EMERSON ELECTRIC CO (EMR)

Items 2 and 3.

Management's Discussion and Analysis of Financial Condition and Results of Operations

(Dollars are in millions, except per share amounts or where noted)

OVERVIEW

For the third quarter of fiscal 2026, net sales were $4.9 billion, up 7 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 6 percent. Foreign currency translation had a 1 percent favorable impact.

Earnings from continuing operations attributable to common stockholders were $718, up 24 percent, and diluted earnings per share from continuing operations were $1.28, up 24 percent compared with $1.03 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.71, up 13 percent compared with $1.52 in the prior year. Overall, results reflected sales growth and strong operating performance.

The table below presents the Company's diluted earnings per share from continuing operations on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company. Adjusted diluted earnings per share from continuing operations excludes intangibles amortization expense, restructuring and related costs, first year purchase accounting related items and transaction-related costs, discrete taxes and certain gains, losses or impairments.

The table below summarizes the changes in adjusted diluted earnings per share from continuing operations. The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30

Following is an analysis of the Company’s operating results for the third quarter ended June 30, 2026, compared with the third quarter ended June 30, 2025.

Net sales for the third quarter of fiscal 2026 were $4.9 billion, up 7 percent compared with 2025. Software & Systems sales were up 11 percent, Intelligent Devices sales were up 6 percent, and Safety & Productivity sales were up 3 percent. Underlying sales were up 6 percent on 3 percent higher volume and 3 percent higher price. Foreign currency translation had a 1 percent favorable impact. Underlying sales were up 10 percent in the U.S. and up 4 percent internationally. The Americas was up 8 percent, Europe was down 1 percent, and Asia, Middle East & Africa was up 8 percent (China down 3 percent).

In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act ("IEEPA") does not authorize the imposition of tariffs. Subsequently, on April 20, 2026, U.S. Customs and Border Protection launched an administrative portal through which eligible importers could submit claims for refunds. During the three months ended June 30, 2026, the Company filed certain claims and received tariff refunds of $82 ($0.11 per share), and the benefit was recorded in Cost of sales. The timing and amount of any further tariff refunds remain uncertain, and, accordingly, no benefit was recognized as of June 30, 2026 for any additional potential refunds related to IEEPA tariffs previously paid.

Cost of sales for the third quarter of fiscal 2026 were $2,218, an increase of $58 compared with 2025, and gross margin of 54.5 percent increased 1.9 percentage points. Gross margin increased primarily due to the tariff refunds discussed above.

Selling, general and administrative (SG&A) expenses of $1,343 increased $77 and SG&A as a percent of sales was 27.6 percent, a decrease of 0.2 percentage points. SG&A as a percent of sales decreased due to leverage on higher sales and savings from cost reduction actions.

Other deductions, net were $311 for the third quarter of fiscal 2026, an increase of $13 compared with the prior year, due to an increase in restructuring costs, partially offset by lower amortization. See Note 7.

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Pretax earnings from continuing operations of $916 increased $182, up 25 percent compared with the prior year, reflecting strong operating results as well as the tariff refunds discussed above. Earnings increased $51 in Software & Systems and $55 in Intelligent Devices, and decreased $10 in Safety and Productivity. See the Business Segments discussion that follows and Note 15.

Income taxes were $198 in the third quarter of fiscal 2026 and $154 in 2025, resulting in effective tax rates of 22 percent and 21 percent, respectively. In the current year, the One Big Beautiful Bill Act (the "OBBBA") increased the effective tax rate by approximately 1 percentage point due to lower tax deduction for foreign-derived intangible income from the change to domestic research and development in fiscal 2026. The Company expects the OBBBA to slightly benefit the effective tax rate beginning in fiscal 2027.

Earnings from continuing operations attributable to common stockholders were $718, up 24 percent, and diluted earnings per share from continuing operations were $1.28, up 24 percent compared with $1.03 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.71 compared with $1.52 in the prior year, up 13 percent. Overall, the increase in earnings per share reflected strong operating results. See the analysis above of adjusted earnings per share for further details.

The table below, which shows results on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein. The Company defines adjusted EBITA as earnings from continuing operations excluding interest expense, net, income taxes, intangibles amortization expense, restructuring and related costs, first year purchase accounting related items and transaction-related costs, and certain gains, losses or impairments. Adjusted EBITA and adjusted EBITA margin are measures used by management and may be useful for investors to evaluate the Company's operational performance.

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Business Segments

Following is an analysis of operating results for the Company’s business segments for the third quarter ended June 30, 2026, compared with the third quarter ended June 30, 2025. The Company defines segment earnings as earnings before interest and taxes. See Note 15 for a discussion of the Company's business segments.

SOFTWARE & SYSTEMS

Software & Systems sales were $1,644 in the third quarter of 2026, an increase of $164, or 11 percent. Underlying sales were up 11 percent on 7 percent higher volume and 4 percent higher price. Underlying sales increased 13 percent in the Americas and 16 percent in Asia, Middle East & Africa (China up 14 percent), while Europe decreased 1 percent. Control Systems & Software sales increased 7 percent, reflecting strong demand in power. Sales for Test & Measurement increased $85, or 23 percent, reflecting strength in semiconductor and aerospace & defense. Earnings for Software & Systems were $296, an increase of $51, or 21 percent, while margin increased 1.4 percentage points to 18.0 percent, reflecting leverage on higher sales, lower intangibles amortization and savings from cost reduction actions. Adjusted EBITA margin was 31.8 percent, a decrease of 0.3 percentage points.

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INTELLIGENT DEVICES

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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Statement

This Annual Report on Form 10-K contains various forward-looking statements and includes assumptions concerning Emerson's operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to risks and uncertainties. Emerson undertakes no obligation to update any such statements to reflect later developments. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Emerson provides the cautionary statements set forth under Item 1A - “Risk Factors,” which are hereby incorporated by reference and identify important economic, political and technological factors, among others, changes in which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions.

Non-GAAP Financial Measures

To supplement the Company’s financial information presented in accordance with U.S. generally accepted accounting principles (U.S. GAAP), management periodically uses certain “non-GAAP financial measures,” as such term is defined in Regulation G under SEC rules, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. For example, non-GAAP measures may exclude the impact of certain items such as acquisitions or divestitures, amortization of intangibles, restructuring costs, discrete taxes, gains, losses and impairments, or items outside of management’s control, such as foreign currency exchange rate fluctuations. Management believes that the following non-GAAP financial measures provide investors and analysts useful insight into the Company’s financial position and operating performance. Any non-GAAP measure provided should be viewed in addition to, and not as an alternative to, the most directly comparable measure determined in accordance with U.S. GAAP, as identified in italics below. Further, the calculation of these non-GAAP financial measures may differ from the calculation of similarly titled financial measures presented by other companies and therefore may not be comparable among companies.

Underlying sales, which exclude the impact of significant acquisitions, divestitures and fluctuations in foreign currency exchange rates during the periods presented, are provided to facilitate relevant period-to-period comparisons of sales growth by excluding those items that impact overall comparability (U.S. GAAP measure: net sales).

Operating profit (defined as net sales less cost of sales and selling, general and administrative expenses) and operating profit margin (defined as operating profit divided by net sales) are indicative of short-term operational performance and ongoing profitability. Management closely monitors operating profit and operating profit margin of each business to evaluate past performance and actions required to improve profitability. EBIT (defined as earnings before deductions for interest expense, net, related party interest income, and income taxes) and total segment EBIT, and EBIT margin (defined as EBIT divided by net sales) and total segment EBIT margin, are financial measures that exclude the impact of financing on the capital structure and income taxes. Adjusted EBITA and adjusted segment EBITA (defined as earnings excluding interest expense, net, related party interest income, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments) and adjusted EBITA margin and adjusted segment EBITA margin (defined as adjusted EBITA divided by net sales) are measures used by management to evaluate the Company's operational performance, as they exclude the impact of acquisition-related investments and non-operational items. EBITDA (defined as EBIT excluding depreciation and amortization) and EBITDA margin (defined as EBITDA divided by net sales) are also used as measures of the Company's current operating performance, as they exclude the impact of capital and acquisition-related investments. Adjusted EBITDA (defined as EBITDA excluding restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments) and adjusted EBITDA margin (defined as Adjusted EBITDA divided by net sales) are also used to exclude the impact of non-operational items. All of these are commonly used financial measures

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utilized by management to evaluate performance (U.S. GAAP measures: pretax earnings or pretax profit margin, segment earnings or segment margin).

Adjusted earnings and earnings per share, which exclude certain gains and losses, impairments, restructuring costs, impacts of acquisitions or divestitures, amortization of intangibles, discrete taxes, or other items provide additional insight into the underlying, ongoing operating performance of the Company and facilitate period-to-period comparisons by excluding the earnings impact of these items. Management believes that presenting adjusted earnings and earnings per share excluding these items is more representative of the Company’s operational performance and may be more useful for investors (U.S. GAAP measures: earnings, earnings per share).

Free cash flow (operating cash flow less capital expenditures) and free cash flow as a percent of net sales are indicators of the Company’s cash generating capabilities, and dividends as a percent of free cash flow is an indicator of the Company's ability to support its dividend, after considering investments in capital assets which are necessary to maintain and enhance existing operations. The determination of operating cash flow adds back noncash depreciation expense to earnings and thereby does not reflect a charge for necessary capital expenditures. Management believes that free cash flow, free cash flow as a percent of net sales and dividends as a percent of free cash flow are useful to both management and investors as measures of the Company’s ability to generate cash and support its dividend (U.S. GAAP measures: operating cash flow, operating cash flow as a percent of net sales, dividends as a percent of operating cash flow).

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FINANCIAL REVIEW