Schneider Electric beat expectations in 2Q26 and raised guidance, with 2026 EPS consensus likely to be revised upward

Overview

This report focuses on Schneider Electric's 2Q26 results and guidance raise. Goldman Sachs believes the company's sales, profits, and cash flow all exceeded expectations, and that management's upgrade to full-year organic growth and margin guidance was above market expectations, which should drive at least a low-single-digit upward revision to 2026 EPS consensus. The report maintains a Buy rating and Conviction List, with a 12-month target price of €321.

Core views

The core view is that earnings quality was strong: 2Q26 sales beat company-compiled consensus by 5%, with both major divisions contributing to growth; Industrial Automation showed particularly clear progress in China, while Energy Management performed positively in North America and Asia; data center growth reached triple digits, and the residential business improved sequentially in 2Q, including in Europe. Group organic sales growth was 16.5%, above ABB's 12%, while 1H26 adjusted EBITA beat expectations by 7% and free cash flow beat expectations by 14%. Management raised full-year organic sales growth guidance to 10%-13% and margin guidance to 19.4%-19.7%, which the report views as a positive surprise for investors.

Analysis framework

The report uses a combined approach of earnings beat analysis, division contribution analysis, peer organic growth comparison, guidance changes, and valuation framework assessment. In the short term, it focuses on evaluating the gap between 2Q26 sales, EBITA, free cash flow, and company guidance versus consensus expectations; valuation remains based on a sector-relative EV/IC and ROIC/WACC methodology, combined with Goldman Sachs' coverage-universe rating framework.

Methodology notes

• Valuation methodsSector-relative EV/IC to ROIC/WACC methodology

  Links enterprise value/invested capital to returns on capital and cost of capital, and compares them relative to the sector.

  Goldman Sachs states that Schneider Electric's €321 target price remains based on its sector-relative EV/IC to ROIC/WACC methodology.

• Factor AnalysisGS Factor Profile

  Compares a stock's position versus the market and industry peers across growth, financial returns, valuation multiples, and composite factors.

  The appendix disclosure states that the growth factor is based on forward sales, EBITDA, and EPS growth; financial returns are based on ROE, ROCE, and CROCI; and valuation multiples are based on P/E, P/B, P/D, EV/EBITDA, EV/FCF, etc.

• Potential M&A AssessmentM&A Rank

  Uses a score from 1 to 3 to assess the probability of a company becoming an acquisition target, and in some cases incorporates it into the target price.

  The appendix disclosure states that M&A Rank 1 represents a 30%-50% probability, 2 represents 15%-30%, and 3 represents 0%-15%; the main body of this report does not provide Schneider Electric's specific M&A Rank.

Asset mapping & comparison

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

• Schneider Electric (SCHN.PA)

  Core covered name; the report maintains a Buy rating and Conviction List.

  Strengths

  2Q26 sales, 1H26 adjusted EBITA, and free cash flow all beat expectations; full-year organic growth and margin guidance were raised; data center growth was triple digit; residential business improved sequentially.

  Weaknesses

  Strong 1H Industrial Automation revenue has not yet fully translated into higher margins; some businesses are still affected by the EU construction recovery, China industrial automation, and near-term performance in India.

  Comparison

  Group organic sales growth was 16.5%, above ABB's 12%; the report also notes that China Industrial Automation performance is a positive signal for Siemens, while the improvement in European residential is a positive signal for Geberit.

  Risks

  Data center growth weaker than key peers, slower-than-expected recovery in the EU construction market, China weighing on Industrial Automation, ROIC-dilutive acquisitions, and near-term weakness in India.

• ABB

  Peer for organic growth comparison.

  Strengths

  As a peer benchmark, it shows Schneider Electric delivered stronger group growth this quarter.

  Weaknesses

  The report does not elaborate on ABB's own fundamentals.

  Comparison

  Schneider Electric group OSG was 16.5%, above ABB's 12%.

  Risks

  The report does not provide ABB-related risks.

• Siemens

  Related peer signal from China Industrial Automation performance.

  Strengths

  Schneider Electric's progress in China Industrial Automation is flagged as a positive signal for Siemens.

  Weaknesses

  The report does not elaborate on Siemens' own earnings.

  Comparison

  Mentioned only as a positive cross-read.

  Risks

  The report does not provide Siemens-related risks.

• Geberit

  Related peer signal from improvement in the European residential business.

  Strengths

  Schneider Electric's residential business improved sequentially in 2Q, including in Europe, and this is flagged as a positive signal for Geberit.

  Weaknesses

  The report does not elaborate on Geberit's own earnings.

  Comparison

  Mentioned only as a positive cross-read.

  Risks

  The report does not provide Geberit-related risks.

Key data

• 2Q26 sales beat expectations+5%Relative to company-compiled consensus, with contributions from both Energy Management and Industrial Automation.
• Group organic sales growth16.5%Above ABB's 12%, mainly driven by stronger performance in Industrial Automation.
• 1H26 adjusted EBITA beat expectations+7%Driven jointly by Energy Management and a lower corporate cost line.
• Full-year organic sales growth guidance10%-13%Previously 7%-10%; company consensus was 10%, and Goldman Sachs estimates 12%.
• Full-year margin guidance19.4%-19.7%Previously 19.1%-19.4%; both consensus and Goldman Sachs estimates were 19.4%.
• Free cash flow beat expectations+14%The report says this is not common for the quarter, and the company continues to guide for improved cash conversion in 2H.
• Target price€32112-month target price; the report maintains a Buy rating and includes the stock on the Conviction List.
• Disclosed price€256.80The Schneider Electric price listed in company-specific regulatory disclosure.

Impact & implications

In terms of investment implications, the 2Q26 earnings beat and guidance raise together improve visibility on upward revisions to 2026 EPS, especially as revenue growth, margins, and cash flow are all improving simultaneously, helping support the Buy rating and target price. Triple-digit data center growth, sequential improvement in the residential business, and progress in Industrial Automation in China are positive drivers; however, investors should still watch the valuation of the Cognite acquisition, 2H pricing strategy, Industrial Automation operating leverage, and changes in backlog.

Risks

• Data center growth weaker than key peers.
• EU construction market recovery slower than expected, delaying growth in the Low Voltage business.
• Pressure from the China market on Industrial Automation.
• ROIC-dilutive acquisitions damaging return quality.
• Near-term weakness in India.
• The high transaction multiple for Cognite may raise market concerns about M&A strategy and capital returns.

What to watch

• How management explains Cognite growth expectations and the broader M&A strategy.
• 2H pricing strategy.
• Whether Industrial Automation can show higher operating leverage in 2H.
• Changes in backlog.
• Whether cash conversion in 2H continues to improve as guided.
• Whether 2026 EPS consensus sees at least a low-single-digit upward revision.