Schneider Electric Sa

Hello and good morning, everyone. Thank you for joining us for our 2026 Healthier Results presentation. I'm joined today by Olivier, our CEO, and by... Nathan, our CFO here in Paris. When it comes to the agenda, so you have the slides as usual, we will walk through the presentation first and then we'll make sure that we have ample time for your question. As always, I want to remind everyone about the disclaimer that you will find on the page number two. And with that, Olivier, I hand over to you.

Thank you Antoine. Good morning to all of you and thanks for joining us. So I will go straight into the results of H1. So we've delivered in Q2 a fairly high growth at 17%. What is very important for me is our two businesses are contributing to this high growth in the second quarter. You see energy management at 18%. but also industrial automation at 11% that shows that really we are starting to be back on track and to deliver more and more to our customers by delivering really the strengths of our two businesses. So great Q2, well on track for the rest of the year. When it comes to the market itself, you can see on the left-hand side really as a reminder what is the exposure of Schneider Electric. So fairly good and balanced exposure between Schneider, Thank you very much. In semiconductor, you can see that power grid, everything which is inside infrastructure continues to be very, very solid. So to get it short, you can see that all the segments of Schneider Electric from a demand standpoint are growing with a fairly high demand everywhere. And probably the only one which continues to be subdued is really the residential market. But all in all, that confirms that both with our strategic portfolio, but also with our exposure, Thank you very much. For me, it's very, very important because I came in front of you last year and in particular during our Capital Market Day with our riverized strategy, advancing energy tech to the next level of intelligence. But we also told you that we are launching internally our company program, which is really to align everyone inside Schneider Electric against what are the priorities, what are the key transformations we want to deliver strategically in the long term. Thank you very much. We will be slightly negative to neutral in RH1, so we are well in track with our plan. It translates also in an improvement of our adjusted EBD margin by 120 bps. And what is very, very important, and that continues to be the signature of Schneider Electric, it translates into a very high level of free cash flow at 1.6 billion. And what is equally important for me is always to measure how this is done, what is the contribution of the portfolio of Schneider Electric, and you know we are a company when we come back on that that want to connect the physical and the digital world and that's why measuring the contribution of our digital portfolio through the flywheel is extremely important and we continue to progress at 62% well in line with our 70% plus ambition at the end of the cycle. So we'll come back of course with Nathan later on in details on all those numbers but what I want to give you is a quick update on where we are. Thank you very much. When I say we want to connect the physical and the digital world, for 190 years Schneider Electric has been a leader in hardware in all the sectors. We have expanded our portfolio everywhere in the world. And since more than 10 years we were convinced that the acceleration of electrification and the acceleration of digitalization will help Schneider Electric to deliver more efficiency and sustainability to our customers. And that's why we have built this unique portfolio, which is made of hardware, edge layer, and with a very strong digital layer. Now, what we have learned also in the past five years, once you enter in the digital layer, there is something that is extremely important, which is data. It's not only about putting software on top of hardware, it's about how you can capture data from the physical world, Contextualize, federate those data and deliver more value to our customer. And we've been pursuing that goal. We refresh our strategy with you and we are doing the Capital Market Day. But that's what we do with the Data Cube. It's about how contextualizing, capturing all those data. Thank you very much. Thank you very much. When I say we connect the physical and the digital world, when I say we need to create a very, very, very strong data foundation, Cognite Data Fusion, amplified by Atlas AI, which is their genetic layer, is a very, very rare asset in the market. It's a unique technology, unique capability that they have developed. Thank you very much. Extremely excited to onboard, hopefully very, very soon, Cognite, who have great people everywhere in the world, but in particular with a very strong tech team in Europe, in Norway. Second update I wanted to give you today is we've made the decision also to accelerate energy intelligence in power grid. Thank you very much. Thank you very much. Real time to anticipate those kind of events and that we can plug inside what we have been doing with Schneider Electric in our smart grid portfolio to deliver even more intelligence to our customers. But of course our customers here again will have the choice to build the full solution of Schneider Electric or to continue to buy directly AI-capability which are growing very very fast every year. Third update I wanted to give you on the technology. I told you last year that a key part of our Thank you very much. The third part, which is important, which is not new for you, we told you many times that we are very excited by, of course, the growth of the AI infrastructure at the CapEx stage to build. But what was equally and even more important for us at Schneider Electric was really to be able to play across the lifecycle at the design stage, at the build stage, but also at the operate and maintain stage. And that's where data is very important. And if I connect to my introduction, we will continue to develop the most competitive portfolio ever Thank you very much. for our customers. And I remind you, we've done a lot also in Q1 with ETAP to create unique digital twins. And we continue that journey, again, to capture data across the lifecycle to deliver even more services for our customers. There is a shortage of manpower everywhere in the world. It's super important that we can deliver more and more digital services, condition-based maintenance services for our customers, and this is what we call EcoCare in the case of Data Center. But you can see really that, again, managing the data across the lifecycle will be a unique differentiation when you want to connect the physical and the digital world. Staying on data center, we continue to be very active in organic R&D. You asked us in the past two years a lot of questions about the evolution of the architecture. Indeed, we see that with the increase of the demand of the GPU, which will be more and more intense, that will require more and more density, power density per racks, it's very, very obvious that we will have to be able to provide different alternatives in terms of architecture. Thank you very much. We've communicated a lot about what we have done with our power rack, what everyone calls in the market the sidecar. But what is very, very, very important progressively in the next two coming years is to come with a very, very industrialized solution with what we call the power center. with new SST solutions that we have developed right now, that we have prototyped and testing already with a couple of customers and to make sure that we are ready with industrialized solutions when the demand in the market will accelerate. So great progress done in R&D and we'll continue to give you an update in the future on the way we are progressing. The second key pillar of Schneider Electric is really the way we want to deal with our customers. This slide, you've seen it, so I'll be very, very fast. But we want in a world which is more and more fragmented to build a unique model of differentiation, which is a regional model where we connect the way we innovate, we supply, we sell. And in every single region, we want to be differentiated. We want to leverage the ecosystem. We want to leverage our knowledge. We want to leverage our ecosystem of partners. And on top of that, for sure, there are a certain number of directions that will continue to be global, On technology, platforming, on the way, of course we manage our supply chain and we connect the different elements of our supply chain, but the way we sell. Just to give you an example, while a large part of the portfolio is sold through local, regional customers, we have an increasing part which is done with global customers, and here it's important that we keep a global dimension. So that continues to be really the compass for Schneider on how we drive our differentiation in front of our customers. And just to report a couple of progress here again in Q2, We have announced in the month of June that unique partnership with SoftBank wanted to make a massive investment in France in the field of AI infrastructure. And I do believe that the unique knowledge and presence of Schneider Electric in France, again, our knowledge of the local ecosystem, which is both our customer, which is both government organization from the top of the country to the lowest level in the region, The connection of Schneider Electric with utility like EDF which has power available. So we are a kind of connector of all this ecosystem and becoming in the future a partner of SoftBank, a technology partner. But where we will also commit on our side to build a new prefab factory which will be close to the data center. as soon as the deployment will start in the coming year. So that's a very, very interesting partnership and I think it was only possible thanks to the very strong presence of Schneider Electric in the local ecosystem. Another update I wanted to give you, we continue to make the most of the acquisition that we have done in the past, again with this willingness to give even more to our customers in every region. Just a first example, as I told you already, Motiver has been growing very, very fast, in particular in North America since we've made the acquisition. It was at the beginning of the acquisition, 95% of the sales of Motiver were done in North America, but our obsession since day one when we closed the acquisition was to get ready to expand, and now it's done. We are ready to manufacture our liquid cooling equipment, our CDU, both in Italy in Conselve, where we had historically our chillers manufacturing, but also in India, in Bangalore, that will help us to serve the rest of the market. So it's a very, very interesting shift that we have prepared in the past two years to get ready now to bring those customers to the rest of the world on top of North America. And as an example, which is interesting, you know that we've doubled down last year in Loris & Nuxon, our acquisition in India, which gives us, of course, a unique presence in India, which is now the third largest country of Schneider Electric from a sales standpoint. But equally important for me is how we leverage India to create this fourth regional hub. We call it the International Hub, but from India. Thank you very much. So that's the update that I wanted to give you when it comes to the customer differentiation. And the last one, which is very important to me, I've been extremely vocal last year in all our communication. We want to be seen as a very, very advanced company when it comes to technology. We want to be extremely close to our customers, to our regional model, but also our global customer. But what is equally important for me is that we go to the next level of operational excellence, the next level of cost competitiveness across the board at Schneider. So we built this plan that we announced to you with our executive committee during our Capital Market Day. We're on one side, we want to go to the next level of leadership, cost-effectiveness on our portfolio. So for me, what is very, very important that we continue to deliver very strong productivity, very strong industrial productivity. Nathan will go more in detail, but we're extremely... Please to report 535 million of industrial productivity in H1 2026. But it's equally, not to say even more important, that at the design stage, when you design the next level of offering, you are extremely cost competitive. And we are averaging here a lot of R&D team in China. In India, with a very, very strong knowledge, again, because they are living in a very cost-competitive environment, on how we can be more effective and really to deliver cost-by-design in all our new offer. And when you start to embed Don's concept, you build more competitiveness at the launching. but that help you also across the life cycle of those products to deliver more productivity if you have anticipated. So very, very, very important point. Last but not the least, I said last year that we will continue to collaborate to leverage partner on technology but also on the supplier side because we don't need to do everything by ourselves and we are very pleased to report the partnership with Foxconn that I will explain in a minute. Last but not the least, but Nathan will go extensively on the detail, we want to be more efficient, We want to be simpler as a company to operate. We have a fantastic growth opportunity in front of us. It's important that we build a model which is simple, which is scalable, which is cost effective. That's why we have this obsession to drive an improvement year on year on our SFC, on our SG&E on sales ratio. And you have seen, and that has been a question you asked us last year in Q1, what are you doing in pricing? We've put a very, very strong methodology, process, discipline in place. I told you we were ready January 1st to hit the market and now you can clearly see that it comes and it flows to the P&L and Nathan will elaborate a little bit more but 280 million of pricing on products that have been delivered in H1. Talking about our supplier collaboration, I just wanted to share with you Thank you very much. Thank you very much. Thank you very much. Thank you very much. Loris & Nixon, Dublin Dunn last year, but also the recent acquisition that I just announced about Cognite and AI Dash. But all of that being extremely focused and contributing to the acceleration of our strategy. Last but not the least, we told you end of last year that we want really to progressively increase and to be more systematic in share buyback. And in line with that strategy, we have started to implement in H1 already 250 million that have been reaper shares. To finish my presentation, I'd like to give you a quick update on what makes Schneider Electric also a very, very different company. A very strong focus on our people, on the engagement of our people, but also the fact that we are an extremely reliable company. Thank you very much. More important is to see what are the drivers of that engagement, the trust in the purpose of Schneider Electric, the North Star, the fact that we have been committed, we are reliable, very strong sense of ethics, and the fact that we offer massive development opportunities in the career of our employees. And as a result of that, just to tell you, we have every year, since many, many years, a worldwide employee shareholding plan. I think the trust of our employees is well illustrated in the 62% of employees who are investing at Schneider Electric. who are investing in the company with three countries, China, France and India, even above 80%. So I think that gives a strong illustration of our commitment, of our employee that I want to thank today again for the great job they are doing at Schneider Electric. Multiple recognitions outside on that commitment to people and sustainability and of course always pleased to see when you are rewarded as the most sustainable company in the world in 26 for the third year in a row. As you know, we've launched our new sustainability impact program. This is the beginning of a new cycle. We are at the end of H1. I will not go into the detail, but we are tracking well with our target that we have fixed for year one. And I will just finish by telling you that my priorities, the priorities of the company are unchanged. It's very interesting, that's probably the first time since I've been appointed that I don't change one of my slides. This slide is exactly the slide we have used to enter in 26 with you, but also with our team. Everything that I said around technology, leading in this new energy landscape, being the most innovative company in this new electrical distribution world, Going to the next level of intelligence by bringing this unique data layer that we need to deliver more intelligence for our customers. It's a combination of being more software-defined in everything we do in our product portfolio, but delivering more value through AI, through software to our customers. And of course, continuing to have a very strong leadership in data center and all of that with more and more technology and supply chain partnership to accelerate our strategy. On customer differentiation, I've covered all the points. We will continue to be that unique company which is extremely regional, to be extremely close to the customer, with a certain number of areas where we want to be really global when it comes to some very important strategic fundamentals. and a very strong obsession at my level on operational excellence. But I do believe that at the end of H1, we are proving to you that what we said last year start to work, start to impact of P&L with a very strong focus on price, delivering better margin and continue to be very focused on productivity and efficiency. and we are also investing in AI internally to make sure that we prepare the next level of efficiency for Schneider Tree, but we'll get back to with more details in the future. On that, I'd like to hand over to you, Nathan, to go more in details into our financials.

Perfect. Thanks, Olivier. And good morning, everyone. I'll start with our key financial highlights for the first half. Our H1 revenues are at 21.2 billion euros, a record for first half. In gross margin, as Olivier already mentioned, we see net positive outcome of 10 bps organic with strong productivity and acceleration in gross pricing on products, offset by inflationary costs, tariffs, and mix. After gross margin, we see strong positive evolution in our operating leverage, driving our adjusted EBITDA margin up 120 bps organic, and we retain good control on our SFCs. Our net income and adjusted net income both show strong positive evolution. Finally, as Olivier mentioned, we delivered a record free cash flow for H1 at 1.6 billion euros. Moving to H1 revenues, both businesses are contributing to growth. In energy management, we deliver growth of 15.4% as we see continued strong demand across all of our end markets, led by data center, but with strong contributions from all. In industrial automation, we deliver growth of 7.7% with strong contribution from discrete as the recovery continues, and we're pleased that process turns positive in Q2 in the longer cycle business after the demand had picked up in H2 of 2025. Scope impacts are now immaterial with Motivair considered for only two months in H1 as it is now part of our organic performance. And FX translation adversely impacted our revenues by close to 750 million euros, mainly due to the weakening of the US dollar and the Indian rupee against the euro. And as you can see at the bottom of the slide, if rates remain where they are now, we would expect Forex impacts of minus 450 to minus 500 million on revenues and negligible impact on adjusted EBITDA margin for the full year. In total, we were up 14% organic in sales with strong momentum going into H2. Sticking with the H1 view for just one more slide, we'll show here our digital flywheel with the weightage and percentage of the group sales. We see the continued progression up two points versus H1 last year to 62% as we execute on our strategy. And at Schneider, we really see the value in the flywheel. And the strong growth in connectable products sets us up well to deliver the energy and industrial intelligence layers, which, of course, are more recurring in nature, deepening our relationships with customers throughout the ecosystem and make our revenues more predictable and resilient over time. Now moving to Q2 and the revenues. Revenues were up 16.5% organic to 11.5 billion euros, a record for any quarter with all regions contributing. In particular, we have North America and China East Asia both delivering growth around or above 20%. And I note India is also growing at similar levels. So our three largest geographic markets are all booming. Scope impacts in Q2 were immaterial, while Forex eased in comparison to Q1. Turning to our mix of business models for Q2. Product growth accelerated to 13% organic. And as Olivier mentioned, price contribution increased sequentially versus Q1 represent approximately four points of product growth in Q2. The realization of price increases passed proactively at the start of the year now started to accelerate through the quarter. What that also means is that product volumes therefore also accelerated with contributions from both business units. If I go to systems, our systems business, where we primarily sell directly to end users, it continued with high demand and strong execution, translating into sales of 28% growth, driven by data center, but again, with growth across all four end markets. Finally, on software and services, they grew plus 6% with double digit ARR growth in Aviva and single digit organic growth. Thank you for joining us. North America, as you see at the top left, was up 25% with the U.S. driven by momentum in data centers, where we saw particularly strong growth from cooling, from prefabricated modular solutions, sorry, and three-phase UPS, with also semi-con and energy and chemical segments contributing to that growth. Canada grew double digit, while Mexico remained down due to certain trade uncertainty. In Europe, we grew at 8% organic, led by performance in power and grid, and also in buildings. Data center demand in the region did remain strong, and we see that demand coming, while the sales growth was impacted by execution on some larger projects last year. In Europe, all five of the major European economies were growing at mid-single digits or higher, with Italy and Germany leading the growth. In China and East Asia, we were up a strong 20%. Inside of that, China was a double digit led by data center, Semicon, and renewable power. Whereas in East Asia, we also grew strong double digit, but it was primarily led by data center, which is a reflection of the broadening in geographies boosted by the AI demand. In South Asia and international, we grew 13%, and it's a bit contrasted in performance by region. But as I mentioned earlier, India remains very strong with broad-based growth across the end markets. Australia was also very strong, benefiting from data center trends. While the growth in South America was a bit more subdued, with some good traction in grid-related projects, with a bit softness in the more short-cycle product exposure there. Finally, on Middle East, it remains of course subject to considerable uncertainty, and while we have adapted, the situation remains volatile and has impacted growth. Turning now to the geographic drivers of industrial automation, which grew 11% in Q2, showing the good momentum and return to revenue growth in process. North America grew 8%, with the U.S. up mid-single digits, led by growth in discrete and returning to growth in process, which we would expect to continue based on the backlog we've built and discussed in previous quarters. Canada grew double digits also in this business unit with strong contribution from the process segments, while Mexico in fact returned to growth against a low baseline of comparison. In Europe, we also grew 8% with a viva of strong double digits with contributions from various countries. There was good growth overall in discrete, led by strong growth in Germany and Italy, which are two of our largest markets there. While process also grew, although the market recovery in Europe was not quite as progressed as in North America. Moving in the circle, China and East Asia delivered very strong growth at 20%. Across the region, we saw strong double-digit growth in discrete markets and encouraging signs in process markets in some of the countries within East Asia. China grew strong double-digit led by good traction with OEMs, while East Asia grew double-digit with semi-con segment as a key driver. Finally, on South Asia and international, we grew 9% in the quarter, with India seeing strong growth in discrete and strong performance from Aviva in Australia. Like for EM, the Middle East remains subject to considerable uncertainty. Across both businesses, we see this as a challenge in H22026, but in the longer term, there are clearly strong opportunities to participate in the post-conflict recovery. Turning now to income statement and our first half income statement here. We finished H1 with adjusted EBITDA of $4.1 billion, a record for an H1, with organic growth of 22%, taking us to a margin of 19.3% of sales and growing 120 BIPs organic. This was driven by our strong top-line growth. Our focus, as Olivier mentioned, on operational excellence, driving strong productivity, driving strong product price with acceleration in Q2, and significant operating leverage. Our adjusted EBITDA margin in energy management was up 100 bps organic, broadly reflecting those same dynamics as the group. The adjusted EBITDA in industrial automation also improved year over year by 50 bps organic as we implement the margin recovery plan there to reach 18% by 2028. The last thing I'll notice at the bottom of the slide, R&D costs in the P&L remain stable at close to 6% of sales, representing our sustained commitment to innovation as we deployed around 1.2 billion on R&D in H1. Turning now to our gross margin bridge for the first year of the half, we finished H1, as I already said, with gross margin of 42.5%, up 10 bps. If I focus on a couple of levers, on net price, we see the benefit from those proactive pricing actions taken at the start of the year, which really accelerated strongly in Q2, but were still insufficient to offset the raw material inflation and tariff impacts we faced. which is a good moment to remind you that the impact from RMI and tariffs in H1 last year was close to zero. Related to tariffs, we saw the benefit of around 100 million euros coming from tariff refunds in Q2. For the full year, we are unchanged in our expectation that we will offset the impact of RMI inflations in value through our pricing actions. Moving to the second lever, productivity was particularly strong, as Olivier mentioned, above 500 million impact in H1, showing good sequential improvement driven by several factors, including technical productivity, supplier negotiation, and leveraging our capacity investment of recent years. One note of caution is that we delivered more than 70% of our full year 2025 productivity in H2, so the baseline does become a bit more challenging as we progress along the year. Mix was negative in gross margin, as expected, given the very strong growth in our systems business model. Moving on to support function costs, these grew at 8% organic compared to the top line growth of 14%. thereby, as Olivier also mentioned earlier, demonstrating considerable leverage with our SFC to sales ratio improving by 1.1 points. We continue to maintain tight control over discretionary costs and start to see the benefit of the structural actions we have taken to improve efficiency. And alongside this discipline on one side, we do continue to invest, as I already mentioned, in R&D, but not only. We also invest in our digital transformations and AI initiatives. Turning now to net income, on a reported basis, including Scope and Forex, our adjusted EBITDA was up 17%. Below the line, I'll pick just a few items to cover. In OOIE, we have an impairment of capitalized development costs. As you know, we have a strong emphasis on refocusing the industrial automation business as part of our overall operational excellence pillar. Part of that initiative involves simplification of our IA offer ranges, and we've been making progress on this in H1. If I move to the second line, on restructuring costs, we do see the uptick that we previously communicated, and you see the savings of that from the previous chart. There's no change to our expectation around the total envelope of incremental charges, but we do expect those to peak in 2026, with total restructuring charges of around $450 million this year. On net financial costs, the increase there just basically represents our bond refinancing and financing undertaken in 2025. And all in at the bottom, our net income lands at $2.5 billion, up 30%, while our adjusted net income, which removes those one-time charges we had last year, grows 21% or 29% at constant currency. If I move then to cash flows, our operating cash flow for H1 grew 28% year over year, reaching around 3.8 billion euros, primarily due to the strong P&L performance. Free cash flow was a record for an H1 at 1.6 billion euros, including the usual H1 build-up in working capital, which reflects the rapidly growing nature of our business. On non-trade working capital, we see the impact of a much stronger H1 performance, both on bonus accruals plus the one-time charges we had taken last year. We expect our cash conversion ratio to be around 100% for full year, which was in line with our communicated expectations. Finally, and Olivier mentioned the strength of the balance sheet, our debt ratios remain strong, supported by our continued strong results. And you will see in this slide that our credit ratings with S&P and Moody's have been reconfirmed following the proposed acquisition of Cognite. With that, Olivier, maybe I'll turn it back over to you.

Thank you very much, Nathan. As usual, Luc, we'd like to finish that presentation to tell you what we see for H2, what are the trends and what are the financial targets of the company. First of all, what I'd like to say is what do we expect in terms of trends? We will continue to live in a very, very complex environment. I think we've been used to, you know, for the past years we are living in a world which is more and more fragmented. And for us, what is very, very important is to make sure we can navigate through that level of uncertainty. So we don't believe it will reduce in the next six months, in the next 12 months. We have to be used to that. When you are living in this kind of environment, what makes China Electric really very, very different is the fact that we have this very, very balanced exposure. So what we expect in H2 basically is... Thank you very much. We see, and it's extremely important for me, that the other segments of Schneider are also contributing. Industry, infrastructure, you've seen that industry automation is really growing fast again in Q2, so that's great to see that we'll be living in a market that will continue to contribute strongly, and also with building and probably residential a little bit behind. But still, a very positive outlook where our portfolio makes a lot of sense. From a geographical standpoint, As I said, all the regions will contribute with a particular contribution from U.S. in India, but we said it in Q1, we say it again today. China contributes, Europe also contributes pretty well, but here we cannot be helped too much by the elements. It's about us to be more differentiated. And of course, as we said, we are still living in a very uncertain world when it comes to the Middle East crisis, and we'll have to continue to navigate, which impacts potentially Europe. Thank you very much. I said it already several times today, it's super important that we continue to execute our company program. The priorities we fixed at the end of last year are the right ones. An obsessed, really focused on gross margin improvement with two particular drivers, pricing and industrial productivity. Continue to be very disciplined in RSG&A. and we've demonstrated for more than one year now that we are extremely disciplined and as a result of that, that gives us the possibility to continue to be very ambitious when it comes really to profitability. So as a result of that, in that environment where Schneider Electric has delivered a very, very strong H1, we are coming to you with a revised target, a target that has been upgraded We believe we can deliver between 14 and 19% of organic improvement of adjusted EBD, which is supported by two very strong drivers, as you know. So we are revising our guidance up in terms of revenue from 7 to 10 to 10 to 13% organic. And we are revising up also our adjusted EBD margin from 50 to 80 to 70 to 100 BIPs by the end of the year. As I said to my team, we are at the halftime of the game. We are extremely ambitious. We have to stay humble to continue to be very focused and making sure that we can really exceed our target this year and deliver that new guidance we are presenting to all of you. Thank you very much for your attention and I hand over back to you for the Q&A, Antoine.

All right, thanks a lot, Olivier. So indeed, that will be time for us to open the Q&A. I'm sure that after what Nathan and Olivier presented, we will have plenty of questions. So just to make sure that we'll be able to give you the capacity to speak, each of you, we'll try to keep it to one question at a time. So with that, operator, let's get started.

Thank you, sir. As a reminder, start one for questions. The first question comes from Phil Buller of JP Morgan.

Hi, good morning. Thank you for the question and congratulations on the results. There's a lot in there, but the gross margin development was not expected, or what was guided to, I guess, being positive in the first half, and 120 bps of adjusted EBITDA margin is also better than expected, and I think that the original guide was that there was going to be an H2 waiting this year. You're now expecting the opposite profile, as implied by the guidance, so what has changed other than costs, which actually went up, Was this price realisation or price increases being above plan? Or were there things like tactical cost savings that we should assume come back in H2? Or how do we reconcile that sequentially lower H2 EBIT margin progression in the second half of the year beyond conservatism? Thanks.

Thank you very much for your question. I'll start and of course, Nathan, I'll let you complete. Look, number one, if you remember all our discussion last year, I was extremely open with you. By the way, all of you guys were pretty challenging on the capacity to Schneider to deliver a really strong operational performance. I think many of you gave us a feedback in our CMD that you liked really the strategic direction, the differentiation of the company, but you were telling us, look, you need to be back to very strong operational excellence. I've been very transformed since I've been appointed. We put a plan last year, we've communicated to our leadership internally, and then we work hard. Now, when you manage such a large company in such a level of uncertainty, It's very difficult to predict at which point of time everything is going to scale. So when I entered in 2026, I had a very high level of confidence that we were very well aligned in the team. In multiple calls I told you we were ready this time January 1st to hit the market. Thank you very much. Everything being amplified, all the work you do on operational excellence is amplified with, of course, more volume, more growth. And as a result of that, we definitely finished H1 a bit in advance versus what was the initial plan, clearly, and in a market where we continue also to grow fast. And if you go in the details of our numbers, you will see that on the growth, and we are always living in a competitive environment, we do pretty well. We were also challenged last year on a certain number of metrics. We say with Nathan, triple digit growth in Semicon, in Data Center. So all this volume also is accelerating, which demonstrates the great job of our salespeople everywhere in the world. and, you know, managing PLL is very, very simple. You know, at the end, if you have great volume and you do a great job on operational excellence, of course, the results are better. So, always difficult to predict at which speed we will be back to business, but I think we are demonstrating that the plan is working and that gives us the confidence to raise the guidance for H2. Do you want to go a little bit more in detail?

Yeah, maybe the only thing I'll supplement for you, Phil, is, because I don't want to repeat what Olivier said, but we view H1 performance as... Thank you for joining us. That element, certainly, we weren't considering back in February when we were talking about the shaping of the P&L across the H1. And otherwise, I mean, inside of our guidance, we're taking multiple scenarios. We're looking at the underlying run rate. We're looking at the operational excellence programs that we have in place. And we're pretty confident that this is the right level at the 70% to 100%. Thank you very much. Thank you, Phil. Operator, next question, please. The next question is from Alastair Leslie of Bernstein.

Yeah, thank you. Good morning. So my question is on data sensors. One of your closest peers yesterday highlighted challenges in scaling more integrated solutions. They talked about being on a learning curve. You're developing similar solutions. You kind of sort of showcased some of those in the slides. How comfortable kind of do you feel about execution risk as these kind of AI deployments become larger, more complex, more modular, and How do you ensure, I suppose, that this doesn't become a constraint on growth or margins, particularly as you're kind of building momentum around execution again? Thank you.

Look, that's a great question. And we've been in this data center industry for more than 20 years. As you rightly said, the past years, we've seen an acceleration. And if you remember every time what we've explained with Nathan, the way we look at the market, number one, we speak to our customer. We have the privilege to work with 200 customers in the world. Of course... A couple of them represent a large part of the opportunity, but not all, because you have the hyperscaler, you have the colo, you have the neocloud in North America, everywhere in the world. And we like to work with them and say, hey, give us basically what is your own forecast in terms of gigawatts to be built for the coming years. And from there, that gives us a kind of idea where we could be in 2030, but more important, where we are now. Thank you very much. Thank you very much. Thank you very much. as I said before what is very important for us is to have all the architecture which are important for that market you don't need to be ready three years in advance you need to be ready when the first customer wants to have the first quotation and place order and on that part I think we are doing extremely well and getting ready for the next wave so Your question is absolutely valid. I'm not saying it's easy when you look at the exponential growth, but we try to be extremely disciplined from the long-term planning to the short-term and the way we manage and execute and deliver great service to our customer. And at the end of the day, what you can see through our H1 result is so far it seems to be working very well, but we need to stay attentive because indeed the world is so unpredictable that you can have an always issue in that area. But so far, so good, I would say.

Thanks, Olivier. Thanks, Alistair.

Next question, operator?

The next question is from Andre Cookman of UBS.

Yes, good morning. Thank you very much for taking my question. I'd like to come back to net price just to clarify a few things. Could you firstly clarify the net tariff impact, because it shows us minus 104 on the bridge, and is that net of 100 million refund? And I guess more importantly, how did the net price evolve in Q2 versus Q1? You said it improved, but did it come already to a break-even or a positive? And if not, do you expect it to be already in the positive in Q3?

Well, look, I'll let Nathan give you all the details of the waterfall. What you can see through H1 is basically we are doing what we said end of last year, which is hitting the market and definitely pricing has been extremely positive to us in H1. But do you want to go through the detail of price impact and pricing, Nathan?

Maybe I can go through a bit more details for you. Yes, from your mechanical read, so I answer the easy one first. Your mechanical read, yes, you can add 100 million to 104. Now, in a broader sense, though, we're monitoring and adapting to this net tariff world. There's still uncertainty in tariffs. You saw the announcements even last week. So we're monitoring that one on all dimensions. Now, you asked a specific question also on the ramp up of the price. We told you in Q4... and in Q1 that price was approximately 2% of the transactional. Now at four points, it's basically a two and a half time Price realization in Q2 versus Q1. So this is really good ramp-up that we're seeing. It's what we've been talking about, this acceleration and the proactive price increase in Q1. And mechanically, that's giving us, again, two and a half times price realization in Q2 versus Q1.

And I think it would be fair to say, Nathan, that when we look at where we are at the end of H1 in June, if we are able to repeat that in H2, we'd be in a great position to compensate the impact of raw material and entire feedback in RPNL.

Thank you for the question. Thank you, André. Thank you, Nathan. Operator, next question, please.

The next question is from Jonathan Mouncey of BNP Paribas.

Hi, good morning. Obviously, lots of good stuff in there. Maybe I'll talk about IA though. Obviously, revenue up strongly, double digits Q2, I think 7.7% organically QH1, I think that's about 265 million of organic sales expansion. Margins only up 30 bits though. I mean, we've waited a long time for this business to start growing, you know, in the second quarter they're double digits and yet The organic profit expansion is still pretty anemic. I was really expecting, if I'd known sales were going to be this strong, I'd have expected a strong expansion. Why is that? And I guess more interestingly, why and when will it get better? And what are you doing to improve IA's drop-through?

Thank you very much for the question. I'll start, and Nathan, feel free to complete. What is really important, and of course, as you know, in our industrial automation portfolio, we have our software business from Aveva, and we have also our legacy industrial automation business. Both are extremely important strategically for Schneider, and when you go to the industrial automation legacy business, We have appointed, as you know, Gwen in H2 last year really to come and to have a new view on that business, how we can make it more synergistic with the rest of Schneider Electric. And we are working on a strategic plan turnaround with two horizons, a long-term horizon and a short-term horizon to deliver strong returns. The mandate that I give really to Gwen is let's make sure that industrial automation contributes strategically in the future to Schneider. So the long-term horizon is priority one, which means that we have to make a certain number of decisions on where we refocus our portfolio, what we want to accelerate, double down, the places which are probably less strategic. and all of that we try to do it with an economic equation where we accelerate the growth and we are returning back to profitability. Our commitment with Nathan and Gwen during the CMD was to say we'll turn around that business to be back to the profitability we used to have. Actually on the other side Aveva is contributing well. They are almost at the end of their transition and we see the positive impact on the profitability. When it comes to the IEA legacy business, we are well on track with the plan and you said it yourself, you can see it already through the growth. When it comes to the profitability, it's on track as well, but again, it's a plan that will take a couple of months, maybe two years really to be back to the level where we want to be. Nathan, anything you want to add?

No, I think what we can say generally there is it's on track to our 18% by 2028, which we communicated. Gwen's working on the portfolio, as Olivier alludes. We took the write-off for some capitalized R&D projects in the past in H1, and we continue to progress. Now, we don't give you the details, but we saw basically the same level of leverage on the base cost, and we continue to work on the gross margin, but we consider that we're on track with our commitments there. in the medium term.

Thank you. Thank you, Jonathan. Operator, we'll go to the next question, please.

The next question is from James Moore of Rothschild & Co. Redburn.

Good morning, everyone, and thanks for the time. Look, I understand your fortunes are not one end market, but just on data center, there's clearly been a fade in equity markets globally around AI in recent months. Thank you very much. Thank you very much.

Thank you very much. I think this is a question that everyone would like to answer with a lot of precision. I would start to tell you, if you look at, first of all, the way we are using AI at Schneider. You know that we have announced and I told you we are very excited by the acquisition of Cognite. Why? Because when you want really to connect the physical and digital world and to deliver more intelligence, we are at a unique point of time. If we are able in the industrial world, process, energy, to capture those data, to structure, contextualize, leverage, you know, OSI stuff to capture those data in the industrial world, operational, real-time data, and really to contextualize and deliver more intelligence to our customers, I mean, we deliver eventually what we wanted to deliver at Schneider Electric for more than 10 years. What does it mean as a result? It means as a company, we will consume more AI, our customers will consume more AI because that will go really to a level of intelligent driving efficiency sustainability that we have never seen before. So on the consumption of AI, if you look at what we do Schneider as a company for our customers, If I go to the efficiency part of what AI can do to make China Electric simpler, we talked already about pricing today. We are starting to experiment AI in pricing. We are experimenting AI in forecasting. We are experimenting AI to amplify ourselves. I can tell you as a CEO of China Electric, if you would ask me what is your level of consumption of AI today versus what it will be in five years from now, I will tell you maybe 1% only. Now, I cannot predict about the world, all the other companies, but when you go to the infrastructure side, we need the right level of infrastructure to support that acceleration. It has been the case in the past. We see an acceleration this year in the US, but we see also a big acceleration in the rest of the world, which was completely disconnected. Because when you look at data center in the world to support cloud, it's fairly balanced by geography. When it comes to AI, Europe, rest of the world, we are really behind. So that's also a place where people are catching up. Now, is it too much compared to what the people will need? I don't think it will stay at that level for the next five, ten years. But there is a very, very solid growth, and I do believe the demand is just increasing. Now, you raise another point that I face as a CEO. It's going to cost you more and more because tokens are not free. The companies who are selling those models have to be profitable. So on our side, we make sure, first of all, we have a good deal and we have the right partner. and on the other side we have to get ready also for that level of efficiency we need to invest in tokens. So we are by the way not increasing our headcount this year. We are extremely strict on our SG&A because we want to make sure step by step we can also increase our spend of tokens where the return on investment will come maybe after one year, two years, three years. So your question is... Thank you very much. Probably the most important one, and the one for a company like Schneider in our industry that will really create a strong differentiation in your capacity to deliver, to execute, to serve the demand of your customer. So, so far, we believe it's manageable, we believe it makes sense, but of course we'll have to be all very, very attentive of the evolution in the coming years. Especially on the evolution of the model, the technology, and how it could change the mix in the future.

Thank you, Olivier. Thank you, James. Look, I'm conscious of time. We are already at the top of the hour, so we may have the time for a couple of questions more. Operator, next one, please.

The next question is from Daniela Costa of Goldman Sachs.

Hi, good morning. Thank you so much for taking my question. I wanted to ask you a little bit if you could give us some color on how should we think about sort of your capital allocation M&A strategy now. Obviously, you did cognize And there's a lot of other rumors out there in the press. Should we be expecting sort of a period where you will accelerate M&A growth along with organic? And on cognite specifically, maybe some color on sort of how you envisage growth and margin profile going forward to contextualize the multiple. Thank you.

Look, thank you very much for the question. I'm afraid I'm going to be a bit boring and repeating what I've said already several times. Number one, we have to keep in mind that when you look at the guidance for this year, when you look at the guidance we presented to you during the Capital Market Day, we said most of it will come organically. Because we do believe that when it comes really to go to the next level of intelligence, physical, digital world, we have a lot in-house to deliver most of the growth that we see in the next chapter. As I said in multiple presentations, I'm obsessed by bringing this technology to the next level, advancing energy tech, the combination of physical and digital. And I want really to make sure we do it at speed. We do it with the best technology. And for instance, when we did Motiver a bit more than three years ago now, that was a good example where we know the market is going to accelerate. GPU is are going to accelerate liquid cooling will become essential. Two options in front of me. We develop organically for five years before you get really competitive or you do it through Motivair. We find a great company, great people, we have a good deal, we go for it. Cognite, you understood that it's the brain of the next cycle of Schneider because this is where you will create this unique data foundation for Energy and Process. It's a company which has developed a unique, rare technology. When you speak to the customer of Cognite, they are extremely positive about the feedback of the product. Now, what do we expect from Cognite? It's a dual mission. Keep developing Cognite for customers, because some customers love to buy that data layer. They want an agnostic platform, and they will continue to sell it and develop it for the customer. at the same time we want to leverage that technology to be inside all the offer that will deliver intelligence to our customers so you can imagine that we will sell more and more solution in the Schneider Electric solution that will be amplified by Cognite technology and likewise it will be the same on the Aveva side so we are very very excited that will be definitely a fast growth on both side but that's really something that will be really a foundation of the next cycle of Schneider. So very excited by that acquisition.

Thank you, Olivier. Thank you, Daniela. Operator, next question, please.

The next question is from Gaëlle Dubré of Deutsche Bank.

Oh, good morning. Thanks very much. Can I get back quickly to the margin performance, please? I think I remember at the CMD last year, you set an industrial productivity target of between 2 and 2.5 billion, cumulatively by 2030. So that's around 500 million annually. I mean, in the first six months, you delivered more than 500 million of productivity. So I'm now wondering if If that performance was kind of exceptional or is rather the beginning of a new trend for you with a stronger productivity improvement run rate than previously assumed?

Yeah, Gail, it's a good question. Thank you for the question. Clearly, let's not mix the two timelines, and I'll be precise on how we feel about it. But from a long-term perspective, we absolutely continue to be committed that productivity will be an absolute obsession for the group. Now, getting to the short term in H1, yes, we really like the performance in productivity. We see the attention... Thank you for joining us. equate to the same linear over a five-year period? Probably not, but we're super excited about the operational excellence and productivity into the H1 of 2026.

Thank you, Nathan. Thank you, Gaëlle. I think that we have the time for one last question before I give back the floor to Olivier for conclusion. Operator, please.

Thank you, sir. The final question is from Ben Ouglo of Oxcap.

Oh, good morning. Thank you for filling me in. Can I ask around China, you know, it's kind of interrelated question, I guess. You're up 20% in industrial automation, up 20% in energy management. It's clearly going extremely well. I guess my question is, when you think about it and when you think about the growth, Is this kind of all related to either semiconductor and data centers, or is it something more broad-based? And the reason I ask, even in your press release, you call out packaging, material handling, and stuff like that. What I want to know is, is this all just a giant pull-through from the AI effect, or are you actually seeing something more granular in, let's call it, the old traditional industrial automation part of China? Thank you.

No, that's a great question and there is probably a lot in your question to cover. First of all, if I just step back a little bit and I give you a global answer, we are at a very, very interesting time where electrification is accelerating everywhere and it's even amplified with the Middle East conflict where more and more it's a topic of sovereignty. It was a topic of sustainability, now it's sustainability, sovereignty, and we see a truly acceleration in electrification everywhere. In home, in building, in transportation, in industry, more and more electrification of process. And of course you combine that with the boom of digital, the boom of AI, which for a company like us gives a lot of opportunity. So that gives us very, very strong fundamentals of technology. Thank you very much. And let's make no mistake, you know, Data Center represents only 1.5% of electricity consumption. Even with this boom that will go to 3, 3+, but 97% of the electricity consumption in the world comes from the other segment. Your home, my home, this building where I am today. Thank you very much. China is a bit more complicated because you have a very strong demand for the export market at that point of time in China. So that's why we are really doing a good job in the industrial sector. As you know, China as a country has been extremely focused on the electrification. So power grid process, industrial electrification is also very, very high demand. Semiconductor is growing. Data Center is also growing in China. So everything which is more infra is growing. And of course, the only part of China which continues to be very slow is the building and residential market. But we reduce drastically our exposure. We have a much lower exposure in residential and building in China that we have in the rest of the world. So at the mix, that gives us a favorable position. So I would say this is the answer I can give you globally with some different color in China. But the good news for us Schneider Electric is again, data center is an accelerator. But what we see and the change for us since 12 months is we see all segments contributing. And that's what we want to do. Because what is super important for me is that we keep a very, very balanced exposure to make sure we are extremely resilient across the life cycle. And I think this is what we are demonstrating probably today through our H1 results.

Thank you, Olivier. Thank you, Ben. So with that, we are closing the Q&A. So obviously, we have not been able to take all of the questions, so we'll engage with you separately. But before we finish, maybe, Olivier, can I give you back the floor for some confusion words?

Thank you, Antoine, and again, thank you for all of you for being with us today. If I summarize, again, I just said it, but... It's a very, very interesting time where I've never seen so many uncertainties in the world. The geopolitics are not helping. There are a lot of big transformations. We put a lot of pressure on companies, especially global companies. As I said, we have to live with that. We have to learn how to navigate and to be faster and more agile than the others. And at the same time, for Schneider Electric, if we look at the way we positioned the company for the past 10 years, electrification is accelerating, digitalization is coming, Thank you very much. Always get prepared for the next cycle and that's exactly what we are doing with our new strategic plan and our company program. I think the H1 results demonstrate that our customers are confident we are bringing the right solution, we are the right partner for the short term, for the long term. The H1 results show also that our team has been extremely resilient at Schneider Electric. We know we were really challenged but they are working hard to deliver really this company program and I want really to thank all our employees and as a result of that I think we do a better job to deliver a strong return to all of you with always a very strong discipline in capital allocation but I would just conclude and you know I love sport, practicing, watching, we are at half time of the game so let's stay extremely ambitious. Thank you very much for being with us today. Thank you, thank you Olivier. Thank you all and thank you for your support as Olivier said. Goodbye, have a good rest of the day.