江森自控 (JCI) 2026 財年第四季法說會：在手訂單創 230 億美元新高，2027 財年展望

重點摘要

• 2026 財年第四季有機營收成長 12%，其中系統營收成長 13%、服務營收成長 8%，主要受美洲與亞太地區雙位數成長所推動。
• 調整後 EBIT 利潤率擴增 300 個基點至 18%，調整後每股盈餘 (EPS) 則成長 32% 至 1.66 美元。
• 受資料中心、電池與半導體製造以及大型研究型大學的需求支持，訂單成長 44%。在手訂單成長 43%，達到創紀錄的 230 億美元。
• 2026 全財年有機營收成長超過 8%，調整後 EPS 成長 37%，調整後自由現金流達到 32 億美元，轉化率達 103%。
• 管理層預計 2027 財年有機營收成長率為 11%-12%，營運槓桿超過 30%，調整後 EPS 為 6.15-6.30 美元。
• 江森自控 (Johnson Controls) 計劃在 2027 財年投資約 9 億美元資本支出，用於擴充產能、加速創新，並透過數位與人工智慧 (AI) 工具提升現場生產力。

關鍵財務數據

業務與營運表現

在冰水機 (chillers)、冷卻分配單元 (CDU)、水冷板 (cold plates)、控制系統及模組化資料中心基礎設施需求的支援下，資料中心仍是主要的成長動力。管理層表示，冰水機仍是產品組合中占比最大的部分，但越來越多的成長來自於擴充江森自控每百萬瓦可服務市場 (TAM) 的產品。

該公司的 CDU 和水冷板潛在訂單管道 (pipeline) 已超過 10 億美元，儘管在法說會進行時僅有一小部分轉化為實際訂單。江森自控正在三大區域擴充 CDU 產能，且大部分產能已被預訂。

透過與 Armada 的合作，江森自控計劃在 2027 年協助建置 500 百萬瓦 (MW) 的分散式邊緣運算產能。相關設備與模組化資料中心的營收預計將在未來 12 至 18 個月內透過 Silent-Aire 注入。

區域需求以美洲與亞太地區最為強勁。管理層表示，三大區域的潛在訂單均有所成長，其中美國和亞太地區的資料中心與半導體需求尤為強勁。歐洲在運算基礎設施發展方面仍處於較早階段，且消防與安防業務占比較高。

服務業務成長仍低於系統業務成長。管理層將部分差距歸因於安防服務產品組合的重新定位，這可能還需要一到兩個季度的時間。隨著時間推移，資料中心更高的服務搭售率預計將同時支撐營收成長與利潤率。

管理層財務預測

取中位數計算，2027 財年調整後 EPS 展望代表較 2026 財年成長 21%。管理層表示，該展望已納入在手訂單能見度、產能投資、重組費用以及持續改善的執行力。

江森自控還預計在 2027 財年與 2028 財年產生約 4 億美元的重組費用，目標是在 2029 財年前實現約 6 億美元的年化毛節省金額。該計畫將主要集中在製造、倉儲以及公司最具差異化的關鍵任務業務之外的支援功能。

公司預計將於 2027 財年第二季末完成住宅及輕型商業防盜入侵業務的拆售交割。該業務每年產生約 5 億美元營收，管理層預計交易交割後將對年化 EPS 產生約 0.15 美元的稀釋效果。

風險與關注焦點

• 部分客戶持續面臨電力供應與電力基礎設施限制，這可能延遲專案驗收與在手訂單轉化。
• 管理層預計在未來 12 個月內將有 70%-80% 的在手訂單轉化為營收。其餘部分將延伸至 2027 財年之後。
• 產能擴充在工廠提升產能期間可能會帶來短期營運逆風，不過管理層認為，隨著新基礎設施趨於穩定，今年稍晚營運槓桿有機會獲得改善。
• 江森自控預計在 2027 財年將保持價格與成本的正向差價，但通膨轉嫁仍可能稀釋利潤率，因為調漲的價格無法達到公司正常的毛利率水準。
• 中東地區在 2026 財年仍極具挑戰性。管理層預計 2027 財年將略有改善，但也強調不確定性依然存在，且營運活動尚未恢復至先前水準。
• 管理層坦承偶有供應鏈問題，但同時提及垂直整合與潛在的補充性併購是減少對外部供應商依賴的方法。

分析師問答重點

在手訂單轉化與營收產能：管理層表示，在無限制條件下，230 億美元的在手訂單技術上可在 12 個月內交付，但客戶時程安排與電力基礎設施可能會延遲驗收。若這些限制放寬，江森自控轉化在手訂單的速度可能比目前假設的更快。

資本效率：公司表示，其商業系統與精益製造計畫大幅減少了所需的投資。管理層預估，若非如此，計劃中的產能擴充可能需要兩倍以上的資本。公司還舉了一家工廠為例，在未增加額外人力或資本的情況下，產能提升至原本的四倍。

資料中心冷卻產品組合：管理層表示，尚未看到市場明顯偏離冰水機的需求。客戶持續針對峰值條件與備援需求來設計設施。江森自控也透過拓展至 CDU、水冷板、控制系統和模組化資料中心來降低產品集中度。

重組計畫：全新的 4 億美元重組計畫與先前與住宅及輕型商業拆售相關的計畫是分開的。先前計畫的預算支出已完成約 85%，估計其年化節省效益比原定 5 億美元的目標高出 1 億至 1.5 億美元。

供應鏈：江森自控強調其在五大關鍵冰水機子系統的垂直整合優勢。公司也在評估選擇性的補充性併購，以增強供應鏈韌性與技術能力。

完整法說會逐字稿

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完整財報電話會議逐字稿

管理層陳述

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.

分析師問答

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.