All right. We're going to get started here. Thanks, everybody, for joining in the room, and on the webcast. My name's Amit Mehrotra. I lead the Multi-Industry Franchise here at UBS. Super, happy to have Paulo Ruiz, the CEO of Eaton, in the audience. We have Yan Jin. Yan, there you are. Hey, nice to see you. Thanks for joining. I hope this is going to be interactive. There's so much to talk about with Eaton in terms of, you know, where the company has been under Paulo's leadership. I think on June 1, you know, where it's going, and, obviously data centers and, and power and now liquid cooling. Obviously it's December 2, so we're going to talk hopefully about 2026 a little bit. I'm trying to make this as interactive as possible.
There are a lot of people in the room today, so please do not feel shy. Raise your hand. We will get you a mic. Maybe to start, Paulo, thank you for joining, first of all.
Thanks for having me.
Appreciate your time.
Sure.
First and foremost, you know, you've been at Eaton for a while, but obviously taken the top job, the top position mid this year. It's not lost upon anyone the change in direction, maybe moving into more growth verticals via, most recently, the acquisition of Boyd Thermal. Maybe just talk about, like, your vision. If we look back, you know, five years from now and look back, what is going to define Eaton and where is the direction that you want to take the company relative to where it was over the last 15, 20 years, which is obviously a very successful direction, but still a little bit different.
Mm-hmm. No, thanks for the question. Thanks for having me, and thanks for the audience for the interest. I would say this, I shared in March during the investor day with the group in New York, and you included that we put our strategy around big pillars, three big pillars, strategic pillars, and I purposely inserted growth in each one of those pillars' names. The first pillar of the corporate strategy is lead for growth. It's all about being customer-centric. It's all about being nimble and moving fast and making the decisions. The second pillar is about execution. If you think about execute for growth, I'm an operator. That's my background. That's what I cut my teeth on, 20-something years of P&L management. Seizing the opportunity of a growing market requires the company to have strong operators.
It's operating well in our sales teams, our engineering teams, operating well our factories, etc. That supports the growth. The third pillar is about investments, being, you know, having the conviction to invest in high-margin, high-growth verticals. We have plenty. Not only everyone mentions data center, which is a pretty obvious growth, you know, vector for us. We have the utilities market in electrical. We have the CNI market. We have, you know, all the mega projects that are just starting in the U.S. It's a long tail of business coming our way. We have the strongest, you know, distribution channels that haven't gone anywhere. They're a strong asset for the company. There's a lot of investment in our future, growing the company organically and then inorganically, to your point. I think it's a misconception that we're doing much more.
I think we're doing what the company always did well, which is, to have tough internal targets where we want to return our investment over 200 or 300 basis points of our capital in M&A, but we are a bit more focused this time. I gave the company clarity on where we wanted to invest. Part of the invest for growth mindset. We said we're going to do electrical and aerospace. Within electrical, look at data centers and utilities. That is exactly what we're doing. The company has historically done a number of deals. If you think about the position we are in today, the big acquisition of, you know, Cooper 13 years ago transformed the company. Since then, many, many, many small deals happened. Some of them did not even hit the main line here. I think the company has that in the DNA.
We are disciplined in our approach. We have a very well-oiled machine in terms of diligence and integration. This year, we were more focused. I give also credit to Craig when he goes out and makes the announcement on behalf of the board that I will be elected. He does that in August 2024.
Right.
That gave me almost a year. I started working with the team on the new strategy, looking for targets. Don't think as something that we did in the last six months. We started 18 months ago.
Sure.
That helped a lot.
One thing obviously we noticed this most recent quarter is the big sequential step up in orders of the company within the Electric America's business, call it from $3.4 billion, $3.5 billion to above $4 billion in the quarter. You were quite bold on the call talking about how you expect this to even improve further in the fourth quarter. Maybe just talk about that because you're talking about 100 gigawatts plus, which is just an insane amount if you just think about what that means. Where are we in that kind of build-out or timeline? Where is your confidence that you can continue to build on this very, very strong order momentum within EA?
You talk particularly about data center build-out, right?
In think about that. In March, when we had Investor Day, we talked about market projections of the data center to go to 70 gigawatts to 130 gigawatts, having 100 gigawatts at the midpoint.
Yeah.
In 2028. Some people were skeptical, but those were market projections, not Eaton projections. We took different projections into consideration. Back then, 2023, the overall U.S. data center capacity was around 20 gigawatts. Approaching the end of the year, we are going to get much closer to 40 already.
Right.
End of 2025. I would say there's upside. The backlog that our customers have in hand in terms of projects they announced, some started, some have not, is 165 gigawatts. We moved from 20 two years ago to close to 40 now in December. We have 165 that's going to be executed. Just follow the CapEx trend. If you think about it, this is incredibly powerful for a company like us in terms of winning business. When I say we need to invest and we invest, we are investing, I'm glad we started early because we are capturing that business. When we talk about data center orders in particular, you saw that our year-over-year orders in Q3 were up 70%. Seven-zero. There are two things here for you to consider. Over time, we improved our lead times.
Over time, we have more visibility into our customers' plans. Over time as well, the data around chips is moving so fast. The new technology is moving so fast. There's a new chip coming out every 18 months. Everything I mentioned here should point to less orders because lead times are coming down. There's more certainty on supply because we're investing in new plants. With the chips coming, the changes coming more frequently, you would expect that orders will come down. Orders are coming really up because the market is so strong that it's overcoming the lead time reductions, overcoming the shift in technology coming so fast. There's much less multi-year orders now and more like data center by data center build-out because.
Yeah.
We are ready. I would argue, of course, the market is really strong. The fact we started to invest early also is helping us to win, you know, more than our fair share of this business.
What's interesting on that point is we talk about this elongation of the backlog, but if I look at, you know, your backlog most recently relative to kind of the revenue, I think it was 34%, 35%, which is, you know, more than double where it was or double where it was several years ago. Are we actually seeing an elongation of the backlog because of lead times, or is this really more foreshadowing the revenue growth that's coming kind of in 2026?
No, this is, the market strength that is pushing that. It's not about lead times allocation. I just told you we are reducing lead times.
Right.
It's actually the strength of the end markets. We talk a lot about the electrical backlog, which is not only bigger, it's four-fold what we had historically, four times bigger and growing. In Q3, we said our backlog is 20% higher than last year, being 9% organic and 11% was the acquisition of FiberBond. It's growing. It was historical levels. We keep investing. We reduce lead times and we continue to grow backlogs. It's also true for aerospace, which we don't talk much about. Our backlogs are also growing. I think it's the strength of the end markets that's driving that.
The technology is obviously changing so fast. We were talking about now, you know, high-voltage data centers and, you know, when we think about your capacity in solid-state transformers, you know, do you feel like you guys are very well positioned? I assume the answer is yes, but maybe you can offer a little bit more color around, you know, how you, how you guys are prepared for that transition and whether your capacity in solid-state transformers will allow you to kind of participate in that growth.
No, I will get to the solid-state. I'll give you a broader picture. We get to the solid-state. For data centers, I think we are winning in that space for many reasons. The first one being that we have the broadest portfolio. I'm going to get to the transformer in a minute.
We have the broadest portfolio that starts from the utility feeder where the transformers sit all the way down to the chips. This is really important. The portfolio is very large and comprehensive. With the three acquisitions we made in that space, FiberBond, Resilient Power, and most recently, Boyd, we're just increasing our penetration in that market. It is an incredible portfolio we have. Two, I think the way we approach that business, which is key to winning across the world, but especially in North America, you need to come up with an integrated offer. What I mean by that is about the hardware, about the software, about service capabilities as well. If you do not have service, you do not win in that space. We have that. We started, as I said before, talking about capacity, getting ready for the growth.
That's another area, which I think is really important. The fourth piece, which I think is also important for us to have in mind, is we start to integrate those solutions, not looking at a product sell one by one, but offering full systems to our customers. Getting to a specific point on 800-volt DC architectures. What happened over time, we moved closer to the chips as a company, and we are embedded in the developments of the NVIDIAs, the Googles, the Metas, etc., on their next generation of chips. That's what Boyd does extremely well. We made us so interested in that business. When you do that, we start projecting back what the power should be. We got to the discussion about accelerating the development of our solid-state transformer technology. We were doing that organically. We always do that.
We are paranoid about, you know, market dynamics. We had a review, and as a team, we said, "Can we look outside? Is there anyone, ahead of us?" The answer was like, "We don't know. Let's go check." They found out that Resilient was actually a couple of years ahead of us.
We're accelerating that development, and we're going to be ready by when those chips that require service with a one-megawatt power, we're going to be ready to supply the whole chain. We can ramp up. We know how to do it, and we just don't need to be ahead of the chip development. That's all.
I think this is an important point because, you know, data center exposure is not created equal across all the different players. If I think about kind of the total data center supply chain from the power generation side to the transmission distribution side to within kind of the gray and white space of the data center, there is a point of differentiation among companies. When I look at companies like Eaton or Vertiv or obviously Schneider with Motive Air, there are questions around kind of what differentiates Eaton versus those kind of, you know, soup-to-nuts players, so to speak, in terms of within the gray and the white space of the data center. How do you think about, you know, how you guys differentiate yourself against maybe those specific players?
I'd rather talk about Eaton than other companies.
I agree.
Since you asked me, I need to address your question. No, I think the big, obvious difference between Eaton and those two players you mentioned is that we have three-phase transformers. They do not. One of the two has a very limited power distribution portfolio, which is the biggest, you know, item in terms of dollar per megawatt in the power side. They do not have much of that capacity there and technology and portfolio. What we also do as a company, as I said before, we go from the utility feeder all the way down to the chip now, and we do that at scale. That is also important. Boyd will give us, is not part of the company at one moment, it will be, will give us a scale entry into cooling.
We want this because, in my opinion, the cooling and power integration will be won by engineering power. If you put together the Eaton engineering power, ingenuity, and Boyd, which they have 500 of the best engineers together, we're going to continue to win. If you move outside the data center for a moment, another big difference to the two companies you mentioned, we are present in utilities. Those guys are not. We can help our data center operators to have better connection to the grid. The question you raised before around direct current, think about our connection with direct current on energy, in storage, battery systems, or even renewable integration. We can help our customers because we are a utility player as well and the broadest North American player. We can help them.
If you go outside the electrical, we have aerospace as a growth vector that those companies do not have. My message to you is, yes, of course, we are a formidable player in data center. Those two companies also are, no doubt. I believe we have the most complete portfolio, especially now with the recent three acquisitions in that space. We can play outside of data center as well.
I guess it also just maybe quantifiably, we can move to like content per megawatt as a differentiating factor as well. I mean, it was, at Investor Day, you talked about maybe a couple million dollars per megawatt. Now we're at $3 million per megawatt. I mean, 100 gigawatts, that's 100,000 megawatts at the $300 billion market. I don't think that there's a company out there, maybe one other that has a similar kind of content per megawatt. Maybe talk about that bridge, that two to three pro forma for the, for the Boyd acquisition.
Yeah. So we, today with the current portfolio we have, we already see our content per megawatt growing in AI data centers close to 2.9.
You know, million per megawatt. The Boyd acquisition, we add $500,000 on top of it. Move from $2.9 million to $3.4 million, rounding $3.5 million, for good math. The way to think about it for us as Eaton is all upside. Why do I say this? First of all, data center is the fastest growing part of our business. For sure it is, but still 20% of the company, right? Within data center, AI, although it is growing really, really fast, is 30% of the data center. We are talking most of the time around 6% of the company.
Right.
Growing really fast. Now the conversion to AI is to be expected that our leadership will only grow because we can go all the way from the utility feeder down to the chip. And the content per megawatt going up favors us. Think about it as a very large tailwind of secular growth coming our way.
Just on that point, you know, we talk about brownfield, greenfield, retrofits. Is there something in the order data that we can observe that tells us something about that and what the opportunity shift is if we move more to retrofit versus greenfield?
Yeah, it's a very interesting question. We talk a lot about that internally, but also with our customers. I would say today it's all greenfield, and there's a reason for it. There's a race for, in building those, at the same time, those training data centers for AI, at the same time need to build the cloud infrastructure for companies to move their data to cloud so they can leverage AI. That's their race. The other element, which is important for us to consider here, the demand is higher than the offer, or the capacity in the market. Our customers are favoring greenfields. Having said that, it's logical to think when the training models are already developed to a certain degree, you need to have inference data centers that are closer to big urban areas.
Yeah.
I would expect that it's logical to think that more retrofits will happen in those today cloud data centers that are closer to big centers and big cities. We are already debating and discussing for our customers flexible design, you know, architectures where they can have both cloud and inference, you know, AI in the same data center. Again, it's something that's coming. It's a tailwind, but it's still very small and it's going to come.
Can we, I want to talk about liquid cooling, which is not something we could have talked to Eaton about, you know, a year ago as much, but now obviously it's a different, different picture. It seems like when you, when you close Boyd, I mean, Boyd is going to grow 70% next year or something like that and, and good margins. I think there, there is a question about, you know, their defensibility of their business when you think about, you know, how much of their business is hardware components and, and what is the commoditization risk of hardware components within that, even cold plates, you know, as we, as we move to two-phase cooling with higher density racks or whatever. Just talk about like the runway of growth for Boyd.
It seems like Eaton with this acquisition is kind of underwriting another acceleration in orders as you close this deal, kind of middle of next year. A lot of questions there, but let's talk first about the commoditization risk of Boyd and how their ability to kind of maintain that market share as we move into higher density racks.
Yeah. I got really comfortable. We asked ourselves those questions over time. We started approaching Boyd 14-15 months ago. We wanted to get to know the business better. We wanted to acquire the business and it was not on the market. We got closer to them much before the deal was signed. What really attracted us to Boyd is not only the scale that they have in terms of revenue and the deep connectivity they have with customers and the build out of the chips, but especially because of their engineering power.
In a market that's moving so fast, when chips are launched every 18 months to two years, if you don't have a seat on the table today with NVIDIA, with Google, with Meta, with Microsoft, and those people do have that seat on the table with all of them, if you're not embedded in their design of the future chips, when they're launched, you're an afterthought.
Yeah.
Right? The race is about engineering and innovation. Why are cold plates important? They are a mirrored image of a chip. Every chip has a different heat map, and you cannot swap a cold plate from one chip to another. You build a cold plate for a particular chip. As you're embedding those developments years in advance, when they're launched, you already start producing. It's closer to what we do in business like aerospace or even mobility markets where you win a position in a platform and you start getting the orders.
Yeah.
That's what these people do. Eventually other companies can try to copy and emulate that. It's possible. By the time you copy a cold plate and you are able to do that, there's a new generation of chips. So you're always behind. You need to have that engineering power, and you need to be connected to the future development, to win. Now, what comes out of that connectivity is not only about cold plates. I don't see Boyd as a cold plate company. I see them as a cooling company.
They move up in the chain. They're moving up in the chain in terms of doing CDUs, the coolant distribution units, which are systems that are detached from the rack. They're really important, and that connectivity is important. They're already moved up. Think about this. They're moving from the chip upwards. We are moving from the utility down. We are meeting in the middle. It's a real powerful combination between two strong engineering cultures. We believe you're going to win by innovating.
Maybe a few months ago when you were far along this process and the headline comes out with Microsoft Microfluidics, I assume that spurred some questions. Obviously you got very comfortable with that. You've done a lot of work. Just talk about why that's not a concern for you.
It was not a concern. To be honest, we were also connected with the company that Microsoft was leveraging in Europe. We knew them. We were in connection with them. My point here, it only reemphasizes what I just said. Innovation will come out every time. Like we just heard about Google's chip launch the other day. It was not a surprise for Boyd. They've been embedded in this development for a long period of time.
Got it.
Those innovations will come out. I would not, of course, undeniably today, NVIDIA has an edge over any other chip manufacturer. It's a fact. I would expect that major hyperscalers, they're going to come more frequently with their launches. They want to have their own technology. Ultimately the industry will move to, from two platforms to maybe five or six platforms around different chips. The companies that will win will be those that can understand this roadmap, that understand the implications on cooling, understand the implications on power, and they can be ahead of the game when the chips are launched. They have the whole technology ready.
The, this valuation discussion, you know, I think it was like 20, 22 times or something next year's EBITDA coming down to single digits. Is that just more of a function of growth? I mean, this is probably not a business where, you know, there's a lot of cost opportunity. I would imagine it's just a function of the growth that they're going to endure beyond 2026.
Yeah. Yeah, from the multiple going down to high single digits, the biggest contributor to that is the growth.
Because they're growing at 40% CAGR, from 2026 to 2029. In three years' time, the multiple will be less than double digits. This is the biggest contribution. Also, very importantly, when you have a business that is a $1 billion revenue business, they cannot get the same deals we get with suppliers. We have much more purchasing power. That's an easy, I would say, synergy to execute. That's the second biggest. The third one, not so big because we normally don't like embedding much of a sales synergy into the model, because we are conservative. There is a third area where we believe we have better connectivity with the multi-tenant, the colos, data center operators than Boyd does.
Again, being an engineering company that's focused on chips, they are embedded into the hyperscalers and NVIDIA and AMD's roadmaps. We believe we can help them with the big colos, winning also more of the cooling business there. The biggest one is growth.
Helpful. I just want to pivot a little bit more to maybe some, some observations about, you know, what you're seeing right now in the market relative to kind of the guidance. And then obviously sitting here December 2nd, so would love to get your perspective on 2026. But first, you know, we're two months into the fourth quarter. You guys obviously reiterated the guidance for the full year. Good growth in the fourth quarter. Maybe just talk about kind of how things are trending relative to maybe what, what you talked about at the third quarter.
Absolutely. We are on track to deliver on our Q4 and our full year guidance on EPS. We are fully on track. We are fine. I also anticipated in Q3 that our growth will be in the lower range of the guidance
Given the vehicle market, the resi markets, again, no surprise here. We are on track for the year as, as per the Q3, you know, earnings call. In terms of '26,
Before we started '26, you know, the margins in EA were better in the third quarter.
Growth was a little bit weaker than maybe expected, but obviously that's reversing in the fourth quarter.
Growth is very strong in EA. Margins, incremental margins implied by our guidance are a little bit weaker. Maybe just, I know you're going through a big expansion. You're more than halfway through this year. You got another. Talk about when we kind of get to the point where we can get back to the incremental margins that are more, you know, lock step with what they had been prior to this expansion.
Yeah. We have a lot of activity in Q4. We are doing well, but there's a lot of ramping happening in the Electric Americas business. That creates a number of inefficiencies. When you have so many plants that are ramping at the same time, training people, expediting material, it creates a number of inefficiencies. That's a reality. We keep investing. You should think about 2026 as a year of continued investment.
Yeah.
We should expect towards the end of the year that we're getting most of these inefficiencies away and we start running at, you know, full speed and all those, you know, expansion projects. For Q4 specifically, that's what's driving. We had in Q3 some carryover of products we couldn't deliver that we're going to deliver in Q4. I think we are tracking really well. The comparison point to last year, I said in the earnings call, some people cracked a laugh, some of your colleagues. The comparison point with last year is the easiest, easiest comp because last year was 9% growth only, because we had some hurricane and, you know, some issues with strikes and things like that. The comparison point is the easiest one. This business is growing well. We are investing. It's natural. It's a growing platform that you see some inefficiencies.
As we get towards the end of next year, we should see those inefficiencies go.
Yeah. I think like it's not lost upon me that, you know, the margin expansion stories are from companies with significantly lower margins than Eaton as well. In some ways, you are a little bit of a victim of your own success in terms of where the margin is today and where the incremental margin could be. Do you feel that we can get back, you know, this time next year when we're on the same stage, look back and say, "Hey, we're back to that 35%‑ish type of incremental margin algorithm"? Is that the way in EA? Is that the way you think about it?
We are improving that for sure. I don't want to give you guidance.
Sure.
That's Fabry, for next year for sure. We are working really hard to ramp those factories up. More broadly, I think it's also important the way I talked about execution being one of the pillars of my strategy. We have a lot of opportunity in running our plants better independently on the ramp. What I mean by that, still within the company, if you look at the way we run our vehicle plants or Electric Asian plants versus our Electric Americas plants, there's a lot of opportunity in Electric Americas. Of course the margins are high, close to 30%. We love it. We are not, you know, we are not just, you know, relaxing on this, you know, big achievement. We are pushing the teams. We are giving them the tools and the talent. They continue to improve.
There is some juice for us to squeeze here.
Good.
In terms of execution.
Great. Sorry, I interrupted you when you were kind of talking about 2026.
That's fine.
You're exiting this year a very good growth. Expectations are also for good growth next year. Maybe just talk about, you know, how you think '26 kind of shapes up. I know you're giving guidance in February, but maybe give us some broad brush strokes.
Yeah. Guidance comes in February, but we gave you an idea where our markets will be.
We see our 2026 markets growing around 7%. It's natural to expect we plan to, you know, have some growth on top of the market. Make some assumptions there. Then using this, an increment of 30% would be a good proxy. That's the way to think about it.
Got it. There is obviously you're closing on Boyd, below the line stuff can matter. You gave us the above the line, you know, variables, but maybe talk about some of the below the line moving parts that could maybe either help or hurt '26.
Yeah. I think in terms of '26, below the line, two items for me to highlight here. First is pension. We normally do not talk about that. It was a positive guy. It turns into a negative next year.
Yep.
The other thing, we are acquisitive, so we need to finance and those, you know, costs will hit the below the line item as well. We have pressure there on the corporate cost, and we continue to see improvement on the segment margins.
And then just on the acquisitions, obviously FiberBond, Boyd Thermal, Ultra PCS. Like what, what's the way to think about, you know, the financial impact from those aside from the below the line item stuff that you talked about?
Yeah. Two of those we already closed.
Yep.
Right? One is pre-revenue, but then FiberBond is in full speed and growing really rapidly. So on FiberBond, I think the assumption could be look at the market growth in data center, assume the same growth.
Yep.
Put an increment on top. That is fine. When we close the other two deals, when we close Ultra, when we close Boyd, we are going to give guidance on how we are going to grow those businesses. Think about market growth as being a good proxy.
Orders, such an important KPI for Eaton and a lot of companies. You kind of were very bold to say, "Hey, we're going to see another step up in orders in the fourth quarter." As we think about kind of the runway for this growth and the next generation platforms and the acquisitions you made, can we have a decent step up in kind of order activity next year? Is that the right expectation?
Again, it's early to talk about next year. I can talk about Q4.
As you see, we kept growing our orders profile, quarter after quarter. We had a very strong Q3. We expect Q4 to be even stronger. With large backlogs like that and the value proposition we have, I see no reasons why we should not continue to win business at that pace. Right? That is logical to expect.
You still think we can build the backlog next year?
We could, but we also are growing.
Right.
you know, we are, we have an.
That's another way to me ask you orders, by the way.
I know. I get your point. For two consecutive years, we've been talking about the backlog being three times or four times historical levels. Would not be a problem. The backlog will come down because we're investing capacity. Reality is, we kept growing backlog quarter after quarter.
But I guess like the orders, I mean, it's tricky because there's some companies now that are moving away from quarterly order disclosures. I know we try to get away from that, but we can't really get away from that. There's always this need to like show sequential, you know, momentum in orders, which is difficult because the orders are large and lumpy and the timing is important. You guys did do chunky, chunky orders in the past, and sometimes that's been a headwind as you look prospectively. Do we have billion dollar plus orders kind of in the pipeline that we could start booking here in your opinion?
We had, you know, as an example, we talked about that openly and publicly. Q4, Q1 2024, we had a multi-year order, which was above $1 billion from a particular customer. We see less of these multi-year orders because, first of all, the customers believe that we can deliver because we're investing capacity. So there's no reason for placing multi-year orders on us. We have a forecast, but we don't have necessarily multi-year orders because they're not needed. The second thing I told you before with the chips changing every 18 to 2 years, customers would not love to place orders three, four years out when technology might change.
Right.
Having said all that, we look at what, how we are performing and we're substituting this big order with the new bread and butter business, which is with high data center, big data center, AI data centers. It is much more common today that we negotiate orders around $500 million, $600 million, $700 million. They're much more frequent. And our negotiation pipeline now is around $8 billion that we are discussing right now.
Wow.
A big portion of it is data center.
Any questions, Sir Paulo from the audience? Raise your hand. We'll bring, we'll bring the mic over to you. I wanted to just finally, just the last couple of minutes that we have, you know, Electric Global has kind of been, you know, the spread between Electric Global margins and America's margins has been very wide. Boyd, if I'm not, if I'm not mistaken, is actually going to go sit within Global, if I'm not mistaken. I think that's part of your strategy about moving away from maybe residential and machine OEM end markets towards faster growing, more value added end markets. That's great. That business has actually inflected quite nicely from a growth perspective.
It feels like those 20, 30 targets seem within reach. If you could talk about maybe some of what you're seeing in Global, particularly in Europe, that's kind of driving that inflection.
Yeah. Cooling aside, when you're not a market leader, as we are not a market leader in Europe, and we, the only thing you can do is to win market share. We, as a mindset, I talk about lead for growth. The mindset with that team is don't look at PMIs. Don't talk to me about PMIs.
Look at the, all the good things we do in the Americas and try to emulate that in Europe. We put a new management team together. We actually got someone from the Electric Americas team to lead Europe with the mission to shift us more towards the growth areas of the market, data center and utilities. Traditionally, our European business has been very strong and it's still strong and will continue to be strong in MOEMs. So machine builders, RESI distribution business, we value it. We're going to protect it. It's all fine. We're going to continue to invest and grow. We were not that strong in utilities and data centers, and now we are becoming stronger.
Yeah.
That's driving the top line. True to my three pillar strategy, we had a strong focus on execution as well. We said if we are going to grow in those areas, we need to invest in those areas. We need to restructure other parts of the business, and we are restructuring and saving money. At the same time, we are improving the way we run our supply chains, the way we run our factories. It's a combination of a different mindset, going after the right growth vectors, not looking at PMIs and executing better. That's the formula.
That's great. Just as a final point, I wanted to maybe tie a bow around how we think about '26. It feels like another year of underlying market growth in the high single digits, which you should and expect to outperform a little bit. Maybe the incremental margin algorithm is good at 30%, but still kind of being pressured by the first half.
Ramp in capacity. As we kind of exit the first half into the second half, it kind of might look like a tale of two halves, so to speak, as you exit some of those maybe inefficiencies related to capacity growth. Is that a fair characterization of '26?
It's accurate. Yeah.
Okay.
Again, guidance is going to come if needed.
Right. Okay. You got some below the line item stuff that's maybe transitionary.
Yeah.
Any final questions for Paulo before we end it here? All right. Thank you, sir. Appreciate your time.
Thank you. Appreciate it.
All right.
Thank you so much. Thank you.