1H26 results were broadly in line with expectations, with accelerating electronics growth and improved industrial merchant pricing, but weaker 2H26 commentary

Overview

This report reviews Air Liquide's 1H26 results. The company's 2Q26 gas & services revenue comparable growth came in slightly above market expectations, 1H26 operating profit was modestly above consensus, and cash flow performance was solid. Goldman Sachs believes the results themselves were broadly in line with expectations, with the main positives coming from clearly accelerating electronics business growth, sequential improvement in industrial merchant pricing, and stronger project opportunities and order backlog; the main near-term shortcoming is that the company's commentary on 2H26 comparable growth was below both market and Goldman Sachs expectations.

Core views

Goldman Sachs' core view is that Air Liquide's medium-term quality growth thesis remains solid, with stronger momentum in electronics and Carrier Gases projects, while improved industrial merchant pricing also supports margins; however, as the stock has outperformed SX4P by about 9% year to date and 2H26 growth commentary was light, results that merely meet expectations may not be enough to support further near-term share price upside.

Analysis framework

The report mainly uses earnings-versus-consensus comparisons, segment comparable growth breakdowns, cash flow and margin tracking, project opportunity backlog assessment, and a DCF valuation framework. It compares 2Q26 and 1H26 segment performance against Visible Alpha and Vara consensus respectively, and evaluates earnings quality in conjunction with the company's FY26/FY27 margin improvement targets.

Methodology notes

• Valuation methodsTwo-stage DCF

  Target price estimation

  Goldman Sachs' €179 target price is derived from a two-stage DCF model, with key assumptions including a 7.8% WACC and a 3.0% terminal growth rate.

• Earnings comparisonConsensus comparison

  Actual results relative to expectations

  The report compares the gas & services division with Visible Alpha consensus and other group metrics with Vara consensus to assess whether revenue growth, profit, and cash flow beat expectations.

• Factor frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factors

  Goldman Sachs' factor framework compares individual stocks with the market and industry peers across growth, financial returns, valuation multiples, and composite indicators as background for investment decisions.

Asset mapping & comparison

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

• Air Liquide (AIRP.PA)

  Covered company stock, Buy rating, 12-month target price of €179.

  Strengths

  Accelerating electronics business growth, improved industrial merchant pricing, solid cash flow performance, increased investment opportunity backlog, and continued progress on the margin improvement path.

  Weaknesses

  2H26 comparable growth commentary was cautious, 1H26 OIR margin of 20.9% was below Vara consensus of 21.1%, and near-term results were only broadly in line with expectations.

  Comparison

  2Q26 gas & services growth, industrial merchant growth, and electronics business growth were all better than the relevant consensus; Large Industries and Healthcare were broadly in line with consensus.

  Risks

  Macro slowdown, weaker US dollar versus euro, project start-up delays, pricing pressure in healthcare and industrial merchant, and slower-than-expected semiconductor and decarbonization infrastructure construction.

Key data

• 2Q26 gas & services comparable growth3.3%Above Vara consensus of 2.9%.
• Industrial merchant 2Q26 comparable growth3.8%Above Visible Alpha consensus of 3.3% and above 1Q26's 2.7%.
• Industrial merchant 2Q26 pricing5.0%A clear improvement from 1Q26's 3.4%.
• Electronics business 2Q26 comparable growth9.5%Significantly above Visible Alpha consensus of 4.6%.
• Healthcare business 2Q26 comparable growth4.4%In line with Visible Alpha consensus of 4.4%.
• 1H26 group OIR€2,845mn1% above Vara consensus, with an OIR margin of 20.9%.
• 1H26 operating cash flow€3,372mnUp 13% year on year, with a 1H26 cash conversion rate of 84%.
• 2Q26 structural efficiency gains€157mn1H26 cumulative total was €299mn, up 11% from €142mn in 1Q26.
• Investment opportunities over the next 12 months€4.8bnAbove €4.5bn in 1Q26 and €4.1bn in 2Q25, with more than 50% coming from the electronics business.
• FY26/FY27 margin target+100bps OIR margin improvementThe company reaffirmed FY26 guidance and mentioned cumulative OIR margin improvement of +560bps over 2022-27.

Impact & implications

The implication for the investment view is that Air Liquide still has high-quality growth characteristics over the medium term, especially with support for future growth from electronics, Carrier Gases, and industrial project opportunities; however, in the short term, the market may focus more on 2H26 growth commentary coming in below expectations and profit-taking pressure after prior relative outperformance in the share price.

Risks

• A prolonged economic downturn caused by the global tariff regime could affect Air Liquide's end markets.
• Continued weakness of the US dollar against the euro could create FX pressure.
• Material delays in project start-ups.
• Pricing pressure in healthcare markets in Europe and the US.
• Pricing pressure in the industrial merchant business.
• New entrants emerging in the industrial merchant competitive landscape.
• US industrial production weaker than expected.
• Decarbonization infrastructure or semiconductor fab construction slower than expected.
• Value-destructive M&A.

What to watch

• Whether 2H26 comparable growth can be meaningfully above 1H26's 2.6%.
• Whether successful electronics and Carrier Gases projects continue to translate into revenue growth.
• Whether industrial merchant pricing can maintain the sequential improvement trend seen in 2Q26.
• Progress toward delivering the FY26/FY27 target of 100bps OIR margin improvement.
• Whether the scale of investment opportunities over the next 12 months and the share from the electronics business continue to increase.
• Further clarification from the company call on 2H26 demand, pricing, and project timing.