Illinois Tool Works added $248 million of sales in the three months ended June 30. The result was a 0.3-point increase in operating margin, from 26.4% to 26.7%. Growth arrived, but the economics of each dollar barely changed.
The headline numbers look stronger than that margin movement. Revenue reached $4.3 billion, operating income rose 7.4%, and diluted EPS increased 10.1% to 2.84. A 2.0% reduction in diluted shares helped the per-share figure do more work than the business itself.
The current filing puts the pressure in plain sight: cost of revenue rose nearly as fast as sales, and employee-related expenses were one reason. ITW said the cost line increased 5.8% in the latest three months.
"Cost of revenue was $2.4 billion and $2.3 billion in the second quarter of 2026 and 2025, respectively, an increase of 5.8%, primarily due to higher revenue and higher employee-related expenses."
Illinois Tool Works, 10-Q filed August 6, 2026
That is why the margin expansion is so modest. ITW sold more, but the costs attached to making and selling those products followed closely behind.
The broader six-month picture differs from the latest three months. Management said year-to-date operating margin fell 40 basis points, with price and cost weighing by 90 basis points, alongside higher employee expenses and unfavorable operating leverage. Enterprise initiatives and lower restructuring expenses offset part of that drag.
"In the year-to-date period, operating margin of 31.4% decreased 40 basis points primarily due to unfavorable price/cost of 90 basis points, higher employee-related expenses and unfavorable operating leverage of 30 basis points, partially offset by benefits from the Company's enterprise initiatives and lower restructuring expenses of 30 basis points."
Illinois Tool Works, 10-Q filed August 6, 2026
The filing therefore leaves two operating clocks running at once. The latest three months produced faster earnings growth than sales growth, while the six-month margin still narrowed. Cost programs are contributing, but they are working against price and cost pressure rather than erasing it.
Cash generation supplied a second detail. Cash rose to $839 million from $788 million, while capital spending fell 5.1% year over year and free-cash-flow margin improved by 2.0 percentage points. The balance sheet is converting more of the reported business into cash, even as inventory increased 2.7% to $1.8 billion.
That tension fits ITW's longer record. The company's annual results show revenue at $16.0 billion in 2025, barely above $15.9 billion in 2024, while operating margin was 26.3%. The latest three-month revenue growth is more pronounced than that recent annual pattern, but the filing's own price-and-cost commentary keeps the margin question attached.
At the latest close, ITW was $297.27, after a 0.8% daily move. The latest 26.7% operating margin provides a benchmark alongside the share-count change.
Source: Illinois Tool Works 10-Q filed August 6, 2026.