Q2 so far: demand strong, margins mixed

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Capital Goods

Q2 so far: demand strong, margins mixed

Industry Overview

Demand trends strong ex-resi, margin trends more mixed

Last week showed data center end markets are still surprising to the upside (in contrast

to market volatility), automation & mining equipment are also strong, while construction

continues to lag. Margin trends are more mixed, with tariff refunds making trends noisy.

Key names reporting this week include Siemens Energy (see ENR preview) and Siemens

(see SIE preview); read-across from key peers has been positive for both so far in Q2.

Data center mkt still surprising to upside (despite mkt vol)

Schneider (Buy) and Legrand (U/P) both beat and raised on org sales growth (16.5% and

10.4% respectively in Q2) with data centers growing triple-digit and >30% respectively.

US peer Vertiv also raised its FY26 sales guide, despite missing in Q2 due to timing and

supply chain issues, and so did Eaton. In terms of orders, Schneider said data center

orders were up triple-digit (better than Q1 +DD) and our US colleagues estimate Vertiv’s

orders stepped up q/q too. Margin trends were more mixed, with Schneider beating on

productivity & pricing while Legrand had margins down 40bps y/y on raw mat inflation.

Prysmian (Buy) implied upside to its announced €10bn hyperscaler fiber agreements, and

mgmt pointed to 25% Q4 Digital Solutions margin exit rate (reassuring post-Corning).

Hitachi Energy delivered 87% order growth and upgraded its FY profit guide 15%, which

is encouraging for ENR Grid (especially after GEV Electrification orders missed slightly).

Automation demand is strong, whereas resi still lagging

Automation appears strong with Hexagon (Buy) delivering 12% org sales growth (highest

since 2021) driven by A&D, electronics and manufacturing; mgmt said this has continued

into Q3. Keyence also beat, with 33% y/y sales growth led by Asia. Both are encouraging

reads for Siemens; peer results in software have also been positive including Cadence

(guide raised to 19% FY sales growth) and PTC (FY guide narrowed up to 9.0-9.5% org

ARR growth). By contrast, construction demand has appeared more mixed with Legrand

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