Revenue of $4.1 billion, an increase of 2% with organic growth of 1%
Record operating margin of 27.4%, an expansion of 90 bps as enterprise initiatives contributed 140 bps
GAAP EPS of $2.81, an increase of 6% excluding prior year divestiture gain
Operating cash flow of $1 billion; free cash flow of $0.9 billion, an increase of 15%
Narrowing full year GAAP EPS guidance range to $10.40 to $10.50 per share
GLENVIEW, Ill., Oct. 24, 2025 (GLOBE NEWSWIRE) — Illinois Tool Works Inc. (NYSE: ITW) today reported its third quarter 2025 results.
“The ITW team concluded the third quarter with solid operational and financial execution, delivering EPS of $2.81, which grew six percent year-over-year excluding the divestiture gain, alongside record operating margin of 27.4 percent, and a 15 percent increase in free cash flow. This outcome underscores the fundamental strength of the ITW Business Model, the inherent resilience of our diversified portfolio, and the high-quality execution demonstrated by our colleagues worldwide,” said Christopher A. O'Herlihy, President and Chief Executive Officer.
“We are very pleased with the significant strategic progress made throughout the year, especially how our focus on excellence in Customer-Back Innovation is enabling consistent above-market organic growth. As we head into the final quarter, we are narrowing our full year EPS guidance range, and remain committed to delivering high-quality, differentiated performance in any economic environment.”
Third Quarter 2025 Results Third quarter revenue of $4.1 billion increased by two percent as organic revenue grew one percent. Foreign currency translation impact increased revenue by two percent and product line simplification reduced revenue by one percent.
GAAP EPS of $2.81 increased six percent excluding a divestiture gain of $1.26 in the prior year quarter. Operating income of $1.1 billion increased six percent. Operating margin improved 90 basis points to 27.4 percent as enterprise initiatives contributed 140 basis points, and six of seven segments expanded margins. Operating cash flow was $1.0 billion, and free cash flow increased 15 percent to $904 million with a conversion rate of 110 percent to net income. During the quarter, the company repurchased $375 million of its own shares and raised its dividend seven percent, bringing the annualized payout to $6.44 per share. This increase marks the 62nd consecutive year of dividend increases. The effective tax rate for the quarter was 21.8 percent.
2025 Guidance
ITW is narrowing its full year 2025 GAAP EPS guidance range to $10.40 to $10.50. The company is projecting overall revenue growth of one to three percent, which incorporates organic growth of flat to two percent. This outlook accounts for the current demand environment, adjusted for ongoing pricing and supply chain actions intended to effectively offset tariff cost impacts and for current foreign exchange rates. Operating margin is projected to be in the range of 26 to 27 percent with a projected contribution of 125 basis points or more from enterprise initiatives. Free cash flow is expected to be approximately 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 23 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 Ended
Nine Months Ended
September 30,
September 30,
In millions except per share amounts
2025
2024
2025
2024
Operating Revenue
$
4,059
$
3,966
$
11,951
$
11,966
Cost of revenue
2,253
2,230
6,685
6,637
Selling, administrative, and research and development expenses
676
658
2,075
2,020
Amortization and impairment of intangible assets
18
26
60
76
Operating Income
1,112
1,052
3,131
3,233
Interest expense
(75
)
(69
)
(217
)
(215
)
Other income (expense)
12
379
28
421
Income Before Taxes
1,049
1,362
2,942
3,439
Income Taxes
228
202
666
701
Net Income
$
821
$
1,160
$
2,276
$
2,738
Net Income Per Share:
Basic
$
2.82
$
3.92
$
7.79
$
9.20
Diluted
$
2.81
$
3.91
$
7.77
$
9.17
Cash Dividends Per Share:
Paid
$
1.50
$
1.40
$
4.50
$
4.20
Declared
$
1.61
$
1.50
$
4.61
$
4.30
Shares of Common Stock Outstanding During the Period:
Average
290.8
296.1
292.2
297.6
Average assuming dilution
291.7
297.0
293.0
298.5
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED)
In millions
September 30, 2025
December 31, 2024
Assets
Current Assets:
Cash and equivalents
$
924
$
948
Trade receivables
3,255
2,991
Inventories
1,725
1,605
Prepaid expenses and other current assets
416
312
Total current assets
6,320
5,856
Net plant and equipment
2,203
2,036
Goodwill
5,028
4,839
Intangible assets
540
592
Deferred income taxes
573
369
Other assets
1,471
1,375
$
16,135
$
15,067
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt
$
1,267
$
1,555
Accounts payable
608
519
Accrued expenses
1,567
1,576
Cash dividends payable
467
441
Income taxes payable
223
217
Total current liabilities
4,132
4,308
Noncurrent Liabilities:
Long-term debt
7,675
6,308
Deferred income taxes
149
119
Other liabilities
970
1,015
Total noncurrent liabilities
8,794
7,442
Stockholders' Equity:
Common stock
6
6
Additional paid-in-capital
1,751
1,669
Retained earnings
29,825
28,893
Common stock held in treasury
(26,498
)
(25,375
)
Accumulated other comprehensive income (loss)
(1,876
)
(1,877
)
Noncontrolling interest
1
1
Total stockholders' equity
3,209
3,317
$
16,135
$
15,067
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED)
Three Months Ended September 30, 2025
Dollars in millions
Total Revenue
Operating Income
Operating Margin
Automotive OEM
$
830
$
182
21.8
%
Food Equipment
694
202
29.2
%
Test & Measurement and Electronics
698
177
25.4
%
Welding
477
156
32.6
%
Polymers & Fluids
441
126
28.5
%
Construction Products
473
149
31.6
%
Specialty Products
452
146
32.3
%
Intersegment
(6
)
—
—
%
Total Segments
4,059
1,138
28.0
%
Unallocated
—
(26
)
—
%
Total Company
$
4,059
$
1,112
27.4
%
Nine Months Ended September 30, 2025
Dollars in millions
Total Revenue
Operating Income
Operating Margin
Automotive OEM
$
2,461
$
513
20.8
%
Food Equipment
2,001
557
27.8
%
Test & Measurement and Electronics
2,036
473
23.2
%
Welding
1,428
468
32.8
%
Polymers & Fluids
1,308
361
27.6
%
Construction Products
1,389
424
30.6
%
Specialty Products
1,342
429
32.0
%
Intersegment
(14
)
—
—
%
Total Segments
11,951
3,225
27.0
%
Unallocated
—
(94
)
—
%
Total Company
$
11,951
$
3,131
26.2
%
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED)
Q3 2025 vs. Q3 2024 Favorable/(Unfavorable)
Operating Revenue
Automotive OEM
Food Equipment
Test & Measurement and Electronics
Welding
Polymers & Fluids
Construction Products
Specialty Products
Total ITW
Organic
5.0
%
0.7
%
(1.4
)%
2.8
%
(3.1
)%
(2.3
)%
1.6
%
0.7
%
Acquisitions/ Divestitures
—
%
—
%
—
%
—
%
—
%
—
%
—
%
—
%
Translation
2.3
%
1.8
%
1.7
%
0.5
%
1.3
%
0.9
%
1.7
%
1.6
%
Operating Revenue
7.3
%
2.5
%
0.3
%
3.3
%
(1.8
)%
(1.4
)%
3.3
%
2.3
%
Q3 2025 vs. Q3 2024 Favorable/(Unfavorable)
Change in Operating Margin
Automotive OEM
Food Equipment
Test & Measurement and Electronics
Welding
Polymers & Fluids
Construction Products
Specialty Products
Total ITW
Operating Leverage
90 bps
10 bps
(30) bps
50 bps
(60) bps
(40) bps
20 bps
20 bps
Changes in Variable Margin & OH Costs
170 bps
50 bps
60 bps
10 bps
120 bps
190 bps
100 bps
80 bps
Total Organic
260 bps
60 bps
30 bps
60 bps
60 bps
150 bps
120 bps
100 bps
Acquisitions/ Divestitures
—
—
—
—
—
—
—
—
Restructuring/Other
(20) bps
20 bps
(60) bps
(30) bps
—
(10) bps
—
(10) bps
Total Operating Margin Change
240 bps
80 bps
(30) bps
30 bps
60 bps
140 bps
120 bps
90 bps
Total Operating Margin % *
21.8%
29.2%
25.4%
32.6%
28.5%
31.6%
32.3%
27.4%
* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets
30 bps
—
130 bps
10 bps
140 bps
10 bps
20 bps
50 bps **
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.05) on GAAP earnings per share for the third quarter of 2025.
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED)
YTD 2025 vs. YTD 2024 Favorable/(Unfavorable)
Operating Revenue
Automotive OEM
Food Equipment
Test & Measurement and Electronics
Welding
Polymers & Fluids
Construction Products
Specialty Products
Total ITW
Organic
2.0
%
0.9
%
(2.5
)%
1.9
%
(1.8
)%
(5.6
)%
0.9
%
(0.4
)%
Acquisitions/ Divestitures
—
%
—
%
—
%
—
%
—
%
—
%
—
%
—
%
Translation
0.4
%
0.4
%
0.9
%
(0.2
)%
(0.2
)%
—
%
0.2
%
0.3
%
Operating Revenue
2.4
%
1.3
%
(1.6
)%
1.7
%
(2.0
)%
(5.6
)%
1.1
%
(0.1
)%
YTD 2025 vs. YTD 2024 Favorable/(Unfavorable)
Change in Operating Margin
Automotive OEM
Food Equipment
Test & Measurement and Electronics
Welding
Polymers & Fluids
Construction Products
Specialty Products
Total ITW
Operating Leverage
40 bps
20 bps
(80) bps
30 bps
(30) bps
(110) bps
20 bps
(10) bps
Changes in Variable Margin & OH Costs
110 bps
30 bps
30 bps
(20) bps
60 bps
160 bps
90 bps
(60) bps
Total Organic
150 bps
50 bps
(50) bps
10 bps
30 bps
50 bps
110 bps
(70) bps
Acquisitions/ Divestitures
—
—
(10) bps
—
—
—
—
—
Restructuring/Other
(20) bps
10 bps
(40) bps
10 bps
—
50 bps
—
(10) bps
Total Operating Margin Change
130 bps
60 bps
(100) bps
20 bps
30 bps
100 bps
110 bps
(80) bps
Total Operating Margin % *
20.8%
27.8%
23.2%
32.8%
27.6%
30.6%
32.0%
26.2%
* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets
30 bps
20 bps
140 bps
—
150 bps
10 bps
10 bps
50 bps **
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.16) on GAAP earnings per share for the first nine months of 2025.
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)
AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
Three Months Ended
Nine Months Ended
September 30,
September 30,
Dollars in millions
2025
2024
2025
2024
Numerator:
Net Income
$
821
$
1,160
$
2,276
$
2,738
Net discrete tax benefit related to the third quarter 2025
(27
)
—
(27
)
—
Discrete tax benefit related to the first quarter 2025
—
—
(21
)
—
Net discrete tax benefit related to the third quarter 2024
—
(121
)
—
(121
)
Interest expense, net of tax(1)
57
53
165
164
Other (income) expense, net of tax(1)
(10
)
(288
)
(22
)
(320
)
Operating income after taxes
$
841
$
804
$
2,371
$
2,461
Denominator:
Invested capital:
Cash and equivalents
$
924
$
947
$
924
$
947
Trade receivables
3,255
3,226
3,255
3,226
Inventories
1,725
1,817
1,725
1,817
Net plant and equipment
2,203
2,071
2,203
2,071
Goodwill and intangible assets
5,568
5,597
5,568
5,597
Accounts payable and accrued expenses
(2,175
)
(2,211
)
(2,175
)
(2,211
)
Debt
(8,942
)
(8,346
)
(8,942
)
(8,346
)
Other, net
651
291
651
291
Total net assets (stockholders' equity)
3,209
3,392
3,209
3,392
Cash and equivalents
(924
)
(947
)
(924
)
(947
)
Debt
8,942
8,346
8,942
8,346
Total invested capital
$
11,227
$
10,791
$
11,227
$
10,791
Average invested capital(2)
$
11,293
$
10,682
$
10,863
$
10,466
Net income to average invested capital(3)
29.1
%
43.4
%
27.9
%
34.9
%
After-tax return on average invested capital(3)
29.8
%
30.0
%
29.1
%
31.3
%
(1) Effective tax rate used for interest expense and other (income) expense for the three months ended September 30, 2025 and 2024 was 24.3% and 23.7%, respectively. Effective tax rate used for interest expense and other (income) expense for the nine months ended September 30, 2025 and 2024 was 24.3% and 23.9%, 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 September 30, 2025 and 2024 were converted to an annual rate by multiplying the calculated return by 4. Returns for the nine months ended September 30, 2025 and 2024 were converted to an annual rate by dividing the calculated return by 3 and multiplying it by 4.
A reconciliation of the tax rate for the three and nine month periods ended September 30, 2025, excluding the third quarter 2025 net discrete tax benefit of $27 million, which included a favorable discrete tax benefit of $43 million related to the estimated U.S. federal tax liability for 2024, partially offset by a $16 million discrete tax expense related primarily to the resolution of a foreign tax audit, and 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:
Three Months Ended
Nine Months Ended
September 30, 2025
September 30, 2025
Dollars in millions
Income Taxes
Tax Rate
Income Taxes
Tax Rate
As reported
$
228
21.8
%
$
666
22.7
%
Net Discrete tax benefit related to the third quarter 2025
27
2.5
%
27
0.9
%
Discrete tax benefit related to the first quarter 2025
—
—
%
21
0.7
%
As adjusted
$
255
24.3
%
$
714
24.3
%
After-tax ROIC for the nine months ended September 30, 2024 included 110 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 three and nine month periods ended September 30, 2024, 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:
Three Months Ended
Nine Months Ended
September 30, 2024
September 30, 2024
Dollars in millions
Income Taxes
Tax Rate
Income Taxes
Tax Rate
As reported
$
202
14.9
%
$
701
20.4
%
Net discrete tax benefit related to the third quarter 2024
121
8.8
%
121
3.5
%
As adjusted
$
323
23.7
%
$
822
23.9
%
AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
Twelve Months Ended
Dollars in millions
December 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 receivables
2,991
Inventories
1,605
Net plant and equipment
2,036
Goodwill and intangible assets
5,431
Accounts payable and accrued expenses
(2,095
)
Debt
(7,863
)
Other, net
264
Total net assets (stockholders' equity)
3,317
Cash and equivalents
(948
)
Debt
7,863
Total invested capital
$
10,232
Average invested capital(2)
$
10,419
Net income to average invested capital
33.5
%
After-tax return on average invested capital
31.2
%
(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 millions
Income Taxes
Tax Rate
As reported
$
934
21.1
%
Net discrete tax benefit related to the third quarter 2024
121
2.7
%
As adjusted
$
1,055
23.8
%
FREE CASH FLOW (UNAUDITED)
Three Months Ended
Nine Months Ended
Twelve Months Ended
September 30,
September 30,
December 31,
Dollars in millions
2025
2024
2025
2024
2024
Net cash provided by operating activities
$
1,021
$
891
$
2,163
$
2,167
$
3,281
Less: Additions to plant and equipment
(117
)
(108
)
(314
)
(319
)
(437
)
Free cash flow
$
904
$
783
$
1,849
$
1,848
$
2,844
Net income
$
821
$
1,160
$
2,276
$
2,738
$
3,488
Net cash provided by operating activities to net income conversion rate
124
%
77
%
95
%
79
%
94
%
Free cash flow to net income conversion rate
110
%
68
%(1)
81
%
67
%
82
%(2)
(1) Excluding the $363 million pre-tax gain on the sale of noncontrolling interest in Wilsonart and related taxes, and a discrete tax benefit of $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, the free cash flow to net income conversion rate would have been 102% for the three months ended September 30, 2024.
(2) Excluding the impact of 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), the $363 million pre-tax gain on the sale of noncontrolling interest in Wilsonart and related taxes, and a discrete tax benefit of $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, the free cash flow to net income conversion rate would have been 94% for the twelve months ended December 31, 2024.
ADJUSTED NET INCOME PER SHARE – DILUTED (UNAUDITED)
Three Months Ended
Twelve Months Ended
September 30, 2024
December 31, 2024
As reported
$
3.91
$
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
)
(1.26
)
As adjusted
$
2.65
$
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.
