管理層發言
Hello, everyone, and welcome to the Johnson Controls Q3 2026 Earnings Conference Call. My name is Ryan, and I'll be coordinating the call today. I would now like to turn the call over to Mike Gates, Senior Director of Investor Relations to begin. Mike, please go ahead.
Good morning, and thank you for joining Johnson Controls Fiscal Third Quarter 2026 Earnings Conference Call. Joining me on the call today are Johnson Controls' Chief Executive Officer, Joakim Weidemanis; and Marc Vandiepenbeeck, our Chief Financial Officer. Before we begin, please note that today's discussion will include forward-looking statements regarding our future performance and financial results. These statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for additional information regarding these risks. We will also reference certain non-GAAP measures. Reconciliations of these non-GAAP measures are included in our earnings release and in the appendix to today's presentation, both of which are available on the Investor Relations section of our website. I will now turn the call over to Joakim.
Thanks, Mike, and good morning, everyone. Thank you for joining us on today's call. Johnson Controls delivered another solid quarter, extending the momentum we established in the first half and reflecting continued strength across the business. Let's begin with Slide 4. Customer demand remained healthy across our portfolio, driven by the increasing need for high-performance, precise and energy-efficient operating conditions. Order momentum sustained above 25%. Revenue grew 10%, adjusted EBIT margin expanded 260 basis points to 17%. Adjusted EPS increased 35% and backlog grew more than 30% to a record $21 billion. Based on this performance, we are raising our full year guidance. Marc will cover the numbers in detail. But before he does, I want to discuss what is driving these results and why we believe Johnson Controls is increasingly well positioned to deliver sustained profitable growth over time.
The answer starts with the customers we serve and the role they play in the global economy and greater society. Every era is defined by the infrastructure of demand, and this is the age of thermal management. AI factories, advanced and biopharma manufacturing, large research hospitals and universities require thermal management solutions capable of delivering performance, precision and energy efficiency at unprecedented scale. As AI infrastructure scales, customers are increasingly focused on maximizing computing capacity from available power. Yesterday, we introduced our AI factory absorption chiller reference design guide, which demonstrates how advanced thermal management can reduce cooling electrical demand by approximately 44% by converting waste heat into productive cooling. These efficiency gains support additional AI computing capacity without increasing on-site power generation, creating the potential for billions of dollars of additional revenue over the life of a 1 gigawatt facility.
While this represents a new approach for many data centers, it builds on more than 65 years of YORK absorption innovation and decades of experience deploying the technology in demanding environments. This is yet another example of how Johnson Controls is helping customers get more value from existing power infrastructure while addressing one of the most significant constraints to scaling AI capacity. It also expands our capabilities as we continue to innovate across the entire thermal management chain, enabling us to play an even greater role in next-generation AI facilities. We are winning with customers by focusing where our technology differentiation matters the most, turning manufacturing into a competitive advantage and meeting our customers' need for flawless uninterrupted operations. Our life cycle service franchise continues to benefit from the increasing importance of uptime, reliability, protection and energy efficiency, supported by an unmatched global field presence that allows us to serve customers wherever they operate and throughout the life of their assets.
Our proprietary business system that defines how we work and deliver is beginning to translate into more predictable execution, giving us an increasing confidence in our long-term potential. Let me walk you through this on Slide 5. Johnson Controls was built for this time because of two competitive advantages. For 140 years, we've shaped and protected the indoor environments where the world's most important work gets done. That track record is built on two strengths that are difficult to replicate. First, our deep proprietary technology know-how. And second, an unmatched global field presence with sales solution architects and field technicians that are roughly twice the scale of our nearest competitor. Together, those capabilities give us a differentiated position in markets where performance, precision and speed increasingly matter. We amplify these strengths through three growth accelerators.
First, our strategic pillars provide clarity on where we focus our resources. Our solutions directly address the growing need for high-performance precision and energy efficiency across some of the fastest-growing areas of the economy: AI, mission-critical environments and decarbonization. By aligning our organization around these opportunities, we can direct innovation, commercial and operational resources toward the segments where we see the greatest potential to create value. Second, our proprietary business system, which we continue to embed throughout the organization. This is how we run the company. It provides a common language and methodology for how we communicate, collaborate and continuously improve. The objective is straightforward: win more customers by solving their biggest problems faster and more consistently than anyone else. That requires both winning behaviors as well as standard approaches that elevate and continuously improve the way we work.
It is how we accelerate rate and speed of innovation, turn manufacturing into competitive advantage and improve execution across our commercial and field operations. And third, we bring together our strategic pillars and business system to translate these advantages into growth, productivity and shareholder value. It is about accelerating speed by limiting waste and processes, focusing resources on the highest value opportunities and driving better outcomes for customers and shareholders alike. Moving to Slide 6. On June 1, we hosted Going to Gemba Day, providing a firsthand look at how strategy is translating into execution across Johnson Controls. You heard directly from the teams closest to our customers and day-to-day operations and saw how the business system is better enabling those colleagues to deliver for customers in targeted areas of the business. Our first stop was JADEC, our advanced development engineering center and home of YORK, where 150 years of leadership in HVAC and thermal management demonstrated the increasing importance of innovation, performance and precision.
You saw how our technology depth and R&D talent, combined with the business system are unlocking a new level of speed and innovation capacity. In one example, the team accelerated the speed to market on a key product by 40% and helped us win a major customer opportunity. Second, we went to our Airside Center of Excellence, or ACE, where for more than 50 years, we have manufactured critical airside technologies. ACE is one of approximately 40 manufacturing facilities around the world, where we are turning manufacturing into a competitive advantage. At ACE, we showcased how the team applied the business system to more than quadruple capacity on the computer room air handler line without significant capital investment—achieving 100% on-time delivery, reducing customer lead times by half, shrinking required manufacturing floor space by more than 30% and cutting inventory by 50%. Our final stop was our local market office in Baltimore, where for the last 100 years, the team has built deep relationship with owners, contractors and consultants.
You saw how these same business system approaches and mindsets are improving customer-facing execution across system sales, system project execution, service sales and service operations. The team demonstrated how they're doubling customer-facing selling time, accelerating project engineering, improving service attachment rates and reducing non-value-added activities, helping strengthen long-term relationships across the customer life cycle. These examples demonstrate what is possible as we continue to deploy our business system across the enterprise. While scaling takes time, we are already seeing improvements in performance and the customer experience in targeted areas of business highlighting what's possible as this becomes how we work everywhere. That opportunity reinforces our confidence in the updated long-term algorithm we introduced that day. We outlined a clear path to high single-digit revenue growth, operating leverage of more than 30% on incremental revenue, double-digit adjusted EPS growth and adjusted free cash flow conversion of approximately 95% to 100%.
In summary, we are building momentum across the business. Our capabilities are critical to the high-growth sectors we serve, which are becoming more demanding, more energy-intensive and more consequential. Customers increasingly require thermal management solutions that deliver performance, precision and energy efficiency while helping them manage cost, capacity and energy usage. Our ability to meet these evolving customer requirements will be a key driver of sustainable growth. Our business system is helping us translate our competitive advantages into better customer outcomes, more predictable execution and improved productivity. Together, our technology innovation, manufacturing capability, global field presence, customer relationships and business system position us to create value for customers and shareholders for years to come. With that, Marc will now walk you through the details.
Thanks, Joakim, and good morning, everyone. We delivered another solid quarter with broad-based growth, continued margin expansion and stronger earnings. Our third quarter results reflect the momentum we have built throughout the year, supported by healthy customer demand, disciplined execution and continued productivity gains across the business. Let's turn to results on Slide 7. Organic sales increased 10% in the quarter, led by strength in applied HVAC and continued growth across both systems and service. System sales increased 11% and service increased 7% and applied HVAC delivered high-teen growth supported by data center demand. This performance drove meaningful margin expansion. Adjusted segment EBITDA margin expanded 220 basis points to 20%, while adjusted EBIT margin expanded 260 basis points to 17%. Adjusted EPS was $1.42, up 35% year-over-year and ahead of our guidance. Let's discuss our regional performance in more detail on Slide 8 and 9.
Orders increased 27%, extending the strong order momentum we have seen throughout fiscal 2026. Systems orders grew 40%, service orders increased 4%, and customer activity remained healthy across our key end markets. From a regional perspective, the Americas continued to lead our performance with orders increasing 37%, led by sustained demand from data centers and other mission-critical environments. EMEA orders increased 6% driven by high single-digit system growth. In APAC, orders grew 12%, reflecting growth across several regions, including Northeast Asia and India. Across our end markets, demand remained healthy as customers continue to invest in high-performance, reliable and energy-efficient operating environments. Turning to revenue performance by region: In the Americas, organic revenue increased 11%, led by high-teens growth in applied HVAC and solid double-digit growth in service.
In EMEA, sales increased 1% despite the ongoing conflict in the Middle East. APAC grew 15%, led by 20% growth in systems and continued strength in applied HVAC. Turning to margins by region: In the Americas, adjusted segment EBITDA margins expanded 260 basis points to 21%, driven by strong operating leverage on higher revenue. In EMEA, margin expanded 20 basis points to 14% as growth was largely offset by the impact of a recent divestiture. In APAC, margin expanded 180 basis points to 21%, supported by productivity improvements, favorable business mix and higher revenues. Backlog increased 32% year-over-year to a record $21 billion. The strength in backlog supports our confidence in both our near-term outlook and our ability to deliver against the long-term growth algorithm we outlined at Going to Gemba Day. Turning to our balance sheet and cash flow on Slide 10. We ended the quarter with approximately $600 million of cash on hand.
Net debt declined to 1.9x, below our long-term target range. Year-to-date, adjusted free cash flow increased to $2.1 billion, driven by earnings growth and disciplined cash conversion. We are now better positioned to invest in the business, while maintaining balance sheet flexibility. Let's now discuss our fiscal fourth quarter and full year guidance on Slide 11. For the fourth quarter, we expect organic revenue growth of 9% to 10%, operating leverage of 45% to 50% and adjusted EPS of approximately $1.55. Our strong third quarter results and record backlog gives us the confidence to raise our fiscal 2026 guidance. We now expect organic revenue growth of approximately 8%, up from our previous expectation of approximately 6%. We expect full year operating leverage of 45% to 50%, consistent with our focus on profitability and disciplined execution while delivering stronger revenue growth. As a result, we are raising our adjusted EPS guidance to approximately $5.05, representing roughly 35% growth and $0.50 higher than our original guide at the beginning of the year.
We continue to expect adjusted free cash flow conversion of approximately 100% for the full year, demonstrating that the higher earnings we are delivering continue to translate into strong cash flow generation. As Joakim mentioned, while we remain early in our business system journey, we are beginning to see benefits in targeted areas of the organization. As we continue to embed our business system across the enterprise, we expect further opportunity to improve productivity, execution and customer responsiveness over time. Operator, we are now ready for questions.
分析師問答
Our first question will come from Nigel Coe with Wolfe Research.
So just wanted to maybe randomly start off with supply chain, just given it seems to be a growing issue for some of the data center infrastructure suppliers. I'm just curious Joakim, how you're feeling about the resilience of the supply chain, any bottlenecks you're experiencing and confidence on sort of delivering on plan from here?
Yes. So the supply chain is always an issue when you're in a high-growth environment. And that's the headline. But then let's dig into that. If you remember from Going to Gemba Day, we were talking about how our deep technological know-how spans the five subsystems that make up an HVAC chiller. But we also talked about the fact that we control the manufacturing and the COGS of those five subsystems. So we are more vertically integrated than some in our industry and in a high-growth environment. That, of course, means that we control more of our own supply chain. And so I feel very good about where we are on many of our product lines. And then, of course, we don't make every single thing. We don't dig iron ore out of the parking lot. So of course, we depend on external vendors as well. Occasionally, there are some bottlenecks. We try to get ahead of that. Very occasionally, I will have to get involved personally, and that is just, I think, an element of operating in a higher growth environment.
Okay. That's great. And then obviously, it's really encouraging to see the double-digit organic growth more than 10% in the quarter. I know it's a little bit early for FY '27 color, but you've got really good visibility on the backlog. I'm just curious how you're thinking about kind of top line growth in FY '27?
Yes. As you mentioned, Nigel, it's a bit too early to provide specific fiscal year '27 guidance. But I'll tell you, we remain extremely confident in the way we've laid out the long-term algorithm at Going to Gemba Day of high single-digit top-line growth and at least 30% of incremental operating leverage. You will see quarters that perform at or above that level over the next couple of quarters, and that's really supported by our record backlog and the fact that our pipeline continues to grow in a very healthy manner. And the business system allows us to improve the execution on that backlog and position us well for the future. But we'll provide you details on how we look at '27 at the next earnings call.
Our next question will come from Amit Mehrotra from UBS.
I wanted to ask about the outlook for growth in applied HVAC. Obviously, huge step-up in the quarter from sort of high single digits to high teens growth. But orders are sort of running well ahead of that. And so I guess the question is, could you just offer any thoughts on sort of where we go? Can we further accelerate or are there just capacity or supply chain constraints and high teens is very good and sort of that's the expectation going forward?
Amit, well, the way we think about it, we look at our pipeline. Our pipeline continues to grow at a very healthy rate. And as you would suspect, data centers is an important part of that, but the non-data center pipeline actually is growing almost double digits. So we feel very good about the continued strength there in our business from the demand side. And then from a supply chain and capacity point of view, we made a meaningful physical plant investment about two years ago. I think we had mentioned on a prior call earlier this year that we were ramping in those new facilities or expanded facilities. And we continue to do that, and we actually had a very good quarter. So we're ramping a little bit ahead of what we thought. And that's really the proprietary business system at work, combined with some strengthening of the leadership that we have that's in charge of that part of the company. The business system is going to continue to, as you saw at Going to Gemba Day, help us create more capacity in the physical space that we already have. But of course, with this kind of growth, we're also going to have to add some new physical capacity. The business system will help us stay ahead of that. So we have some time to ramp other physical capacity expansion. So we feel pretty good at where we're at right now.
Okay. Got it. So just trying to understand what you're saying beneath the surface. It doesn't seem like there's any impediment to sort of further accelerate growth in applied HVAC. And my follow-up question on that is around margins and operating leverage because you have this long-term framework of 30% plus. Obviously, you're punching way above that this year as you start this business model kind of evolution. As we think about '27, '28, I mean the backlog, I assume as it converts, is accretive to margins. Do we have another year or two where we're sort of punching above that 30% plus long-term target? How do we think about the slope of the operating leverage as we sort of further progress through this evolution?
Yes. I mean as you see the growth accelerating beyond the mid-single digits, you've seen that we've been able to maintain this year what I would call a very healthy operating leverage between 45% and 50%. That incremental revenue that we see is converting at rates that are extremely healthy, but is closer to the long-term operating leverage framework we had laid out of 30-plus percent. So dynamically, you will still see higher than 30% operating leverage over the next 12 to 18, maybe 24 months. But the way you need to think about that is that the margin we've seen on incremental growth comes mostly from our data center revenue, which becomes a very large portion of our mix. That means systems business is growing ahead of our service business in the near term, which creates a smaller equipment mix margin headwind, but nothing that would prevent us from continuing to deliver well above the 30% incremental we laid out at Going to Gemba Day as part of our long-term algorithm.
Our next question will come from Scott Davis with Melius Research.
Congrats again on putting together some solid numbers here. I wanted to ask you guys a little bit about market share shifts and potential — how do the hyperscalers think about working with you guys and your peers? Do they think in terms of de-risking and spreading around their supply base, or do they think in terms of who has the best capabilities, capacity, delivery and quality? How are they thinking about it? And are you seeing any supply chain shifts that either benefit you guys or perhaps do not benefit you guys?
I think the way it works, Scott, is our large data center customers design or architect their data centers in certain ways and make equipment choices as part of that architecture. They engage with vendors as they do that. Many large data center customers will send groups of engineers to sit with our engineers for a week or ten days. Think of that as being designed in, and they will really pick one or a couple partners that they design in with. There might be two; there might even be three. Then when it comes to a particular site or architecture that they might build over the next two to three years, they will sit down with those vendors. Typically, no one will get all of it; it's usually split, but someone will get a little more of their purchases. And even if initially you were awarded a certain amount, executing better on lead times and having fewer supply chain issues can result in securing more over time than you initially thought. So you need to be very actively involved on the design side when they're architecting the overall data center. It's a very collaborative approach. You need to be competitive in their initial selection and then you need to execute competitively to perhaps gain share beyond the initial award.
And is the service side of it a similar kind of situation?
Yes. That's usually part of the initial selection—your capability to support customers in the locations where data centers are being built. As we get closer to actual selection of equipment for a particular site, we make customers aware of our local footprint. Our footprint is comprehensive across the United States and many countries around the world. Historically, we've had a focus on having our own people serve our customers, so we have more feet on the ground than some other players in the industry. So we have multiple opportunities to win. But you need to win on the design side to have a strong value proposition. You need to be competitive on cost and value, execute well on supply chain and delivery, and then prove you can execute on service. When you can orchestrate all of that together, that's when you start to see market-winning growth.
Net-net, do you think you are gaining share then, Joakim?
We think we are for the categories that we focus on. Absolutely.
Our next question will come from Andrew Obin with Bank of America.
At a recent industry event, you highlighted your product together with Armada, the modular product. I was wondering if you could comment on how much interest you're getting from customers, what kind of TAM it represents, and when or if it starts flowing through your revenue, is it margin accretive or margin dilutive because of pass-through?
Great question, Andrew. We believe that future data centers are not all going to be mega data centers; there will be decentralization and a world where there are smaller, edge-oriented data centers. It's in that context that we collaborate with Armada. We also have an investment in that company. The application is not brand new—think of them as data centers in a shipping container that we build in our factories and essentially include all the products we sell at Johnson Controls. These are a couple of megawatts today, and megawatts are increasing as we continue to innovate. They are forward deployed; traditional applications include remote oil and gas locations and defense applications. We believe decentralized, close-to-the-edge applications will continue to grow, and we're excited about the potential. The TAM is significant but still in formation, so I hesitate to throw precise numbers out there. We're working on a number of meaningful opportunities and expect within the next couple of quarters to be able to talk more about this opportunity. Think of it as an example of where we've taken a step back to consider how our technological know-how can advance human society, and we're taking a broader look at the AI opportunity and how we can help accelerate advancements there.
And just a follow-up question. Where are we on the strategic review for some portions of your portfolio? Any update on timing where we could hear something from you?
We continue the work on that. As you've heard before, the guiding principle here is to create shareholder value. We continue to make progress, and we will keep you posted.
And you've seen we've taken some portfolio actions in the quarter. We continue to divest our residential subscriber business around the world quite successfully; we have a few more to go, and we are making a lot of progress on actioning the commitments we've made in prior quarters in readjusting our portfolio.
Our next question will come from Chris Snyder with Morgan Stanley.
I wanted to follow up on some of the commentary around data center. Specifically, I wanted to talk about your content within the data center. On the last conference call, you said your net content would go higher, but there were moving parts under the service. I think you said chillers could go down, but air handling goes up and then the CDU business certainly goes up. I was hoping to get a little more of a magnitude of those respective moves. Is legacy content going higher when we think about chillers and air handlers? How much of it is coming from CDU being a new product where you guys are gaining share?
Broadly, as rack densities increase and new chips are launched, the amount of heat generated in data centers continues to increase. There are other things that generate heat too, such as higher voltage DC architectures. The amount of heat that needs to be extracted will continue to increase, and energy efficiency is essential. We see speculation around reduced demand for chillers as a nominal impact, if any. We see the need for air handling units—our Silent-Aire franchise, for example—continuing to increase. CDUs will become more important as more liquid cooling is implemented. We also have our Alloy investment from a couple of quarters ago, where we're making great progress in pilots and some early orders now. Our controls are critical as well. As I mentioned earlier, the absorption chiller portfolio geared to the data center space will allow customers who generate power locally to capture a meaningful part of excess heat and put it to use within the thermal management architecture, allowing them to reduce the power needed for thermal management by more than 40%. So very meaningful value proposition. We're going to continue to work on increasing our dollars per megawatt. Even the Armada example is loaded with everything we make in this company, so we will continue to drive dollar value up per megawatt as a core part of our strategy.
You've talked about bringing a more comprehensive solution to market rather than piecing the equipment together. I imagine that would lead to better energy efficiency for the data center. Is there any data about the level of efficiency savings? And do hyperscaler customers care more about energy efficiency than they did a year ago?
I think they have always cared, and they care a little more now. There are headlines and local communities concerned about power impact and prices, which leads data center customers to make more careful choices about where they build. We haven't seen any impact on demand from that; it's more a matter of where they deploy. Where they deploy depends heavily on power availability. The less power you need, the easier it is to find attractive locations. Thermal management today uses roughly one-third of all the power that goes into a data center. Whoever can eke out multiple percentage points of savings in energy for thermal management offers a very meaningful value proposition to customers. What we're working on is well beyond a couple of percentage points, and we'll talk more about our solutions when we're ready to launch them. It's very exciting and will be meaningful.
Our next question will come from Jeffrey Sprague with Vertical Research.
Let me ask a bigger-picture question. There's a lot of investor concern about whether end customers can earn an acceptable return on all this investment looking out. Against that, you're committing capital and adding capacity. Where do you stand on the sustainability of this demand? Do we have sustainable demand looking out two to three years that supports the investments you're making and the confidence shown in orders?
You asked for an opinion, so I'll give you one. I spent the five-plus years before this assignment in medical diagnostics. What's holding back the acceleration of new therapies, vaccines, medicines and diagnostics is our ability to make sense of existing data around human biology. Those industries are using AI today, but compared to what they could be doing, we're still in the very early innings. Demand for compute to support research is growing as more researchers gain access to AI and compute becomes more affordable. Also, within our own company, we're using AI in single-digit percent capacities relative to what we could use it for. So from a demand point of view—where compute is put to use—I am optimistic. There is a lot of speculation about CapEx, but thinking about demand for the output of data centers and where it will be put to use, I believe demand will continue to grow meaningfully.
Helpful. Another question: with rising power demand and heat loads, thermal and electrical solutions need to work in concert. Looking at your portfolio or partners on the electrical side, is there an avenue for JCI to play more on the electrical side, or will this remain a partnering relationship with whoever the hyperscaler chooses for that part of the equation?
Good question. In our materials from Going to Gemba Day, we talked about the five subsystems of a chiller, which include electrical aspects. We've chosen to own a subsystem that creates a whole system that performs at a higher level. We have considered broader synergies between power and thermal, but we need to be careful: procurement synergies alone are not our focus if they don't advance how data centers perform. We are exploring multiple opportunities to see what we could do there. It's possible we will surgically expand our capabilities, either through partnership or targeted inorganic moves. For now, our focus is on technology development and the value proposition side rather than broad procurement consolidation.
Our next question will come from Joe Ritchie from Goldman Sachs.
Can you help level set embedded in your guidance for the year: how much is embedded for data center revenues this year? And as you think about the backlog build and visibility for FY '27, how much of that backlog do you expect to ship in the FY '27 time frame?
Data center revenue is probably going to land in the high teens as a percentage of revenue for fiscal year '26. That subsegment is growing much faster than the rest of the portfolio, with some subsegments in very healthy double digits. As we outlined at Going to Gemba Day, we see that mix becoming about one-third of the company from a revenue standpoint over the next three to five years, and it will continue to be accretive to the overall enterprise. As we expand our installed base because of recent system growth, we continue to improve our service attachment rate, and that installed base will generate very strong service growth over the next few years, fueling data center mix expansion profitably.
That's helpful. How big is your CDU backlog today? Have you gotten through key final milestones in terms of testing and validation to start shipping your CDUs?
We are going to start shipping actually this quarter. Most of the testing and validation is through. We are still working through some of the hyperscaler validation. The pipeline for that business is well beyond the hundreds of millions and has now reached $1 billion. We think the opportunity here is enormous. It allows JCI to continue to expand the total addressable market we have per megawatt and it will continue to do so as part of a broader thermal management solution for data centers.
And we had the recent NVIDIA certification as well just a little while ago. So good progress here.
Our next question will come from Nicole DeBlase with Deutsche Bank.
Could you talk about what you're seeing with respect to the Middle East? How much of an impact did that have on the third quarter? And what have you embedded from a fourth quarter perspective for EMEA growth and when that business might return to more material growth?
We can't predict the Middle East any better than you can. It's about 10% of our EMEA business, and as you can imagine, the business environment there is very challenging right now. There's pent-up demand for sure. We have assumed that there will be no material change in the next quarters compared to recent quarters.
In our guidance, you'll see EMEA land in very low single digit to flat in Q4. That's a couple of points of pressure versus a normal run rate if the Middle East had returned to normal, which we do not expect for this fourth quarter.
APAC came in above your expectations significantly in Q3, both revenue and margins. Can you dive into what drove that and whether that's sustainable into the fourth quarter?
There are a number of markets in APAC that are quite healthy, India in particular, and there are data center markets and significant investments in advanced manufacturing, biopharma and semiconductors. Even countries like Japan, which some think are slow-growing, are strong right now on the back of investments in more advanced industries beyond data centers. We've also been able to strengthen our team in Asia Pacific and are seeing traction from very talented leaders who are now on board. I think we're still in the early innings of that upside.
Our next question will come from Andy Kaplowitz with Citi Group.
Service was up 7% revenue growth and orders up 4% in Q3, both slightly better than Q2. Johnson Controls could do better than that 4% orders in North America. Can you update us on initiatives to improve service, particularly in areas such as security, which you talked about before? Should we expect a bigger turn in service growth as you go into '27?
We remain very confident in the long-term service opportunity and how profitable that business is. Returning to mid- to higher single-digit growth is the focus. HVAC and fire are performing well within that range. We saw a bit of a decline in the Americas service backlog mostly associated with the security business. It's not a profitability issue; it's a pivot toward growth and the dynamics of price in that market. Our security business is a little less differentiated than our HVAC business, which created some competitive volume pressure. We are taking targeted action. You saw an improvement in the quarter, and you'll continue to see improvement as we drive greater consistency across the business in the Americas and EMEA. We still think there's a large opportunity to grow the installed base, especially with system growth in the double digits. One of the big priorities from Going to Gemba Day is productizing our service offering and taking a differentiated go-to-market approach to drive better value propositions for customers. It's a small bump now, but we think we've seen an inflection point.
Very helpful. Double-clicking on Fire and Security, it's flat in revenue in Q3. Is that a reflection of the initiatives you're doing? What's the underlying market doing and what's embedded in Q4 expectations and beyond?
We're keeping up with the market; the underlying market globally is flat the way we see it. We intend to do better than the market by refocusing the organization across fire detection, fire suppression and core security businesses. As we pivot into next year, this will be a core focus to lift growth. In transparency, this is not a high-single-digit or double-digit growth market, but we think we can drive performance to a high single-digit to mid-single-digit level over time.
This concludes our Q&A session. I will now hand the call back to Joakim Weidemanis for any closing comments.
Thank you. Thank you for all your questions today. We delivered another strong quarter, driven by sustained order momentum, broad-based growth and continued margin expansion. The combination of our differentiated technology, unmatched field presence and the early proof points we're seeing from our proprietary business system reinforced our confidence in the opportunities ahead. I want to thank our more than 90,000 colleagues around the world for their dedication to our customers and for embracing new ways of working that help us serve them better every day. I look forward to continuing my conversations with all of our stakeholders. Thank you for joining us today.
This now concludes today's call. Thank you all for joining. You may now disconnect your lines.