Loading blog posts...
August 16, 2025 • 3 min read
Johnson Controls International (JCI), a global leader in creating smart, healthy, and sustainable buildings, recently released its financial results for the third quarter of fiscal year 2025. In this post, we'll dive into the key figures from its latest 10-Q filing to understand the company's performance and significant strategic shifts.
JCI's business provides essential building technologies, including HVAC systems, building automation, and fire and security solutions. Its financial health offers a valuable glimpse into broader trends in the construction and building management industries.
For the quarter ended June 30, 2025, Johnson Controls reported total net sales of $6.05 billion, a modest 3% increase from the same period last year. This growth was driven by solid performance in its EMEA (Europe, Middle East, & Africa) and APAC (Asia-Pacific) segments, which grew 8% and 7%, respectively. However, sales in the company's largest market, the Americas, remained flat.
A notable bright spot is the composition of this growth. The company’s Services division, which provides higher-margin, recurring revenue, grew 6.7% to $1.93 billion. This outpaced the Products & Systems division, which saw a slight 0.8% increase to $4.12 billion. This favorable shift helped boost gross profit by 6.5% to $2.25 billion, expanding the company's gross margin to 37.1% from 35.8% a year ago.
The following flow diagram illustrates how JCI's revenue for the first nine months of the fiscal year translates into profit.
Please log in to view diagrams.
While gross profit improved, the bottom line tells a different story. Net income attributable to Johnson Controls fell to $701 million, or $1.07 per share, a significant drop from $975 million, or $1.45 per share, in the prior-year quarter.
A primary driver of this decline was a substantial 58% year-over-year surge in Selling, General, and Administrative (SG&A) expenses, which rose to $1.42 billion from $895 million. This increase in operating costs directly impacted profitability.
Furthermore, the year-ago quarter's results were boosted by a one-time $351 million insurance recovery related to a legal settlement. This gain, which was recorded as a separate line item and not as a reduction to SG&A, made the prior year's pre-tax income unusually high. The absence of a similar gain this quarter, combined with the sharp rise in SG&A, explains the steep drop in net income.
A defining development in the filing is the company's "Portfolio Simplification" initiative. JCI has officially classified its Residential & Light Commercial (R&LC) HVAC business as a discontinued operation held for sale. This is a massive move, as the segment generated $1.4 billion in sales this quarter alone and has over $5 billion in assets on the balance sheet. Divesting this unit signals a strategic decision to focus exclusively on its core commercial buildings business.
Looking ahead, the company's backlog—a key indicator of future revenue—provides a solid foundation. The total backlog stood at a healthy $14.6 billion, up 11% year-over-year (excluding currency effects), indicating a robust pipeline of future projects.
In conclusion, Johnson Controls' latest quarter reveals a company in the midst of a significant transformation. It is delivering steady top-line growth and improving gross margins, but higher operating expenses are pressuring the bottom line. The planned divestiture of its residential business is a pivotal moment, sharpening its focus on the commercial market where it competes with giants like Siemens, Honeywell, and Schneider Electric. The company's future success will depend on its ability to manage its cost structure and effectively convert its strong backlog into profitable growth.
Last updated: August 16, 2025