NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Amounts are in millions 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.
Note 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Eaton Corporation plc (Eaton or the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (US GAAP) for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are necessary for a fair presentation of the condensed consolidated financial statements for the interim periods.
This Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in Eaton’s 2025 Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year. Management has evaluated subsequent events through the date this Form 10-Q was filed with the Securities and Exchange Commission.
During the first quarter of 2026, Eaton re-segmented certain business segments due to a reorganization of the Company's businesses. The new segment is Mobility, which consists of the legacy Vehicle and eMobility segments. Historical segment information has been recast to reflect this change.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). This accounting standard requires disaggregated income statement expense disclosures on an annual and interim basis, including inventory purchases, employee compensation, depreciation, and intangible asset amortization for each income statement line item that contains these expenses. The standard also requires disclosure of total selling expenses on an annual and interim basis, and the definition of those expenses disclosed annually. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, and may be applied prospectively or retrospectively. The Company is evaluating the impact of ASU 2024-03 and expects the standard will only impact its disclosures with no material impact to the consolidated financial statements.
In September 2025, the FASB issued Accounting Standards Update 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software (ASU 2025-06). This accounting standard changes when software project costs should be capitalized by removing all references to development stages and requiring costs to be capitalized when (1) the Company authorizes and commits to funding the software project and (2) it is probable the software project will be completed. The standard also requires additional annual and interim disclosures, including the capitalized software balance and accumulated amortization. ASU 2025-06 is effective for annual reporting periods, including interim reporting periods within those annual periods, beginning after December 15, 2027, with early adoption permitted and may be applied prospectively, retrospectively, or using a modified prospective transition approach. The Company is evaluating the impact of ASU 2025-06 to the consolidated financial statements and related disclosures.
In December 2025, the FASB issued Accounting Standards Update 2025-10, Government Grants (Topic 832) – Accounting for Government Grants Received by Business Entities (ASU 2025-10). This accounting standard requires a government grant to be recognized when (1) it is probable the conditions of the grant will be met and (2) the grant will be received. ASU 2025-10 is effective for annual reporting periods, including interim reporting periods within those annual periods, beginning after December 15, 2028, with early adoption permitted and may be applied using a modified prospective approach, modified retrospective approach, or a retrospective approach. The Company is evaluating the impact of ASU 2025-10 to the consolidated financial statements and related disclosures.
Note 2. ACQUISITIONS AND DIVESTITURE OF BUSINESSES
Acquisition of Fibrebond Corporation
On April 1, 2025, Eaton acquired Fibrebond Corporation (Fibrebond) for $1.43 billion, net of cash acquired. Fibrebond is a U.S. based designer and builder of pre-integrated modular power enclosures for data center, industrial, utility and communications customers. Fibrebond is reported within the Electrical Americas business segment.
The acquisition of Fibrebond has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. During the measurement period, which ended in March 2026, opening balance sheet adjustments were made to finalize Eaton's fair value estimates based on the final valuations received, which are summarized in the table below. The measurement period adjustments did not have a material impact to the Consolidated Statements of Income. | | | | | | | | | | | | | | | | | | | | |
| (In millions) | | Preliminary Allocation | | Measurement Period Adjustments | | Final Allocation |
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| Accounts receivable | | $ | 50 | | | $ | (6) | | | $ | 44 | |
| Inventory | | 96 | | | 5 | | | 101 | |
| Prepaid expenses and other current assets | | 72 | | | (5) | | | 67 | |
| Property, plant and equipment | | 104 | | | 13 | | | 117 | |
| Other intangible assets | | 709 | | | 6 | | | 715 | |
| Other assets | | 3 | | | — | | | 3 | |
| Accounts payable | | (48) | | | — | | | (48) | |
| Other current liabilities | | (106) | | | 26 | | | (80) | |
| Other noncurrent liabilities | | (2) | | | (23) | | | (25) | |
| Total identifiable net assets | | 878 | | | 16 | | | 894 | |
| Goodwill | | 572 | | | (31) | | | 541 | |
| Total consideration, net of cash received | | $ | 1,450 | | | $ | (15) | | | $ | 1,435 | |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Fibrebond. Goodwill recognized as a result of the acquisition is deductible for tax purposes. The estimated fair value of the customer relationships, technology, trademarks and backlog intangible assets of $410 million, $171 million, $74 million and $60 million, respectively were determined using either the relief-from-royalty model or the multi-period excess earnings model, which are 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. 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. The estimated useful lives for the customer relationships, technology, trademarks and backlog intangible assets were 17 years, 9 years, 17 years and 2 years, respectively. See Note 6 for additional information about goodwill.
As part of the acquisition, Eaton assumed $240 million of employee transaction and retention awards. Awards vest in six equal annual installments starting in the second quarter of 2025, subject to continued employment with Eaton. Forfeited employee awards are paid to former Fibrebond shareholders annually. Eaton recognizes compensation expense for the awards over the requisite service period and any employee forfeitures owed to former Fibrebond shareholders are expensed immediately in Other income - net. During the first quarter of 2026, compensation expense of $10 million, $3 million and $1 million were included in Costs of products sold, Selling and administrative expense, and Other income - net, respectively, on the Consolidated Statements of Income.
Acquisition of Resilient Power Systems Inc.
On August 6, 2025, Eaton acquired Resilient Power Systems Inc. (Resilient), a leading North American developer and manufacturer of innovative energy solutions, including solid-state transformer-based technology. Resilient was acquired 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 based on 2025 through 2028 revenue performance and achievement of technology-based milestones. The fair value of contingent consideration liabilities is estimated by discounting contingent payments expected to be made, and may increase or decrease based on changes in milestone achievements and discount rates, with a maximum possible undiscounted value of $45 million. As of March 31, 2026, the fair value of the contingent future payments is $32 million. Resilient is reported within the Electrical Americas business segment.
As part of the acquisition, Eaton assumed employee incentives with a maximum payout of $50 million contingent upon achievement of the same revenue performance and technology-based milestones, as well as continued employment with Eaton. The incentives will be paid over three years, starting in 2026 and concluding in 2028. As of March 31, 2026, the Company expects to pay $50 million of employee incentives based on the estimated probability of the milestones being achieved. Compensation expense will be recognized over the requisite service period. During the first quarter of 2026, compensation expense of $11 million was included in Selling and administrative expense on the Consolidated Statements of Income.
Investment in SPAN
On January 15, 2026, Eaton invested $75 million in SPAN for a stake of approximately 7 percent. SPAN is a manufacturer of smart panel and power controls technology to further enable affordable home electrification at scale. Eaton accounts for this nonmarketable investment at cost, less impairment, adjusted for observable price changes. The investment is included in Other assets on the Consolidated Balance Sheets.
Acquisition of Ultra PCS Limited
On January 23, 2026, Eaton acquired Ultra PCS Limited (Ultra PCS) for $1.53 billion, net of cash acquired. Ultra PCS is headquartered in the U.K. with operations in the U.K. and the U.S. Ultra PCS produces electronic controls, sensing, stores ejection and data processing solutions, enabling mission success for global aerospace customers in the air and on the ground. Ultra PCS is reported within the Aerospace business segment.
The acquisition of Ultra PCS has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date. These preliminary estimates will continue to be revised during the measurement period as third-party valuations are received and finalized, further information becomes available and additional analyses are performed. These differences could have a material impact on Eaton's preliminary purchase price allocation. | | | | | | | | | | | | |
| (In millions) | | | | | | January 23, 2026 |
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| Accounts receivable | | | | | | $ | 38 | |
| Inventory | | | | | | 65 | |
| Prepaid expenses and other current assets | | | | | | 26 | |
| Property, plant and equipment | | | | | | 21 | |
| Other intangible assets | | | | | | 798 | |
| Other assets | | | | | | 4 | |
| Accounts payable | | | | | | (13) | |
| Other current liabilities | | | | | | (77) | |
| Other noncurrent liabilities | | | | | | (170) | |
| Total identifiable net assets | | | | | | 692 | |
| Goodwill | | | | | | 837 | |
| Total consideration, net of cash received | | | | | | $ | 1,529 | |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Ultra PCS. As a result of the acquisition, goodwill of $99 million recognized in the United States is expected to be deductible for tax purposes. Other intangible assets of $798 million are expected to include customer relationships, technology and backlog. Given the timing of the acquisition, Eaton utilized a benchmarking approach based on similar acquisitions to determine the preliminary fair values for intangible assets. See Note 6 for additional information about goodwill.
The Company incurred $17 million of acquisition related transaction costs during the first quarter of 2026 for Ultra PCS that were included in Selling and administrative expense on the Consolidated Statements of Income.
Eaton's 2026 condensed consolidated financial statements include Ultra PCS results of operations, including segment operating profit of $13 million on sales of $48 million, from the date of acquisition through March 31, 2026.
Acquisition of Boyd Thermal
On March 12, 2026, Eaton acquired Boyd Thermal for $9.55 billion, net of cash acquired. Boyd Thermal is 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 6,000 people with manufacturing sites across North America, Asia, and Europe. Boyd Thermal is reported within the Electrical Global business segment.
The acquisition of Boyd Thermal has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date. These preliminary estimates will continue to be revised during the measurement period as third-party valuations are received and finalized, further information becomes available and additional analyses are performed. These differences could have a material impact on Eaton's preliminary purchase price allocation. | | | | | | | | | | | | |
| (In millions) | | | | | | March 12, 2026 |
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| Accounts receivable | | | | | | $ | 365 | |
| Inventory | | | | | | 238 | |
| Prepaid expenses and other current assets | | | | | | 18 | |
| Property, plant and equipment | | | | | | 190 | |
| Other intangible assets | | | | | | 5,587 | |
| Other assets | | | | | | 43 | |
| Accounts payable | | | | | | (307) | |
| Other current liabilities | | | | | | (47) | |
| Other noncurrent liabilities | | | | | | (1,439) | |
| Total identifiable net assets | | | | | | 4,648 | |
| Goodwill | | | | | | 4,901 | |
| Total consideration, net of cash received | | | | | | $ | 9,549 | |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Boyd Thermal. Goodwill recognized as a result of the acquisition is not expected to be deductible for tax purposes. Other intangible assets of $5,587 million are expected to include customer relationships, technology and backlog. Given the timing of the acquisition, Eaton utilized a benchmarking approach based on similar acquisitions to determine the preliminary fair values for intangible assets. See Note 6 for additional information about goodwill.
The Company incurred $35 million of acquisition related transaction costs during the first quarter of 2026 for Boyd Thermal that were included in Selling and administrative expense on the Consolidated Statements of Income.
Eaton's 2026 condensed consolidated financial statements include Boyd Thermal results of operations, including segment operating profit of $24 million on sales of $92 million, from the date of acquisition through March 31, 2026.
Spin-off of Mobility business
On January 26, 2026, Eaton announced its intention to pursue a spin-off of its Mobility business, which consists of the Mobility business segment, 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.
Note 3. REVENUE RECOGNITION
Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to our customers. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Sales are measured at the amount of consideration the Company expects to be paid in exchange for these products or services.
The following table provides disaggregated sales by lines of businesses, geographic destination, market channel or end market, as applicable, for the Company's business segments:
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| Three months ended
March 31 | | |
| (In millions) | 2026 | | 2025 | | | | | | |
| Electrical Americas | | | | | | | | | |
| Products | $ | 1,020 | | | $ | 743 | | | | | | | |
| Systems | 2,580 | | | 2,267 | | | | | | | |
| Total | $ | 3,600 | | | $ | 3,010 | | | | | | | |
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| Electrical Global | | | | | | | | | |
| Products | $ | 1,056 | | | $ | 938 | | | | | | | |
| Systems | 889 | | | 672 | | | | | | | |
| Total | $ | 1,945 | | | $ | 1,610 | | | | | | | |
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| Aerospace | | | | | | | | | |
| Original Equipment Manufacturers | $ | 408 | | | $ | 386 | | | | | | | |
| Aftermarket | 446 | | | 350 | | | | | | | |
| Industrial and Other | 285 | | | 242 | | | | | | | |
| Total | $ | 1,139 | | | $ | 979 | | | | | | | |
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| Mobility | | | | | | | | | |
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| Vehicle | $ | 614 | | | $ | 617 | | | | | | | |
| eMobility | 153 | | | 162 | | | | | | | |
| Total | $ | 766 | | | $ | 779 | | | | | | | |
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| Total net sales | $ | 7,451 | | | $ | 6,377 | | | | | | | |
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (revenue recognized exceeds amount billed to the customer), and deferred revenue (advance payments and billings in excess of revenue recognized). Accounts receivable from customers were $5,709 million and $4,682 million at March 31, 2026 and December 31, 2025, respectively. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. These assets and liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. Unbilled receivables were $933 million and $759 million at March 31, 2026 and December 31, 2025, respectively, and are recorded in Prepaid expenses and other current assets. The increase in unbilled receivables reflects higher revenue recognized and not yet billed from increased business activity in 2026, higher revenue recognized over time in 2026, and unbilled receivables associated with the Ultra PCS acquisition.
Changes in the deferred revenue liabilities are as follows:
| | | | | |
| (In millions) | Deferred Revenue |
Balance at January 1, 2026 | $ | 923 | |
| Customer deposits and billings | 1,233 | |
| Revenue recognized in the period | (1,088) | |
| Deferred revenue from business acquisitions | 51 | |
| Translation | (6) | |
| |
Balance at March 31, 2026 | $ | 1,113 | |
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| (In millions) | Deferred Revenue |
Balance at January 1, 2025 | $ | 618 | |
| Customer deposits and billings | 853 | |
| Revenue recognized in the period | (813) | |
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| Translation | 7 | |
Balance at March 31, 2025 | $ | 665 | |
Deferred revenue liabilities of $1,088 million and $899 million as of March 31, 2026 and December 31, 2025, respectively, were included in Other current liabilities on the Consolidated Balance Sheets with the remaining balance presented in Other noncurrent liabilities.
A significant portion of open orders placed with Eaton are by customers of electrical products and electrical system and services, original equipment manufacturers or distributors. These open orders are not considered firm as they have been historically subject to releases by customers. In measuring backlog of unsatisfied or partially satisfied obligations, only the amount of orders to which customers are firmly committed are included. Using this criterion, total backlog at March 31, 2026 was approximately $22.8 billion. At March 31, 2026, approximately 68% of this backlog is targeted for delivery to customers in the next twelve months and the rest thereafter.
Note 4. CREDIT LOSSES FOR RECEIVABLES
Receivables are exposed to credit risk based on the customers’ ability to pay which is influenced by, among other factors, their financial liquidity position. Eaton’s receivables are generally short-term in nature with a majority outstanding less than 90 days.
Eaton performs ongoing credit evaluation of its customers and maintains sufficient allowances for potential credit losses. The Company evaluates the collectability of its receivables based on the length of time the receivable is past due, and any anticipated future write-off based on historic experience adjusted for current market conditions. The Company's global credit department performs the credit evaluation and monitoring process to estimate and manage credit risk. The process includes an evaluation of credit losses for both the overall segment receivable and specific customer balances. The process also includes review of customer financial information and credit ratings, approval and monitoring of customer credit limits, and an assessment of current market conditions. The Company may also require prepayment from customers to mitigate credit risk. Receivable balances are written off against an allowance for credit losses after a final determination of collectability has been made.
Accounts receivable are net of an allowance for credit losses of $58 million and $57 million at March 31, 2026 and December 31, 2025, respectively. The change in the allowance for credit losses includes expense and net write-offs, none of which are significant.
Note 5. INVENTORY
Inventory is carried at lower of cost or net realizable value using the first-in, first-out (FIFO) method. The components of inventory are as follows:
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| (In millions) | March 31, 2026 | | December 31, 2025 |
| Raw materials | $ | 1,932 | | | $ | 1,726 | |
| Work-in-process | 1,262 | | | 1,034 | |
| Finished goods | 1,951 | | | 1,961 | |
| Total inventory | $ | 5,146 | | | $ | 4,721 | |
Note 6. GOODWILL
Changes in the carrying amount of goodwill by business segment are as follows:
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| (In millions) | January 1, 2026 | | Additions | | | | | | Translation | | March 31, 2026 |
| Electrical Americas | $ | 8,010 | | | $ | 1 | | | | | | | $ | (3) | | | $ | 8,008 | |
| Electrical Global | 4,156 | | | 4,901 | | | | | | | (57) | | | 9,001 | |
| Aerospace | 2,977 | | | 837 | | | | | | | (46) | | | 3,768 | |
| Mobility | 626 | | | — | | | | | | | (1) | | | 625 | |
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| Total | $ | 15,769 | | | $ | 5,739 | | | | | | | $ | (106) | | | $ | 21,402 | |
During the first quarter of 2026, Eaton re-segmented certain business segments due to a reorganization of the Company's businesses. The new segment is Mobility, which consists of the legacy Vehicle and eMobility segments. The Company's reporting units are equivalent to the business segments, except for the Aerospace segment which continues to have two reporting units.
As a result of the re-segmentation, the goodwill of the legacy Vehicle and eMobility reporting units was combined and assigned to the new Mobility reporting unit. The re-segmentation did not result in a reallocation of goodwill using a relative fair value methodology, as the re-segmentation resulted in a combination of previously existing reporting units and did not change the composition of other reporting units.
The 2026 additions to goodwill relate primarily to the anticipated synergies of acquiring Boyd Thermal and Ultra PCS. The allocation of the purchase price from the Resilient, Ultra PCS and Boyd Thermal acquisitions are preliminary and will be completed during the measurement period.
Note 7. SUPPLY CHAIN FINANCE PROGRAM
The Company negotiates payment terms directly with its suppliers for the purchase of goods and services. In addition, 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. If a supplier elects to participate in the SCF program, the supplier decides which invoices are sold to the financial institution and the Company has no economic interest in a supplier’s decision to sell an invoice. 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. The amounts due to the financial institution for suppliers that participate in the SCF program are included in Accounts payable on the Consolidated Balance Sheets, and the associated payments are included in operating activities on the Condensed Consolidated Statements of Cash Flows.
The changes in SCF obligations are as follows:
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| (In millions) | SCF Obligations | | |
Balance at January 1, 2026 | $ | 543 | | | |
| Invoices confirmed during the period | 567 | | | |
| Invoices paid during the period | (480) | | | |
| Translation | (1) | | | |
Balance at March 31, 2026 | $ | 629 | | | |
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| (In millions) | SCF Obligations | | |
Balance at January 1, 2025 | $ | 398 | | | |
| Invoices confirmed during the period | 390 | | | |
| Invoices paid during the period | (365) | | | |
| Translation | 1 | | | |
Balance at March 31, 2025 | $ | 424 | | | |
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Note 8. DEBT
On February 6, 2026, Eaton Corporation, 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 facility’s maturity date remains unchanged at September 27, 2030. The revolving credit facility 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 revolving credit facility at March 31, 2026. Also on February 6, 2026, the Company increased its commercial paper program from $3,000 million to $4,000 million. The Company maintains access to the commercial paper markets through its $4,000 million commercial paper program, of which $2,497 million was outstanding on March 31, 2026.
On March 6, 2026, Eaton Corporation, a subsidiary of Eaton, issued notes (2026 U.S. Notes) with an aggregate face amount of $8,500 million. The 2026 U.S. Notes are comprised of six tranches: 3.850% notes due 2028 in the amount of $1,500 million; 3.950% notes due 2029 in the amount of $1,500 million; 4.200% notes due 2031 in the amount of $1,500 million; 4.500% notes due 2033 in the amount of $1,000 million; 4.800% notes due 2036 in the amount of $2,000 million; and 5.450% notes due 2056 in the amount of $1,000 million. Interest is payable semi-annually. The issuer received proceeds totaling $8,428 million from the 2026 U.S. Notes issuance, net of financing costs and discounts. The 2026 U.S. Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The U.S. 2026 Notes contain customary optional redemption and par call provisions. The U.S. 2026 Notes also contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2026 U.S. 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 respective terms of the 2026 U.S. Notes. The 2026 U.S. Notes are subject to customary non-financial covenants.
On March 10, 2026, Eaton Capital Unlimited Company, a subsidiary of Eaton, issued Euro denominated notes (2026 Euro Notes) with an aggregate face amount of €1,200 million ($1,390 million). The 2026 Euro Notes are comprised of two tranches of €600 million each, which mature in 2034 and 2038, with interest payable annually at a respective rate of 3.550% and 4.000% per annum. The issuer received proceeds totaling €1,191 million ($1,380 million) from the 2026 Euro Notes issuance, net of financing costs and discounts. The 2026 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The 2026 Euro Notes contain customary optional redemption and par call provisions. The 2026 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 2026 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 respective terms of the 2026 Euro Notes. The 2026 Euro Notes are subject to customary non-financial covenants.
On March 6, 2026, Eaton Corporation, a subsidiary of Eaton, terminated the $8,000 million senior unsecured delayed-draw term loan facility (Term Credit Agreement) entered into on February 6, 2026. No loans were outstanding as of the date of termination and the Company incurred no fees or penalties in connection with the termination. The Term Credit Agreement was terminated in connection with the issuance of the 2026 U.S. Notes and 2026 Euro Notes.
Note 9. RETIREMENT BENEFITS PLANS
The components of retirement benefits expense (income) are as follows:
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pension benefit expense | | Non-United States pension benefit expense | | Other postretirement
benefits expense (income) |
| Three months ended March 31 | | |
| (In millions) | 2026 | | 2025 | | | | 2026 | | 2025 | | | | 2026 | | 2025 | | |
| Service cost | $ | 1 | | | $ | 4 | | | | | $ | 13 | | | $ | 11 | | | | | $ | — | | | $ | — | | | |
| Interest cost | 30 | | | 34 | | | | | 23 | | | 21 | | | | | 2 | | | 2 | | | |
| Expected return on plan assets | (48) | | | (48) | | | | | (33) | | | (31) | | | | | — | | | — | | | |
| Amortization | 6 | | | 4 | | | | | 5 | | | 4 | | | | | (2) | | | (3) | | | |
| (11) | | | (6) | | | | | 8 | | | 5 | | | | | — | | | (1) | | | |
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| Settlements | 12 | | | 9 | | | | | 1 | | | 2 | | | | | — | | | — | | | |
| Total expense (income) | $ | 1 | | | $ | 3 | | | | | $ | 9 | | | $ | 7 | | | | | $ | — | | | $ | (1) | | | |
The components of retirement benefits expense (income) other than service costs are included in Other income - net.
During 2020, the Company announced it was freezing its United States pension plans for its non-union employees. The freeze was effective January 1, 2021 for non-union U.S. employees whose retirement benefit was determined under a cash balance formula and was effective January 1, 2026 for non-union U.S. employees whose retirement benefit is determined under a final average pay formula.
Note 10. LEGAL CONTINGENCIES
Eaton is subject to a broad range of claims, administrative proceedings, and legal proceedings, including, but not limited to, claims for punitive damages, penalties, and interest, in a variety of matters, including, but not limited to, contract, indemnity, tax, patent infringement, intellectual property, personal injury, commercial, warranty, product liability, environmental, antitrust and trade regulation, class action, and labor and employment matters. Eaton is also subject to legal claims from historic products which may have contained asbestos. Insurance may cover some of the costs associated with claims and proceedings involving Eaton. Although it is not possible to predict with certainty the outcome or cost of these matters, the Company believes they will not have a material adverse effect on the condensed consolidated financial statements.
Note 11. INCOME TAXES
The effective income tax rate for the first quarter of 2026 was expense of 21.6% compared to expense of 18.0% for the first quarter of 2025. The increase in the effective tax rate in the first quarter of 2026 was primarily due to greater levels of income in higher tax jurisdictions and the fact that the effective tax rate for the first quarter of 2025 included a reduction in the amount of foreign unrecognized tax benefits.
Note 12. EATON SHAREHOLDERS' EQUITY
The changes in Shareholders’ equity are as follows:
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| Ordinary shares | | Capital in excess of par value | | Retained earnings | | Accumulated other comprehensive loss | | Shares held in trust | | Total Eaton shareholders' equity | | Noncontrolling interests | | Total equity |
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| (In millions) | Shares | | Dollars | | | | | | | |
Balance at January 1, 2026 | 387.9 | | | $ | 4 | | | $ | 12,837 | | | $ | 10,702 | | | $ | (4,118) | | | $ | — | | | $ | 19,425 | | | $ | 44 | | | $ | 19,469 | |
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| Net income | — | | | — | | | — | | | 866 | | | — | | | — | | | 866 | | | 2 | | | 868 | |
| Other comprehensive loss, net of tax | | | | | | | | | | | | (118) | | | | | | (118) | | | | | | (118) | |
| Cash dividends paid and accrued | — | | | — | | | — | | | (431) | | | — | | | — | | | (431) | | | (1) | | | (432) | |
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Issuance of shares under equity-based
compensation plans | 0.4 | | | — | | | (21) | | | — | | | — | | | (1) | | | (21) | | | — | | | (21) | |
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Changes in noncontrolling interest of
consolidated subsidiaries - net | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
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Balance at March 31, 2026 | 388.3 | | | $ | 4 | | | $ | 12,817 | | | $ | 11,137 | | | $ | (4,235) | | | $ | (1) | | | $ | 19,721 | | | $ | 44 | | | $ | 19,765 | |
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| Ordinary shares | | Capital in excess of par value | | Retained earnings | | Accumulated other comprehensive loss | | Shares held in trust | | Total Eaton shareholders' equity | | Noncontrolling interests | | Total equity |
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| (In millions) | Shares | | Dollars | | | | | | | |
Balance at January 1, 2025 | 392.9 | | | $ | 4 | | | $ | 12,731 | | | $ | 10,096 | | | $ | (4,342) | | | $ | (1) | | | $ | 18,488 | | | $ | 43 | | | $ | 18,531 | |
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| Net income | — | | | — | | | — | | | 964 | | | — | | | — | | | 964 | | | 1 | | | 965 | |
| Other comprehensive income, net of tax | | | | | | | | | | | | 92 | | | | | | 92 | | | | | | 92 | |
| Cash dividends paid and accrued | — | | | — | | | — | | | (411) | | | — | | | — | | | (411) | | | (2) | | | (413) | |
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Issuance of shares under equity-based
compensation plans | 0.4 | | | — | | | (19) | | | — | | | — | | | — | | | (19) | | | — | | | (19) | |
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Changes in noncontrolling interest of
consolidated subsidiaries - net | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
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| Repurchase of shares | (1.9) | | | — | | | — | | | (608) | | | — | | | — | | | (608) | | | — | | | (608) | |
Balance at March 31, 2025 | 391.3 | | | $ | 4 | | | $ | 12,711 | | | $ | 10,041 | | | $ | (4,250) | | | $ | (1) | | | $ | 18,506 | | | $ | 41 | | | $ | 18,547 | |
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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 the three months ended March 31, 2026, no ordinary shares were repurchased. During the three months ended March 31, 2025, 1.9 million ordinary shares were repurchased under the 2025 Program and the 2022 Program in the open market at a total cost of $608 million.
The changes in Accumulated other comprehensive loss are as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Currency translation and related hedging instruments | | Pensions and other postretirement benefits | | Cash flow
hedges | | Total |
Balance at January 1, 2026 | $ | (3,159) | | | $ | (1,062) | | | $ | 102 | | | $ | (4,118) | |
Other comprehensive income (loss) before
reclassifications | (95) | | | 9 | | | (42) | | | (128) | |
Amounts reclassified from Accumulated other
comprehensive loss (income) | (4) | | | 21 | | | (7) | | | 10 | |
Net current-period Other comprehensive
income (loss) | (99) | | | 30 | | | (49) | | | (118) | |
Balance at March 31, 2026 | $ | (3,257) | | | $ | (1,032) | | | $ | 53 | | | $ | (4,235) | |
The reclassifications out of Accumulated other comprehensive loss are as follows:
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| (In millions) | | Three months ended March 31, 2026 | | Consolidated Statements
of Income classification |
Gains and (losses) on net investment hedges (amount excluded
from effectiveness testing) | | | | |
| Currency exchange contracts | | $ | 4 | | | Interest expense - net |
| Tax expense | | — | | | |
| Total, net of tax | | 4 | | | |
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Amortization of defined benefits pensions and other
postretirement benefits items | | | | |
| Actuarial loss and prior service cost | | (22) | | 1 | |
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| Tax benefit | | 1 | | | |
| Total, net of tax | | (21) | | | |
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| Gains and (losses) on cash flow hedges | | | | |
| Floating-to-fixed interest rate swaps | | 3 | | | Interest expense - net |
| Currency exchange contracts | | 6 | | | Net sales and Cost of products sold |
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| Tax expense | | (2) | | | |
| Total, net of tax | | 7 | | | |
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| Total reclassifications for the period | | $ | (10) | | | |
1 These components of Accumulated other comprehensive loss are included in the computation of net periodic benefit cost. See Note 9 for additional information about pension and other postretirement benefits items.
Net Income Per Share Attributable to Eaton Ordinary Shareholders
A summary of the calculation of net income per share attributable to Eaton ordinary shareholders is as follows: | | | | | | | | | | | | | | | | | |
| Three months ended
March 31 | | | | |
| (In millions except for per share data) | 2026 | | 2025 | | | | | | |
| Net income attributable to Eaton ordinary shareholders | $ | 866 | | | $ | 964 | | | | | | | |
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| Weighted-average number of ordinary shares outstanding - diluted | 389.2 | | | 393.6 | | | | | | | |
| Less dilutive effect of equity-based compensation | 1.0 | | | 1.4 | | | | | | | |
| Weighted-average number of ordinary shares outstanding - basic | 388.2 | | | 392.2 | | | | | | | |
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| Net income per share attributable to Eaton ordinary shareholders | | | | | | | | | |
| Diluted | $ | 2.22 | | | $ | 2.45 | | | | | | | |
| Basic | 2.23 | | | 2.46 | | | | | | | |
For the first quarter of 2026 and 2025, all stock options were included in the calculation of diluted net income per share attributable to Eaton ordinary shareholders because they were all dilutive.
Note 13. FAIR VALUE MEASUREMENTS
Fair value is measured based on an exit price, representing the amount that would be received to sell an asset or paid to satisfy a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy is established, which categorizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
A summary of financial instruments and contingent consideration recognized at fair value, and the fair value measurements used, is as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Total | | Quoted prices in active markets for identical assets
(Level 1) | | Other observable inputs
(Level 2) | | Unobservable inputs
(Level 3) |
| March 31, 2026 | | | | | | | |
| Cash | $ | 565 | | | $ | 565 | | | $ | — | | | $ | — | |
| Short-term investments | 186 | | | 186 | | | — | | | — | |
Derivative contract assets | 19 | | | — | | | 19 | | | — | |
Derivative contract liabilities | (61) | | | — | | | (61) | | | — | |
| Contingent future payments from acquisition of Resilient Power Systems Inc. (Note 2) | (32) | | | — | | | — | | | (32) | |
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| December 31, 2025 | | | | | | | |
| Cash | $ | 622 | | | $ | 622 | | | $ | — | | | $ | — | |
| Short-term investments | 181 | | | 181 | | | — | | | — | |
Derivative contract assets | 26 | | | — | | | 26 | | | — | |
Derivative contract liabilities | (64) | | | — | | | (64) | | | — | |
| Contingent future payments from acquisition of Resilient Power Systems Inc. (Note 2) | (31) | | | — | | | — | | | (31) | |
Eaton values its financial instruments using an industry standard market approach, in which prices and other relevant information is generated by market transactions involving identical or comparable assets or liabilities.
Other Fair Value Measurements
Long-term debt and the current portion of long-term debt had a carrying value of $18,619 million and fair value of $18,065 million at March 31, 2026 compared to $9,894 million and $9,587 million, respectively, at December 31, 2025. The fair value of Eaton's debt instruments was estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities and is considered a Level 2 fair value measurement.
Note 14. RESTRUCTURING CHARGES
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 $374 million. This restructuring program is expected to be completed in 2026 and is expected to incur additional expenses related to workforce reductions of $78 million and plant closing and other costs of $24 million, resulting in total estimated charges of $475 million for the entire program.
A summary of restructuring program charges is as follows:
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| Three months ended
March 31 | | | | |
| (In millions except for per share data) | 2026 | | 2025 | | | | | | |
| Workforce reductions | $ | 24 | | | $ | 13 | | | | | | | |
| Plant closing and other | 14 | | | 6 | | | | | | | |
| Total before income taxes | 39 | | | 18 | | | | | | | |
| Income tax benefit | 8 | | | 4 | | | | | | | |
| Total after income taxes | $ | 30 | | | $ | 14 | | | | | | | |
| Per ordinary share - diluted | $ | 0.08 | | | $ | 0.04 | | | | | | | |
Restructuring program charges (income) related to the following business segments:
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| Three months ended
March 31 | | | | | | Restructuring program charges incurred from inception through |
| (In millions) | 2026 | | 2025 | | | | | | | | March 31, 2026 |
| Electrical Americas | $ | 1 | | | $ | 1 | | | | | | | | | $ | 28 | |
| Electrical Global | 31 | | | 14 | | | | | | | | | 182 | |
| Aerospace | (1) | | | — | | | | | | | | | 19 | |
| Mobility | 5 | | | 3 | | | | | | | | | 100 | |
| Corporate | 2 | | | 1 | | | | | | | | | 45 | |
| Total | $ | 39 | | | $ | 18 | | | | | | | | | $ | 374 | |
A summary of liabilities related to workforce reductions, plant closing, and other associated costs is as follows:
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| (In millions) | Workforce reductions | | Plant closing and other | | Total |
Balance at January 1, 2024 | $ | 35 | | | $ | 6 | | | $ | 41 | |
| Liability recognized, net | 120 | | | 83 | | | 202 | |
| Payments, utilization and translation | (59) | | | (81) | | | (141) | |
Balance at December 31, 2024 | 96 | | | 7 | | | 103 | |
Liability recognized, net1 | 81 | | | 52 | | | 133 | |
| Payments, utilization and translation | (67) | | | (51) | | | (118) | |
Balance at December 31, 2025 | 109 | | | 8 | | | 118 | |
| Liability recognized, net | 24 | | | 14 | | | 39 | |
| Payments, utilization and translation | (18) | | | (14) | | | (33) | |
Balance at March 31, 2026 | $ | 115 | | | $ | 8 | | | $ | 123 | |
1The restructuring program liability was adjusted by $12 million in the fourth quarter of 2025 primarily related to true-ups for completed workforce reductions in the Mobility business segment.
These restructuring program charges (income) were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income - net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items. See Note 15 for additional information about business segments.
Note 15. BUSINESS SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance. The Company's chief operating decision maker is the chief executive officer. Operating profit includes the operating profit from intersegment sales. For additional information regarding Eaton's business segments, see Note 18 to the consolidated financial statements contained in the 2025 Form 10-K.
The chief operating decision maker uses segment operating profit as an input to assess segment performance and determine appropriate resource allocations, including capital, financial, and employee resources. Segment operating profit results are regularly evaluated versus annual profit plan, forecast and/or prior year.
Other segment items are primarily comprised of Cost of products sold, Selling and administrative expense, Research and development expense, depreciation of property, plant and equipment, and certain items included in Other income – net on the Consolidated Statements of Income. The Company's chief operating decision maker manages these items on a consolidated basis.
During the first quarter of 2026, Eaton re-segmented certain business segments due to a reorganization of the Company's businesses. The new segment is Mobility, which includes the legacy Vehicle and eMobility segments. Historical segment information has been recast to reflect this change. Eaton's segments as of March 31, 2026 are as follows:
Electrical Americas and Electrical Global
The Electrical Americas segment consists of electrical components, industrial components, power distribution and assemblies, residential products, single phase power quality and connectivity, three phase power quality, wiring devices, circuit protection, utility power distribution, power reliability equipment, and services that are primarily produced and sold in North and South America. The Electrical Global segment consists of electrical components, industrial components, power distribution and assemblies, single phase and three phase power quality, and services that are primarily produced and sold outside of North and South America; as well as hazardous duty electrical equipment, cooling products, emergency lighting, fire detection, intrinsically safe explosion-proof instrumentation, and structural support systems that are produced and sold globally. The principal markets for these segments are commercial & institutional, data centers and distributed IT, industrial, utilities, residential, and machinery OEMs. These products are used wherever there is a demand for electrical power in data centers, utilities, industrial and energy facilities, commercial buildings, apartment and office buildings, hospitals, factories, and residencies. The segments share certain common global customers, but a large number of customers are located regionally. Sales are made through distributors, resellers, and manufacturers’ representatives, as well as directly to original equipment manufacturers, utilities, and certain other end users.
Aerospace
The Aerospace segment is a leading global supplier of aerospace fuel, hydraulics, and pneumatic systems for commercial and military use, as well as filtration systems for industrial applications. Products include hydraulic power generation systems for aerospace applications including pumps, motors, hydraulic power units, hose and fittings, electro-hydraulic pumps; controls and sensing products including valves, cylinders, electronic controls, electromechanical actuators, sensors, aircraft flap and slat systems and nose wheel steering systems; fluid conveyance products, including hose, thermoplastic tubing, fittings, adapters, couplings, sealing and ducting; fuel systems including air-to-air refueling systems, fuel pumps, fuel inerting products, sensors, valves, adapters and regulators; mission systems including oxygen generation system, payload carriages, and thermal management products; high performance interconnect products including wiring connectors and cables. The Aerospace segment also includes filtration systems including hydraulic filters, bag filters, strainers and cartridges; and golf grips. The principal markets for the Aerospace segment are manufacturers of commercial and military aircraft and related after-market customers, as well as industrial applications. These manufacturers and other customers operate globally. Products are sold and serviced through a variety of channels.
Mobility
The Mobility segment designs, manufactures, markets, and supplies a broad portfolio of mechanical, electrical, and electronic systems that improve emissions, fuel economy, power management, performance, and safety across on‑road and off‑road vehicles. The Mobility segment serves global OEMs and aftermarket customers with solutions spanning internal combustion, hybrid, and electrified powertrains, including transmissions and transmission components, clutches, differentials, hybrid systems, engine valves, fuel and vapor components, as well as high‑voltage inverters and converters, power electronics, circuit protection, vehicle controls, and power distribution systems. The principal markets for the Mobility segment are OEM and aftermarket customers of heavy-, medium-, and light‑duty trucks, SUVs, CUVs, passenger cars, construction, agricultural, material handling, and mining equipment.
Business Segment Information | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| (In millions) | | | | | 2026 | | 2025 |
| Net sales | | | | | | | |
| Electrical Americas | | | | | $ | 3,600 | | | $ | 3,010 | |
| Electrical Global | | | | | 1,945 | | | 1,610 | |
| Aerospace | | | | | 1,139 | | | 979 | |
| Mobility | | | | | 766 | | | 779 | |
| Total net sales | | | | | $ | 7,451 | | | $ | 6,377 | |
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| Other segment items | | | | | | | |
| Electrical Americas | | | | | $ | 2,678 | | | $ | 2,106 | |
| Electrical Global | | | | | 1,572 | | | 1,310 | |
| Aerospace | | | | | 835 | | | 753 | |
| Mobility | | | | | 677 | | | 688 | |
| Total other segment items | | | | | $ | 5,761 | | | $ | 4,855 | |
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| Segment operating profit | | | | | | | |
| Electrical Americas | | | | | $ | 922 | | | $ | 904 | |
| Electrical Global | | | | | 373 | | | 300 | |
| Aerospace | | | | | 304 | | | 226 | |
| Mobility | | | | | 89 | | | 91 | |
| Total segment operating profit | | | | | 1,690 | | | 1,522 | |
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| Corporate | | | | | | | |
| Intangible asset amortization expense | | | | | (140) | | | (106) | |
| Interest expense - net | | | | | (106) | | | (33) | |
| Pension and other postretirement benefits income | | | | | 4 | | | 5 | |
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| Restructuring program charges | | | | | (39) | | | (18) | |
| Other expense - net | | | | | (302) | | | (193) | |
| Income before income taxes | | | | | 1,107 | | | 1,177 | |
| Income tax expense | | | | | 240 | | | 212 | |
| Net income | | | | | 868 | | | 965 | |
| Less net income for noncontrolling interests | | | | | (2) | | | (1) | |
| Net income attributable to Eaton ordinary shareholders | | | | | $ | 866 | | | $ | 964 | |
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| (In millions) | March 31, 2026 | | December 31, 2025 | | |
| Identifiable assets | | | | | |
| Electrical Americas | $ | 6,863 | | | $ | 6,283 | | | |
| Electrical Global | 4,996 | | | 3,852 | | | |
| Aerospace | 3,033 | | | 2,684 | | | |
| Mobility | 2,710 | | | 2,708 | | | |
| Total identifiable assets | 17,601 | | | 15,526 | | | |
| Goodwill | 21,402 | | | 15,769 | | | |
| Other intangible assets | 11,259 | | | 5,054 | | | |
| Corporate | 4,823 | | | 4,902 | | | |
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| Total assets | $ | 55,085 | | | $ | 41,251 | | | |
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| Three months ended March 31 | | |
| (In millions) | 2026 | | 2025 | | | | |
| Capital expenditures for property, plant and equipment | | | | | | | |
| Electrical Americas | $ | 86 | | | $ | 57 | | | | | |
| Electrical Global | 57 | | | 40 | | | | | |
| Aerospace | 18 | | | 17 | | | | | |
| Mobility | 16 | | | 21 | | | | | |
| Total | 177 | | | 136 | | | | | |
| Corporate | 16 | | | 11 | | | | | |
| Total expenditures for property, plant and equipment | $ | 193 | | | $ | 147 | | | | | |
| | | | | | | |
| Three months ended March 31 | | |
| (In millions) | 2026 | | 2025 | | | | |
| Depreciation of property, plant and equipment | | | | | | | |
| Electrical Americas | $ | 37 | | | $ | 31 | | | | | |
| Electrical Global | 29 | | | 26 | | | | | |
| Aerospace | 20 | | | 18 | | | | | |
| Mobility | 28 | | | 31 | | | | | |
| Total | 113 | | | 105 | | | | | |
| Corporate | 9 | | | 10 | | | | | |
| Total depreciation of property, plant and equipment | $ | 122 | | | $ | 115 | | | | | |