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ITW Reports Second Quarter 2025 Results

•Revenue of $4.1 billion, an increase of 1% with flat organic growth
•Operating margin of 26.3% as enterprise initiatives contributed 130 bps
•GAAP EPS of $2.58, a new Q2 record
•Raising full year 2025 GAAP EPS guidance by $0.10; narrowing the range to $10.35 to $10.55 per share

GLENVIEW, IL., July 30, 2025 - Illinois Tool Works Inc. (NYSE: ITW) today reported its second quarter 2025 results and updated guidance for full year 2025.

“The ITW team outpaced underlying end market growth and delivered solid financial performance in the second quarter, achieving EPS of $2.58, operating income of $1.1 billion, and operating margin of 26.3 percent, all second-quarter records. Our results are a direct outcome of the strength of the ITW Business Model, the quality of our diversified and resilient portfolio, and the unwavering dedication of our global ITW colleagues to serving our customers and executing our strategy with excellence,” said Christopher A. O’Herlihy, President and Chief Executive Officer.

“I am very encouraged by the meaningful strategic progress we made in the first half of the year, diligently executing our Next Phase growth priorities to make consistent above-market organic growth powered by Customer-Back Innovation a defining ITW strength. Looking ahead, we are raising our full year guidance, confident in our ability to successfully navigate an uncertain environment and deliver differentiated performance through 2025 and beyond.”

Second Quarter 2025 Results
Second quarter revenue of $4.1 billion increased by one percent as organic growth was essentially flat. Foreign currency translation impact increased revenue by one percent.

GAAP EPS of $2.58 increased two percent. Operating margin expanded 10 basis points to 26.3 percent as enterprise initiatives contributed 130 basis points. Operating cash flow was $550 million, and free cash flow was $449 million with a conversion of 59 percent to net income. During the quarter, the company repurchased $375 million of its own shares, and the effective tax rate was 24.4 percent.

2025 Guidance
ITW is raising its full year GAAP EPS guidance range of $10.15 to $10.55 per share by $0.10 or one percent at the midpoint to a narrower range of $10.35 to $10.55 per share. The company is projecting revenue growth of one to three percent and organic growth of flat to two percent based on current levels of demand adjusted for on-going pricing actions that are projected to offset tariff cost impacts and current foreign exchange rates. Operating margin is projected to be in the range of 26 to 27 percent as enterprise initiatives are expected to contribute 100 basis points or more. Free cash flow is expected to exceed 100 percent of net income, and the company plans to repurchase approximately $1.5 billion of its own shares. The projected effective tax rate is approximately 24 percent.

Non-GAAP Measures
This earnings release contains certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures is included in the attached supplemental reconciliation schedule. The estimated guidance of free cash flow to net income conversion rate is based on assumptions that are difficult to predict, and estimated guidance for the most directly comparable GAAP measure and a reconciliation of this forward-looking estimate to its most directly comparable GAAP estimate have been omitted due to the unreasonable efforts required in connection with such a reconciliation and the lack of reliable forward-looking cash flow information. For the same reasons, the company is unable to address the potential significance of the unavailable information, which could be material to future results.

Forward-looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements regarding the potential impact of tariffs, the Company’s projected pricing actions, the impact of enterprise initiatives, future financial and operating performance, free cash flow and free cash flow to net income conversion rate, organic and total revenue, operating and incremental margin, price/cost impact, statements regarding diluted earnings per share, after-tax return on invested capital, effective tax rates, exchange rates, expected timing and amount of share repurchases, end market economic and regulatory conditions, and the Company’s 2025 guidance. These statements are subject to certain risks, uncertainties, assumptions, and other factors, which could cause actual results to


differ materially from those anticipated. Important risks that could cause actual results to differ materially from the Company’s expectations include those that are detailed in ITW’s Form 10-K for 2024 and subsequent reports filed with the SEC.

About Illinois Tool Works
ITW (NYSE: ITW) is a Fortune 300 global multi-industrial manufacturing leader with revenue of $15.9 billion in 2024. The company’s seven industry-leading segments leverage the unique ITW Business Model to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required. ITW’s approximately 44,000 dedicated colleagues around the world thrive in the company’s decentralized and entrepreneurial culture. www.itw.com


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)

Three Months EndedSix Months Ended
June 30,June 30,
In millions except per share amounts2025202420252024
Operating Revenue$4,053 $4,027 $7,892 $8,000 
Cost of revenue2,271 2,262 4,432 4,407 
Selling, administrative, and research and development expenses693 686 1,399 1,362 
Amortization and impairment of intangible assets21 25 42 50 
Operating Income1,068 1,054 2,019 2,181 
Interest expense(74)(75)(142)(146)
Other income (expense)4 26 16 42 
Income Before Taxes998 1,005 1,893 2,077 
Income Taxes243 246 438 499 
Net Income$755 $759 $1,455 $1,578 
Net Income Per Share:
Basic
$2.58 $2.55 $4.97 $5.29 
Diluted
$2.58 $2.54 $4.95 $5.27 
Cash Dividends Per Share:
Paid
$1.50 $1.40 $3.00 $2.80 
Declared
$1.50 $1.40 $3.00 $2.80 
Shares of Common Stock Outstanding During the Period:
Average
292.3 297.6 292.9 298.3 
Average assuming dilution
292.9 298.5 293.7 299.3 



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION (UNAUDITED)

In millionsJune 30, 2025December 31, 2024
Assets  
Current Assets:  
Cash and equivalents$788 $948 
Trade receivables3,320 2,991 
Inventories1,710 1,605 
Prepaid expenses and other current assets416 312 
Total current assets6,234 5,856 
Net plant and equipment2,177 2,036 
Goodwill5,038 4,839 
Intangible assets558 592 
Deferred income taxes564 369 
Other assets1,477 1,375 
 $16,048 $15,067 
Liabilities and Stockholders' Equity  
Current Liabilities:  
Short-term debt$1,242 $1,555 
Accounts payable613 519 
Accrued expenses1,544 1,576 
Cash dividends payable437 441 
Income taxes payable96 217 
Total current liabilities3,932 4,308 
Noncurrent Liabilities:  
Long-term debt7,695 6,308 
Deferred income taxes144 119 
Other liabilities1,066 1,015 
Total noncurrent liabilities8,905 7,442 
Stockholders' Equity:  
Common stock6 6 
Additional paid-in-capital1,725 1,669 
Retained earnings29,471 28,893 
Common stock held in treasury(26,124)(25,375)
Accumulated other comprehensive income (loss)(1,868)(1,877)
Noncontrolling interest1 1 
Total stockholders' equity3,211 3,317 
$16,048 $15,067 



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)

Three Months Ended June 30, 2025
Dollars in millionsTotal RevenueOperating IncomeOperating Margin
Automotive OEM$845 $180 21.3 %
Food Equipment680 189 27.7 %
Test & Measurement and Electronics686 157 22.8 %
Welding479 159 33.1 %
Polymers & Fluids438 121 27.7 %
Construction Products473 145 30.8 %
Specialty Products455 148 32.6 %
Intersegment(3)— — %
Total Segments4,053 1,099 27.1 %
Unallocated— (31)— %
Total Company$4,053 $1,068 26.3 %
Six Months Ended June 30, 2025
Dollars in millionsTotal RevenueOperating IncomeOperating Margin
Automotive OEM$1,631 $331 20.3 %
Food Equipment1,307 355 27.1 %
Test & Measurement and Electronics1,338 296 22.1 %
Welding951 312 32.8 %
Polymers & Fluids867 235 27.1 %
Construction Products916 275 30.0 %
Specialty Products890 283 31.8 %
Intersegment(8)— — %
Total Segments7,892 2,087 26.4 %
Unallocated— (68)— %
Total Company$7,892 $2,019 25.6 %


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)

Q2 2025 vs. Q2 2024 Favorable/(Unfavorable)
Operating RevenueAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
Organic2.4 %0.8 %(0.7)%2.8 %(3.7)%(6.9)%0.3 %(0.4)%
Acquisitions/
Divestitures		— %— %— %— %— %— %— %— %
Translation1.4 %1.3 %1.9 %0.1 %0.3 %0.8 %0.8 %1.1 %
Operating Revenue3.8 %2.1 %1.2 %2.9 %(3.4)%(6.1)%1.1 %0.7 %
Q2 2025 vs. Q2 2024 Favorable/(Unfavorable)
Change in Operating MarginAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
Operating Leverage40 bps10 bps(20) bps40 bps(80) bps(150) bps—(10) bps
Changes in Variable Margin & OH Costs110 bps40 bps(50) bps(30) bps30 bps160 bps40 bps(10) bps
Total Organic150 bps50 bps(70) bps10 bps(50) bps10 bps40 bps(20) bps
Acquisitions/
Divestitures		————————
Restructuring/Other 40 bps  10 bps — 10 bps — 130 bps  30 bps  30 bps
Total Operating Margin Change190 bps60 bps(70) bps20 bps(50) bps140 bps70 bps10 bps
Total Operating Margin % *21.3%27.7%22.8%33.1%27.7%30.8%32.6%26.3%
* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 20 bps  30 bps  130 bps  10 bps  150 bps  10 bps  10 bps  60 bps **
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.05) on GAAP earnings per share for the second quarter of 2025.




ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)

H1 2025 vs. H1 2024 Favorable/(Unfavorable)
Operating RevenueAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
Organic0.6 %1.0 %(3.1)%1.4 %(1.1)%(7.2)%0.6 %(1.0)%
Acquisitions/
Divestitures		— %— %0.1 %— %— %— %— %— %
Translation(0.5)%(0.3)%0.4 %(0.4)%(1.0)%(0.4)%(0.5)%(0.3)%
Operating Revenue0.1 %0.7 %(2.6)%1.0 %(2.1)%(7.6)%0.1 %(1.3)%
H1 2025 vs. H1 2024 Favorable/(Unfavorable)
Change in Operating MarginAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
Operating Leverage10 bps20 bps(80) bps20 bps(20) bps(150) bps10 bps(20) bps
Changes in Variable Margin & OH Costs80 bps30 bps(10) bps(40) bps30 bps150 bps90 bps(150) bps
Total Organic90 bps50 bps(90) bps(20) bps10 bps—100 bps(170) bps
Acquisitions/
Divestitures		——(20) bps—————
Restructuring/Other (20) bps  10 bps  (20) bps  20 bps — 60 bps ——
Total Operating Margin Change70 bps60 bps(130) bps—10 bps60 bps100 bps(170) bps
Total Operating Margin % *20.3%27.1%22.1%32.8%27.1%30.0%31.8%25.6%
* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 30 bps  30 bps  140 bps  10 bps  150 bps  10 bps  20 bps  50 bps **
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.11) on GAAP earnings per share for the first half of 2025.


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)

AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
Three Months EndedSix Months Ended
June 30,June 30,
Dollars in millions2025202420252024
Numerator:
Net Income$755 $759 $1,455 $1,578 
Discrete tax benefit related to the first quarter 2025— — (21)— 
Interest expense, net of tax (1)
56 57 108 111 
Other (income) expense, net of tax (1)
(3)(20)(12)(32)
Operating income after taxes$808 $796 $1,530 $1,657 
Denominator:
Invested capital:
Cash and equivalents$788 $862 $788 $862 
Trade receivables3,320 3,250 3,320 3,250 
Inventories1,710 1,819 1,710 1,819 
Net plant and equipment2,177 2,011 2,177 2,011 
Goodwill and intangible assets5,596 5,551 5,596 5,551 
Accounts payable and accrued expenses(2,157)(2,191)(2,157)(2,191)
Debt(8,937)(8,473)(8,937)(8,473)
Other, net714 133 714 133 
Total net assets (stockholders' equity)3,211 2,962 3,211 2,962 
Cash and equivalents(788)(862)(788)(862)
Debt8,937 8,473 8,937 8,473 
Total invested capital$11,360 $10,573 $11,360 $10,573 
Average invested capital (2)
$10,996 $10,480 $10,741 $10,357 
Net income to average invested capital (3)
27.4 %29.0 %27.1 %30.5 %
After-tax return on average invested capital (3)
29.4 %30.4 %28.5 %32.0 %

(1)    Effective tax rate used for interest expense and other (income) expense for the three months ended June 30, 2025 and 2024 was 24.4% in both periods. Effective tax rate used for interest expense and other (income) expense for the six months ended June 30, 2025 and 2024 was 24.2% and 24.0%, respectively.

(2)    Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within each of the periods presented.

(3)    Returns for the three months ended June 30, 2025 and 2024 were converted to an annual rate by multiplying the calculated return by 4. Returns for the six months ended June 30, 2025 and 2024 were converted to an annual rate by multiplying the calculated return by 2.

After-tax ROIC for the six months ended June 30, 2024 included 170 basis points of favorable impact related to the cumulative effect of the change from the LIFO method of accounting to the FIFO method for certain U.S. businesses ($117 million pre-tax, or $88 million after-tax) in the first quarter of 2024.








A reconciliation of the tax rate for the six month period ended June 30, 2025, excluding the first quarter 2025 discrete tax benefit of $21 million related to the reversal of a valuation allowance on net operating loss carryforwards, is as follows:

Six Months Ended
June 30, 2025
Dollars in millionsIncome TaxesTax Rate
As reported$438 23.1 %
Discrete tax benefit related to the first quarter 202521 1.1 %
As adjusted$459 24.2 %


AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)

Twelve Months Ended
Dollars in millionsDecember 31, 2024
Numerator:
Net income$3,488 
Net discrete tax benefit related to the third quarter 2024(121)
Interest expense, net of tax (1)
215 
Other (income) expense, net of tax (1)
(336)
Operating income after taxes$3,246 
Denominator:
Invested capital:
Cash and equivalents$948 
Trade receivables2,991 
Inventories1,605 
Net plant and equipment2,036 
Goodwill and intangible assets5,431 
Accounts payable and accrued expenses(2,095)
Debt(7,863)
Other, net264 
Total net assets (stockholders' equity)3,317 
Cash and equivalents(948)
Debt7,863 
Total invested capital$10,232 
Average invested capital (2)
$10,419 
Net income to average invested capital33.5 %
After-tax return on average invested capital31.2 %

(1)    Effective tax rate used for interest expense and other (income) expense for the year ended December 31, 2024 was 23.8%.

(2)    Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within the period presented.



A reconciliation of the 2024 effective tax rate excluding the third quarter 2024 net discrete tax benefit of $121 million, which included favorable discrete tax benefits of $107 million related to the utilization of capital loss carryforwards upon the sale of Wilsonart and $87 million related to a reorganization of the Company's intellectual property, partially offset by a $73 million discrete tax expense related to the remeasurement of unrecognized tax benefits associated with various intercompany transactions, is as follows:
Twelve Months Ended
December 31, 2024
Dollars in millionsIncome TaxesTax Rate
As reported$934 21.1 %
Net discrete tax benefit related to the third quarter 2024121 2.7 %
As adjusted$1,055 23.8 %


FREE CASH FLOW (UNAUDITED)

Three Months EndedSix Months Ended
June 30,June 30,
Dollars in millions2025202420252024
Net cash provided by operating activities$550 $687 $1,142 $1,276 
Less: Additions to plant and equipment(101)(116)(197)(211)
Free cash flow$449 $571 $945 $1,065 
Net income$755 $759 $1,455 $1,578 
Net cash provided by operating activities to net income conversion rate73 %91 %78 %81 %
Free cash flow to net income conversion rate59 %75 %65 %67 %


ADJUSTED NET INCOME PER SHARE - DILUTED (UNAUDITED)

Twelve Months Ended
December 31, 2024
As reported$11.71 
Cumulative effect of change in inventory accounting method, net of tax (1)
(0.30)
Impact of sale of noncontrolling interest in Wilsonart (2)
(1.26)
As adjusted$10.15 

(1)    Represents the cumulative effect of the change from the LIFO method of accounting to the FIFO method for certain U.S. businesses in the first quarter of 2024 ($117 million pre-tax, or $88 million after-tax).

(2)    Includes the $363 million pre-tax gain on the sale of noncontrolling interest in Wilsonart and related taxes in the third quarter of 2024.