.4% in 2024 to 19.4% in 2025. Material factors affecting this increase were a 270 basis point increase from higher sales, partially offset by a 230 basis point decline from higher commodity and wage inflation. The operating margin decreased from 19.3% in 2023 to 18.4% in 2024. Material factors affecting this decrease were a 150 basis point decline from higher wage inflation, a 70 basis point decline from the sale of a non-production facility in the third quarter of 2023, a 60 basis point decline from higher support costs, and a 50 basis point decline from unfavorable product mix, partially offset by a 140 basis point increase from operating efficiencies and a 90 basis point increase from higher sales.
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Aerospace
(In millions)
2025
Change
from 2024
2024
Change
from 2023
2023
Net sales
$
4,249
13
%
$
3,744
10
%
$
3,413
Operating profit
$
1,013
18
%
$
859
10
%
$
780
Operating margin
23.9
%
23.0
%
22.9
%
Changes in Net sales:
2025
2024
Organic growth
12
%
10
%
Foreign currency
1
%
—
%
Total increase in Net sales
13
%
10
%
Change from December 31
Performance metrics:
December 31, 2025
December 31, 2024
2025 vs. 2024
2024 vs. 2023
Backlog
$
4,316
$
3,721
16
%
15
%
Organic change in backlog
13
%
16
%
Organic change in customer orders
11
%
10
%
Book-to-bill
1.1
1.1
The increase in organic sales in 2025 was due to broad-based strength across all markets, with particular strength in military aftermarket. The increase in organic sales in 2024 was due to strength in commercial OEM, commercial aftermarket, and military OEM.
The operating margin increased from 23.0% in 2024 to 23.9% in 2025. Material factors affecting this increase were a 540 basis point increase from higher sales, partially offset by a 260 basis point decline from higher commodity and wage inflation, a 70 basis point decline from operating inefficiencies, a 60 basis point decline from higher costs to support growth initiatives, and a 60 basis point decline from the sale of a production facility in the first quarter of 2024. The operating margin increased from 22.9% in 2023 to 23.0% in 2024. Material factors affecting the operating margin were a 470 basis point increase from higher sales and a 70 basis point increase from the sale of a production facility in the first quarter of 2024, partially offset by a 280 basis point decline from higher commodity and wage inflation, a 180 basis point decline from higher costs to support growth initiatives, and a 70 basis point decline from unfavorable product mix.
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Vehicle
(In millions)
2025
Change
from 2024
2024
Change
from 2023
2023
Net sales
$
2,505
(10)
%
$
2,790
(6)
%
$
2,965
Operating profit
$
419
(17)
%
$
502
4
%
$
482
Operating margin
16.7
%
18.0
%
16.3
%
Changes in Net sales:
2025
2024
Organic growth
(10)
%
(5)
%
Foreign currency
—
%
(1)
%
Total decrease in Net sales
(10)
%
(6)
%
The decrease in organic sales in 2025 was due to weakness in the North American truck and light vehicle markets. The decrease in organic sales in 2024 was due to weakness in the North American and European regions, partially offset by strength in the South American region.
The operating margin decreased from 18.0% in 2024 to 16.7% in 2025. Material factors affecting this decrease were a 250 basis point decline from higher commodity and wage inflation and a 60 basis point decline from lower sales, partially offset by a 190 basis point increase from operating efficiencies. The operating margin increased from 16.3% in 2023 to 18.0% in 2024. Material factors affecting this increase were a 190 basis point increase from operating efficiencies and a 60 basis point increase from the sale of a non-production facility in the second quarter of 2024, partially offset by a 70 basis point decrease from lower income from investments in associate companies.
eMobility
(In millions)
2025
Change
from 2024
2024
Change
from 2023
2023
Net sales
$
604
(9)
%
$
662
4
%
$
636
Operating loss
$
(14)
(100)
%
$
(7)
67
%
$
(21)
Operating margin
(2.3)
%
(1.0)
%
(3.2)
%
Changes in Net sales:
2025
2024
Organic growth
(10)
%
4
%
Foreign currency
1
%
—
%
Total increase (decrease) in Net sales
(9)
%
4
%
The decrease in organic sales in 2025 was due to weakness in the North American region. Despite OEM delays in electric vehicle rollouts due to weaker than expected customer demand, organic sales increased in 2024 due to strength in the European region, partially offset by weakness in the North American region.
The operating margin decreased from negative 1.0% in 2024 to negative 2.3% in 2025. Material factors affecting this decrease were a 270 basis point decline from unfavorable product mix, a 240 basis point decline from higher commodity inflation, and a 240 basis point decline from the sale of non-production facilities in the second quarter of 2024, partially offset by a 360 basis point increase from the reimbursement of research and development and support costs by a customer and a 290 basis point increase from operating efficiencies. The operating margin increased from negative 3.2% in 2023 to negative 1.0% in 2024. Material factors affecting this increase were a 510 basis point increase from operating efficiencies, a 350 basis point increase from higher sales, and a 220 basis point increase from the sale of non-production facilities in the second quarter of 2024, partially offset by a 320 basis point decline from higher costs to support growth initiatives, a 300 basis point decline from unfavorable product mix, and a 220 basis point decline from higher commodity and wage inflation.
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Corporate Expense
(In millions)
2025
Change
from 2024
2024
Change
from 2023
2023
Intangible asset amortization expense
$
486
14
%
$
425
(6)
%
$
450
Interest expense - net
241
85
%
130
(14)
%
151
Pension and other postretirement benefits income
(19)
(53)
%
(40)
(13)
%
(46)
Restructuring program charges
133
(34)
%
202
254
%
57
Other expense - net
941
39
%
675
3
%
654
Total corporate expense
$
1,782
28
%
$
1,392
10
%
$
1,266
The material factors affecting the increase in Total corporate expense in 2025 were higher Other expense - net, Interest expense - net, and Intangible asset amortization expense, partially offset by lower Restructuring program charges. The increase in Other expense - net is primarily due to higher acquisition and divestiture costs and tax litigation charges. The material factor affecting the increase in Total corporate expense in 2024 was higher Restructuring program charges.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
Liquidity and Financial Condition
Eaton’s objective is to finance its business through operating cash flow and an appropriate mix of equity and long-term and short-term debt. By diversifying its debt maturity structure, Eaton reduces liquidity risk.
On May 9, 2025, a subsidiary of Eaton issued Euro denominated notes (2025 Euro Notes) with a face amount of €500 million ($564 million). The 2025 Euro Notes mature in 2035 with interest payable annually at a rate of 3.625% per annum. The issuer received proceeds totaling €494 million ($558 million) from the 2025 Euro Notes issuance, net of financing costs and discounts. The 2025 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The 2025 Euro Notes contain customary optional redemption and par call provisions. The 2025 Euro Notes also contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2025 Euro Notes at a purchase price of 101% of the principal amount plus accrued and unpaid interest. The capitalized deferred financing fees are amortized in Interest expense - net over the term of the 2025 Euro Notes. The 2025 Euro Notes are subject to customary non-financial covenants.
Also on May 9, 2025, the same subsidiary of Eaton issued senior notes (2025 Notes) with a face amount of $500 million. The 2025 Notes mature in 2030 with interest payable semi-annually at a rate of 4.45% per annum. The issuer received proceeds totaling $495 million from the 2025 Notes issuance, net of financing costs and discounts. The 2025 Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The 2025 Notes contain customary optional redemption and par call provisions. The 2025 Notes also contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2025 Notes at a purchase price of 101% of the principal amount plus accrued and unpaid interest. The capitalized deferred financing fees are amortized in Interest expense - net over the term of the 2025 Notes. The 2025 Notes are subject to customary non-financial covenants.
On September 29, 2025, a subsidiary of Eaton entered into a new $3,000 million five-year revolving credit agreement that will expire on September 27, 2030 (New Revolving Credit Agreement), which replaced the $500 million 364-day revolving credit agreement dated September 30, 2024 and $2,500 million five-year revolving credit agreement dated October 3, 2022. The New Revolving Credit Agreement is used to support commercial paper borrowings and is fully and unconditionally guaranteed by Eaton and certain of its direct and indirect subsidiaries on an unsubordinated, unsecured basis. There were no borrowings outstanding under the New Revolving Credit Agreement at December 31, 2025. The Company maintains access to the commercial paper markets through its $3,000 million commercial paper program, of which none was outstanding on December 31, 2025. On February 6, 2026, a subsidiary of Eaton exercised a $1,000 million upsize of the existing $3,000 million five-year revolving credit agreement, increasing the total facility size to $4,000 million. The upsize was executed under the New Revolving Credit Agreement, and the facility’s maturity date remains unchanged at September 27, 2030. Also on February 6, 2026, the Company increased its commercial paper program from $3,000 million to $4,000 million.
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On February 6, 2026, a subsidiary of Eaton entered into a senior unsecured delayed-draw term loan facility (Term Credit Agreement) in an aggregate principal amount of up to $8,000 million. The proceeds of the Term Credit Agreement, if drawn, will be used solely by the Company to finance a portion of the expected acquisition of Boyd Thermal. The Term Credit Agreement will mature and be payable in full on December 31, 2026 unless the Term Credit Agreement is terminated earlier pursuant to its terms. The Term Credit Agreement is fully and unconditionally guaranteed by Eaton and certain of its direct and indirect subsidiaries on an unsubordinated, unsecured basis. The Company has not drawn on the Term Credit Agreement.
In addition to the revolving credit facility, the Company also had available lines of credit of $872 million from various banks primarily for the issuance of letters of credit, of which there was $350 million outstanding at December 31, 2025.
Over the course of a year, cash, short-term investments, and short-term debt may fluctuate in order to manage global liquidity. As of December 31, 2025 and 2024, Eaton had cash of $622 million and $555 million, short-term investments of $181 million and $1,525 million, respectively, with $1 million short-term debt as of December 31, 2025 and no short-term debt as of December 31, 2024. Eaton has investment grade credit ratings from the two major rating agencies as reflected in the following ratings assigned to its debt:
Credit Rating Agency (long- /short-term rating)
Rating
Outlook
Standard & Poor's
A-/A-2
Stable outlook
Moody's
A3/P-2
Stable outlook
Eaton believes it has the operating flexibility, cash flow, cash and short-term investment balances, availability under the existing revolving credit facility, and access to capital markets in excess of the liquidity necessary to meet future operating needs of the business, fund capital expenditures and acquisitions of businesses, as well as scheduled payments of long-term debt, for at least the next 12 months and the foreseeable future thereafter.
On April 1, 2025, the Company paid $1.43 billion, net of cash acquired, to acquire Fibrebond Corporation. On August 6, 2025, the Company acquired Resilient Power Systems Inc. for $86 million, including $55 million of cash paid at closing and an initial estimate of $31 million for the fair value of contingent future consideration. In addition, on January 23, 2026, the Company paid $1.53 billion, net of cash acquired, to acquire Ultra PCS Limited and the Company expects to close the acquisition of Boyd Thermal in the second quarter of 2026 for $9.5 billion.
For additional information on financing transactions and debt, see Note 9.
Eaton’s credit facilities and indentures governing certain long-term debt contain various covenants, the violation of which would limit or preclude the use of the credit facilities for future borrowings, or might accelerate the maturity of the related outstanding borrowings covered by the indentures. At Eaton’s present credit rating level, the most restrictive financial covenant provides that the ratio of secured debt (or lease payments due under a sale and leaseback transaction) to adjusted consolidated net worth (or consolidated net tangible assets, in each case as defined in the relevant credit agreement or indenture) may not exceed 10%. Eaton's actual ratios are substantially below the required threshold. In addition, Eaton is in compliance with each of its debt covenants for all periods presented.
Cash Flows
A summary of cash flows is as follows:
(In millions)
2025
Change
from 2024
2024
Change
from 2024
2023
Net cash provided by operating activities
$
4,472
$
145
$
4,327
$
703
$
3,624
Net cash used in investing activities
(1,101)
(830)
(271)
2,304
(2,575)
Net cash used in financing activities
(3,173)
763
(3,936)
(3,065)
(871)
Effect of currency on cash
(131)
(79)
(52)
(68)
16
Total increase in cash
$
67
$
67
$
194
Operating Cash Flow
Net cash provided by operating activities increased by $145 million in 2025 compared to 2024. The material factor affecting this increase was higher net income of $292 million.
Net cash provided by operating activities increased by $703 million in 2024 compared to 2023. The material factor affecting this increase was higher net income of $575 million.
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Investing Cash Flow
Net cash used in investing activities increased by $830 million in 2025 compared to 2024. Material factors affecting this increase were an increase in cash paid for business acquisitions to $1,490 million in 2025 from $50 million in 2024, and an increase in capital expenditures for property, plant and equipment to $919 million in 2025 from $808 million in 2024, partially offset by sales of short-term investments to $1,339 million in 2025 from $575 million in 2024.
Net cash used in investing activities decreased by $2,304 million in 2024 compared to 2023. Material factors affecting this decrease were sales of short-term investments of $575 million in 2024 compared to purchases of short-term investments of $1,861 million in 2023, partially offset by payments for settlement of currency exchange contracts not designated as hedges of $3 million in 2024 compared to proceeds from settlement of currency exchange contracts not designated as hedges of $92 million in 2023.
Financing Cash Flow
Net cash used in financing activities decreased by $763 million in 2025 compared to 2024. Material factors affecting this decrease were a decrease in repurchase of shares to $1,862 million in 2025 from $2,492 million in 2024, and a decrease in payments on borrowings to $717 million in 2025 from $1,015 million in 2024, partially offset by an increase in cash dividends paid to $1,626 million in 2025 from $1,500 million in 2024.
Net cash used in financing activities increased by $3,065 million in 2024 compared to 2023. Material factors affecting this increase were an increase in repurchase of shares to $2,492 million in 2024 compared to no repurchase of shares in 2023, and an increase in payments on borrowings to $1,015 million in 2024 from $19 million in 2023, partially offset by a decrease in net payments of short-term debt to $8 million in 2024 from $311 million in 2023, and an increase in proceeds from borrowings to $1,084 million in 2024 from $818 million in 2023.
Uses of Cash
Purchases of Goods and Services
The Company purchases goods and services in the normal course of business based on expected usage. For certain purchases, the Company enters into purchase obligations with various vendors, which include short-term and long-term commitments for purchases of raw materials, outstanding non-cancelable purchase orders, releases under blanket purchase orders, and commitments under ongoing service arrangements. As of December 31, 2025, the Company has purchase obligations to support the operation of its business similar to those included in historical cash flow trends.
Capital Expenditures
Capital expenditures were $919 million, $808 million, and $757 million in 2025, 2024, and 2023, respectively. The Company plans to increase capital expenditures over the next several years to expand production capacity across various markets to support anticipated growth. As a result, Eaton expects approximately $1.1 billion in capital expenditures in 2026.
Dividends
Cash dividend payments were $1,626 million, $1,500 million, and $1,379 million in 2025, 2024, and 2023, respectively. On February 26, 2026, Eaton's Board of Directors declared a quarterly dividend of $1.10 per ordinary share, a 6% increase over the dividend paid in the fourth quarter of 2025. The dividend is payable on March 27, 2026 to shareholders of record on March 10, 2026. Payment of quarterly dividends in the future depends upon the Company’s ability to generate net income and operating cash flows, among other factors, and is subject to declaration by the Eaton Board of Directors. The Company intends to continue to pay quarterly dividends in 2026.
Share Repurchases
On February 23, 2022, the Board of Directors adopted a share repurchase program for repurchases of ordinary shares up to $5.0 billion to be made during the three-year period commencing on that date (2022 Program). On February 27, 2025, the Board of Directors renewed the 2022 Program by providing authority for up to $9.0 billion in repurchases to be made during the three-year period commencing on that date (2025 Program). Under the 2025 Program, the ordinary shares are expected to be repurchased over time, depending on market conditions, the market price of ordinary shares, capital levels, and other considerations. During 2025 and 2024, 5.7 million and 7.8 million ordinary shares were repurchased under the 2025 or 2022 Programs in the open market at a total cost of $1.9 billion and $2.5 billion, respectively. During 2023, no ordinary shares were repurchased. At December 31, 2025, there is $7,597 million still available for share repurchase under the 2025 Program. The Company does not intend to pursue share repurchases in 2026 due to the expected acquisition of Boyd Thermal in the second quarter of 2026.
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Acquisition of Businesses and Investments in Associate Companies
The Company paid cash of $1,490 million and $50 million in 2025 and 2024, respectively, to acquire businesses. There were no business acquisitions in 2023. The Company paid cash of $16 million, $70 million, and $68 million in 2025, 2024, and 2023, respectively, for investments in associate companies. The Company will continue to focus on deploying its capital toward businesses that provide opportunities for higher growth and strong returns, and align with secular trends and its power management strategies.
Debt
The Company manages a number of short-term and long-term debt instruments, including commercial paper. At December 31, 2025, the Company had Short-term debt of $1 million, Current portion of long-term debt of $1,136 million, and Long-term debt of $8,758 million. The Company believes it has the operating flexibility, cash flow, and access to capital markets to meet scheduled payments of long-term debt. For additional information on financing transactions and debt see Note 9.
Leases
See Note 8 for maturities of lease liabilities.
Unrecognized Income Tax Benefits
At December 31, 2025, the gross unrecognized income tax benefits totaled $1,300 million and interest and penalties were $218 million. Eaton cannot predict with reasonable certainty the timing of cash settlements with the respective taxing authorities. For additional information about income taxes see Note 12.
Defined Benefits Plans
Pension Plans
During 2025, the fair value of plan assets in the Company’s employee pension plans increased $198 million to $4,191 million at December 31, 2025. The increase in plan assets was primarily due to higher than expected return on plan assets, contributions, and the impact of positive currency translation. At December 31, 2025, the net unfunded position of $497 million in pension liabilities consisted of $587 million in plans that have no funding requirements and $166 million in plans that require funding, offset by $256 million in plans that are overfunded.
Funding requirements are a major consideration in making contributions to Eaton’s pension plans. With respect to the Company’s pension plans worldwide, the Company intends to contribute annually not less than the minimum required by applicable law and regulations. In 2025, $124 million was contributed to the pension plans. The Company anticipates making $98 million of contributions to certain pension plans during 2026. The funded status of the Company’s pension plans at the end of 2026, and future contributions, will depend primarily on the actual return on assets during the year and the discount rate used to calculate certain benefits at the end of the year. For additional information about pension plans see Note 10.
Supply Chain Finance Program
A third-party financial institution offers a voluntary supply chain finance (SCF) program that enables certain of the Company’s suppliers, at the supplier’s sole discretion, to sell receivables due from the Company to the financial institution on terms directly negotiated with the financial institution. The SCF program does not have a significant impact on the Company’s liquidity as payments by the Company to participating suppliers are paid to the financial institution on the invoice due date, regardless of whether an individual invoice is sold by the supplier to the financial institution. For additional information on the SCF program, see Note 7.
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Guaranteed Debt
Issuers, Guarantors and Guarantor Structure
Eaton Corporation has issued senior notes pursuant to indentures dated April 1, 1994 (the 1994 Indenture), November 20, 2012 (the 2012 Indenture), September 15, 2017 (the 2017 Indenture), and August 23, 2022 (as supplemented by the First and Second Supplemental Indentures of the same date and the Third Supplemental Indenture dated May 18, 2023, the 2022 Indenture). Eaton Capital Unlimited Company, a subsidiary of Eaton, is the issuer of four outstanding series of debt securities sold in offshore transactions under Regulation S promulgated under the Securities Act (the Eurobonds) and Registered Senior Notes (as defined below) issued under an indenture dated May 9, 2025 (as supplemented by the First and Second Supplemental Indentures of the same date, the 2025 Indenture). The senior notes issued under the 1994, 2012, 2017, 2022, and 2025 Indentures are registered under the Securities Act of 1933, as amended (the Registered Senior Notes). The Eurobonds and the Registered Senior Notes (together, the Senior Notes) comprise substantially all of Eaton’s long-term indebtedness.
Substantially all of the Senior Notes (with limited exceptions), together with the credit facilities described above under Liquidity and Financial Condition (the Credit Facilities), are guaranteed by Eaton and 17 of its subsidiaries. Accordingly, they rank equally with each other. However, because these obligations are not secured, they would be effectively subordinated to any existing or future secured indebtedness of Eaton and its subsidiaries. As of December 31, 2025, Eaton has no material, long-term secured debt. The guaranteed Registered Senior Notes are also structurally subordinated to the liabilities of Eaton's subsidiaries that are not guarantors. Except as described below under Future Guarantors, Eaton is not obligated to cause its subsidiaries to guarantee the Registered Senior Notes.
The table set forth in Exhibit 22 filed with the Form 10-Q filed on August 5, 2025 (10-Q Exhibit 22) and incorporated by reference in this Annual Report on Form 10-K details the primary obligors and guarantors with respect to the guaranteed Registered Senior Notes.
Terms of Guarantees of Registered Securities
Payment of principal and interest on the Registered Senior Notes is guaranteed, on an unsecured, unsubordinated basis by the subsidiaries of Eaton set forth in the table referenced in the 10-Q Exhibit 22. Each guarantee is full and unconditional, and joint and several. Each guarantor’s guarantee is an unsecured obligation that ranks equally with all its other unsecured and unsubordinated indebtedness. The obligations of each guarantor under its guarantee of the Registered Senior Notes are subject to a customary savings clause or similar provision designed to prevent such guarantee from constituting a fraudulent conveyance or otherwise legally impermissible or voidable obligation.
Though the terms of the indentures vary slightly, generally, each guarantee of the Registered Senior Notes by a guarantor that is a subsidiary of Eaton Corporation provides that it will be automatically and unconditionally released and discharged under certain circumstances, including, but not limited to:
(a)the consummation of certain types of transactions permitted under the applicable indenture, including one that results in such guarantor ceasing to be a subsidiary; and
(b)for Registered Senior Notes issued under the 2022 and 2025 Indentures, when such guarantor is a guarantor or issuer of indebtedness in an aggregate outstanding principal amount of less than 25% of our total outstanding indebtedness.
Further, each guarantee by a direct or indirect parent of Eaton Corporation (other than Eaton) provides that it will also be released if:
(c)such guarantee (so long as the guarantor is not obligated under any other U.S. debt obligations), becomes prohibited by any applicable law, rule or regulation or by any contractual obligation; or
(d)such guarantee results in material adverse tax consequences to Eaton or any of its subsidiaries (so long as the applicable guarantor is not obligated under any other U.S. debt obligation).
The guarantee of Eaton does not contain any release provisions.
Future Guarantors
The 2012 and 2017 Indentures generally provide that, with certain limited exceptions, any subsidiary of Eaton must become a guarantor if it becomes obligated as borrower or guarantor under any series of debt securities or a syndicated credit facility. Further, the 2012 and 2017 Indentures provide that any entity that becomes a direct or indirect parent entity of Eaton Corporation and holds any material assets, with certain limited exceptions, or owes any material liabilities must become a guarantor. The 2022 and 2025 Indentures provide only that, with certain limited exceptions, any subsidiary of Eaton must become a guarantor if it becomes obligated as borrower or guarantor under indebtedness with an aggregate outstanding principal amount in excess of 25% of the Parent and its Subsidiaries’ then-outstanding indebtedness.
The 1994 Indenture does not contain provisions with respect to future guarantors.
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Summarized Financial Information of Guarantors and Issuers
(In millions)
December 31, 2025
Current assets
$
4,075
Noncurrent assets
13,439
Current liabilities
4,598
Noncurrent liabilities
10,788
Amounts due to subsidiaries that are non-issuers and non-guarantors - net
9,499
(In millions)
2025
Net sales
$
16,241
Sales to subsidiaries that are non-issuers and non-guarantors
967
Cost of products sold
11,154
Expense from subsidiaries that are non-issuers and non-guarantors - net
943
Net income
1,515
The financial information presented is that of the issuers and the guarantors, which includes Eaton Corporation plc, on a combined basis and the financial information of non-issuer and non-guarantor subsidiaries has been excluded. Intercompany balances and transactions between the issuers and guarantors have been eliminated, and amounts due from, amounts due to, and transactions with non-issuer and non-guarantor subsidiaries have been presented separately.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in the United States requires management to make certain estimates and assumptions that may involve the exercise of significant judgment. For any estimate or assumption used, there may be other reasonable estimates or assumptions that could have been used. However, based on facts and circumstances inherent in developing estimates and assumptions, management believes it is unlikely that applying other such estimates and assumptions would have caused materially different amounts to have been reported. Actual results may differ from these estimates.
Revenue Recognition
Sales are recognized when control of promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. The majority of the Company’s sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer. Sales recognized over time are generally accounted for using an input measure to determine progress completed at the end of the period. Sales for service contracts generally are recognized as the services are provided. For agreements with multiple performance obligations, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of agreements, we generally allocate sales price to each distinct obligation based on the price of each item sold in separate transactions.
Due to the nature of the work required to be performed for obligations recognized over time, Eaton estimates total costs by contract. The estimate of total costs are subject to judgment. Estimated amounts are included in the recognized sales price to the extent it is not probable that a significant reversal of cumulative sales will occur. Additionally, contracts can be modified to account for changes in contract specifications, requirements or sale price. The effect of a contract modification on the sales price or adjustments to the measure of completion under the input method are recognized as adjustments to revenue on a cumulative catch-up basis.
Eaton records reductions to sales for returns, and customer and distributor incentives, primarily comprised of rebates, at the time of the initial sale. Rebates are estimated based on sales terms, historical experience, trend analysis, and projected market conditions in the various markets served. The rebate programs offered vary across businesses due to the numerous markets Eaton serves, but the most common incentives relate to amounts paid or credited to customers for achieving defined volume levels. Returns are estimated at the time of the sale primarily based on historical experience and are recorded gross on the Consolidated Balance Sheets. See Note 3 for additional information.
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Impairment of Goodwill and Indefinite Life Intangible Assets
Goodwill
Goodwill is evaluated annually for impairment as of July 1 using either a quantitative or qualitative analysis. Goodwill is tested for impairment at the reporting unit level, and is based on the net assets for each reporting unit, including goodwill and intangible assets. The Company’s reporting units are equivalent to the reportable operating segments, except for the Aerospace segment which has two reporting units. Goodwill is assigned to each reporting unit, as this represents the lowest level that constitutes a business and is the level at which management regularly reviews the operating results. The Company performs a quantitative analysis using a discounted cash flow model and other valuation techniques, but may elect to perform a qualitative analysis.
Additionally, goodwill is evaluated for impairment whenever an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Events or circumstances that may result in an impairment review include changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit or sustained decrease in share price.
The annual goodwill impairment test was performed using a qualitative analysis in 2025, except for the eMobility reporting unit which used a quantitative analysis in 2025. The annual goodwill impairment test was performed using a quantitative analysis in 2024, except for the Vehicle and eMobility reporting units which used a qualitative analysis in 2024. A qualitative analysis is performed by assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales and operating profit margins, discount rates, industry data, and other relevant qualitative factors. These trends and factors are compared to, and based on, the assumptions used in the most recent quantitative analysis performed for each reporting unit. The results of the qualitative analyses did not indicate a need to perform quantitative analysis.
Quantitative analyses were performed by estimating the fair value of the reporting unit using a discounted cash flow model. The model includes estimates of future cash flows, future growth rates, terminal value amounts, and the applicable weighted-average cost of capital used to discount those estimated cash flows. The future cash flows were based on the Company's long-term operating plan and a terminal value was used to estimate the reporting unit's cash flows beyond the period covered by the operating plan. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. These analyses require the exercise of judgments, including judgments about appropriate discount rates, perpetual growth rates, revenue growth, and margin assumptions. Sensitivity analyses were performed around certain of these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values.
Based on these analyses performed in 2025 and 2024, the fair value of Eaton's reporting units continue to substantially exceed their respective carrying amounts and thus, no impairment exists.
Indefinite Life Intangible Assets
Indefinite life intangible assets consist of certain trademarks. They are evaluated annually for impairment as of July 1 using either a quantitative or qualitative analysis to determine whether their fair values exceed their respective carrying amounts. Indefinite life intangible asset impairment testing for 2025 and 2024 was performed using a quantitative analysis. Determining the fair value of these assets requires significant judgment and the Company uses a royalty relief methodology similar to that employed when the associated assets were acquired, but using updated estimates of future sales, cash flows and profitability. Sensitivity analyses were performed around certain of these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values.
Additionally, indefinite life intangible assets are evaluated for impairment whenever an event occurs or circumstances change that would indicate that it is more likely than not that the asset is impaired. Events or circumstances that may result in an impairment review include changes in industry and market considerations, cost factors, financial performance, and other relevant entity-specific events that could affect inputs used to determine the respective fair values of the indefinite-lived intangible assets.
For 2025 and 2024, the fair value of indefinite lived intangible assets exceeded the respective carrying value.
For additional information about goodwill and other intangible assets see Note 6.
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Acquisitions of Businesses
The acquisition of a business is accounted for using the acquisition method of accounting which requires assets and liabilities to be recognized at their fair values on the acquisition date. The initial fair value of assets acquired and liabilities assumed may be revised based on the final determination of fair value during the measurement period of up to 12 months from the acquisition date. The Company generally determines the fair value of intangible assets acquired using third-party valuations that are prepared using discounted cash flow models that rely on the Company's estimates. These estimates require judgment of future revenue growth rates, future margins, and the applicable weighted-average cost of capital used to discount those estimated cash flows. Sensitivity analyses are performed around certain of these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values. For additional information about the acquisitions of businesses see Note 2.
Recoverability of Deferred Income Tax Assets
Eaton is subject to the income tax laws in the jurisdictions in which it operates. In order to determine the income tax provision for financial statement purposes, Eaton must make significant estimates and judgments about its business operations in these jurisdictions. These estimates and judgments are also used in determining the deferred income tax assets and liabilities that have been recognized for differences between the financial statement and income tax basis of assets and liabilities, and income tax loss carryforwards and income tax credit carryforwards.
Management evaluates the realizability of deferred income tax assets for each jurisdiction in which it operates. If the Company experiences cumulative pre-tax income in a particular jurisdiction in a three-year period including the current and prior two years, management normally concludes that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized, unless known or planned operating developments, or changes in tax laws, would lead management to conclude otherwise. However, if the Company experiences cumulative pre-tax losses in a particular jurisdiction in a three-year period including the current and prior two years, management then considers a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, carryback capability under the tax law in a particular country, prudent and feasible tax planning strategies, changes in tax laws, and estimates of future earnings and taxable income using the same assumptions as those used for the Company’s goodwill and other impairment testing. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, management would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, management would establish a valuation allowance. For additional information about income taxes see Note 12.
Unrecognized Income Tax Benefits
Eaton recognizes an income tax benefit from an uncertain tax position only if it is more likely than not that the benefit would be sustained upon examination by taxing authorities, based on the technical merits of the position. The Company evaluates and adjusts the amount of unrecognized income tax benefits based on changes in law, facts and circumstances.
The evaluation and determination of the amount of unrecognized income tax benefits related to uncertain tax positions is complex and involves both the exercise of judgment and the utilization of certain estimates and assumptions. Each tax position carries unique facts and circumstances that must be evaluated in light of current tax laws, regulations, and judicial decisions. Additionally, the ultimate resolution of the majority of Eaton’s unrecognized income tax benefits is dependent upon uncontrollable factors such as the timing of finalizing resolutions of audit disputes through reaching settlement agreements or concluding litigation, or changes in law.
Pension and Other Postretirement Benefits Plans
The measurement of liabilities related to pension plans and other postretirement benefits plans is based on assumptions related to future events including interest rates, return on plan assets, rate of compensation increases, and health care cost trend rates. Actual plan asset performance will either reduce or increase losses included in accumulated other comprehensive loss, which ultimately affects net income.
The discount rate for United States plans was determined by discounting the expected future benefit payments using a theoretical zero-coupon spot yield curve derived from a universe of high-quality bonds as of the measurement date and solving for the single rate that would generate the same benefit obligation. Only corporate bonds with a rating of Aa, determined by averaging the ratings by Moody’s, Standard & Poor's, and Fitch, were included. Callable bonds that are not make-whole bonds and certain other non-comparable bonds were eliminated. Finally, a subset of bonds was selected by grouping the universe of bonds by duration and retaining 50% of the bonds that had the highest yields.
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The discount rates for non-United States plans were determined by region and are based on high quality long-term corporate and government bonds. Consideration has been given to the duration of the liabilities in each plan when selecting the bonds to be used in determining the discount rate.
To estimate the service and interest cost components of net periodic benefit cost for the vast majority of its defined benefits pension and other postretirement benefits plans, the Company used a spot rate approach by applying the specific spot rates along the yield curve used to measure the benefit obligation at the beginning of the period to the relevant projected cash flows.
Key assumptions used to calculate pension and other postretirement benefits expense are adjusted at each year-end. A 1-percentage point change in the assumed rate of return on pension plan assets is estimated to have approximately a $46 million effect on pension expense. Likewise, a 1-percentage point change in the discount rate is estimated to have approximately a $15 million effect on pension expense. A 1-percentage point change in the assumed rate of return on other postretirement benefits assets is estimated to have less than $1 million effect on other postretirement benefits expense. A 1-percentage point change in the discount rate is estimated to have a $2 million effect on expense for other postretirement benefits plans.
Additional information related to changes in key assumptions used to recognize expense for other postretirement benefits plans is found in Note 10.