Rockwell Automation's FY2025 10-K: Software Growth Masks Profit Drop

Rockwell Automation, a global leader in industrial automation and digital transformation, recently filed its annual 10-K report for the fiscal year ending September 30, 2025. For anyone interested in the health of the industrial economy, Rockwell's performance offers a valuable look into current trends. Let's dive into the numbers from their latest filing to see what they reveal about the company's year.

At first glance, it was a year of stability on the top line, with total sales inching up 1% to $8.34 billion. However, the story gets more complex as we move down the income statement, with net income attributable to the company falling to $869 million from $953 million in the prior year.

The following flow diagram provides a visual breakdown of Rockwell's income statement, illustrating how revenue is transformed into profit after accounting for various costs and expenses.

A Tale of Three Segments

The flat overall sales figure masks a significant divergence in performance across Rockwell's business segments. The star of the show was undoubtedly the Software & Control division, which provides the critical software and control systems that run modern factories.

• Software & Control: Sales grew a healthy 9% to $2.38 billion. More impressively, the segment's operating margin expanded from 24.2% to a robust 29.7%. This highlights the success of Rockwell's strategic focus on higher-margin, recurring software revenue.
• Intelligent Devices: This segment, which includes hardware like motor controls and sensors, saw sales dip slightly by 1% to $3.76 billion, with its operating margin tightening from 18.4% to 18.0%.
• Lifecycle Services: Comprising consulting, professional services, and support, this division experienced a 3% sales decline to $2.20 billion, and its operating margin compressed to 14.5% from 16.1% in 2024.

This performance clearly shows that while the hardware and services businesses faced headwinds, the company's software-centric strategy is paying dividends, driving both growth and profitability.

What Weighed on the Bottom Line?

If the high-margin software business did so well, why did overall net income fall? The answer lies in several significant charges that hit the books this year. Two items in particular stand out:

1. Impairment and Amortization: "Purchase accounting depreciation and amortization, and impairment" costs more than doubled, jumping to $365 million from $144 million in fiscal 2024. Impairment charges often occur when the value of an asset, frequently goodwill from a past acquisition, is deemed to be lower than what is carried on the balance sheet.
2. Legacy Charges: The company recorded $154 million in "Net legacy asbestos and environmental charges," a sharp increase from just $21 million the previous year. These are long-tail liabilities related to past operations that can fluctuate significantly.

These non-operational charges had a substantial impact on reported earnings. In fact, the company's own non-GAAP metric, Adjusted EPS, which excludes these and other special items, rose to $10.53 from $9.85, painting a more positive picture of the core business's performance.

Looking Ahead

Rockwell Automation's 2025 fiscal year tells a story of strategic transition. The strength in its Software & Control segment demonstrates that its pivot toward software and recurring revenue is working. However, the company is also navigating a challenging environment for its traditional hardware products and is contending with significant legacy and accounting charges. For investors and industry watchers, the key will be to monitor whether the growth from its modern software offerings can continue to outpace the headwinds facing other parts of the business.