ABB shares fall as net income misses forecasts despite record orders on data-center demand

ABB's orders hit a record $12.06 billion in the third quarter as data-center customers more than doubled their bookings, but the Swiss engineering group's net income fell short of forecasts and its shares dropped about 5% in Zurich on Tuesday, Oct. 20.

A record quarter for orders

ABB said in its third-quarter results on Tuesday, Oct. 20, that orders rose 40% from a year earlier to $12.06 billion, a record for the Swiss engineering group. The increase was also 40% on the comparable basis ABB reports alongside its dollar figures. Orders edged up from the second quarter as well, which Chief Executive Morten Wierod called "a stronger outcome than the historical pattern of seasonal decline."

Data centers drove much of the gain. ABB said orders from that customer segment showed a triple-digit increase, meaning they more than doubled, with strong demand for power distribution and cooling equipment used in facilities that run artificial intelligence. Two of ABB's three business areas posted strong order growth, the company said, without naming them in its summary.

Revenue rose 14% to $9.70 billion, slightly below the $9.74 billion average of analysts' estimates that ABB compiled before the release. Because orders grew faster than sales, ABB booked $1.24 of new business for every dollar of revenue, a ratio known as book-to-bill.

Operating profit beat; net income fell short

Operational EBITA, ABB's headline measure of operating earnings before interest, taxes and amortization, rose 24% to $2.03 billion. That was a little ahead of the $2.0 billion analysts had expected, and the margin widened to 20.8% from 19.2% a year earlier, against the 20.5% forecast.

The bottom line told a different story. Net income attributable to ABB fell 2% to $1.18 billion, well below the $1.42 billion consensus, and basic earnings per share slipped to $0.65 from $0.66, against expectations of $0.79. ABB said higher net finance expenses held earnings back, mainly a non-cash revaluation of a currency hedge tied to its planned acquisition of Rotork, which it announced in July.

Cash generation held up. Free cash flow rose 2% to $1.58 billion in the quarter, and ABB said that at $3.7 billion so far this year it was well placed to beat last year's $4.6 billion.

The stock fell anyway

ABB shares closed at 74.70 Swiss francs on Monday. They opened Tuesday at 71.50 francs in Zurich, fell as low as 69.68 francs, a 6.7% drop, and were down 5.25% at 70.78 francs at 11:05 a.m. local time (5:05 a.m. ET), according to Yahoo Finance data.

The decline came as earnings per share and revenue missed forecasts while orders topped them, a mix flagged in a pre-market note by Newsquawk. It also came on a weak morning for technology shares. The Stoxx 600's technology sector was down 1.54% in early trading, according to Reuters, and Sharecast noted another selloff in Asian technology stocks overnight amid concerns about overinvestment in AI. In Paris, French rival Schneider Electric fell 4% after selling new shares at 240 euros each, a discount of nearly 5% to its last close.

Analysts were already cautious on ABB before the results. Of the 25 that contributed to the company's consensus, five rated the stock a buy, 18 a hold and two a sell.

A firmer outlook and a deal in Japan

ABB now expects comparable revenue growth in the "low teens" for 2026, up from its earlier forecast of low double digits to low teens, Reuters reported. It expects orders to exceed revenue for the year, which it calls a positive book-to-bill, and its reported Operational EBITA margin to improve by at least 270 basis points. For the fourth quarter, ABB expects comparable revenue growth broadly similar to the third quarter and a margin that softens from the third quarter, though by less than the historical pattern. That forecast excludes a positive impact of about 240 million francs from property sales already completed in the quarter.

ABB said its capital spending is already running at a higher level of around $1 billion, which it does not expect to rise further in the medium term.

Separately, ABB agreed to take a controlling 51% stake in a joint venture to be formed with Mitsubishi Electric's low-voltage power distribution business, plus full ownership of related sales operations outside Japan, for about 79 billion yen, or roughly $495 million. The deal values the combined businesses at about $890 million, and ABB has an option to take full ownership in the medium term. The Mitsubishi Electric business had revenue of about 102 billion yen, roughly $640 million, in its 2025 fiscal year, with a low double-digit EBITDA margin; ABB said it expects to lift the venture's Operational EBITA margin to at least 20% within five years.

"This deal will make us the low voltage market leader in Japan, one of the world’s largest electrification markets, allowing us to benefit from the broad electric power trends including any local data center build-out," Wierod said.