ジョンソンコントロールズ（JCI）2026年度第4四半期決算説明会：過去最高の受注残高230億ドル、2027年度見通し

主要ハイライト

• 2026年会計年度第4四半期のオーガニック売上高は12%増加しました。南北アメリカおよびアジア太平洋（APAC）地域での2桁成長が牽引し、システム売上高は13%増、サービス売上高は8%増となりました。
• 調整後EBITマージンは300ベーシスポイント拡大して18%となり、調整後EPSは32%増の1.66ドルに上昇しました。
• 受注高はデータセンター、バッテリーおよび半導体製造、大手研究大学に支えられ44%増加しました。受注残高は43%増の230億ドルとなり、過去最高を記録しました。
• 2026年会計年度通期では、オーガニック売上高が8%超増加し、調整後EPSは37%上昇、調整後フリーキャッシュフローは32億ドル（コンバージョン率103%）に達しました。
• 経営陣は2027年会計年度のオーガニック売上高成長率を11%〜12%、営業レバレッジを30%超、調整後EPSを6.15ドル〜6.30ドルと予想しています。
• ジョンソンコントロールズは、生産能力の拡大、イノベーションの加速、ならびにデジタルおよびAIツールを通じた現場の生産性向上を目的に、2027年会計年度に約9億ドルの設備投資を計画しています。

主要財務データ

事業および業績の動向

データセンターが引き続き成長の主因となり、チラー、冷却分配装置（CDU）、コールドプレート、制御装置、モジュール型データセンターインフラの需要に支えられました。経営陣によると、チラーがポートフォリオの大半を占め続けているものの、1メガワットあたりのジョンソンコントロールズの獲得可能市場（TAM）を拡大する製品が成長に与える寄与度が高まっています。

同社のCDUおよびコールドプレートの商談パイプラインは10億ドルを超えていますが、決算説明会の時点では受注に変換されたのはその一部にとどまっています。ジョンソンコントロールズは3地域すべてでCDUの生産能力を拡大しており、その能力の大半はすでに割り振りが決まっています。

Armadaとの提携を通じ、ジョンソンコントロールズは2027年に500メガワットの分散型エッジコンピューティング容量の構築を支援する計画です。これに関連する機器およびモジュール型データセンターの売上高は、今後12〜18ヶ月間にわたってSilent-Aireを通じて計上される見込みです。

地域別の需要は南北アメリカとAPACで最も好調でした。経営陣によると、3地域すべてでパイプラインが拡大しており、特に米国とアジア太平洋地域でデータセンターおよび半導体向けの需要が一段と強くなっています。欧州はコンピューティングインフラの整備が初期段階にあり、防災・セキュリティ事業の構成比が高い状態が続いています。

サービスの成長率はシステムの成長率を下回る水準にとどまりました。経営陣はその格差の一因としてセキュリティサービス・ポートフォリオの再編を挙げており、これにはあと1〜2四半期かかる可能性があります。長期的には、データセンターにおける高いサービスアタッチ率（付帯率）が売上成長と利益率の両方を下支えすると予想されています。

業績予想（ガイダンス）

中間値ベースで、2027年会計年度の調整後EPS予想は2026年会計年度比で21%の成長を示しています。経営陣は、この予想に受注残の視認性、生産能力への投資、事業再編費用、ならびに継続的な執行力の改善が反映されていると述べました。

ジョンソンコントロールズはまた、2027年会計年度および2028年会計年度にかけて約4億ドルの事業再編費用を見込んでおり、2029年会計年度までに年換算で約6億ドルの総削減効果を目指しています。このプログラムは主に、同社の最も差別化されたミッションクリティカル事業以外の製造、倉庫、およびサポート部門に焦点を当てます。

同社は住宅・小規模商業施設向け侵入検知セキュリティ事業の売却を、2027年会計年度第2四半期末頃に完了する予定です。この事業は年間約5億ドルの売上高を生み出しており、経営陣は取引完了後、年換算EPSに約0.15ドルの希薄化をもたらすと見込んでいます。

リスクと注目点

• 一部の顧客は引き続き電力供給および電気インフラの制約に直面しており、プロジェクトの検収や受注残の売上転換が遅れる可能性があります。
• 経営陣は今後12ヶ月間で受注残の70%〜80%が売上に転換すると見込んでいます。残りは2027年会計年度以降にわたります。
• 生産能力の拡大は工場の立ち上げ期間中に短期的な営業上の逆風となる可能性がありますが、経営陣は新しいインフラが安定するにつれて年度後半にはレバレッジが改善する可能性があるとみています。
• ジョンソンコントロールズは2027年会計年度も引き続きプライス・コストでプラスを維持すると見込んでいますが、追加の値上げ分には通常の売上総利益率が乗らないため、インフレの転嫁が利益率を低下させる要因となり得ます。
• 2026年会計年度の中東地域は引き続き厳しい状況でした。経営陣は2027年会計年度に緩やかな改善を期待していますが、不透明感が残っており、事業活動は以前の水準には戻っていないことを強調しました。
• 経営陣は散発的なサプライチェーン上の問題を認めつつも、垂直統合や補完的なボルトオン買収を外部サプライヤーへの依存度を低減する手段として挙げました。

アナリストQ&Aのハイライト

受注残の売上転換と収益能力：経営陣は、制約がない環境下であれば230億ドルの受注残高は技術的に12ヶ月以内に納品可能であるものの、顧客のスケジュールや電力インフラの影響で検収が遅れる可能性があると述べました。これらの制約が緩和されれば、ジョンソンコントロールズは現在想定されているよりも速いペースで受注残を売上に転換できる可能性があります。

資本効率：同社は、自社のビジネスシステムとリーン生産方式の取り組みにより必要な投資額が大幅に削減されたと述べました。経営陣の試算によれば、これらがなければ計画されている生産能力拡大には2倍以上の資本が必要であった可能性があります。また、人員や資本を追加することなく生産能力を4倍に拡大した工場の事例も挙げられました。

データセンター向け冷却製品の構成比：経営陣は、チラーからの大幅なシフトは見られないと述べました。顧客はピーク時の条件や冗長性を考慮して施設設計を続けています。ジョンソンコントロールズはまた、CDU、コールドプレート、制御装置、モジュール型データセンターへと事業を拡大することで、特定製品への集中を緩和しています。

事業再編：新たな4億ドル規模の事業再編プログラムは、住宅・小規模商業施設事業の売却に伴う以前のプログラムとは別のものです。以前のプログラムにおける計画支出の約85%が完了しており、そのコスト削減ペースは当初目標の5億ドルを1億ドル〜1億5,000万ドル上回ると試算されています。

サプライチェーン：ジョンソンコントロールズは、チラーの5つの主要サブシステムにおける垂直統合を強みとして強調しました。また、サプライチェーンの強靭性と技術力を強化し得る補完的なボルトオン買収の選択肢を検討しています。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Hello, everyone, and welcome to the Johnson Controls Q4 2026 Earnings Conference Call. My name is Ryan, and I'll be coordinating the call today. [Operator Instructions]

I will now hand the call over to Eric Swanson, VP, Investor Relations, to begin. Eric, please go ahead.

Eric Swanson

Good morning, and thank you for joining Johnson Controls Fiscal Fourth Quarter 2026 Earnings Conference Call. Joining me on the call today are Johnson Controls Chief Executive Officer; Joakim Weidemanis; and Marc Vandiepenbeeck, our Chief Financial Officer.

As a reminder, today's discussion will include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for additional information.

We will also reference non-GAAP measures. Reconciliations are included in our earnings release and presentation appendix available on our Investor Relations website.

I will now turn the call over to Joakim.

Joakim Weidemanis

Thanks, Eric, and good morning, everyone. This is Eric's first earnings call since joining our Investor Relations team last month, and we're excited to have him on board.

I want to start by recognizing Johnson Controls colleagues around the world. Over the last 18 months, we've made significant progress toward becoming a more focused thermal technology company, growing at a faster rate with more investment capacity and higher profitability. At the end of the day, it's our people who bring these strategies for life, combining our technology and deep field and manufacturing expertise to deliver for customers. Their commitment to customers and disciplined execution is reflected in the consistency of our performance.

Fiscal 2026 was an important proof point for the framework we introduced at our going to Gamba Day in June. Our differentiated technological capabilities, unmatched field presence, global manufacturing strength and proprietary businesses are helping us move with speed, win with customers and strengthen performance.

For the full year, we exceeded both our initial fiscal 2026 guidance and the raised outlook we provided during the year. Organic revenue increased more than 8%. Adjusted EPS increased 37% and adjusted free cash flow conversion was 103%. We enter fiscal 2027 with momentum and confidence in our ability to continue creating value for customers and shareholders.

That confidence is grounded in a business model built around three reinforcing elements. Our strategic pillars focus resources on the most attractive opportunities including AI and data centers, mission-critical environments and decarbonization. Our proprietary business system and powers frontline teams accelerates problem-solving and drives continuous improvement everywhere in our company. And our economic engine converts those advantages into differentiated customer value, innovation, manufacturing scale and frontline productivity.

The result is a powerful value creation engine that helps our colleagues win and deliver for our customers and grow profitably and compound value over time. These capabilities are increasingly relevant as our priority customers are investing in some of the world's most demanding operating environments to deliver the outcomes they aspire to. This is especially evident across AI and data centers, advanced manufacturing and biopharma.

As customers scale capacity in these verticals, the environment supporting their operations are more heat and energy intensive, need to be controlled within tighter tolerances and are less tolerant of disruption. Our portfolio brings together integrated thermal management and controls with liquid cooling technologies, including cooling distribution units and cold plates for data centers. We combined subsystem technology developed in-house with the ability to design, deliver and service the broader architecture across the thermal chain, including controls.

As data center architectures continue to evolve, we see additional opportunity in modular data centers. We believe our differentiated capabilities position us well in this emerging segment, and we are investing to win and building a stronger partner ecosystem. Our collaboration with Armada is one example. As announced at the NVIDIA GTC in Berlin, together, we plan to build 500 megawatts of distributed edge compute capacity in 2027, bringing together our thermal management technology, engineering capabilities and global manufacturing scale to bring capacity online faster.

Our advantage comes from bringing together five areas of expertise: a focused portfolio oriented toward high-growth mission-critical verticals, proprietary technologies built over the last 150 years, an unmatched global field presence of approximately 50,000 sales solution architects and highly skilled technicians and emerging manufacturing advantage focused on quality, capacity and delivery and our proprietary business system. These five areas of expertise allow us to solve complex customer challenges with greater speed, create differentiated value and support sustained profitable growth. We are a global thermal technology leader that is built for this time.

With that context, Marc will take you through the financial results in more detail.

Marc Vandiepenbeeck

Thanks, Joakim, and good morning, everyone. We finished the year with strong fourth quarter results. Organic revenue increased 12%, led by strong double-digit growth in Americas and APAC. Systems grew 13%, reflecting continued strength in data centers while service continues to deliver with a solid 8% growth. That top line growth combined with continued productivity contributed to margin expansion across all three regions. Americas adjusted segment EBITDA margin expanded 210 basis points to 22%. EMEA expanded 80 basis points to 16.4%, and APAC expanded 110 basis points to 19%.

Strong operating performance, combined with lower corporate expense, drove significant adjusted EBIT margin expansion of 300 basis points to 18%, aligning our operating leverage well within range despite much higher growth. Adjusted EPS increased 32% to $1.66. The demand environment also accelerated as we exited the year. Orders increased 44%, driven by continued data center demand, along with strong growth across other mission-critical verticals including battery and semiconductor manufacturing and large research universities. Backlog grew 43% to a record $23 billion, reflecting sustained demand for our differentiated technology and capabilities.

Our operating performance translated to strong cash flow generation, supported by the disciplined execution and working capital focus embedded in our business system. For the full year, adjusted free cash flow was $3.2 billion, representing 103% conversion. We ended the year with $600 million of cash while net debt declined to 1.8x below our long-term target range. And we returned $2.5 billion to shareholders through share repurchases and dividends.

This performance provides capacity to invest for growth, maintain our investment-grade credit profile and return capital to shareholders. With customer demand extending well beyond fiscal year 2027 and requirements continuing to scale, customers need a partner with the capabilities and willingness to invest alongside them. Joakim will now discuss or we are investing to meet the demand.

Joakim Weidemanis

As Marc said, we see customer demand translating into a record backlog, a strong pipeline and increasing visibility into longer-term demand with our largest customers. We're acting decisively on that opportunity, investing ahead to expand capacity and capture a larger portion of the growth in our highest growth markets, while simplifying Johnson Controls to reduce complexity, move faster and increase earnings power. Both are integral to our value creation plan and reflect a consistent and disciplined approach to capital allocation, investing where we see the greatest opportunities for growth while building a simpler, more productive company.

We expect approximately $900 million of capital expenditures in fiscal 2027. This investment puts us in a strong position to capture a larger portion of the growth. It is anchored in the demand we see across our backlog and pipeline as well as the longer-term requirements we are planning for with our largest customers, particularly in our highest growth markets. This capital will strengthen our ability to win new business and capture the significant opportunity had. It will also expand capacity, improve lead times, delivery and quality, enable us to serve customers as their requirements scale.

Our business system is enabling us to add that capacity more efficiently. Without the productivity and capital efficiency we are driving across the company, we estimate the capital requirement would have been more than 2x higher. We are applying that same discipline to our restructuring actions, reallocating resources and capacity toward the areas where we see the strongest opportunities for growth.

While our growth investment is focused on thermal technology, our restructuring actions are concentrated primarily in other parts of our portfolio outside our most technology-differentiated mission-critical verticals. There, we are optimizing our manufacturing and warehouse footprint, streamlining the functions that support those operations and moving accountability closer to customers. We anticipate approximately $400 million of restructuring expense over fiscal 2027 and fiscal 2028, and expect approximately $600 million of gross annualized savings by fiscal 2029. These actions will position us to support the growth we see today and the opportunities ahead. Additional capacity positions us to capture increasing demand, simplification, improved speed and accountability. And productivity creates room to reinvest, expand margins and increase earnings power.

Marc will now review our fiscal 2027 guidance.

Marc Vandiepenbeeck

The investments and actions Joakim just outlined position Johnson Controls to accelerate growth while maintaining our margin expansion trajectory. Our fiscal year 2027 outlook reflects the strength of the demand environment, the visibility provided by our backlog and continued improvement in execution. For the first quarter, we expect organic revenue growth of 12% to 14%, operating leverage of 30% to 35% and adjusted EPS of $1.15 to $1.20. For the full year, we expect organic revenue growth of 11% to 12%, ahead of the high single-digit growth in our long-term algorithm.

We expect operating leverage of greater than 30% and adjusted EPS of $6.15 to $6.30. At the midpoint, that represents 21% EPS growth from fiscal 2026. As we meaningfully increased capital expenditure to support growth, we expect an adjusted free cash flow conversion of approximately 95%. Our ability to maintain such a strong cash flow conversion while increasing investment, investing in restructuring and increasing manufacturing capacity demonstrate the strength and quality of our earnings and disciplined capital allocation.

Operator, we are now ready for questions.

Operator

[Operator Instructions] Our first question will come from Amit Mehrotra with UBS.

質疑応答

Amit Mehrotra

I appreciate the question. Maybe we can start with backlog and growth, obviously, both extremely strong. Maybe you can just talk about your ability to sort of keep growing the backlog as the revenue growth picks up. Do you still expect to sort of convert 70%, 80% of that over the next 12 months? And I noticed F&S growth sort of perked up in the Americas, which is encouraging to see. Maybe you can just talk about sort of the expectations there as well.

Joakim Weidemanis

So we had very healthy order entry in the quarter coming off of a prior quarter where the order entry also was very strong. So our backlog continues to grow, while our ability to execute and deliver through our manufacturing operations, but also our field teams continues to improve.

Our pipelines, Amit, continue to grow. They're very healthy in multiple verticals. Of course, data centers was very strong, but we also have a number of other mission-critical verticals that continue to grow here from both pipeline and orders point of view. So we're very confident with the guide that we've given here.

Amit Mehrotra

And I guess, Marc, just as a follow-up on the incremental margin of 30% plus, and that's obviously consistent with the long-term framework. I understand that obviously, there's a need for capacity. But at Investor Day, we talked a lot about this opportunity to create synthetic capacity. And so maybe you can just balance those two? And is there maybe an opportunity to sort of exceed the long-term framework in '27, just given how early we are in the journey of the productivity initiatives.

Marc Vandiepenbeeck

Yes. So we're already exceeding the long-term algo on the top line, right? We guided that 30-plus percent incremental on a high single-digit long-term algo, which we're seeing a much faster growth now going into fiscal year '27, and yet are maintaining that operating leverage well above 30%.

The underlying question is how much headwinds do we see as we build that capacity into the factory. There's an opportunity to accelerate growth and potentially create higher operating leverage in the back end of the year as the ramp-up stabilize a little bit, and we get to a better run rate from the infrastructure we've built. And of course, the business system continues to drive enormous opportunities for us to create that soft or synthetic capacity within the factory allowing us to really create more output with much, much less capital. As Joakim laid out in his opening remarks, we think we would have probably have needed about twice as much capital as we were going to need over the next year or so to be able to invest in the growth we have seen and that continues to increase from our customers.

Joakim Weidemanis

And the $900 million, Amit, investment in capacity here is obviously in manufacturing, but it's also in innovation as well as investing in digital and AI approaches to continue to -- which is part of our proprietary business system to continue to drive more productivity and better execution capabilities in our field operations.

Operator

Our next question will come from Nigel Coe with Wolfe Research.

Nigel Coe

Note about FY '26, congratulations on wrapping that up. Just I want to go back to the orders and obviously, standard strength in the Americas good traction elsewhere. But just curious if there's any change in the kind of the consoles of the orders. Is this still largely a chiller story? Or are we starting to see a bigger mix of, I don't know, module or CDU, just wondering if there's any change in the mix of orders.

Joakim Weidemanis

Yes. So what we've been working on in particular in the data center area is to increase our TAM. And as you've heard over the last couple of quarters, we've increased our offering, added CDUs, acquired a cold plate company that we're now making good progress with several major customers. And in modular data centers, that is not a new product line for us, but with a little bit increased focus here and a little bit more innovation work, you've been able to read about some of the progress that we've been making here more recently. So chillers is the largest part of our portfolio still, but a good part of our growth is starting to come from these efforts that we -- I outlined here to increase our TAM. So we're very encouraged about what we're seeing here.

Nigel Coe

No question. And then just coming back to the -- it looks like it's a new restructuring program, Marc, the $400 million of expense to yield to $600 million of savings by FY '29. Number one, I just want to make sure this is the new program on top of the existing program. And maybe just bring us up to speed in terms of where we are right now on the current program and the sort of savings you expect to realize on the current program.

Marc Vandiepenbeeck

Yes. So if you look at the existing program that really came from the divestiture of our residential light commercial, a lot of that program had to do with fixing how we organize and the base cost and the support infrastructure that drives solutions and function support for customers. And we're very pleased with how that came about. So we had announced about $400 million of expense for $500 million of savings. And we've spent about 85% of that $400 million. And you can see as it translates into the earnings here this year, the run rate savings is probably $100 million to $150 million above that original $500 million target. So the outcome and the speed at which we generate the savings ended up, a, being much faster on the old program, but also being much higher.

As we looked at more opportunity to simplify the portfolio, we clearly saw the opportunity to simplify the part of the portfolio that is less geared towards the mission critical and data center and simplify a little bit on our logistics and manufacturing footprint, which hasn't been touched as part of the original program. And so that new program, we expect will have maybe a little bit longer lead time than the original program, less low-hanging fruits. But I think it will bear probably as good of the level of return as the first program did. And we are very excited about the opportunity to further simplify our infrastructure.

Operator

Our next question will come from Steve Tusa with Wells Fargo.

Charles Stephen Tusa

Just on the earnings bridge for '27. I think you break out mix and things like that. You mentioned the savings this year. Can you maybe give us a little bit of color on mix, price/cost and then any kind of savings you're flowing through just to help decompose a little bit the margin?

Marc Vandiepenbeeck

Yes. The -- so I'll get past the divestiture, right, that we put on that bridge. But clearly, the year was really supported by the accelerated growth that we saw mostly in system, and that's a for chiller output revenue that came about. Because of the efforts we did from a business system standpoint, we saw a lot of productivity. The mix uplift we saw really had to do with the different mixes of businesses that generated that incremental revenue. So less traditional fire and security business and more of the higher-end-margin Chile where we differentiate more, and we have the ability to really deploy our technological advantage, and that created a gross margin life.

Now transparently service was a slight drag into that internal mix. But if you net all of that out, it's really focusing and orienting our growth opportunity against end market where we can differentiate and provide solution for the customer that they're willing to pay for.

Charles Stephen Tusa

Okay. And your price cost positive?

Marc Vandiepenbeeck

We have price cost positive for the year. There was a lot of inflation on both material and a little bit on raw. You can see that while we maintain price cost positivity, the incremental price we got on top of inflation does not fully translate into the same margin rate. Said differently, we don't get exactly the 37% gross margin rate we have on a recovery on inflation, but we're absolutely price cost positive, it's just slightly margin dilutive for the year.

Operator

Our next question will come from Scott Davis with Melius Research.

Scott Davis

Congrats on a great year. And just quick to clarify on Steve's question. Are you -- do you need more price in '27 to be price/cost positive?

Marc Vandiepenbeeck

No. We are price cost positive in '26, and we will be price cost positive in '27. We don't need more relative price. My point, Scott, was if you get 100 points of price and you have a cost increase of 80, your price cost positive by 20. But that 20 is less than your normal 37% in our case, gross margin rate. And so -- yes, ideally, I'd always love more price, but we want to remain competitive in the way we play in the market. And so we'll continue to act as good guardian of our shareholders' money. And price way higher than what we see in inflation, but our ability to maintain from an inflatory standpoint, the entirety of the gross margin rate of the enterprise at time will become challenged.

Scott Davis

Okay. That's helpful. And then are you guys done with 80/20 in fire security? And I don't mean that well, growth reaccelerated. So are we kind of -- have you anniversaried the tougher kind of comps there on 80/20 or was growth itself just that much stronger?

Joakim Weidemanis

Well, when it comes to the business system that we have built and are deploying that's a multiyear journey. So to some respect, and it's the good news that you're never done because there's always more opportunity. I think what we're seeing is to go back to the performance of some of those businesses is that as a result of leveraging our business system, but also as a result of some work changes we made a couple of quarters ago where we have decentralized decision-making and empowered frontline general managers with a broader scope of responsibility, think being able to influence the customer end to end. I think we're starting to see the early benefits of that. So I'm very encouraged and expect to see more here going forward.

Operator

Our next question will come from Joe Ritchie with Goldman Sachs.

Joseph Ritchie

I echo everybody's congratulations on a great year. The first question I have is really just around the backlog conversion. So your guidance implies call it, roughly around $3 billion in incremental revenue in FY '27 versus FY '26. Obviously, backlog is up $8 billion. What I'm trying to understand is just -- is it just the nature of the projects that you're booking and when those projects are expected to deliver? And is there potential upside to Amit's question from earlier around like some better capacity to be able to deliver more of your backlog in FY '27 than what's implied in your balance?

Marc Vandiepenbeeck

Yes. No, fair question, Joe. The $23 billion backlog we've not accumulated over the past year, that really provides us very clear visibility into the growth for '27 and is fully embedded in how we've outlooked the 11% to 12% organic revenue growth for the year. We still anticipate 70% to 80% of that backlog to convert into revenue over the next 12 months. That's not something that has changed. And the remainder of that balance extends beyond fiscal year '27. The primary constraint really is not demand. The demand continues to accumulate and the mix of projects is not materially changing. But in some cases, we see customers that continues to face power and some electrical infrastructure limitation, that influences their commitment on when they want to take delivery and the project timing and simply the schedule of how that will all unfold. But we are very confident that we are going to continue to build a backlog and continue to build capacity to accelerate growth.

Joseph Ritchie

That's great, Marc. And then I guess just my follow-up question, maybe just on the capacity. You guys talked about this ability to create some better capacity. I'm just curious just given the demand environment remains so strong? Is there a point where this capital efficient drug that you guys have maybe requires additional hard CapEx? Or do you feel like you've got good line of sight for the next couple of years?

Joakim Weidemanis

I think we have pretty good line of sight for the next couple of years. And we'll back that up with what many of you who participated in our go to Gamba Day in June, where we showed an example of how we had taken a part of a factory and quadruple the capacity without adding headcount, capital and actually have reduced the number of space needed. So there are still many opportunities like that available to us. So our capacity expansion going forward is going to continue to be less capital intensive than in the past.

Operator

Our next question will come from Andrew Obin with Bank of America.

Andrew Obin

Can you just talk about what's happening in just HVAC supply chain, specifically, I'm thinking Silent-Aire? A lot of headlines, a lot of concerns. You seem to have been able to deal with it well. Where are we? What does it look like into next quarter? And what are your assumptions into next year? And how are you managing it?

Joakim Weidemanis

Well, so first of all, thanks for that question. So first of all, as you heard also from at the go to Gamba Day and those materials for those of you who weren't there are on our website. So our vertical integration here is really a significant advantage in a high demand environment that we're living in right now. And you'll recall, we talked about for chillers, for example, that chiller is really 5 key subsystems, and we own not just the proprietary technological know-how, but also control the COGS.

So we manufacture the 5 side systems and are quite vertically integrated. And we, of course -- but we're not vertically integrated on everything. So we continue to look at what would make sense economically to do more in-house to reduce the dependency on potential shortages from a variety of vendors. And included in that is also looking at potential acquisitions of -- I think of them more as surgical acquisitions, bolt-on acquisitions to help protect our supply chain here. But so far, our teams are executing very well. So even though there are the odd issues, which there always are in manufacturing, we're able to execute pretty well here, as you see from the results.

Andrew Obin

And then just maybe more a technical question. Given your relationship with Armada, how does the modular product flow through your P&L? How should we think about it? Because you sort of -- you cite about capacity additions. Do we just assume all of this revenue flows through the P&L and margin? Or how should we think about modeling it?

Marc Vandiepenbeeck

Yes. So the way that flows through is our Silent-Aire. So relationship with Armada is we are really the infrastructure provider of those containerized modular edge compute sovereign AI pods. As you know, we are very proud of being -- now qualified for the new NVIDIA program, and we announced that plan to ramp up 500-megawatt with them.

Armada has the entirety of the software layer and distributed application that goes through that compute. And we take care and revenue in our P&L over the next 12, 18 months, everything that has to do with the equipment and those container eves -- modular data centers. And so we're very excited about that opportunity. The growth it represents. We think that market will continue to evolve and will continue to evolve to the positive. Some of the political environment and the uncertainty around logistic allocation and the need to accelerate the speed to compute will continue to be a critical item for our customers.

Joakim Weidemanis

In our TAM, our dollars per megawatt, if you will, is higher in this kind of business than in most other parts of the data center business that we're in -- I'm talking about per megawatt now. And so you should think about those modular data centers as having pretty much everything we develop and own included in it.

Operator

Our next question will come from Nicole DeBlase with Deutsche Bank.

Nicole DeBlase

Can we just talk a little bit about what you're seeing with respect to the Middle East and what you've baked in for the Middle East within the EMEA outlook for 2027?

Joakim Weidemanis

So the Middle East was challenged in 2026. But over the last couple of quarters, it would seem like some customers have figured out how to live with the uncertainty of the environment. And therefore, we are projecting a slight improvement in what we expect from that region. But of course, there's still a lot of uncertainty around what's going to happen there. So we're not back to where we were before the uncertainties.

Nicole DeBlase

Okay. Understood. And then with respect to the global intrusion announcement yesterday, is it possible to size that business in terms of the total divestitures that you guys were -- have been considering that you've disclosed? And any update on the progress for -- or the time line for additional divestitures?

Marc Vandiepenbeeck

Yes. So First, that intrusion business, if you remember, it's residential, very light commercial type of business. As you know, those are two end markets that we've really decided were noncore for what JCI does and really not aligned with our mission-critical approach. We anticipate to close that transaction towards the end of the second quarter of '27. That transaction will be slightly dilutive. Think about $0.15 on an annualized basis once it's closed. So for the balance of fiscal year '27, it won't be highly material as we look into it. But depending on the timing, we'll keep you posted. The annual revenue of that business is right around $0.5 billion.

Joakim Weidemanis

And then, Nicole, we continue to work on our overall portfolio and the overarching goal here is, of course, to create shareholder value. And so there is more work going on, and we'll keep you posted. But meanwhile, of course, we're -- as per the other question that was asked, we're making sure that we continue to execute better across the portfolio.

Operator

Our next question will come from Noah Kaye with Oppenheimer.

Noah Kaye

Yes. So your comment earlier about the productivity of the CapEx you're adding and how would have been twice as high were it not for the business system. I wonder if we could put some additional parameters around that. Is there a way to think about the revenue capacity that this investment is bringing? Because I think it would be a good measure of kind of your capital efficiency here and obviously help us understand some of the longer-term growth possibilities.

Marc Vandiepenbeeck

The goal is to keep up with the demand as we see it coming from the mission-critical vertical like data center, meaning the goal is to keep up for a longer period of time with double-digit growth demand in terms of revenue opportunity. Doesn't mean we'll be a double-digit growth company forever, but it means that the objective of the buildup of our infrastructure in '27 and in '28 is to maintain that double-digit trajectory and capture as much as we can of the opportunity as we see it and maintain that leadership position in those critical domain that JCI has been operating in.

Joakim Weidemanis

And keep in mind, again, the $900 million, of course, manufacturing is an important part of that. But as I've mentioned before, there is an important part of innovation investments in there as well to accelerate the rate, the speed and rate of innovation to further our competitive advantage, capitalize on 150 years of know-how technological, know-how that we built up. And then there's also a chunk of investment related to basically, think of it as productivity in the field that will enable our -- with AI and digital approaches and tools enable our field to serve and win more customers.

Noah Kaye

A question on some of the regional orders dynamics. I think it's striking that Americas was so robust this quarter. When we look at the pipelines and where we're seeing inflection in pipeline growth, one could argue that EMEA and APAC are perhaps seeing more excel at this point. I'm curious to know if you see that in your pipeline as well? And how you think about the implications for orders growth from here moving into the next several quarters?

Joakim Weidemanis

So our pipelines continue to grow at a nice rate in all three regions. Now having said that, the some of the secular drivers around data centers, semicon, those two verticals that really are related to the world's desire and need for more compute. -- the drivers are much stronger in the United States and Asia Pacific. And by the way, in Asia Pacific, they have strengthened in a very nice way here over the last couple of quarters. Europe is just simply a little bit earlier in its journey when it comes to all things compute, but we expect that to hopefully change here over the next year.

Beyond those verticals, there are healthy pipeline growth in, for example, biopharma, but also defense for the obvious reasons you can read in the paper every day what's going on in the world, right? So -- and so the mix of what's happening in the pipeline is a little bit different by region here. But generally, pipelines are growing very nicely in every region.

Operator

Our next question will come from Jeffrey Sprague with Vertical Research.

Jeffrey Sprague

Couldn't stay away, guys. I hope you're doing well. Just coming back to backlog and conversion. I know there's been a couple of questions on this. But the fundamental principle of the backlog you share with us, I believe, is backlog that you can deliver within the next 12 months? Obviously, what you can deliver and what the customer accept are maybe two different things, which gets us to maybe that 70% to 80%. But I want to confirm that's fundamentally correct. The backlog is technically deliverable within 12 months. And then -- so maybe you could -- if that's so, then the numbers do suggest fairly significant revenue upside relative to your guide, and it obviously is an initial guide, we get that.

But maybe just kind of talk about maybe those customer bottlenecks? Are they getting more significant, what role you can maybe play in helping untangle some of the stuff? And just any other perspective on that sort of broader question.

Marc Vandiepenbeeck

Yes. So as I mentioned earlier, the primary constraint is really not demand. And yes, the definition, as you laid it out, is exactly what it is. We unconstrained supply and constrained demand, we could deliver the entirety of that backlog in the next 12 months. It doesn't mean that our customer will be able to -- and in some cases, the customer continued to face the same problem as they have historically. I wouldn't say not at a faster pace. So dynamically, the market isn't changing. The location maybe in some of those data centers is moving a little bit wrong, but we don't see really a slowdown or more difficulty from a customer standpoint to accept the orders. But your point stands, if some of those constrained simplify or loosen up a little bit over the next 12 months, our ability to unfold more of the backlog quicker is absolutely an opportunity. And -- as you said, 11% to 12% is where we see the year coming in. Should the market evolve a little bit differently, we could be -- potentially do better.

Jeffrey Sprague

And then maybe since we're near the tail end of the call, and you covered a lot of ground. I'll just throw a modeling knit at you, Marc. Just kind of the movement in and Armada, looks a little odd, dropping down the way it did in Q4 and then back up in Q1. Can you just provide a little color on what's going on there?

Marc Vandiepenbeeck

Yes, the Armada coming down was just part of the normal amortization schedule. And when you see it coming back up, it's associated with the transaction we did on Alloy that increased in the quarter, the amortization expense, as you know, new acquisitions, especially technology capability acquisition will come sometimes with a little bit more than you normally do. But those are for the good reason and we're really excited about the opportunity that Alloy brings from a heat exchanger differentiation as well as our entry into the cold plate market and differentiated CDU opportunities.

Operator

Our next question will come from Varun Govindaraj with Bernstein.

Varun Govindaraj

These few months, there's always the scale that sellers are going away at GTC Berlin NVIDIA put out another video showing that. Clearly, it's not reflecting in your strong order numbers, but are you sharing anything at all from customers indicating a shift away from chillers? And just as you plan for this over the longer run, how are you thinking of managing that risk away?

Joakim Weidemanis

Thank you for the question. I think lots have been written on that topic by many on this call. I think there will be some situations over time. We're on the margin. Perhaps 1 or 2 tier chillers will be needed. But by and large, customers are designing data centers with redundancy and designing them for operating at a certain peak conditions, which even though you think you may be able to reduce number of chillers and practice in reality, that's not how they're being designed at least not yet with less chillers that is.

Now regardless of that, as I mentioned before, our strategy in the data center market is to continue to increase our TAM per megawatt, and we're doing that through a number of ways. But if I talk about two approaches. One is, and we've talked about this before. One is simply approaching our strategy is to win in the overall thermal architecture of the entire data center to be able to reduce the amount of energy used for even higher capacity and more rapid response cooling. And we're doing that by adding -- have been adding capabilities in CDUs in cold plates and in controls. And there's more to come, and we'll be announcing more here in the next couple of quarters.

And so that's one way to increase the TAM and help our customers basically design and operate much more efficient data centers. And then the second thing which we talked about earlier on this call is really the modular segment that we have been in for a number of years, but that we've decided to double down on because we think the opportunity is very, very compelling here in the near and medium term. And there, again, as I alluded to, our TAM per megawatt is even higher than in the larger gigawatt data centers.

Varun Govindaraj

Got it. And then as a quick Chile-related follow-up, are you seeing anything happen on the mix between air cooled and water cool units just with this whole narrative around water conservation? Whatever you can share qualitatively?

Joakim Weidemanis

The mix has not changed materially recently. And as you know, almost all of the data centers that are being built today have closed loop water cooling systems and consume less than -- much, much less than your local golf course. And so I think this water consumption point is something -- many of our customers are addressing now with the general public through their ramping PR agencies here. It's quite frankly, old news and not the way centers have been designed for a long time.

Operator

Our next question will come from Brett Linzey with Mizuho.

Brett Linzey

I wanted to follow up on the pipeline, the CDU and then the incremental business on cold plates. I guess as we look at that $1 billion pipeline, how much of that is already converted into orders -- firm orders here. And then thinking about as that new capacity comes online, how much is effectively spoken for versus really dependent on future order conversion?

Marc Vandiepenbeeck

Only a small portion of that $1 billion plus pipeline is converting to date. So there's a lot of upside opportunity, and we continue to see that pipeline growing. We are ramping up capacity for CDU in all three regions. That capacity is mostly spoken for as we look at it. But part of the investment we're making, the $900 million of CapEx has to do with ramping up the capacity at speed to reduce our lead time and have the opportunity to accelerate the order rate for a very differentiated CDU product offering.

Joakim Weidemanis

And then in general, on capacity, let me share a little bit the types of discussions I'm having with some of our larger customers which basically is along the following lines. We have, over the last year, staffed up with an incredibly strong manufacturing and operations team which is why, and they're helping us deploy the business system to create capacity through lean manufacturing, but they're also very strong an experience that's standing up new capacity as we continue to do, and we've talked about on this call. We are able to -- for many of our product lines, stand up new plants, physical plant capacity within 12 months.

And with the lean manufacturing the business system, we're able to create meaningful capacity within quarters in addition to what we get for the -- with the hard capacity that we create. Many of our customers it takes more than a year to build the data center, right? So they are ordering in some cases, up to a year ahead of when they need the actual equipment. So we're trying to create a situation here, and I think we're there where we can -- we have flexibility on creating capacity faster than the demand requires it. And so we're trying to create a bit of a business model change, which we believe is going to be part of our many aspects of our differentiation.

Brett Linzey

Yes. I appreciate that. And then just a quick follow-up on service and specifically the attachment rates. So very strong growth in systems, service, obviously, strong. But the rate of growth, not the same level. What really explains that? I guess, is it duration? Or is there resource allocation? Maybe just talk about the uptick in your attachment rate trends.

Joakim Weidemanis

Well, so we're in many different service businesses, right? You've got HVAC, you have fire, you have security. And within those businesses, there are different service games, right? So it's -- you can't really generalize. We've spoken about in prior quarters where the growth has been more subdued in particular, in our security part of the portfolio, the service and the security portfolio, where we have done work to look at what kind of contracts we want to be involved in the growth run rate and the profitability of those. And as we're repositioning and a little bit in the service side of the -- security service side of the business, we're still seeing a little bit of subdued growth there, but it's starting to pick up. But as we've said in prior quarters, we still probably have another 1 or 2 quarters ahead before we're on the other side of that. So the security service business is the one that is -- has the biggest opportunity here.

Operator

Our next question will come from Toby Okwara from Morgan Stanley.

Tobenna Okwara

Congrats on the great quarter. Just wanted to follow up on some of the service questions and specifically in data center. I guess was this -- as the business mix is more towards data center, does that change the service opportunity long term at all? Or how do you kind of think about that?

Joakim Weidemanis

Yes, it will. And obviously, the systems growth is very, very healthy, and the attachment rates in the data center world are higher than fleet average. So over time, that will benefit us -- and we believe that our field footprint is one of the industry's largest. And as we're deploying our business system, and as many of you who visited us on the go to Gamba Day could see we're not just improving our ability to productize and sell services, but we're also improving our ability to execute on those services more productively. So we believe there is both a, over time, a top line acceleration opportunity, but also a very nice margin opportunity here.

Tobenna Okwara

And then following up on some of the international questions. I guess outside of Middle East, how did the growth look in Europe there? And what would you need to see in the market to see acceleration in the catch up to the growth that we've seen in Americas and APAC?

Joakim Weidemanis

Yes. So first of all, I think it's important to understand that our business mix is quite different in Europe than the other two regions. So we're much heavier on fire and security in Europe. And -- but building our presence on thermal management, meaning HVAC and controls. So -- and that's where the investments are going in Europe. As you heard the market in Europe for data centers and semicon is in earlier stages than it is in the United States and Asia Pac, but I think that over the next few years, we're going to see a significant pickup in that, and we're positioning ourselves to be ready for that.

Operator

This concludes our Q&A session. I will now hand the call back to Joakim Weidemanis for any closing comments.

Joakim Weidemanis

Thank you all for joining us today. So we exit fiscal 2026 with great momentum, record backlog and clear visibility into the year ahead. Our differentiated technological capabilities, our unmatched field presence and proprietary business system positions us to support customers as their requirements continue to scale and to create increasing value for our shareholders.

I want to thank our more than 90,000 colleagues around the world for their commitment to our customers and for continuing to raise the standard of execution across Johnson Controls. Thank you for joining us today.

Operator

This now concludes today's call. Thank you all for joining. You may now disconnect your lines.