ITW · 10-Q · 2026Q2 · Full report

Operating Margin Drivers

ILLINOIS TOOL WORKS INC · 2026-08-06 · Importance 49 · Surprise 32 · No source text

Consolidated operating income increased 7.4% to $1.147 billion in the second quarter and 7.3% to $2.167 billion year to date. Operating margin expanded 40 basis points to 26.7% in the quarter and 50 basis points to 26.1% year to date. Enterprise initiatives contributed 120 basis points in both periods, while positive operating leverage contributed 90 basis points in the quarter and 50 basis points year to date. Higher employee-related expenses and unfavorable price/cost reduced the gains, with price/cost pressure of 40 basis points in the quarter and 20 basis points year to date.

Key facts

• Operating income was $1,147 million in the second quarter of 2026 and $1,068 million in the second quarter of 2025, an increase of 7.4%. source
• Operating income was $2,167 million for the six months ended June 30, 2026 and $2,019 million for the six months ended June 30, 2025, an increase of 7.3%. source
• Operating income after taxes for the three months ended June 30, 2026: $1,640 million. source
• Total invested capital as of June 30, 2026: $11,750 million. source
• Average invested capital for the three months ended June 30, 2026: $11,650 million. source
• Operating margin increase in Q2 2026 of 40 basis points was primarily due to benefits from the Company's enterprise initiatives of 120 basis points and positive operating leverage of 90 basis points, partially offset by higher employee-related expenses and unfavorable price/cost of 40 basis points. source
• Net income to average invested capital (annualized) for the three months ended June 30, 2026: 28.0%. source
• After-tax return on average invested capital (After-tax ROIC) (annualized) for the three months ended June 30, 2026: 29.7%. source

Impact estimates