Air Liquide 2Q26 preview: electronics business driving growth, with a relatively balanced pace of margin improvement

Overview

This report is Bernstein's thematic update ahead of Air Liquide SA's 2Q26 earnings release. Based on recent communication with the company, the report focuses on assessing 2Q26 comparable growth, recovery in the electronics business, performance of the industrial gases segments, the 2026 margin improvement target, as well as valuation and risks. The overall conclusion is positive: current Visible Alpha consensus expectations for 2Q26 growth and OIR are considered broadly consistent with the company's latest information, and Bernstein maintains its Outperform rating.

Core views

The core views include: first, 2Q26 comparable growth is likely to improve versus 1Q26, and market expectations have largely reflected this change, but the current group comparable growth consensus of 2.8% is still considered achievable; second, the electronics business is the main acceleration driver, with carrier gases maintaining high-single-digit to low-double-digit growth driven by capacity ramp-up, while Materials and E&I will also contribute to growth; third, Large Industries continues to be affected by weak volumes outside the Americas, Industrial Merchant pricing remains solid but Asia and helium are under pressure, and Healthcare continues to grow but may be below the upper end of the historical 4-6% range; fourth, the 2026 margin improvement target of +100bps is expected to be delivered relatively evenly through the year, supported by existing pricing actions and ongoing cost reductions.

Analysis framework

The report uses a combination of company communication, segment growth breakdown, Visible Alpha consensus comparison, and forward P/E valuation. Growth analysis starts from segments such as Electronics, Large Industries, Industrial Merchant, and Healthcare; profit analysis focuses on OIR and the margin improvement target; valuation uses the forward P/E framework for leading industrial gas companies and compares relative valuation with peers such as Linde plc.

Methodology notes

• Earnings previewSegment comparable growth breakdown

  Assess the achievability of group 2Q26 comparable growth by business segment.

  The report identifies the electronics business as the main source of incremental growth and, combined with ongoing performance in Large Industries, Industrial Merchant, and Healthcare, concludes that the consensus comparable growth of 2.8% for the group and about 2.7% for G&S is consistent with the company's latest communication.

• Margin analysis100bps margin improvement tracking

  Verify the pace of achieving the full-year margin improvement target across the first and second halves.

  The company reiterated confidence in delivering +100bps of margin improvement in 2026, and the report believes existing pricing actions and ongoing cost savings will help the target be achieved in a relatively balanced way.

• Valuation methodsNTM P/E

  Use forward P/E to assess a reasonable target price for a leading industrial gases company.

  The report uses about 28x NTM P/E as the valuation basis for Air Liquide, believing the premium to the upper end of its historical range reflects industry consolidation, improved discipline, revenue resilience, and long-term growth potential, while still maintaining a modest discount relative to Linde plc.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Air Liquide SA (AI.FP)

  core covered name

  Strengths

  The industrial gases portfolio is resilient, growth in the electronics business is accelerating, pricing actions and cost savings support margin improvement, and industry consolidation plus improved discipline support a higher valuation multiple.

  Weaknesses

  Large Industries volumes outside the Americas remain weak, Healthcare growth may be below the upper end of its historical range, and interest costs are rising year on year due to DIG Airgas debt.

  Comparison

  The report believes Air Liquide can command a valuation above the upper end of its own historical range, but should maintain a modest discount relative to its closest peer Linde plc because Linde has stronger earnings potential and operating discipline.

  Risks

  If North American Industrial Merchant is hit by a deep recession, IM pricing weakens, project backlog slows again, or new clean hydrogen contract signings are insufficient, all could weigh on the target price and share performance.

Key data

• RatingOutperformBernstein rating, 12-month horizon.
• Target price€207.00From the ticker table and valuation methodology explanation.
• Closing price€176.30As of 2026-07-01.
• Implied upsideabout +17.4%Calculated from target price €207.00 and closing price €176.30.
• 2Q26 comparable growth consensusgroup 2.8%; G&S 2.7%Visible Alpha consensus; Bernstein estimates group 2.8% and G&S 2.9%.
• Implied electronics business comparable growthabout 6-7%Based on recent carrier gas growth of about 9-10%, and an assumption of average growth of about 3% for Materials and E&I.
• 2026 margin improvement target+100bpsThe company reiterated relatively balanced delivery between the first and second halves.
• OIR consensusgroup €2,914m; G&S €3,046mVisible Alpha consensus; Bernstein estimates about 3% higher.
• Adjusted EPS2025A €6.70; 2026E €7.39; 2027E €8.14From the report ticker table.
• CMD date2026-10-05The company's capital markets day date has been confirmed, avoiding Linde's schedule on October 1.

Impact & implications

The report implies that near-term earnings risk is relatively manageable: the market already expects 2Q26 to improve versus 1Q26, but the current consensus still has fundamental support. If acceleration in the electronics business, Industrial Merchant pricing, and cost savings continue to be delivered, Air Liquide is likely to maintain its margin improvement path and support the Outperform rating. Conversely, if the growth improvement fails to materialize, or if project backlog, pricing, and macro demand weaken, the valuation premium may come under pressure.

Risks

• Since June 2022, the new CEO has emphasized performance delivery; if execution setbacks occur, the share price reaction may be amplified.
• North American Industrial Merchant sales account for about 70% of regional sales; if a deeper recession scenario emerges, the share price could come under clear pressure.
• If Industrial Merchant pricing weakens, it will undermine the margin improvement path.
• If project backlog slows again, especially if the clean hydrogen story sees insufficient new contract signings due to uncertainty, this will pose downside risk.
• Large Industries continues to be affected by weak volumes outside the Americas.
• Although Healthcare continues to grow, it is expected to be below the upper end of the historical 4-6% range.
• DIG Airgas debt is causing interest costs to rise year on year, which may affect net profit performance.

What to watch

• Whether 2Q26 group comparable growth is clearly above the 1.9% in 1Q26.
• Whether the Electronics business achieves about 6-7% comparable growth and whether carrier gas growth of about 9-10% continues.
• Pricing resilience in Industrial Merchant outside Asia and helium, and whether volumes merely remain resilient or return to growth.
• Whether volume pressure in Large Industries outside the Americas eases.
• Healthcare growth relative to the historical 4-6% range.
• The delivery pace of the 2026 margin improvement target of +100bps in the first and second halves of the year.
• Whether the 2026-10-05 CMD provides new medium-term guidance on growth, margins, or capital allocation.