Report date: July 28, 2026, before the market opens
Earnings call: 7:30 a.m. ET
Last close: $69.35 on July 27
Carrier enters Q2 with unusually strong momentum in commercial HVAC—particularly data-center cooling—while its residential and light-commercial businesses appear to be performing better than management originally feared.
The near-term numbers should be relatively well anchored. In early June, CEO David Gitlin said Carrier was comfortable with approximately $6 billion of revenue and $0.80 of adjusted EPS for Q2. The more important questions tomorrow will be:
My bias is that the report should be operationally constructive. However, the stock has already rerated substantially, making orders, margins and forward commentary more important than a small EPS beat.
| Metric | Current expectation |
|---|---|
| Q2 adjusted EPS | Management: ~$0.80; Street: ~$0.81 |
| Q2 revenue | Just below $6 billion |
| Q2 organic growth | Management previously indicated flat to down low single digits; Street around -2% |
| Adjusted operating margin | ~17% |
| Adjusted tax rate | ~24% |
| Free cash flow | A few hundred million dollars |
| FY26 revenue | ~$22 billion |
| FY26 organic growth | Flat to low single digits |
| FY26 adjusted operating profit | ~$3.4 billion |
| FY26 adjusted EPS | ~$2.80 |
| FY26 free cash flow | ~$2 billion |
| FY26 share repurchases | Management still expected ~$1.5 billion as of June |
At $69.35, Carrier is trading at approximately 24.8 times management’s $2.80 full-year adjusted EPS target. The shares are up about 31% year to date, up roughly 12% since the day before Q1 earnings, and about 9% below their June peak.
That valuation suggests investors are already assigning significant value to the data-center opportunity and an eventual recovery in short-cycle HVAC markets.
Carrier’s commercial HVAC business is now the primary growth engine.
In Q1:
The outlook became even more bullish at Carrier’s June 9 investor conference. Management said:
Orders and backlog: Another exceptional commercial HVAC order quarter would reinforce the thesis that Carrier is taking share rather than merely participating in a strong market.
2026 execution: The company is simultaneously designing, sourcing, producing and commissioning certain systems. A $1 billion second-half data-center ramp introduces manufacturing, engineering and customer-acceptance risk.
2027 capacity: Any quantified 2027 data-center revenue expectation would likely be the most important new disclosure in the report.
Margins: Management has said data centers are accretive to Carrier’s overall applied HVAC margins. Investors should look for evidence that expedited production and capacity investments are not consuming that benefit.
QuantumLeap and liquid cooling: Carrier is broadening its offering beyond chillers into coolant distribution units, controls, infrastructure-management software and integrated thermal systems. Updates on its 1.3-, 2.6- and 5-megawatt CDU platforms—and the share of orders that include multiple Carrier products—would help validate the systems strategy.
A strong data-center quarter would mean more than a high order number. The best outcome would combine large orders, rising backlog, higher 2027 capacity and stable-to-improving profitability.
Residential HVAC was Carrier’s largest Q1 headwind:
Carrier originally expected Q2 residential sales to decline around the mid-teens. By early June, management said results would be better than that, with potential upside for both Q2 and the full year.
There are several encouraging points:
April benefited from favorable weather and purchasing ahead of a price increase. Consequently, strong shipments do not automatically equal strong underlying sell-through.
The most useful data points will be:
A modest Q2 residential beat accompanied by continued low channel inventory would be more valuable than a larger shipment beat caused by inventory rebuilding.
Management’s Q2 framework called for:
Both residential and light commercial were subsequently running better than expected. Because these are among Carrier’s highest-margin businesses, better volume should produce favorable mix and absorption.
At the same time, there are offsets:
Carrier previously expected tariff pricing and incremental costs to be approximately neutral in the second half. Investors should determine whether that remains true after changes in U.S. Section 232 tariffs.
In April, Carrier expected roughly $400 million–$450 million of additional annual pricing, with approximately 75% tied to tariffs. By June, lower tariff rates allowed management to reduce its companywide pricing expectation from about 3% to approximately 2.5%.
A good report would show that Carrier can reduce customer pricing while still offsetting its revised cost exposure dollar for dollar.
Carrier’s European residential and light-commercial business showed signs of recovery in Q1:
By June, management described heat-pump orders in Germany, France and Italy as “extremely encouraging.” It suggested European residential sales could rise mid-single digits in Q2, better than the prior flat assumption.
The problem was profitability. Q1 Climate Solutions Europe margin fell to 6.9% due to lower commercial volume, promotions, warranty costs and under-absorption. Management’s Q2 framework was approximately 10% margin.
The bullish case requires Europe to progress from strong orders to better sales and margins. Heat-pump growth that merely offsets weak boilers without improving profitability would be less compelling.
China residential and light-commercial sales fell approximately 25% in Q1, while total China sales declined low teens. Management did not see a clear residential bottom.
Commercial HVAC is more encouraging, supported by data centers, semiconductor facilities, healthcare and electric-vehicle battery projects. Investors should therefore separate weak Chinese housing exposure from potential growth in applied HVAC.
Q1 sales were affected by regional conflict, and management reduced the full-year margin expectation for Climate Solutions Asia Pacific, Middle East & Africa. Carrier generated approximately $400 million of Middle East sales in 2025 and also receives income from regional joint ventures.
A normalization in project activity would be helpful, but management may remain cautious on timing.
Transportation’s Q1 organic sales rose 5%:
Container demand continued to exceed expectations into Q2, but North American truck and trailer remained soft. A good outcome would be better full-year revenue with no further deterioration in margin.
Carrier’s formal 2026 outlook is:
A simple reaffirmation would not be surprising. Management said in June that it felt good about both Q2 and the year, but Carrier also has several moving pieces:
The most constructive outcome may be a guidance reaffirmation paired with higher underlying volume expectations, more data-center investment and greater confidence in 2027. Conversely, an EPS increase driven mainly by a lower share count or tax rate would be lower quality.
Carrier appears positioned to meet or modestly exceed Q2 expectations. The company had good visibility to its approximately $6 billion revenue and $0.80 EPS framework in early June, while North American residential HVAC and European heat pumps were performing better than planned.
But tomorrow’s investment debate will not be decided by one or two cents of EPS. The stock’s rerating means investors need evidence that:
The highest-quality result would pair a clean Q2 beat with stronger commercial orders, disciplined channel inventory, healthy margins and a materially improved 2027 data-center setup.
Research reviewed: Carrier’s Q1 2026 earnings release, earnings-call transcript and Form 10-Q; its June 9, 2026 Wells Fargo conference remarks; recent company filings and news; and market data through July 27, 2026.