JCI Johnson Controls plc 10-K 2026-09-30 section summaries

Johnson Controls — Business and Human Capital

Business and strategy

Johnson Controls is a global building-technology company focused on commercial HVAC and thermal management, building controls, fire and security systems, digital solutions, and lifecycle services. After completing the 2025 divestiture of its Residential and Light Commercial HVAC business—including North America Ducted and its global residential joint venture with Hitachi—and divesting Air Distribution Technologies, management describes the company as simpler and more focused on commercial and mission-critical environments.

In FY2026, products and systems accounted for approximately 69% of sales from continuing operations and services 31%. Its direct sales and service network and large installed base support customer retention and recurring maintenance, retrofit, and replacement opportunities. The company is integrating software and digital capabilities with equipment and services to deliver data-driven building solutions.

JCI reports three operating and reportable segments: Americas, EMEA, and APAC. Each offers combinations of HVAC, controls, building management, refrigeration, fire and security, digital solutions, and technical services. Americas also includes energy-efficiency solutions; EMEA includes a global residential security subscriber business and marine customers.

Strategy emphasizes thermal management and mission-critical facilities, lifecycle customer value, targeted verticals, and customer-focused execution. Priority markets include data centers, healthcare, biopharma and advanced manufacturing, higher education, airports, and commercial offices. JCI plans to invest in products, technology, partnerships, digital capabilities, and talent, while using its operating system to simplify work and improve productivity, with goals of growth, margin expansion, and cash generation. Data centers and other critical environments require reliable control of temperature, humidity, air quality, and pressure, supporting demand for JCI’s cooling, building-management, and service offerings. Differentiated capabilities in energy efficiency and decarbonization—including energy-efficient products and low-GWP refrigerants—are also strategic priorities.

Risks and operating considerations

• Materials, supply chains, and tariffs: JCI uses materials and components including steel, aluminum, brass, copper, polypropylene, fluorochemicals, semiconductors, and other electronics. Inflation, supply-chain disruption, labor shortages, demand, regulation, and tariffs have increased costs. Although the company has largely mitigated tariffs enacted to date, additional or reciprocal tariffs could reduce sales and increase cost of goods sold, pressuring growth and margins. Management expects commodity prices and availability may fluctuate significantly in FY2027.
• Environmental and product regulation: Regulations affect refrigerants, greenhouse-gas emissions, energy efficiency, fluorinated gases, product safety, fire codes, and PFAS. Legacy firefighting foams contained PFOS, PFOA and/or other PFAS, creating potential exposure to tightening restrictions, remediation, enforcement proceedings, penalties, and compliance costs. JCI continues investing in products to meet emerging emissions and efficiency requirements. FY2026 capital expenditures solely related to regulatory compliance were not material; management does not expect compliance spending for any individual regulation or related group of regulations to materially harm annual results or competitive position.
• Competition and seasonality: Competition includes global HVAC, building-controls, fire, security, and data-center providers, local building-services firms, and digital, SaaS, and IoT entrants. Contracts are competitively awarded based on performance, quality, price, technology, reputation, and execution. Management says the loss of any one contract or customer would not be material. Air-conditioning demand is generally higher in summer, while other offerings mitigate the overall seasonal effect.
• Other operating dependencies: The business is subject to extensive labor, trade, tax, licensing, environmental, and other regulation across its markets, and depends on wireline and wireless communications for security signaling. JCI states that no individual patent or group of patents is critical to business success.

Human capital

As of September 30, 2026, JCI employed approximately 84,000 people worldwide: 31,000 in the U.S. and 53,000 internationally. Approximately 20,000 employees were covered by collective bargaining agreements or works councils; the company characterized labor relations as generally positive. In FY2026, its OSHA Total Recordable Incident Rate was 0.31 and Lost Time Incident Rate was 0.13. Safety efforts include reviews, audits, training, and third-party conformity assessments, alongside wellbeing and inclusion programs.

Workforce and succession planning focus on critical capabilities, particularly in frontline manufacturing, service, installation, and sales roles. JCI invests in role-based learning, career paths, development, and internal mobility, supplemented by selective external hiring. More than half of open management positions in FY2026 were filled internally. High-potential leadership programs achieved greater than 80% application of learning to the job and an NPS of 74. Management tracks workforce composition, succession, engagement, safety, capability development, and talent outcomes, and reports human-capital priorities, risks, and progress to the Board and its Compensation and Talent Development Committee.

Principal risks and business exposures

JCI’s growth strategy depends on executing capacity expansion, restructuring and operating-model changes while converting demand and backlog into profitable revenue. It plans increased capital expenditures in FY2027 to expand capacity and is continuing a multi-year restructuring program to address stranded costs and right-size global operations. Delays, unexpected costs, disruption, employee or customer attrition, and weaker-than-expected productivity gains could reduce the benefits. Failure to implement business-system and organizational improvements, or to hire, train and retain needed employees, could also impede execution.

A growing share of commercial HVAC demand, revenue and backlog is tied to data centers. Demand depends substantially on AI adoption and capital spending by a limited number of hyperscale technology companies, while projects also face power-availability, permitting, zoning, regulatory and community-acceptance constraints. JCI must develop and scale advanced cooling, including direct-to-chip liquid cooling, amid competition from established providers and specialized entrants. Customers could reduce orders or develop proprietary solutions; some newer counterparties have limited operating histories, weaker credit profiles or rely on project financing. If demand falls short or JCI misses delivery timelines, capacity and supply commitments could result in excess capacity, inventory write-downs or asset impairments.

More broadly, demand is exposed to construction, retrofit and industrial cycles, customer financing, interest rates, real-estate conditions, public and institutional budgets, and input-price volatility. Projects may be delayed or canceled, reducing fixed-cost absorption and putting pressure on selling prices. Fixed-price backlog can limit recovery of commodity-cost increases; price increases on new orders may not offset inflation. Hedging can mitigate cost exposure, but may also leave JCI with lower margins when commodity prices decline and customer prices adjust downward. Tariffs and retaliatory measures could raise costs, disrupt supply or reduce demand; mitigation may be ineffective, and local-content requirements could require manufacturing investment or lead to lost sales.

JCI’s direct sales and installation help establish an installed base that supports lifecycle services, monitoring, solutions and retrofits. Weaker installation growth could therefore also limit product pull-through and future recurring-service opportunities. Technology-enabled self-service by customers or contractors could further pressure services. Product-development investments may not generate commercially successful offerings or acceptable margins; changing regulation, competition and customer preferences can reduce product appeal. AI-enabled products and tools also create risks from inaccurate outputs, unintended actions, security or confidentiality failures, IP issues and evolving regulation. Competitors’ more effective use of AI could weaken JCI’s position.

Operations, supply chain and technology

JCI relies on global suppliers for materials including steel, copper and aluminum, semiconductors, electronic components and rare-earth-related components. Shortages, inflation, supplier concentration, long qualification periods and arrangements that do not guarantee availability can disrupt production. Subcontractor labor or supply problems can delay projects and backlog conversion. Labor shortages may constrain manufacturing, field service and project support. JCI employs approximately 84,000 people worldwide; approximately 24% are covered by collective bargaining agreements or works councils. Future labor disputes, wage increases or work stoppages could raise costs or disrupt operations.

Manufacturing and monitoring facilities may be disrupted by disasters, cyber incidents, geopolitical events, power outages or labor shortages, affecting alarm response, fulfillment, backlog conversion and collections. Alternative sourcing and recovery may require added expense or capital, and insurance may not cover lost sales and higher costs. Quality, safety or delivery failures—including issues that have resulted in past quality problems and recalls—could lead to lost sales, corrective actions, warranty or product-liability claims, injuries, reputational damage and costs exceeding reserves or insurance.

Connected building systems, digital products, cloud services and third-party providers increase cyber and privacy exposure. JCI has experienced cybersecurity incidents and expects incidents to continue; attacks may go undetected and losses may exceed insurance. Consequences could include disruption, data or IP loss, customer claims, litigation, regulatory action, fines and reputational harm. Evolving security requirements may raise costs, delay launches or restrict market access. Privacy breaches and misuse of AI, including employee use of unapproved tools, could create similar exposure; some contracts lack liability limits, and contractual caps or insurance may not cover major claims.

Financial, portfolio and regulatory risks

Credit-market disruption could restrict funding beyond operating cash flows, while higher interest rates, lower credit ratings or volatile capital markets could increase financing costs. Materially higher indebtedness or a rating downgrade could further affect financial flexibility. Defined-benefit retirement-plan risks, customer or counterparty distress, major-customer losses, guaranteed-performance contract failures, backlog cancellations and project delays could also affect results.

JCI intends to simplify its portfolio toward comprehensive commercial-building solutions and may sell businesses or product lines. Divestitures could disrupt operations and relationships, divert management attention, leave contingent liabilities, dilute earnings or trigger goodwill and intangible-asset impairments; proceeds and benefits are uncertain. Acquisitions and joint ventures may require cash, debt or equity and carry integration, retention, synergy and contingent-liability risks, as well as potential impairment of goodwill and long-lived assets.

Climate effects could damage facilities, disrupt supply chains and raise material, insurance and operating costs. Emissions, energy-efficiency and refrigerant requirements may require additional R&D and capital, constrain products or affect demand; policy changes and possible incentive rollbacks create uncertainty. JCI has committed to net-zero Scope 1 and 2 emissions by 2040 and set science-based Scope 1 and 2 operational and Scope 3, category 11, targets for emissions from customers’ use of sold products. Meeting them may require significant resources, and failure could harm reputation and results.

Environmental and legal exposures include investigation and remediation at current and former sites, including the Fire Technology Center and Stanton Street facility in Marinette, Wisconsin, involving arsenic, solvents, metals, lead, PFOS/PFOA and other PFAS, and asbestos. Increasing PFAS regulation and litigation over firefighting foam previously sold by a subsidiary create uncertain costs that could exceed accruals. Asbestos personal-injury litigation continues. Fire and security services also create liability exposure from employee conduct or system failures. Regulatory risks include product, environmental, health and safety rules, export controls, sanctions, antitrust, customs and government-contracting compliance; violations can bring fines, restrictions, lost permits or government business.

International, tax and shareholder matters

Foreign-currency weakness against the U.S. dollar could reduce overseas margins. Recession, inflation, supply disruption and geopolitical conflicts—including Russia-Ukraine and Middle East conflicts—could affect markets, energy, suppliers and operations and raise sanctions and cybersecurity risks.

Pillar Two’s 15% global minimum tax applies to JCI in fiscal 2026; differing national implementation and changes to guidance or transition relief could raise its tax liability, cash taxes and effective rate. Pillar One could reallocate residual profits of qualifying multinationals (annual global revenue above €20B and margins above 10%), but implementation and timing remain uncertain. The IRS could challenge JCI’s position that Section 7874 does not apply to its Irish incorporation following the Merger; treatment as a U.S. corporation could substantially increase U.S. tax liability. Other tax risks include audit outcomes, tax-law changes, deferred-tax-asset valuation adjustments and tax consequences of business sales.

U.S. civil judgments may not be automatically enforceable in Ireland, and Irish company law differs from U.S. law, including director duties and shareholder remedies. Certain direct share transfers may incur Irish stamp duty of 1%; most transfers through DTC are exempt. Irish dividend withholding tax is 25% when exemptions do not apply.

Cybersecurity Risk Management and Governance

JCI is regularly exposed to cybersecurity threats, ranging from individual attackers to sophisticated, targeted campaigns. Potentially affected areas include its information technology systems, products, customers, supply chain, and third-party providers, including cloud providers. The company states that cybersecurity threats and prior incidents have not materially affected, and are not reasonably likely to materially affect, its business, strategy, results of operations, or financial condition to date.

JCI’s risk-management program includes annually reviewed policies informed by ISO 27001, the NIST Cybersecurity Framework, and ISA/IEC 62443 for automation and control products. Cybersecurity is incorporated into product and service development and enterprise risk assessments. Employees receive mandatory annual security training and certification in 20 languages, supplemented by ongoing awareness campaigns. A 24/7 operations center monitors IT systems and coordinates alert investigation and response.

When assessing incidents, JCI considers possible effects on manufacturing and supply-chain continuity, data and personal-information security, operations, costs, and reputation. Its mitigation measures include vulnerability assessments, updates to threat-detection tools, cybersecurity insurance, and engagement of external specialists for penetration testing, maturity assessments, threat analysis, and incident response.

Third-party access and integration are important areas of exposure. JCI conducts risk-based due diligence on providers with access to critical systems or data and on providers whose offerings are integrated into JCI products. Depending on the risk, safeguards may include contractual protections, incident-notification requirements, audit rights, and certifications such as SOC 2 or ISO 27001.

The Board oversees significant risks, including cybersecurity, and receives several cybersecurity and IT updates each year from senior management, including the CIO and CISO. The Governance and Sustainability Committee provides quarterly oversight of cybersecurity and AI governance, high-risk areas, and mitigation strategies. A quarterly Cybersecurity Steering Committee, chaired by the CISO and including the CFO, Chief Legal Officer, CIO, and senior business and functional leaders, reviews the threat landscape and risk-reduction efforts and coordinates accountability and remediation. The CISO leads the global enterprise security team and is authorized to pause or stop business processes when necessary during incident response. The Steering Committee approves the Enterprise Information Security Policy.

JCI — FY2026 Section 7 Summary

Results and operating performance

Sales increased 9%; organic growth contributed $1.988B and favorable currency translation contributed $215M, partly offset by a $133M net impact from acquisitions and divestitures. Excluding currency and portfolio changes, sales grew 8%. Products and Systems grew 9% and Services 8%. Gross margin expanded 70 basis points, supported by organic growth, productivity and operating leverage. SG&A declined to 21.5% of sales from 24.4%; the decrease included $110M of AFFF insurance recoveries, a $70M gain on the ADT Mexico divestiture, and cost-reduction actions. The higher effective tax rate—16%, versus 12%—reflected AFFF proceeds and current or planned divestitures, partly offset by tax reserve adjustments and global tax planning. The prior-year discontinued-operations result largely reflected the gain on sale of the R&LC HVAC business.

Restructuring and impairment costs totaled $311M, down from $546M: restructuring and related costs were $190M versus $164M; goodwill and intangible impairments were $38M versus $206M; and other impairments were $83M versus $176M. In Q4, JCI expanded its multi-year restructuring plan by $350M, bringing expected total costs to approximately $750M through FY2028. About $400M is expected in FY2027–FY2028; the plan targets footprint consolidation and streamlined support functions, with approximately $1.1B of annual savings expected at completion.

Segment performance

Americas organic sales grew 10% excluding currency and acquisitions, led by Applied HVAC, including data centers; EBIT growth reflected operating leverage. EMEA organic growth was constrained by Middle East conflict impacts, while productivity and pricing lifted EBIT, partly offset by divestitures. APAC organic sales grew 12%, led by 16% growth in Products and Systems and strength in Applied HVAC; volume and productivity supported EBIT growth.

Demand, investment and strategy

Orders reached $29.7B, up 35% year over year excluding acquisitions, dispositions and currency; backlog was $23.0B, up 43%. Demand was led by data centers and other mission-critical markets, including battery and semiconductor manufacturing and research universities.

Remaining performance obligations (RPO) were $29.3B. RPO differs from backlog: it includes certain long-duration public-building contracts (average initial terms of 25–35 years), while backlog includes about five years of those contracts. RPO excludes some short-term or readily cancellable service contracts that backlog includes, and includes full terms of penalized service contracts where backlog includes only one year.

JCI is positioning its HVAC, building systems and lifecycle services for AI and high-performance computing, hyperscale data-center cooling, decarbonization and energy-efficiency investment. It aims to use its installed base and data-driven offerings to grow outcome-based solutions, services and recurring revenue. Exposure to construction and retrofit activity, real-estate financing, tariffs, supply-chain disruption, inflation and geopolitical conflict remains. Certain U.S. IEEPA tariffs were invalidated in February 2026, but replacement tariffs and duties were imposed; tariffs and refunds had no material financial impact to date. JCI is pursuing refunds and managing exposure through regional manufacturing and sourcing, pricing, contractual change orders, supplier diversification and productivity.

Cash flow, capital allocation and liquidity

Higher net income and favorable changes in payables, accrued liabilities and accrued income taxes supported operating cash flow; higher receivables partly offset the improvement. Investing use reflected acquisitions of Alloy Enterprises and Nantum AI, net investment activity and higher capital expenditures, partly offset by ADT Mexico and Spain divestiture proceeds. Financing cash use fell mainly because FY2025 included accelerated share repurchases. FY2026 discontinued-operations cash use included approximately $155M of final purchase-price adjustments and other sale-related costs; FY2025 included R&LC HVAC sale proceeds.

Negative working capital deteriorated as deferred revenue, accounts payable and current long-term debt increased, partly offset by higher receivables and cash. Debt comprised $678M short-term debt, $1.066B current long-term debt and $7.533B long-term debt; commercial paper outstanding was $250M, down from $400M. FY2026 repurchases were $5.0B for 43.6938M shares at an average $114.43 per share; approximately $3.2B remained authorized at year-end. Dividends were $1.60 per share. JCI expects approximately $900M of FY2027 capital expenditures, focused on expanding global thermal-management capacity.

Management considers liquidity adequate. A $2.5B revolving credit facility, expiring December 2028, was undrawn at both year-ends. S&P ratings were A-2 short-term / BBB+ long-term, Stable; Moody’s were P-2 / Baa1, Stable. JCI was covenant-compliant, including with a $3.5B minimum attributable shareholders’ equity requirement. Long-term debt interest payable is $305M in the 12 months after September 30, 2026, and $3.0B thereafter; purchase obligations are approximately $2.0B due within 12 months and $300M thereafter. Significant earnings are held outside the parent; additional capital could raise interest expense or dilute earnings.

Co-issued senior notes mature from 2027 through 2035. The Parent Company and Luxembourg co-issuer reported a summarized FY2026 net loss of $400M, excluding $67M of net income from intercompany transactions; the obligor group had no sales or gross profit. It had $4.656B current and $255M noncurrent assets, against $3.705B current and $7.418B noncurrent liabilities. Different Irish and Luxembourg insolvency laws may impair noteholders’ ability to enforce rights or recover amounts.

Estimates and risk exposures

Long-term contract revenue depends on cost-to-cost estimates of progress and completion costs; engineering issues, delays, inflation, labor or supplier performance, and weather can trigger cumulative catch-up adjustments. Estimated contract losses are recorded when identified. Variable consideration and allocation of contract prices also require judgment.

At September 30, 2026, JCI had a $6.4B valuation allowance against continuing-operations deferred tax assets: $6.2B primarily related to loss carryforwards in France, Ireland, Luxembourg, Mexico and the U.K., and $0.2B to other deferred tax assets. Realization depends on future taxable income. A $1.8B liability represents management’s best estimate of probable losses on certain tax positions; ultimate payments could differ materially, and certain returns remain under audit.

The July 2026 annual goodwill impairment review used qualitative assessments and found no factor indicating reporting-unit fair values were more likely than not below carrying values. Goodwill and indefinite-lived intangible values remain sensitive to forecasts, growth, discount rates, EBITDA multiples and royalty assumptions. Pension valuations also depend on actuarial assumptions: expected FY2027 long-term asset returns are 7.10% for U.S. plans and 6.53% for non-U.S. plans; below-expected returns could require additional contributions. A 25-basis-point increase in key assumptions would have an immaterial effect on projected benefit obligations and ongoing expense, excluding potential mark-to-market adjustments.

Asbestos claim and defense-cost estimates, projected through 2068, depend on claims, legal developments, defense strategy and insurer recoverability. Environmental costs are accrued when probable and estimable; changing regulatory, technical or site conditions could make future charges or outlays material.

JCI hedges 70%–90% of known transactional FX exposure, primarily with forwards, and selectively hedges anticipated transactions and non-U.S. net investments. An unfavorable 10% exchange-rate change would have reduced net unrealized gains by approximately $113M at September 30, 2026, versus $166M a year earlier. Substantially all debt is fixed-rate; a 100-basis-point change in rates on variable-rate debt would have an immaterial interest-expense effect. Commodity derivatives are used selectively for risk management, not speculation.

Item 7A provides no separate market-risk metrics or disclosures. It directs readers to the “Risk Management” discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Johnson Controls (JCI) — FY2026

Consolidated results

Fiscal years ended September 30; $ billions except per-share data.

Revenue increased 8.8%; gross margin improved to approximately 37.1% from 36.4%. Continuing-operations earnings rose substantially, while attributable net income and total diluted EPS fell because discontinued operations shifted from $1.570B of attributable income in FY2025 to a $27M loss in FY2026. FY2026’s tax rate was 16%, versus 12% in FY2025 and 7% in FY2024.

Regional segments

$ millions.

Segment profit grew faster than revenue in each region. Segment EBITA, a non-GAAP measure, was $4.728B versus $4.007B. Americas generated most of the revenue increase. JCI’s integrated building-systems and services business serves markets including data centers, healthcare, pharmaceuticals, advanced manufacturing and higher education, where reliability, energy efficiency and decarbonization are important customer needs.

Items reconciling segment EBIT to pretax income were corporate expenses of $653M versus $767M; restructuring and impairment costs of $311M versus $546M; AFFF insurance recoveries of $(149)M versus $(39)M; net financing charges of $279M versus $319M; a $70M divestiture gain versus none; and a $73M net mark-to-market gain versus a $6M loss.

Cash flow and capital allocation

$ billions.

Stock repurchases and retirements used $1.505B, down from $5.991B; dividends were $976M in both years. Acquisitions, net of cash acquired, used $291M, while divestitures, net of cash divested, provided $331M.

Balance sheet, debt and shares

$ billions except shares.

Total equity attributable to JCI was $13.611B; equity less goodwill and other intangible assets was negative $6.476B on a total-equity basis and negative $6.511B on a parent-attributable basis. The $2.5B revolving credit facility was undrawn and expires in December 2028; JCI reported covenant compliance. Long-term debt maturities include $1.066B in FY2027 and $5.059B thereafter. Net financing charges were $279M, including $223M net interest expense; debt interest paid was $286M.

Weighted-average basic shares were 609M versus 652M; diluted shares were 611M versus 654M. Stock-compensation expense was $122M versus $126M. Year-end awards included 1.600M nonvested restricted shares, 0.732M nonvested PSUs and 2.840M options outstanding.

Contracts, portfolio and principal risks

Remaining performance obligations were $29.3B at year-end, with approximately 73% expected to be recognized within two years. Current contract liabilities were $3.370B versus $2.470B; FY2026 revenue recognized from beginning contract liabilities was approximately $2.1B versus $1.8B. Certain long-term contracts use cost-to-cost estimates, making recognized revenue and margins sensitive to estimated costs and completion progress.

FY2026 acquisitions of Alloy Enterprises and Nantum AI expanded liquid-cooling and OpenBlue capabilities. The ADT Spain sale generated $98M net proceeds; a prior $50M impairment was recorded. ADT Mexico’s sale generated $207M net proceeds and a $70M pretax gain. ADT UK Residential Security was held for sale, with $235M of assets and $40M of liabilities. The R&LC HVAC divestiture generated a $27M discontinued-operations loss from post-closing adjustments; JCI paid approximately $155M for final purchase-price adjustments.

JCI expanded its multi-year restructuring plan by $350M, bringing expected FY2025–FY2028 costs to approximately $750M; about $400M is expected in FY2027–FY2028. AFFF/PFAS litigation and remediation remain significant uncertainties. JCI recorded $149M of FY2026 insurance recoveries, but further recoveries and ultimate exposure are uncertain and could be material. The company also carries asbestos-related and self-insured liabilities; estimates depend on claims, litigation, insurance recoveries and other assumptions.

The auditor issued unqualified opinions on the financial statements and internal controls, and identified revenue recognition as a critical audit matter.

During the three months ended September 30, 2026, no JCI director or Section 16 officer adopted, amended, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement.