Welcome to Rockwell Automation Investor Day. Our program will begin shortly. Please find your way to your seat. We ask that you silence your phones and devices for the duration of the program. Welcome to Rockwell Automation Investor Day 2025. Please give a round of applause for your event emcee, Aijana Zellner, Vice President, Investor Relations and Market Strategy.
Welcome, everyone, and thank you for joining us for the webcast portion of our annual Investor Day. We'll begin the day with a customer presentation from Brian Snyder, who shared how Rockwell is helping Thermo Fisher accelerate their vision for the factory of the future. A great example of how our technology and partnership deliver real results. In a world full of AI potential, Rockwell is implementing AI in ways that actually drive productivity. As the world's largest pure play in industrial automation and digital transformation, our portfolio is unmatched. Today, you'll hear from more customers who are transforming their operations with Rockwell as their partner. During today's presentation, we'll walk through the four pillars of our Rockwell operating model: high-performance culture, accelerated top-line growth, margin expansion, and operational excellence.
We'll start with an update from our Chairman and CEO, Blake Moret, on our strategic growth framework and how our operating model continues to drive focus. Our business segment leaders will share how Rockwell is driving innovation for our customers. You'll hear from Mateus Bulho, our SVP of Software and Control, on how we are differentiating through technology. Tessa Myers, SVP of Intelligent Devices, on how Rockwell is leading the shift from automation to autonomy. Matt Fordenwalt, SVP of Lifecycle Services, with real-world examples of customer transformation. Our CFO, Christian Rothy, will share our progress on our margin expansion strategy and how we're continuing to execute with discipline. We'll wrap up with our Chief Supply Chain Officer, Bob Buttermore, who will share how we're using our own technology to modernize our operations and bring the factory of the future to life right here at Rockwell.
Lastly, we'll open up the floor for a live Q&A session. With that, please join me in welcoming Blake Moret to the stage.
Blake.
Hey, thanks, and welcome again. I'd like to take just a minute to double down on the importance and the significance of this event. You know, I've been coming to these, as many of you have, for a long time, and to see the power of Rockwell and our ecosystem on full display at an automation fair is something I think is worth noting. We'll have over 15,000 people here, either, you know, employees, customers, suppliers, channel partners, all here because they're a part of the Rockwell story. When you see our partners and our shared objectives with them, with a trust that's built over decades, that's meaningful. It's an integral part, really, of our culture that we create, and it adds value along our journey. We've been on a journey to combine more ways to win with traditional sources of value, expertise with technology.
Over the last few years, we've had to add resilience to our model with more urgency than ever before. Where we are today, I wouldn't trade places with anyone. Quite simply, we are the most used technology in American industry, but with a draw and an interest that's growing around the world. Just a couple of comments on culture as kind of the first pillar of that operating model. Culture drives performance, and I think that a culture is really defined most centrally by the behavior of current employees and partners, but it's shaped by expectations that persist for many years. We accentuate the positive, and we strengthen what is especially important at different points in our journey. We'll talk about some of the things that are particularly important at this point in our journey over the next little while.
The principles of our culture are the same ones that I talked to the board about before I came into this role, and I think they're still as vibrant today. It's about integrity and inclusion and continuing to demonstrate in everything we do a commitment to that. It's about willing to compare ourselves, being willing to compare ourselves against all of the choices that a stakeholder has, whether that stakeholder is a customer, an employee, obviously, an investor, a partner, and to think about that every day. Incremental improvements on what we are already doing are important, but we have to make sure that there's not a better mousetrap out there, and if there is, that we're willing to consider that. I think that's been an important part of the evolution of Rockwell over the last years.
It's about increased speed of decision-making, and it's about a steady stream of new ideas, both from people who have grown up in the company as well as new perspectives. Just to take an extra minute on that, on the talent in the organization, it really does demonstrate our commitment to this idea of hearing a steady stream of new ideas from all voices that can contribute to the best outcome. You think about what we've added in the last few years to complement our traditional expertise: data science from Calypso and Knowledge Lens. We built a control-level cloud from the ground up. We thought that we needed to do that ourself, and you see that manifested in things like FactoryTalk Design Studio. At the information level, with acquisitions like Plex and Fiix and OSM, partners helping to provide us with customer intimacy to complement our own.
At the leadership level, and of course, we'll have leadership on full display over the next hour or so, it's seasoned leadership who understands the automation market and our customers, both the lifers like me who have grown up in Rockwell, as well as people demonstrating new perspectives. I think we collectively are comfortable with the opportunities and the challenges of technologies like artificial intelligence. We're making sure our organizations embrace that and think about using that, harnessing those capabilities for maximum impact. We're very well positioned as we move forward, and we manifest ourselves as a learning organization. Just like the technologies increasingly are about learning, the organization needs to continue to be a learning organization as well. That's culture. Let's move on to the next pillar of the operating model, and that's accelerated top-line growth.
You know, that growth framework that we released in November of 2023 is still intact, and I feel good about the progress we've made in each of these levels. We are fundamentally an organic growth story. We're in an attractive market with a lot of secular drivers, as people around the world are recognizing the importance of manufacturing. Specifically here in our home market, where we're seeing the highest growth, we obviously have a special place. Globally, we expect about 5% CAGR in the market that we serve over the next five years. That includes price, and that's obviously an important part of it. There are some fundamental drivers.
As companies are looking to add resilience and agility and sustainability to their operations, they're also recognizing that there's no way that countries with relatively high labor costs, like the U.S., can reindustrialize without complementing that labor with the technology such as we offer. When it comes to price, we've dramatically improved the % realization and the speed with which we can implement price changes since 2022. Many of you remember the discussions at that time where we were lagging a little bit in our ability to implement and realize price. We made changes, and those are serving us in very good stead now as we see the increased volatility of tariffs. We expect going forward as well, whether tariffs are an issue or not, to be able to get regular price increases implemented quickly.
You'll hear Christian talk a lot more about that here in a little bit. This is a graphic that you haven't seen before that talks about Rockwell's key served markets. First, I'll state the obvious. You know, we have great market access and really good balance between discrete, hybrid, and process markets. Process is fully 40% of our total business now, with good capabilities in control, in services, in power control, and we expect that to only improve in the years to come. We had hundreds of people at our process users group earlier this week, and they're very interested in new Logix capabilities. Software-defined automation that Mateus is going to talk about is especially interesting to those customers as they look to free themselves of bespoke hardware that they're captive to in some ways for many, many years.
We have some opportunities to disrupt in that respect. New power control offerings, digital services, because simulation is important in process as it is in discrete as well. Overall, we're growing at a faster ratio than historically to industrial production. It's due to this good balance and this proactive selection of target verticals, as well as the new ways to win that we've introduced. Automotive remains important to us. It's all forms of propulsion. Right now, one of the key activities is people who were on a headlong rush to EVs are kind of rebalancing and coming back to more hybrid and even ICE engines. We have great readiness to serve in all those areas. E-commerce and warehouse automation, the single fastest growing vertical that we have. There are multiple subsegments there that are contributing to that growth.
Obviously, data center, with what we're doing with the Cubic acquisition for power distribution, but also an increasing number of data center operators are finding that it's very attractive to switch in the building management systems from the DDC, the distributed control that they've been using, to industrial control systems like Logix. We see that as a strong contributor to continuing double-digit growth into next year and beyond.
We also see within that e-commerce segment, obviously new fulfillment centers, parcel handling, and you'll hear from Joel Stenson in just a little bit as he and I talk about what we're doing for UPS, as well as a lot of the consumer packaged goods companies who are recognizing that this concept of production logistics, bringing material to the make line and then taking finished product away to the loading dock and to the warehouse, is a really important part of their efficiency plans. There's still a lot of forklifts whizzing around. There's a lot of people pushing carts with packaging material as a line sits idle waiting to be resupplied, and our production logistics capabilities are fueling a lot of that growth. CPG, people continuing to modernize, making their facilities more resilient.
Life sciences, as an aging population wants to live longer, healthier lives, and we certainly heard from Brian about that from Thermo Fisher's point of view. Energy. The world is still using 100 million barrels plus of oil a day, and getting that pumped out of the ground and distributed efficiently is still high on their priority list. The next level in our growth algorithm is the ability to expand our served market and to take share. One of the things that we have, you know, in our advantage is home field advantage in the U.S. We have the largest share by a lot in the U.S., and the additional investment in the U.S. naturally accrues at a greater rate to Rockwell. We have the largest installed base. We have the best partners. We have the highest share and the deepest relationships.
I like that list of advantages. We have the ability to go into customers that are already standardized on the basic automation from Rockwell and to be able to add more ways to win in terms of software, services, mobile robots. Obviously, the ability to take existing products and to be able to infuse them with artificial intelligence to give those workers superpowers at all levels of the tech stack, whether it be at the intelligent device level, things like Vision AI, Logix AI, the use of artificial intelligence in mobile robots, and then in scheduling applications. We're doing it today, and we're doing it in a less disruptive way by infusing it into existing products and workflows to reduce the risk of being able to get the benefits for these customers.
You see more great examples of the things that we're doing here at different levels, right? I've talked about our production logistics portfolio, software and control, the ability to help customers create digital twins, to implement model predictive control, and life cycle services, the digital services, which by the way allow us to engage with our customers at a higher level than we ever did as Rockwell in their organizations. The next section is going to focus on our technology differentiation as a key enabler to create autonomous operations at our customers. We'll also talk about the progress and our expectations for capacity expansion at our customers, both globally and in the U.S., because it is a global game. The business leaders that you're going to hear from next have all taken different paths through Rockwell. They've come up through the technology route.
They've had exposure to commercial positions, IT services, international assignments, but the sum total of that creates what I think is a really impressive synergy as they collaborate together to bring our objectives to life. With that, I'm going to introduce Mateus Bulho to talk a little bit about our technology. Mateus has driven the modernization of our control and software technology. That's a pretty broad statement, but I think it's warranted. It took a respected insider to be able to move the center of gravity in the organization. With that, I'd like to welcome Mateus to the stage.
Okay, good morning. Yeah, thanks for being here with us. You know, Blake talked a little bit about this future, future of autonomy. For that to become reality, we need technology.
You know, and in particular, there are three that I would like to talk to you about today, three that we believe are essential, you know, software-defined automation, artificial intelligence, and robotics. I will be walking you through some of the progress that we have made and continue to make across every single one of them today. Let's get going. Let's get started with software-defined automation. You know, our plan for software-defined automation is quite simple. You know, we have been working to make the entire production system stack software-defined. If you listen to this market and what is talked about in this industry, much of what you hear is very narrowly focused on one, one dimension of this opportunity, typically software-defined control. Here at Rockwell, we have been doing that and applying software-defined automation concepts across every other layer of the stack.
I'm going to give you a few examples right now. Take, for example, design. Blake talked a little bit about that. FactoryTalk Design Studio, one system-wide application, logically defined, object-oriented, modern way of constructing systems, completely, completely abstracted from hardware, entirely software-defined. Once these systems are designed, they can then be simulated. They can be tested entirely, not just the automation system, but the entire production line, all in the virtual space with things like FactoryTalk Echo, Emulate 3D. When you talk about the next layer, when you are running your system, visualization and plant information systems, things like FactoryTalk Optics, that you will see in abundance in our show floor. One software-defined runtime that scales from simple operator interface all the way up to complex plant-wide information systems. It runs in our hardware or anybody's hardware, entirely, entirely software-defined.
When it comes to control, I would submit to you that just plain and simple, no one, no one in this industry has done more to contribute towards software-defined control as we have. You know, that journey began with Logix. You know, Logix did many, many things for this industry, but one thing it did that had the largest contribution to software-defined control is that it took all of the additional needs of control that surrounded the PLC, things that were employed in dedicated hardware, things like functional safety, hardware for general motion control, hardware for robotics, hardware for the DCS, the process, and many more, most recently process safety. It turned all of that hardware into software-defined capabilities, native, integrated into the Logix environment.
That alone not only had the largest contribution to software-defined control, but it's also what has made and continues to make Logix the most trusted and the most valuable control system runtime in the world to date. We haven't stopped innovating. You know, when you think about the next wave of evolution, we have what we call Logix SDA. Logix SDA is different. It's unique. It's different than the traditional approach to virtual control. It's different than the approach that people have applied towards soft control. The reason it's different is because if we're honest, soft control, the idea of virtual control, it's not new. We ourselves have had it for decades. The reality is, in this market, it has largely failed to gain any meaningful adoption. That's exactly why Logix SDA is different.
We understand why soft control needs to be done differently. There are quite a few things, but I'll point to two right now for you. First, our approach to Logix SDA brings forward all of these disciplines of control that I just talked about, safety, motion, robotics, and so on, brings them forward because it makes no sense for people to talk about virtual control for one piece of the system, and it still needs dedicated hardware for everything else. Logix SDA solves for that, which is one of the main reasons why soft control hasn't gained any meaningful adoption.
The second thing that Logix SDA does differently, and again, there are many more, it solves for the complex life cycle management that's involved in deploying real-time control on open platforms, things like what it takes to provision real-time control so it can perform, things like what it takes to manage the dependencies, the operating system, the things that will be running alongside on the same compute surface so that when they crash or are compromised, control remains resilient, remains intact, not to mention what it takes to secure, secure open platforms that are running control. Logix SDA solves for all of that. Just like Logix redefined the idea of the PLC, Logix SDA, it's going to change virtual control in a way that allows it to truly scale. We are very excited. I hope you had a chance to see it because it's in the show floor.
Our first variant is what we call Logix Edge. It's exactly what it sounds. It's Logix running on edge compute, but Logix SDA is there in the show floor in many other forms, included in our AMRs. I am very excited about what we're about to do again in this industry and continue to change what it takes to consume automation in a software-defined manner. Software-defined alone does not yield autonomy. You know, it creates the conditions for your system to be agile, for software to move freely in the compute that's available across your enterprise. For you to get to autonomy, you need intelligence. Just like SDA, and as Blake mentioned, we have been applying artificial intelligence across the entire stack. You see it here.
We talked about it last year, and we've continued to evolve all the way from end devices, scaling all the way up to plant information solutions. We know that the real question is not whether we have AI. You're going to see many other automation players with AI in their stack. The real question is how, how AI is being used. Here at Rockwell, we are focused on where we believe AI adds the most value. I'm going to point to three today. The first is AI that's used to power production system design. Second is, once these systems are designed, how we use AI so the system can continuously optimize, the system can learn, it can get better, it can do more over time because it runs for a very long operational life cycle.
Third is how we're using AI to transform plant information systems with agentic technology. Our differentiation across all three of this, it's quite strong. Take, for example, with design. By being the first to cloud with the truly cloud-native production system design environment, we have been able to introduce capabilities, AI capabilities to our customers much earlier. Last year, we talked about all of the generative AI capabilities that are embedded in FactoryTalk Design Studio, and we've continued to evolve that AI that helps people do their work better, it helps people be more productive. This year, what you saw in the show floor is the next wave of transformation. We're not only just helping people do work, we're using AI to do the work for people with new agents, agents that take inputs, drawings, specifications, code libraries, you name it.
We will reason through that and do the bulk of the work for the entire system because FactoryTalk Design Studio deals with the entire system. AI powering design does a lot for our customers, and we are going to be leading what it takes to reduce the cost of design system as much as practical. For us, AI applied to design also opens up a whole new set of opportunities because it dramatically simplifies what it takes to consume automation. Automation can be more broadly used across many more use cases. We are very, very excited about that degree of differentiation there. When it comes to AI that is used for process optimization, the most valuable data that informs optimization of control systems and processes, they live in the automation controller, they live in Logix.
When you have such a large share, especially in North America, where most of this technology is being consumed, you have the assets to deliver the most value to your customers. That is exactly where we're at. When you think about agentic plant information systems, it's a broad spectrum of solutions we have from maintenance with Fiix, visualization systems with Optics, MES with Plex, quality management with Plex, and many more. Think about this. Just take Plex as an example. Plex is exposed to over 10 billion transactions every single day, not every week, not every month, trillions over the spectrum of a year. That is happening across thousands of plants. When you have such a rich data set, you can create the AI capability, the agents that will transform MES. Plex is going to be leading the next wave of agentic MES transformation.
It's going to be changing MES from pure systems of interaction to systems of autonomy. We couldn't be more proud of how that's continued to progress across the organization. You take software-defined automation and you take AI and you get autonomy. You get a good amount of autonomy, but you can get even more autonomy if your system is actually free from physical constraints, from mechanical constraints, because a lot of what the intelligence is doing is actually causing change to happen throughout the system and the system needs to adapt. That's why we have been investing in robotic solutions in this market.
We have a very comprehensive set of robotic solutions, you know, all the way from very strong partnerships where we simplify what it takes to integrate a robot control system with the rest of the automation that's already available in the rest of the production line and reduce the risk of integrating disparate technologies, all the way to further simplifying that by moving the robot controller function as a software-defined capability natively into Logix, providing people a significant degree of simplification in that process, all the way to the integration of the entire stack, including the mechanics, including robots where we have the opportunity to add the most value. They also happen to be the geometries, the types of robots that are fastest growing in this market.
We're very excited about what we've continued to build with respect to the most comprehensive set of robotic solutions that's out there. I trust that as I walked you through software-defined automation, artificial intelligence, and robotics, you could get a sense for how complete our software portfolio is across the entire stack. It's software that's focused on production. We're dedicated to powering production systems. That's what we do. That's what we live for. Not only is it a very complete software stack, it's one of the most modern stacks in this industry, and we're very, very proud of it. You don't need to take this only from me. What I'd like to do today is invite one of our good customers, Lucid Motors, so they can share a little bit with you, a little more about how we've been able to create value together.
Please join me and welcome Gaetano Cantalupo from Lucid.
How are you?
Good to see you. Gaetano, thank you. Thank you very much. Thank you for being here with us. It's an honor and a pleasure. I have a few questions for you. I know that Lucid has just gone through a pretty substantial upgrade for your execution, for the MES layer. Can you talk a little bit about how that's impacted, you know, your operations?
Yeah, I really like this question. We already discussed with other colleagues around this, on the upgrade we just did. I like to describe this as an on event in a very positive way. The point is the team came to me a few months ago and said, "Oh, we need to upgrade the MES system." MES is the backbone of our factory. They showed me the plan, and the plan was absolutely overlapped with our plan to scale up the production. We are scaling up also the production of the new vehicle, so we have a new vehicle in the plant. I say, "Wow, upgrade is not matching with normal production, no?" Anyway, I approved the plan. We moved forward, and I forgot.
A couple of months later, I called them and said, "Oh, where are we with the MES upgrade?" They say, "Oh, it's done." I say, "Okay, thank you." The point is, we start to see the new feature. We start to see how powerful this new MES system is.
Great.
Thank you for what you're doing.
That's great to hear. We're very, very happy that it continues to progress well with you. We know that Lucid is scaling, you know, scaling globally.
Yeah.
How important is it for Lucid to have a strong digital foundation as you continue to build more?
Yeah, it's, I mean, consistency is absolutely critical. We are on a very fast pace. Now, you know, we are building, I want to say, I like to say, now the most advanced vehicle. To do this, you really need to push the boundary of the innovation to the limit. Not only, we are doing it at a very high speed. If you see our milestone, now we start in 2019 with the construction of the greenfield plant. In 2021, we added the SOP of the car. At the same time, two years later, we started the construction of a factory in KSA. A few years later, from the SOP of the Arizona plant, we quadrupled, we multiplied by four our footprint. We moved from 800,000 sq ft to close to 4 million.
Now, the point is, now we are continuing with this space. We are introducing a new model. We are introducing now the new mid-size platform, a more affordable vehicle. Now, all of this can be done only if you really unify your backbone, you unify your digital backbone. This is helping us to efficiently scale up, for sure, reducing the risk, and for sure, to maintain the quality of what we do across all the different regions. Again, the point is, and the key is to create a complete connected ecosystem that is operating our processes.
That's great. That's great to hear and count on us to continue to work together on that. You know, I know that Lucid is thinking about even more innovation, and I know that you're considering autonomous mobile robots as part of your operations. Can you talk a little about why and the benefits you're expecting?
Yeah, we are reimagining, I mean, redesigning how we deliver the material to the line site. It's a key factor because, I mean, building a car means thousands and thousands of parts that have to go together in time and in sequence. We really need to have a system that is absolutely robust. Now, this AMR system, like the Otto, are really helping us on redesign or reimagine. The point is it's not only an help on the efficiency, no? To have the efficiency or to have the system that is running smoothly and so on, but it's also addressing several issues that, for example, the safety. Having more AMR running in the plant, now you eliminate forklift, you eliminate trolley, stuff like this from the plant, and you are increasing dramatically the safety of your environment.
Not only, this AMR system is really helping us to manage criticality because they are real-time, they are taking decisions using real-time data, and they autonomously manage eventually bottleneck or congestion of the flow, creating in different routes, rerouting, whatever it is, way faster than you can do by yourself.
That's great. It's great when you have one solution that can solve for multiple opportunities.
Yeah, definitely. Yeah.
That's great. What's next? You know, what's next for Lucid and how do you see our collaboration and working together?
Yeah, the next is already today, no? The point is we are continuing with this path. We are continuing with the Lucid way of doing stuff. We cut from legacy constraints or traditional technology. We really embraced the innovation. You talk a lot about the software design, no? Actually, we also changed the product, our vehicle, our car. I mean, it's different. It's a really software-defined product. Now, to build this, you need to software-define your manufacturing process. This is what we are doing.
System to like Emulate 3D, I don't know, we invest very heavily on simulating and to create a digital twin or as you want to call, to be sure that in the moment that I start to install the first machine on the line side, this machine has been fully tested, fully, let's say, stressed, let's say in this way, in the digital world. I'm not talking about the single machine. I'm talking about the complete ecosystem. I said before, autonomous is not making the automation of a machine. It is to build a complete ecosystem that is connecting all the dots from logistics to production to the machine to the process.
100%. Gaetano, thank you very much for being here with us.
Thank you.
It's incredible.
Thank you.
We are honored to be part of your journey.
Thank you.
Thank you for taking the time very much.
Thank you.
Okay. You know, you heard me talk about these technology pillars that enable autonomy. What I'd like to do now is to invite my colleague, Tessa Myers, to the stage so she can tell you how we've been helping people combine them to transform operations and move towards this future of autonomy. Please join me and welcome Tessa.
Hey, good morning. As Matteo said, I'm going to take the opportunity to share with you how we bring all of this together, all of the new technologies that you just heard about and hopefully saw on the expo floor yesterday. When we combine artificial intelligence, software-defined automation, and robotics with our core automation capabilities and our domain expertise, we're able to unlock the potential of autonomous operations with our customers. Imagine a factory where machines anticipate needs before they arise, where material moves seamlessly without human intervention, and production lines adjust in real time to changes in demand or disruptions. Yesterday's factories reacted. Tomorrow's factories will anticipate.
A great example of bringing this all together is an area we call production logistics, which is really about the orchestration of the digital, the data in a manufacturing operation, and the physical, the resources, the material movement throughout the manufacturing process. Production logistics brings together advanced material handling solutions, things like AMRs and independent cart technology. It brings together fleet management and operation software to plan, schedule, and then execute work orders on the manufacturing floor. It brings together our consulting and our domain expertise to help customers understand where their biggest opportunities to drive efficiency in their logistics and help them implement in their manufacturing environment. It's not, though, just about what we do, the technology that we deliver to our customers. A real differentiator for Rockwell Automation is how we work with them and how we help them identify the best opportunities for them to improve.
We connect our innovation with practical implementation, helping our customers understand what are their best opportunities for productivity and improvement in their operations and bringing the combination of expertise and technology to them. We find customers at all different stages of maturity in their journeys to autonomous operations. While, you know, many have started down the path, you know, we see enterprise customers who are moving more quickly, acting a little more boldly as they drive their autonomous operation strategies. We see small and medium-sized customers really getting started. What is important is we meet them, as Blake said, where they're at, and we help them understand what are the best opportunities and next steps that they can take to move forward. We're pretty early in the adoption cycle. We have a long runway ahead of us and opportunity in collaborating with our customers.
Importantly, this journey from digital silos to a connected, efficient operations really applies across the industries that we serve, from high, mixed, discrete manufacturing to continuous process. We have dramatically improved our ability to serve across that wide range of industries over the last few years. We have expanded our capabilities with all of our new technologies and new capabilities that we have built organically and through acquisition. We have significantly increased the amount of value and opportunity that we can work with our customers on. I think the best way to demonstrate this to you is with a customer example. I am going to take us on a little tour of a virtual factory. We have great partnerships with customers all around the world. A significant industry for us is the global food and beverage industry.
I want to share with you the work that we're doing with a Fortune 100 global food and beverage manufacturer, helping them drive towards more autonomous operations. They've invested heavily in smart factories, leveraging core automation technology, sensors, control architecture, intelligent devices that are really helping them automate tasks like package sorting, product packaging, helping them drive efficiency in their operations. They're deploying digital twins in their operations, both in manufacturing to understand design changes and improvements that they can make, but as well in their warehousing operations so that they can see how to make more efficient the logistics across their plant network. Artificial intelligence is a central part of their strategy. They're leveraging the combination of AI and automation for improving quality outcomes, quality control, predictive maintenance, optimizing the ingredients that are used in their plants.
They are using AI and automation to adjust the temperature and texture of products in real time. They are using AI and sensors to monitor machine conditions and predict when potential failures might occur. They are using AI-powered vision systems to assess the raw materials that are coming into their process so that they can tune that process to create the perfect product every time. They have deployed intelligent material movement, so the combination of independent cart and AMRs in their manufacturing facility so that they can seamlessly deliver materials to their production lines, making the overall plant flow more efficient and safer for their operators and workers across the plant.
All of this is built on a connected IT OT infrastructure to help them optimize the deployment of these technologies in their operations and allowing them to harness the valuable data that's being produced by all of the equipment and processes across their plants. All of these new capabilities are helping them be more energy efficient, more sustainable, and more productive across their plant operations. Autonomous operations are not a distant dream. They are our next era of growth. We are making progress with our customers, one plant, one process, one partner at a time. With that, I will invite Blake to join me on the stage. Thank you.
Thanks, Tessa. You know, there's really nothing better than to talk about a specific customer that is bringing all of these disciplines together and getting value and picked us over, you know, strong competition from around the world. Tessa has been involved with a lot of these customers directly as we've looked at bringing these different pieces together, both from her organization and from others. She was also involved in a lot of the early acquisition integration activities, bringing those new technologies, those new people into the organization. I'm very happy with our progress there. You know, we talked about an end user, but obviously the machine builders are an important part of this as well. Let's hear from GAIA, which is a great customer of ours. They're investing heavily in the U.S., but they're working with us to win around the world.
Thank you, Blake. It's a real pleasure to join you and your investors today. At GAIA, we are a team of more than 18,000 people worldwide. We build high-tech industrial machines and process lines for the food, beverage, and pharmaceutical industries. Our technologies are part of everyday life. Every second liter of beer, every fourth package of pasta, every second tablet to treat cancer, they all rely on GAIA engineering. North America is a key growth market for us. We generate over EUR 1 billion in revenue here, and we invest strongly in this region because we believe in its economic potential. Let me give you a concrete example. In Chainesville, Wisconsin, we invested $20 million in a state-of-the-art facility for the manufacturing and maintenance of our machines, including logistics and training. We did not stop there.
Right next door, we invested another $20 million in our new food application and technology center. This is where we help our customers develop future foods like egg alternatives, cultivated meat, or cultivated seafood. Why are we doing this? Because the demand is real. We are already working with companies like Believer Meats. They have built the world's largest cultivated chicken production facility in North Carolina with GAIA technology. This is not a distant vision. It is happening now. North America is leading the way. Everything we do is guided by our purpose: engineering for a better world. That starts with sustainability. For example, our Chainesville facility runs on renewable energy. It is designed for low water use and waste reduction. We also help our customers produce more sustainably.
Our eco-friendly family of At Better Solutions is significantly more resource-efficient than earlier models, by up to 50% in many cases. This is independently validated. That's good for the planet and good for the business. To deliver advanced, sustainable solutions at scale, we rely on strong partners. That is where Rockwell Automation comes in. Rockwell is a strategic partner for us. Our collaboration spans our entire business. We combine GAIA's deep process and engineering expertise with Rockwell's leadership in automation and digital technology. Together, we build the solutions that help our customers operate more efficiently and sustainably. For our customers, this partnership delivers real value: better performance, greater reliability, and technology they can trust. It shows what is possible when two industry leaders join forces. Our ambition is clear: to be the key partner for our customers in North America.
Working with a leader like Rockwell is crucial to making that happen. Thank you so much.
We really appreciate the partnership with Stefan and GAIA and the rest of his organization. He talked about expansion in the U.S. To go a little bit deeper on the topic of investment and capital projects, especially here in our home market in the U.S., I'd like to invite Matt Fordenwalt to the stage. Matt leads our Lifecycle Services business. Lifecycle Services as a business segment is instrumental in a lot of these new capacity builds. Matt has brought profitable scale to new offerings like cybersecurity services, digital twin creation, and other recurring services revenue. Matt, please join.
Thank you, Blake. It's great to be here.
Great to see everyone.
You know, we've done a great job, I think, of diversifying our market exposure. We talk about our good access into discrete and hybrid and process markets. When we look at, you know, some of the specific capital investments, we see that they're split relatively evenly between areas that we have relatively lower share in, like data center and semiconductor, with traditional strongholds of Rockwell that we see here, like pharma, water treatment, and things like that. Process, as I mentioned before, is now our largest segment, 40% of our total business. We also have core strength in areas like food and beverage within hybrid, life sciences, automotive, and discrete, of course. They're yielding great opportunities over the coming years. We also have those emerging growth areas with new ways to win into e-commerce, warehouse automation, and of course, data centers.
Matt, your lifecycle services business has really been a central part of this. It's been a door opener and a significant source of value in a lot of these opportunities.
Yes, thank you, Blake. You know, one of the things as a company that we've worked on really, really hard is diversifying our capabilities, creating those new ways to win. It's been a major driver of profitable growth for Rockwell Automation. The lifecycle services segment is a dramatically different business than it was 10 years ago. We now have cyber. We have digital services, AI-driven solutions. We are reaching much earlier into partnerships that engage customers long before they ever break ground. This has made us a true end-to-end strategic advisor for our customers' journey towards autonomy.
We've had good orders for new capacity in fiscal year 2025. They were higher than they were in 2024. We expect new capacity orders to grow strong double- digits in fiscal year 2026. Matt, your team's been involved with a lot of these wins. Maybe let's talk about how you and a partner ecosystem are winning these roles and delivering them.
Yes. We have expanded our partnerships dramatically. We are engaging engineering firms, OEMs, system integrators, and we are engaging customers much earlier and much higher than we have ever done before. I will give you two quick examples of how that is coming to life. In both cases, our team was engaged very early on, consulting well before an automation decision was made. Helping our customers deliver new capacity faster, with higher quality and better predictability, these are the projects where Rockwell's technology, like Mateus talked about earlier, and our expertise are at the heart of that transformation. Electrolyt is investing $400 million in a 640,000 sq ft state-of-the-art manufacturing facility in Texas. This plant blends liquids, producing over 1 million bottles a day across 26 flavors, operating 24/7 on four lines. To accelerate and ensure the success of this project, our Calypso consulting team is delivering a comprehensive digital transformation package.
This means working across multiple OEMs to create a digital twin that contextualizes each line and then digitizes the full plant. This is going to save both the end customer and the OEM tremendous time in deploying it because they have a virtual replica of each line. Emulate 3D technology enables that virtual commissioning by simulating every single aspect of the line, how it comes together before a machine ever reaches the site. Another aspect of our secure digital operations architecture is our industrial data center, which provides plant-wide computing that powers both our energy management solution and our batch performance analytics solution, so that they're going to have direct visibility into the energy consumed by each batch as well as the quality level. These batches are also going to be AI-driven motion tracking document workflow throughout the entire facility, working seamlessly.
In addition, predictive maintenance through Guardian AI is embedded directly into the line. These new ways to win with secure digital operations expand our traditional automation scope in these types of greenfield facilities while reducing risk and the timeline for the end customer.
You know, one of the things that we've talked about before is the importance of making these digital capabilities an intrinsic part of the project timelines. If you go through and you try to do just the basics and then decide at the end that you want to insert some of these capabilities you've just talked about, it really is, it's more trouble.
It is all about investing some of the time upfront to go fast at the end. That generates so much more productivity on the back end through the lifecycle of the asset. I'm going to share another example in our partner-friendly approach that benefits both the customer and the broader Rockwell ecosystem, reducing that time to market, decreasing risk in the project timeline, strengthening the resilience overall. At the same time, we are deploying the latest technologies that Mateus mentioned earlier today. This example is a major greenfield for Irving Consumer Products. They are adding a new tissue production line and a fully automated warehouse, supporting their production of household paper products for top American retailers. This project involves a large global OEM paper-making machine, as well as converting lines with several different OEMs.
It's a great example of how we deliver traditional automation in conjunction with new ways to win. We engage really deeply with the EPC upfront, as well as the OEM, to deliver a robust power package that's at the heart of production. We provided all of the details associated with the coordinated drive system and the motor control centers that bring that machine to life, while our consortium partners, part of our broader ecosystem, supply the switchgear, the motors, that complement our portfolio. This is going to save time and ensure that tight alignment from the EPC to the OEM as production's coming together. To further reduce complexity, Rockwell's cyber networking compute capabilities are being utilized to securely connect the entire facility.
Our ability to simplify that connectivity with a managed service agreement will allow Irving to have a modern digital background connecting their traditional automation and their IT assets from day one. This allows every asset in the facility to be actively managed. Listen, our ecosystem is second to none. Our strong partnerships across the value chain, from early days with an EPC to an OEM to local systems integrators to our consortium partners that round out the portfolio, enable tremendous value by reducing project timelines, reducing risk, and really securing that new capacity in North America.
Yeah. Matt, thanks so much.
Thanks, Blake.
Really appreciate a little bit of that deep dive into a couple of these projects. We're going to switch to the next lever of our top-line growth, annual recurring revenue. You know, when I got into this role in 2016, we had about $200 million of ARR. It's now over 10% of our revenue. And it's actually more profitable than the Rockwell average. We continue to expect a point of growth from ARR with software as a service and recurring services as the major components. Think of Plex, Fiix, FactoryTalk Design Studio, FactoryTalk Optics, FactoryTalk Data Mosaics, Verve for cybersecurity, Calypso, and there's others. But you see that we've built that both organically and inorganically. We expect high single-digit profitable growth in fiscal year 2026. With that, we'll move to the final element of our growth algorithm, and that's acquisitions.
You know, we took a pause over the last couple of years, and I think it was the right thing to do to focus on bringing all our new capabilities together as a pure play, but also to help expand the margins. I'm pleased with our progress on both fronts. We're updating our acquisition priorities going forward, starting with industrial AI applications. These are applications for impact in production environments, software and services targets with recurring revenue streams, profitable recurring revenue streams. Second is expansion into Europe and Asia, being able to expand our presence and grow our share in those markets. I should mention that these priorities are not mutually exclusive. The very best of them often combine multiple elements of our priorities. Finally, product portfolio expansion.
To frame this, think of very profitable hardware that has a mature channel in Europe and/or Asia that our North American distributors would love to sell through their best-in-class systems. That gives you an idea of the kind of targets that we're considering there. With that, I'd like to introduce Joel Stenson of UPS. He's the Senior Vice President of Operations Technology. I will bring Joel to the stage to have some discussion.
Blake. H ow are you?
Joel.
I'm doing great. How are you doing?
I'm doing wonderful.
Really appreciate you joining us.
Thank you. Thanks a lot. Thanks for the invite.
Yeah, for sure. Maybe just start to talk a little bit about UPS's mission, kind of some of the priorities right now.
I think the priority that I would share with everybody is our mission is to move the world forward by delivering what matters. What we are really focusing on and focusing our investment and our resources on is the healthcare industry. It is small and medium businesses. It is international, which includes that cross-border, trans-border movements, as well as modernizing our network. That is the priority right now.
You mentioned network, and I know you have a very ambitious network of the future project. Maybe talk a little bit about some of what you're trying to accomplish there.
Absolutely. What we decided we wanted to do is we wanted to take a clean-sheet look at our entire network. That network was built over the last 118 years. Yep, my math is right. What we said is when a building came to exist, it came to exist because that is where the center of population was in that particular area. As population grew and the suburbs grew, buildings followed that population growth. Now if you look at that 118 years later, you kind of ask yourself three questions. If we had to do this all over again, would we still have the same number of buildings? Would those buildings be in the same locations, and would they have the same technology? The answer to all three of those questions was no.
It is we would have buildings that have volume more concentrated because that concentrated volume allows us to have the ROI required to be able to automate. We would have a faster network. We would have safer facilities, and we would have more precision in how we move packages.
Yeah. You mentioned automation, of course, the magic word. Maybe talk for a little bit about how Rockwell is playing a role in those objectives.
Yeah. I think what we did here is when we came into what we call NOF, Network of the Future, is we knew that we needed a partner in a different way from what we have in the past. We've been partners with Rockwell for a very long time. When I first joined the organization 31 years ago, I was introduced to PLCs through the PLC-5. One of my first programming was done on a SLC 500. We've been together for a very long time, it was really transactional. We put out an RFP, we competitively bid, we award a contract, we execute a project, and we move on. What we knew is going into this, where we were going to have to drive automation to 400 facilities, it was going to result in us closing 200 facilities.
We had to do that all within a certain period. When you have to run a multi-billion dollar project, you do not need a vendor. You need a partner. That is where that relationship with Rockwell really deepened for us, for us to come together and say, we need somebody that we can depend on to partner with us to roll this program out in a way that Rockwell really stood out compared to the rest of the competition.
Yeah. You know, if we're honest, at the beginning of the discussion, because we had not worked together as closely in the past, I think one of the things we had to demonstrate to you was that Rockwell understood the sense of urgency. It wasn't just having the right technology, but it was also the urgency and the agility to work with you on what is a big, complex, multi-year project.
Yeah. I will say a lot of companies want to work with very large organizations. I'm sure you see the same thing. What they don't always realize is scale. One of your other speakers talked about it a little earlier today is that scale for what we need to have done requires a resiliency. It requires a reliability. It requires the ability to manufacture. You and I toured some of your manufacturing facilities as we were really kicking off this program to ensure that Rockwell had the manufacturing capacity, the warehousing capacity, the technical skills to be able to partner with us to make this a reality.
Yeah. Some of that scale requires ongoing work with standardization because you've got technology and installed base and varying levels of expertise that have built up over decades. To be able to move at the speed you and your customers need, that standardization, I think, is important.
Yeah. I would say when we look at the, it's also a product. A standardization, we had to be able to standardize. That is really what made us make this decision is we wanted to do what we had never done before. We wanted to single-source this program. That is what we decided to do, partnering with Rockwell on this program. It's because we needed standardization. To move with speed, we were going to need to have solutions that were as repeatable as possible within a network of facilities that have an age range that varies greatly. We were going to need an infrastructure that was repeatable. Rockwell brought that infrastructure. The devices, the details matter.
When we started to talk about what can we do with Emulate 3D, we were working with Emulate 3D to enable us to be able to speed up the commissioning process. What does Armaflex allow us to do? When we think about the Armaflex VFDs, that allows us to speed up the installation because if you have to have a VFD inside of a panel and conduit run to that VFD, that slows everything down. As we partnered with Rockwell across the different platforms, Logix, Emulate 3D, Armaflex, those things all unlocked a value chain that made it very unique.
Yeah. You know, with all that automation that's being installed, there's a little bit of data that's being created. Maybe talk about how much data and where it's going to be useful to you.
Absolutely. We have about 70 PB of data within UPS. Just to kind of give you an understanding of what that means, the Library of Congress's digital storage is about a third of that. The data that we have is immense. Being able to partner with somebody that can help us leverage AI to get insights from that data is important. What we are doing now is really trying to push the envelope there to get to that predictive, prescriptive model of how can we support our facilities and our systems to understand better how can we balance spare parts around the network because of the new predictability that we will have on what we need where versus simply overspending on spare parts that can collect dust in a facility if you never need to use them.
Yeah. It sounds like there's plenty of things to work on today and tomorrow.
Absolutely.
Look, Joel, very much appreciate the partnership. And thanks for sharing some of the journey with us as well.
Thank you, Blake.
Yeah.
All right.
Thank you, Joel.
Have a good day.
All right. With that, we're going to wrap the top-line growth segment. I'm going to invite Christian in a minute up on stage. You know, when we talk about the importance of impactful new perspectives, there's probably no better example than what Christian has brought to Rockwell. Our collaboration between he and I started in early 2024 on a weekend chat and then followed by kind of a clandestine visit to Twinsburg because he wanted to see our operations. I think we're all pretty happy with the results of his first full year at Rockwell. With that, I'll invite Christian to the stage to talk a little bit about expanding our margins.
Morning, Blake.
Yeah. Thank you very much.
Thank you very much for the kind words. That was outstanding. This is an exciting time to be at Rockwell, and I'm thrilled to be here. My first 15 months were a ton easier just because of the partnership, the partnership with Blake, the rest of the leadership team, with our employees around the world. I'm here to talk about margin expansion, the next pillar in our Rockwell operating model. You heard about the accelerated top-line growth. Margin expansion certainly is a lot easier when you're getting growth on the top line. At the same time, not all of our actions are going to require top-line growth in order to expand our margins. In fact, in fiscal 2024, we grew 1% on the top line, yet we were able to expand margins by 110 basis points.
A couple of weeks ago on our Q4 earnings call, we talked about our guide for fiscal 2026, mid-single-digit top-line growth, another 100 basis points in margin expansion. We want to go into a little bit more detail here over the next few visuals to talk about what are the actions that we're taking in order to execute and expand those margins. The first part is price discipline. Blake talked about this earlier this morning. In fiscal 2025, as an organization, we hit a new level of performance on price discipline. We had three points of total price realization for the year that consisted of two points of underlying price, which is the equivalent of four points of price realization on the product side of our business. You add to that 60 basis points of tariff-based price realization.
That tariff-based price realization was put in place in order to offset our tariff costs so that we could have a neutralized effect on the EPS line. As we look at fiscal 2026, included in our guide is two points of price realization, one point from underlying price, which again equates to about two points related to our products, and then another point of tariff-based price. When you combine this with our other initiatives, these are key drivers to margin expansion. It also creates great optionality for us as an organization. It gives us the opportunity to have strategic pricing when we need to do it for key wins. It also allows us to reinvest in our business. We're going to talk about reinvestment here in a moment. Another key activity that we're doing to expand margins is structural cost reduction.
This visual is very familiar to our investors. We first initiated this about 18 months ago, and we had a very large target that was in place, $350 million of structural cost savings over an 18-month window. We actually hit that $350 million cost savings number in 15 months, not 18 months. In our fourth quarter, which created that 18-month window, we added another $75 million of cost savings. We achieved $435 million of structural cost savings over an 18-month time frame. That is outstanding. Again, structural cost savings, huge help for us in fiscal 2025. It also positions us really well as we are thinking about transitioning and as we are transitioning that program from an event, a moment, to a way of life. We are going to talk about that more in a moment. We are going to take that momentum.
We're going to continue to take that disciplined execution that we built on. It is going to lead to even greater margin expansion as we reinvest in the business. Capital deployment is another portion of that. Our long-term capital deployment framework remains intact with one update. Capital expenditures previously we would have talked about as 2%-2.5% of our sales. We're now changing that. We've updated it for at least the short to medium term that it's going to be at 2.5%-4% of sales. On the low end of that range, that 2.5%, that is a heightened level of investment in our equipment and our digital infrastructure. The high end of that range, the 4%, is when we're making larger investments in brick and mortar. Our guide for fiscal 2026 is 3% of sales.
Continuing down this slide and talking about the capital framework, we remain committed to 100% free cash flow conversion. Blake just gave an update on our priorities around acquisitions. We continue to be committed to doing acquisitions over the long term. We are only talking about 1% growth on the top line in our growth algorithm. We are not talking about a huge amount of use of capital for acquisitions, which will allow us to continue to have a really strong balance sheet, hold on to that A rating, and allow us to return value to shareholders. We just announced a 5% increase in our dividend that is effective in December. Our guide for fiscal 2026 is $500,000,000 in share buybacks. We are continuing to return value to our shareholders. We are also committed to continuing to reinvest in ourselves through innovation spending.
In the fourth quarter, we gave a new metric to folks. It is our new engineering and development line item. It's in our statement of operations. Historically, if you recall, we always talked about research and development. Research and development for Rockwell Automation has typically been around 6% of sales. That was always in our cost of goods sold. That underrepresented the innovation spending that we had as an organization. Our innovation spending actually has always been around 8% of sales. You take the R&D at 6%. You add to a continuation engineering spending that's always been around 2%. So 8% is the number you should be thinking about. We've removed that from the cost of goods sold line item. We've created this new line item in operating expenses, engineering and development.
That gives our investors better visibility to what we're reinvesting in the business for innovation while at the same time is giving us a lot better comparability with our industrial peers on our gross profit. Really good simplification move. That 8% number, we're very comfortable with it. Walk the floor at the Automation Fair. You saw this yesterday when you were out there touring. There is a lot of innovation happening at Rockwell Automation. That 8% is fueling that fire. We'll continue to spend that. I'm excited about, and you heard about it earlier today with my colleagues. When we talk about it from a segment perspective, software and control, high teens investment in engineering and development. Intelligent devices, high single digits investment in engineering and development.
Finance person, want to make sure that you all know we are committed that investment dollars, of those investment dollars, we are going to get an ROI on those. We continue to measure that. This actually goes hand in hand with long-term margin expansion. We've had these targets in place for the last couple of years. 23.5% is our composite number for the corporation that we're targeting. In fiscal 2025, our segment operating margins were 20.4%. We expanded 100 basis points in fiscal 2025, 110 basis points. In fiscal 2026, our guide is at 21.5%. We've got a couple hundred basis points left to go from where we are today or where we're expecting to be in fiscal 2026 to where we're targeting for our medium-term range, that 23.5%. From a segment perspective, Lifecycle Services has checked the box. They're in their corridor on segment margins.
They were last year in, sorry, they were in 2024. They were in 2025 as well. Software and control is getting closer. Historically, this business has performed within this corridor. In the last few quarters, they've gotten close to being within that quarter. We haven't put together 12 quarters yet. So we haven't checked the box, but we're getting closer. Intelligent devices has a little farther to go. In our guide this year, we're talking about 150-200 basis points of margin expansion. That would take intelligent devices to the high teens, potentially even 20%. We're getting closer there, but we have some more work to do. Importantly, that 23.5%, that is not a ceiling for us.
We're doing things today to focus on not just getting to 23.5%, but getting through 23.5% in order to hit that higher level of performance that I think all of our investors are looking for and a long-term runway to continue to expand margins. In order to do that, we have to reinvest. We also have to add more tools to the toolkit. We have to give our organization more data points and understand what exactly the running rules are going to be going forward. We've added a couple of them, or at least I want to highlight a couple of the many tools that we've added here today. The first one is the cost to produce. Last year, when we first introduced the Rockwell operating model, we were talking about margin expansion.
One of the items that we highlighted was that we needed to have precision in product and project costing. The tool that we've added for this is a cost to produce metric. That cost to produce metric is very holistic. Think of it as standard costing, accounting standard costing plus plus. We want to give complete visibility to all the costs of production for our manufacturing operations, give them a really good understanding of the levers to pull, how they're going to be tracked, and give them the opportunity to develop plans to be able to hit their cost metrics for many years to come. They have the ability to plan for that, which is outstanding. That has been rolled out in our manufacturing operations. We're going to continue to refine that.
We're going to continue to push that farther and farther down so it gets all the way down to line-level leaders so they can see what the cost to produce is for their line. The next part is a new ROI model. ROI models are not unique to Rockwell. They're not new to Rockwell. As I came into the organization and evaluated the way we were looking at our investments, investment decisions weren't wrong or bad. They were being made using different models throughout the organization. That created an opportunity for us to harmonize. As we transition from an asset-light organization to one with a little bit more intensity on our investment level, it allows us to transition away from a very payback-focused to one that's more ROI-focused. Historically, intelligent devices R&D would use their own investment model.
CapEx spending out of the integrated supply chain had an investment model. The acquisition model was different. We actually have one model now. That one model allows us to look at all of our investment opportunities under the same set of metrics, and we can prioritize and come to determinations around where we're best spending our money. It also allows us to continue to drive greater accountability for the organization because what's built into the model are real accountability metrics. We're taking that model, and that model is important because we are investing at a higher level. We need that discipline. We need that system in place because at the end of Q3 in our earnings call, we talked about a higher level of investment with $2 billion that we're going to be spending over the next five years.
Blake, you want to give us some more information around that?
Happy to, Christian.
Hey, we talked about the investments being primarily centered around plants, talent, and digital infrastructure. We expect the outcomes of those investments really are to add efficiency and resiliency and profitability, which take us well beyond those medium-range margin targets. Think technology added to existing plants to drive efficiency, new capacity, and agility to take share, and AI-first business systems to increase customer service, which will translate to share, as well as visibility. The $2 billion includes a little bit more than 80% of CapEx and less than 20% of OpEx, much of which is already in the run rate. With the next section, I think it's appropriate that we talk about operational excellence, and we'll focus on the plant and the operation side of this investment. We've made significant progress in making our operations more resilient and agile through COVID, supply chain challenges.
These investments that were started during those times are serving us well in the current environment. Who knew that adding capabilities to build our high-value products in multiple plants to add to resiliency would help us minimize the impacts from tariffs? They are, and they'll give us additional flexibility going forward. To do this, I've been very happy with the teaming between various groups in the organizations, between our integrated supply chain organization, the business units, and finance. It really took everybody working together to drive that culture of operational excellence as well as continuous improvement. I'd like to ask our Chief Supply Chain Officer, Bob Buttermore, to join the conversation. Bob's experience around the world in commercial and product-specific roles before this role has really accelerated that teaming to be able to bring together the various organizations and the people to move faster.
Let's hear Bob and Christian talk about how in our own organizations we're advancing the future of industrial operations. Bob? Sourcing, re-engineering the network, autonomous operations. Before we move off of this slide, let's hit on a couple of other examples. Under logistics, last year in fiscal 2025, we generated millions in annualized savings from the air-to-ocean mode shift, which is fantastic. Great work. Bob, when we think about as we go forward, is there more room to run on the mode shift?
There is. We do have more room to run. We converted about 10 lanes last year, but we're converting more lanes now from air to ocean. We've got a disciplined process to just continue to do this over time.
Additionally, we're implementing a TMS, a transportation management system, that will allow us to have real-time trade-offs for transportation that will enhance our ability to really extract more productivity in the logistics space from consolidation, from more mode optimization, reducing the amount of expedites, and optimizing our lanes.
TMS is another tool that we've added to the toolkit, which is fantastic. Let's stay in that logistics column and talk about in-region for region. Resiliency is outstanding, but duplication, it has real cost to it. It can be suboptimal for overall spending. Can we talk a little bit more about how we're balancing that resiliency need while also working to expand margins?
As you said, we started building this redundancy, building the same product in multiple regions to help us recover from the crisis. We continue to do this to help us mitigate the tariff costs that we've experienced over this year. As we continue to expand this in-region for region strategy, this will enable further productivity in transportation costs. It'll actually reduce our lead times, and it'll reduce our carbon footprint. One of the impacts that I'm most excited about is that this will actually help us improve customer experience over time also. Christian, I want to talk about one of your favorite subjects, and that's insourcing and vertical integration.
Absolutely. I brought props, so.
All right.
Here we go. Insourcing is a favorite subject of mine. Again, to reiterate, Rockwell has historically been an asset-light organization. That creates complications when you think about new product development and when you're taking those products to market. When the manufacturing organization gets those products and they have to take them and build them up to scale from a production perspective, if the capital equipment and the resources are limited, then the only option you have is to go on the outside. What I have in my hand is the 100C, which is a motor contactor. A lot of you have probably been to our Milwaukee headquarters. You've been on the eighth floor. You've seen our contactor production line. It's a highly automated line.
If you look at it, you probably think to yourself, "Wow, Rockwell's taken a ton of the manufacturing costs out of that process." It'd be hard to think of other ways we can take the cost out. The integrated supply chain team has done an outstanding job of looking at continuing to look at ways where we can take costs out. The 100C is a really good example. This product, on the outside, we've been making the housing. This plastic housing consists of five parts that make up the 100C. My favorite part is this one. Probably can't even see it. This part is an injection-molded plastic part. We were doing it on the outside. It cost us 4 cents a copy. We're now making it inside out of our Ladysmith, Wisconsin facility, and we're doing it for 3 cents a copy. A penny.
We're saving a penny. You multiply that times the volume that we have in fiscal 2026, this one part is going to save us $30,000. All told, the five parts that make up the housing for the 100C product line, this is going to save us nearly $1 million in fiscal 2026. Really good job taking costs out of something that already felt like and looked like it was optimized. Of course, this actually has a 50% ROI on the activity that we've had. We took out 40% of costs that we were spending on the outside. I'm going to approve these kinds of projects all day long, Bob.
Another great example is implementing rock-on-rock technology in Twinsburg on a previously manual line. Using an ecosystem OEM partner of ours, we automated the ControlLogix manufacturing final assembly cell. We have ControlLogix controllers manufacturing ControlLogix controllers with our integrated robotics, our visualization, our industrial control safety and sensing products also. Good return on investment here. 50% improvement in labor efficiency, 49% reduction in process time, translating into lower cost to produce and increased capacity for growth. The next step is to move to autonomy with AMRs bringing material to the line and the way from the line to shipping.
I love this project too. It's a low-risk investment. Rock-on-rock technology. We're using a known process, and we're also working with a partner that has been a customer of ours for years. Now they're a supplier of ours. It's great to be able to work with them on that. Again, takes that risk level down a lot. At a 20% ROI, really excited about doing those kinds of projects all day long too. Bob, you gave a lot of numbers there, and I liked every one of them. One of the numbers that you didn't talk about was footprint reduction. Why didn't we talk about using less square footage in Twinsburg with this project?
Yeah. If you recall, the first pillar that we showed on advancing the factory of the future slide talked about optimizing end-to-end processes or optimizing existing processes. We optimized the Twinsburg footprint on a previous continuous improvement project. We already got the footprint savings prior to this project. Let's talk about a larger investment in re-engineering the network.
Yeah. I'm excited to be the one up here on stage talking about this one. Yesterday at Automation Fair, you saw the press release as well. We announced a brand new brick-and-mortar investment, a greenfield facility for Rockwell that's going to be located in southeastern Wisconsin. We're starting with a bare piece of ground, more than 100 acres. It's going to be a purpose-built facility for Rockwell, and it's going to meet multiple objectives. First, the facility will be designed and programmed in the Omniverse. We're going to use rock-on-rock technology in order to optimize that facility. We're going to make sure we have the highest quality and highest efficiency, and we're going to do it before we ever actually put a shovel in the ground. Second, it's going to be a showcase for our customers. I was talking to some of our sales folks yesterday.
They're really excited about taking their customers to this site and showing them the factory of the future and the way Rockwell envisions it. Third, we're going to be able to optimize our overall cost to produce, driving costs out while also building in quality. Fourth, we're going to show that all of this is possible to do it in a U.S. manufacturing location. There's an added benefit for us too, which is it's a bonus for our employees. We are going to have three significant primary locations that are all within a half hour of each other: our Milwaukee headquarters, our Mech Wand, Wisconsin facility, and this new facility in southeastern Wisconsin. That allows great sharing of best practices between all of our employees at those locations. It allows a really good career path for those people, and they can do it without ever actually moving or relocating.
By the way, it's got an ROI, low double-digit ROI on this project, which is, again, when you talk about brick-and-mortar, a low double-digit ROI is something that I'm pretty excited about. Bob, I think what you're probably most excited about, though, outside of all those, because those are all great, but bringing truly autonomous operations to our headquarters market is pretty exciting. We've done it elsewhere. Why don't we talk a little bit about the Singapore story?
Picture Singapore. For those of you that have been there, what do you remember? A lot of office buildings. Our manufacturing facility is on the fourth and fifth floor of an office building, not our traditional manufacturing setup. Singapore was already a world-class facility before we went and did this. If you look at externally published metrics for quality for OEE and SCRAP, Singapore was already in a world-class position. Also, the plant was already highly automated and highly efficient.
The bottom of this visual is outstanding. 33% increase in labor efficiency. For our factory staff, a 60% improvement in time to competency, which means a brand new employee in the training process, they're actually able to be productive 60% faster. All of that while improving quality and reducing our cost to produce. That is being done in a high-cost market with an ROI north of 20% and a payback of less than three years. It is pretty compelling. Bob, what were some of the big takeaways for us on that?
The journey from automation to autonomy in Singapore has been accelerated by software-defined automation, integrated robotics and production logistics, and software and AI. I'll give you a couple of examples of that. We moved to a digital design process with a digital twin using our Emulate 3D to lay out the facility and the workflow. This saved us considerable time, and we found issues with our original design by working in this digital design environment. Additionally, we automated material movement from inbound to outbound, lights out warehouse, and we automated with AMRs all our material movement inside of the manufacturing environment.
Great examples, Bob. On that last one, where do those savings come from with all this automated material movement?
Yeah. For all manufacturers and us, indirect labor is a significant portion of our labor costs in our plants. Think of it as maybe 30% for us. We were able to really put this solution in place, and it significantly improves our indirect labor efficiency.
Great. It's a really good start on creating a showcase of the factory of the future and the benefits we can achieve in a facility that was already highly automated. The end result is margin expansion while also enabling capacity to grow. Just as importantly is what a great showcase that location is in Asia-Pacific for our customers and how to create the factory of the future. This was a pilot use case for us. We can call it pilot use case number one. How do we take that pilot and how do we scale it?
Pilot and scale, pilot and scale resonates with everything Christian and I have discussed today. Twinsburg is a great example of pilot and scale for us. Twinsburg is similar to Singapore, but it has higher complexity and higher mix. The reason we picked Twinsburg next is it is one of our highest revenue plants.
Yeah, that's a really good point. Singapore in the Rockwell world is a high-volume, low-mix facility. Twinsburg is a lot more complex. What's different in Twinsburg, Bob? How are we going to go farther than what we did in Singapore?
We're integrating everything that we did in Singapore in Twinsburg. Let me talk about a couple of examples of how we're expanding on what we did in our Singapore factory of the future. We're building a digital twin model with agentic AI agents that will not only help in the design phase, but it'll live real time in our control room to allow us to continually optimize and de-bottleneck the line when we're in an operate and maintain portion of the facility. We're also implementing advanced AMR capabilities with articulated arm robot attachments on top of the Otto AMR and our Otto fleet management software integrated with our FactoryTalk Production Center MES.
It's really good examples of how we're going to expand that vision. I know the answer to this. Our investors probably know the answer to this, but just want to underscore it because this is going to happen a lot as we take customers to these new showcases. What's the first question that we get when you bring a customer through and you show them this factory of the future? You show them Rockwell Automation technology. What are they asking you first?
It never fails. The first question from a customer is, what is the return on investment for implementing this technology? We relentlessly talk about Rockwell Automation with an ROI. Rockwell Automation is cool. It's fun, but it has to have an ROI.
I don't think you're ashamed at all to stand up in front of a customer and talk about a 20% ROI, that's for sure.
In conclusion, Christian and I have shown how we've begun a journey in operationalizing our operating model that will drive a continuous stream of margin expansion that'll make us more profitable, more resilient, and more competitive. Our organization is ready and energized to drive us to becoming the showcase for building factories of the future and helping our customers do the same.
With that, let's have Blake come back up and join us.
Great. Thanks, guys. I hope that you're getting a sense of purpose and urgency that's really permeating the organization as we work together to bring these things to life. For kind of the final way to bring this together, as with us, so with our customers, bringing these capabilities together to drive greater efficiency as they grow. Ferrero is a good customer of ours. They're making U.S. investments such as the recent acquisition of Kellogg, but they're also using Rockwell products around the world. And now we'll hear from Giuseppe Del Duca, who's the head of Ferrero Engineering, about their goals and our partnership.
Dear Blake, dear Rockwell team, I'm truly sorry I couldn't be with you in person today. I want to sincerely thank you for your kind invitation and for the opportunity to share this short video message. It's always a pleasure to connect with you. As you know, Ferrero continues to grow year after year, both organically and through strategic acquisitions, with a particular focus on the U.S. and North American market. As a CEO of Ferrero Technical Services and head of engineering for the Ferrero Group, I feel deeply grateful to have a partner like Rockwell supporting us through this exciting and challenging journey. Over the past few years, our partnership has strengthened significantly, overcoming major global challenges such as the shortage of electronic components after COVID-19. In many ways, these difficulties have brought us closer together.
Throughout it all, we have remained ambitious and committed to our plans, confident in the support and dedication of our partners. Over the past two years, the entire Ferrero organization started with our CEO, with procurement playing a key role. I had the pleasure of working closely with you to strengthen our partnership and jointly shape our business plan across key areas such as cybersecurity, lifecycle services, robotics, AMR innovation, and overall modernization. This journey has been guided by mutual clarity, transparency, and a shared commitment to excellence, values that continue to drive our success. Looking ahead, we know more challenges await, from geopolitical tensions to evolving regulations, but I'm confident that together we'll continue to navigate them with resilience and innovation.
In closing, I'd like once again to thank the entire Rockwell team, from Blake and Bob Buttermore to the global account team, for your continued support, expertise, and really collaborative spirit. The road ahead is full of challenges, but I'm confident that together we will keep building strong and innovative solutions to support Ferrero's global growth. Thank you again for this opportunity and for being such an important part of our journey.
Yeah, I think there's no more eloquent way to put on display the way that we're bringing all of this together to add value to customers than to hearing one themselves who has choices around the world, who's picked us, and how we're helping them. To bring together a few of the things that I'd like to leave you with, we have returned to top-line growth, and we're putting that together with expanding margins to create what I think is a more complete, very attractive result. We remain laser-focused on execution as we make these investments for the future with purpose and urgency. In the end, there is nobody who's better positioned than Rockwell. I thank you for your attention. With that, we'll bring the rest of the presenters on stage to answer some of your questions.
Hey, guys. Is that on yet? Not on yet.
Is it on yet?
Yeah, now it's on.
Gotcha.
Andy Kaplowitz was from Citi. Christian, you came from an 80/20 background, and today you and Bob talked about operationalizing margin expansion. Why not just formalize the program as some sort of new enterprise strategy? One of your industrial peers does that. Is it too early to do that? If you don't want to do that, where are the biggest savings going to come from over the next couple of years, whether it's procurement or manufacturing footprint or this cost to produce you talked about?
It definitely is becoming part of our normal organizational fabric. The difference around how we believe we want to do it is we do not necessarily, if we put an annual target out there and we continue to treat it like it is an event, it is going to feel to the organization, it is going to feel probably to our investors like we are in a perpetual cycle around events, as opposed to institutionalizing it, driving that operational excellence into the organization to the deepest levels, and then continuing to do that as part of our core, just part of what we do every day. Yeah.
I mentioned to a couple of you, we added a company-wide coordinator within Bob's organization to work with all the businesses and the functional areas, just as Christian said, to be able to make this an absolutely intrinsic part of what we do every day. In fact, it has its own quadrant in the Rockwell operating model, but you see elements of that in all of these pieces. I want it to be an everyday part of what we're doing.
One of the things that I think is compelling to the organization, they say, "Well, this cost saving's great, but is it in opposition to top-line growth?" I had a general manager years ago who said, "No, cost savings are actually a revenue-getting opportunity because they give you the flexibility to be able to go out, and when you have to get aggressive on pricing, then you can do that." That mind shift, I think, is helpful. That's exactly what we're going for, is for people to understand what their role is as well as the why we're doing those things.
Blake, I think you said new capacity orders expect to grow strong double digits in 2026. Maybe give us more color on how much of that statement is just cyclical commentary versus the unlocking of what Matt and Mateus talked about in terms of delivering full autonomous solutions and/or comprehensive digital package.
Yeah. The projects that we're tracking represent, I would say, new capacity with a U.S. component of it. As I mentioned, it's around the world. There's a great mix on those projects. Of course, Matt talked a little bit about Electrolyt and Irving as examples where there's a certain amount of traditional capabilities, it's Logix, it's big drives, it's motor control centers support, but it's also these other things. It's simulating the operation of these plants. It's going in and adding more software than we ever would have been able to before with a certain element of annual recurring revenue. It shows up in all parts of the organization. It's probably weighted a little more heavily towards the configure-to-order portions of Tessa's business as well as lifecycle services and Matt's.
There are plenty of Logix processors that are going out there as well, either as part of those systems or going to engineering firms where they're doing the final integration. We're not breaking out the growth contribution from those projects versus other flow business, but we are seeing the percentage of business that's due to CapEx that is a little bit higher in that respect. Importantly, as we talked about on the earnings call, we're not counting on some big inflection up. We're seeing some of it. It's going through a fairly high level of scrutiny within our customers. As things come in, we're ready for it. We do expect that more and more of these projects are going to go through because there is pent-up demand. Now we've got a few questions.
Thanks. Julian Mitchell at Barclays. Maybe Blake, just following up on the top-line discussion, you talked about the kind of CapEx trajectory. Maybe home in a bit more detail what you're seeing in the Logix platform on demand. Secondly, on the top line, you had that very interesting scatter chart showing market share versus market CAGR. Maybe help us understand some of the higher growth markets where your share is lower, what you're doing to push.
Yeah. I'll start, and then I'm going to ask Mateus to talk some about the specific Logix profile, what we're seeing with respect to what we're seeing there. That chart was something we developed to portray our end markets and where we are, where to play, how to win kind of things. Obviously, some of those verticals have waxed and waned a little bit over the last 10 years. In areas like data center, big potential market, of course, we don't serve all aspects of electrification and automation in data center, but we see really good progression of profitable business there. As I mentioned, through the Cubic acquisition that's in Tessa's shop now, power distribution for data centers, a really good solution there. The replacement of direct digital control in the control space for the building management systems with Logix, we're seeing that there.
Some of those customers are also asking us to do the panel build in that respect. Adding value add because we've talked a lot today about standardization and speed. In no place is that more important than the data center business. Life sciences, some of us remember a time when we didn't really talk about pharmaceutical and life sciences, but that's been a gift that's kept giving great growth. It is a strong contributor to the company's growth and profitability. Really interesting because most of our business in the life sciences is not boxed product. We do sell lots of drives and controllers and so on, but the majority of the business, more than half of it, is the services and the software. As we add to our capabilities there, then it's only fueling that growth. That's a couple of examples of that.
I don't want to play someone else's game. I don't want to be late to the party. We have a certain amount of discipline in terms of not rushing off to try to buy something to jump into a space and finding that we're not going to be able to get the profit that we expect because we're not differentiated or we didn't really understand it. We are careful about these things. Even within certain of these end markets, I think there's lots of room to run. With that, I'll turn it over to Mateus.
Yeah. I think just one point on this, the data center business with the building management systems is actually something that's not new to us. We've done quite a bit in semiconductor for decades. It's been building on that capability and that technology. Blake, I think we mentioned that throughout fiscal 2025, we've touched quarterly averages that were pre-pandemic levels, but we're still below. There's room to continue to expand on a unit basis. The only other point I would make is on process control. Logix continues to expand and grow. We've added significant capability around process safety. Really, if you think about Logix in process, there are many reasons why it's changing the game. I'll give you three right now. For example, a lot of the process business relies on the understanding of the process, the domain, the know-how.
We partner better than anybody else because a lot of the delivery of large process systems from our competitors is done by themselves. You see a lot of these partners looking at them as competition when they look at us as partners to grow and amplify. The second is really we come from, we've been the best in the world in large control system for a very long time, and that's continued to gain even more capabilities. We come from the cost basis of a large control system that's much more attractive than the traditional heavy DCS type of solution.
When you take segments like in verticals like life sciences and CPG, we're really one of the only people on earth that can tell you we have a same consistent platform from what we call the wet end of the plant all the way to the dry end of the plant and the packaging and so on. You combine these three, and you have a pretty robust set of differentiation that's kind of hard to replicate if you're just a pure process player.
That's great. Just one quick follow-up. The financial goals, some of them, I think the segment margin and the segment operating leverage and the ROIC, I'm not sure, maybe I missed them in this one, but you had the sort of 35% and the over 20%. Are they sort of still around? Any sort of fleshing out of those?
Yeah. No changes around those objectives. So still, ROIC remains a key metric for us. The incremental margins at 35% kind of through cycle on the average. As you all know, or as many of you know, we did guide to a little bit higher than that when we talk about fiscal 2026 at a 40% clip. But generally, we're still in that same ballpark. And so, yeah, the rest of the objectives are still in place.
Hi. Thanks for the time today, Jeff Sprague at Vertical. I wanted to dig a little bit further into the vertical integration opportunity, actually, no pun intended. Can you give us a sense of maybe what percent of your COGS would be sort of value-added sourcing of some sort that would then be a candidate for evaluation for vertical integration? As the example that you gave us, roughly kind of a 25% savings on that particular part, is that sort of a decent rule of thumb on what the opportunity is?
Yeah. Maybe I'll talk a little bit about the detail. And Bob, if you want to jump in with some more around the kind of the broader opportunity. Actually, that one part, yes, that was a 25% savings. It all depends on where it's coming from, though. From an experience level, plastic injection molding, normally that's a 30-35% savings that you can get. This one happens to be with those five components all in. We're getting about a 40% savings. That is a really good area of opportunity for us. When we're talking about other things that are done on the outside, there are many of them that are in the 20s, some that are even in the 40s. It all depends on what those opportunities are. Honestly, there are some that are 10-15%.
Those are ones that we eliminate pretty quickly, saying, "Look, we got other opportunities. Let's go get those first before we go after something that is that narrow of a margin opportunity," especially when you think about it from the perspective, again, we have better opportunities. On top of that, we have the risk that comes with having to do a lot of those things in-house for that kind of yield that's not quite there. Bob, on the overall opportunity that we have as an organization and what we're spending on the outside with parties that we have the opportunity to bring in, I don't think we've ever actually sized that number.
I think what we've talked about a lot is that every facility, if we've had the factory managers in, we've talked to all of them, every facility sees really good opportunities to be able to bring those in. That all depends on what they're doing in that factory, whether it's injection molded parts from housings like we used as an example, but there are harnesses that are being done on the outside. We're also able to do some things around trying to integrate our operations with doing some wire cutting and fitting that happens on site using automation technology.
I would say there's a nice opportunity in our direct spend, and it's kind of a two-way approach, right? There's a commodity down approach, exactly what Christian was just talking about, where we're saying, "Hey, injection molding." We're saying cable assemblies. We're saying subassemblies, metal fab, things that really align with our capabilities, and we know we can get that return on investment. There is the bottoms up where we really have everyone in our organization focused on where are their insourcing opportunities. The plants are coming up with ideas because they see it every single day in opportunities all the way through additive manufacturing, where we buy something today on the outside, but we're able to actually do that internally through additive manufacturing. It is a top-down, bottoms-up approach, buy commodity, and then just what the plant sees.
There's a nice opportunity for us in the direct space as we go forward.
You don't want to give us kind of bigger than a bread box, though. You told us indirect costs are 30% of the total. Why don't we chop up the rest of the COGS if we can?
Yeah. I mean, you're in the right ballpark from that perspective. Again, we're not necessarily—it's truly a bottoms-up, tops-down approach. We are for sure going after the opportunity. We have not sized yet exactly what we're going after.
Some of this started back in 2024 when we embarked on a cost savings program looking at direct material. To be able to effectively negotiate with your existing suppliers, you have to create a credible threat to their longevity in your supply base. That is whether you're looking at an alternate supplier, you have to do a certain amount of engineering and feasibility work, or looking at insourcing. Some of those things, we kind of opened that up. We know what it takes to do certain of these things. I think that's going to serve us well. That is an evergreen process, right? It really started primarily in the intelligent devices segment because Tessa has got such a proliferate—so many SKUs in that organization. It's a pretty target-rich environment.
For sure. Just a quick one. The cost to produce metric, were you able to do any kind of look back on that? Is that a source of historical spillage and margins and returns and the like? There is a real kind of measurable improvement that you expect to get just looking at sort of a before and after sort of approach?
We haven't done a full deep dive into the past history around it. We really are taking this as a fresh start and a movement forward. We're more focused on the organization trying to take that tool and develop their own plans on how to continue to improve it. Obviously, we have a lot of the key data points in the standard costing system that allows us to see a lot of that in the history, but we do not have a lot of history around the cost to produce.
Thank you. Chris Snyder, Morgan Stanley. You guys provided a lot of really good ROI metrics on your internal investments. I imagine customers can achieve somewhat similar ROI by employing these solutions. I guess the question is, when the ROI is in this 20% + kind of range, why does the customer say no? Any way to think about the opportunity within just the installed base? What percent of US factories are using all of the automation solutions that they could?
Yeah. I'll make a couple of comments. Then, because Matt is so involved in some of these capacity decisions, I'll ask him for some comments. I got asked the same question when I was talking to the board about this job. Why isn't automation and Rockwell growing faster? It's about the risk. Intellectually, you can look at an ROI that looks very compelling, way over your WACC and so on. If you lose two months of startup because you didn't take all the factors about interfacing it with existing systems in your plant and you lost some production there, it blew your ROI out of the water. That's why I talk so much about simplification so that you can get something that approaches more IT levels of adoption of that technology because when something's running, it's running. You're producing your products at the other end.
That simplification aids with risk reduction, and that's why they sometimes say no. Today, in the environment we're in, people are also a little bit skittish about making investments at the pace that they would like to because they want to make sure that the costs in their business case are still valid. Tariffs have certainly thrown some uncertainty into that, as well as making sure in areas like the chemical industry, is their demand going to remain intact? Fundamental parts of their own equations. There's a little bit of volatility now. We think that that'll level out, but that's still casting a little bit of a damper on some of those spends.
Yeah. I would agree that CapEx is somewhat constrained based upon the cost of capital, the decision-making. I see across greenfields, people are going all in. They're looking at every aspect of how they can automate. A very large CPG company that I'm an executive sponsor for made the decision to move away from AGVs to our AMRs to really consistently reduce that indirect labor, but also given the flexibility. Instead of laying a track down as a fixed asset, they're really thinking about the mobility that they need, the flexibility that they need. I would also say the people part of the equation. It's a balance between the technology and the people. To Blake's point, when there's risk involved, there's a huge opportunity in brownfields across the U.S. There is an aging installed base. There is a dwindling workforce that can support that installed base.
People are really starting to look hard at their asset base. How do they modernize? How do they take advantage of it? Everything that Bob talked about, our customers are talking about. If we could see a little bit more stability in terms of the project cost rates between real estate, the trades, once we get to a little bit more stability there, there's a lot of room to grow.
Thank you. I just wanted to follow up on the slide that said new capacity orders could grow strong double digits in fiscal 2026. I guess, in your guys' view, is that just the natural evolution? Right now, we're seeing paybacks and efficiency, and then capacity expansion comes after that. Are your customer conversations indicating that this could happen? I know this is not all of your orders, but the company has kind of gotten out of forecasting orders. I just kind of wonder what gave you the confidence to put that in the slide. Thank you.
Yeah. It's very specific projects with bills of material that we're tracking in each of those industries. I’m happy with the way that project tracking has matured. It's in our CRM system. There's worldwide visibility. We have a team that's sole purpose is to coordinate among our various organizations around the world. It's deep, obviously, within sales, but also with a strong collaboration with the individual businesses. We showed the CapEx that's being invested with some US content. That's not the full worldwide picture, but we have really good line of sight to what's in there. That's why when we talk about these projects, some of them are being delayed but not canceled. We know that with very granular views.
When I made the comment about cost and demand causing some of these projects to be delayed, that's talking directly with the people who are on the pursuit teams with those projects as we review those funnels in those areas.
Question.
Yeah. It's Andrew Buscaglia with BNP Paribas. Christian, so far, so good under your watch. You've had over a year now to kind of really dig into the portfolio. You came out with a lot of great details today. I'm wondering, I go back and forth where the bigger margin opportunity is segment-wise. Software, you got these past acquisitions that are maturing, and you catch a cycle here that could be pretty powerful. You're kind of bumping into those targets, whereas intelligent devices, maybe you have a little more work to do to get towards those goals. In your mind, I guess you gave a lot of details. Where do a lot of these fall under where you see a big, maybe more near-term expansion?
Yeah. From my side, importantly, we all have opportunity. The software and control business has shown really good leverage as they're getting back to a growth mode. The intelligent devices business, as you think about what we've done over the last couple of years from a cost reduction and margin expansion, a lot of the examples that we talked about with areas that we're going to as we're operationalizing that program, a lot of that is going to be intelligent devices is going to be the primary beneficiary of that. From a pricing perspective, we talked about the product side of it. Intelligent devices, again, is the largest beneficiary of that. There is not a single segment within Rockwell that doesn't have runway and doesn't have an opportunity for us to continue to expand margins over the long term.
Yeah. Maybe Tessa had just a few examples of what's at the top of your list as we continue on that journey.
Yeah. I think there's a couple of things for the segment that are going to be really important. I think we have a good line of sight of what we need to execute, continuing to drive the top line and new products that we're introducing, driving both expansion in existing customers and winning new customers and new logos around the world. We have a number of acquisitions in intelligent devices that are growing fast and adding a lot of value to customers, continuing to grow those, drive operational performance. The integration synergy that we expected from those is going to be important.
I think we've elevated our IQ around portfolio optimization, pricing, so really pressure testing the range of products and SKUs that we have available and making strategic decisions around what doesn't make sense to be a part of our portfolio, so eliminating underperforming SKUs or really leveraging price as a strategic lever for us to address either low-performing, low-margin parts of the portfolio. I think lastly, and very importantly, we've got a great relationship with our supply chain. Bob has done a great job leading in that organization. We've made a lot of progress over the last 12 to 18 months in terms of the operational efficiency. What you saw today will have a direct impact. Looking at product cost reductions, looking at efficiency in manufacturing, looking at the indirect cost, logistics, and others, will have a positive impact for the segment.
I feel good about the fact that we've executed well over the last 12 to 18 months. We've got a good line of sight to the priorities that we have ahead of us.
Yeah. Really appreciate everybody's attention. Great questions during Rockwell's investor day. That concludes our prepared remarks and the Q&A section. Thank you all for joining in, both in person and on the webcast. Thank you.
Thank you, guys. We have lunch for you in the back. We'll have a member of our leadership team at each of the tables, and we'll conclude at 1:00 P.M. Thank you.