Earnings

Rockwell CEO Concedes Recurring-Revenue Growth Of 5% 'Did Not Meet Our Expectations'

Blake Moret cited project delays and costlier IT gear for the miss, while management guides to 7% recurring-revenue growth next year.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

— 2 min read
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Rockwell CEO Concedes Recurring-Revenue Growth Of 5% 'Did Not Meet Our Expectations'

Rockwell Automation, which makes industrial automation hardware, software and services, grew organic annual recurring revenue just 5% in the fourth quarter, and Chairman and CEO Blake Moret said on the company's earnings call Thursday that "ARR growth did not meet our expectations."

Delays and pricier IT gear

Pressed by a Bank of America analyst on why the metric disappointed, Moret pointed to two causes in Lifecycle Services, the segment where much of the services-based recurring revenue sits. Delays in large initial projects hold back the recurring contracts that attach to them.

The second is inflation in IT equipment, which he said is shrinking some network and cybersecurity rollouts. A food and beverage customer weighing a managed-services contract at 30 additional plants, he said, might cut it in half.

Moret said renewals remain strong and Rockwell keeps adding customers. Software recurring revenue grew at a high single-digit rate, while Lifecycle Services grew at a low single-digit rate. Segment organic sales rose 2%, and its book-to-bill ratio, new orders against sales, was 0.97, above the company's usual fourth-quarter pattern, with new demand in the energy-focused process automation business that returned after the Sensia joint venture dissolved.

The fix: faster quotes, smoother renewals

Rockwell is simplifying its processes and using internal agentic orchestration tools, software that automates steps, to cut keystrokes. Moret called that "a revenue-getting measure" as well as a productivity gain, because quicker quotes should win more projects.

Management guided to recurring revenue growth of 7% next year. Moret told a Baird analyst both software and services should improve, helped by business-system enhancements meant to reduce friction in renewals and in customers' cross-portfolio orders.

Guidance and the stock

The company set fiscal 2027 adjusted earnings per share guidance at $14.50 to $15.50, or $15 at the midpoint, with organic sales growth of 6% to 9%. Fourth-quarter adjusted EPS was $3.88, up 16%, and core sales grew 7%.

Rockwell shares were at $381.98, down about 14%, in Thursday trading, according to market data taken at 1:56 p.m. ET.

Rockwell holds its Investor Day in Boston in under two weeks, where management said it will update long-term margin targets and productivity plans.

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