Organic revenue increased 4% in Q4, driven by continued strength in commercial HVAC and services. Reported revenue totaled $5.1 billion, up 6% compared to the prior year. Leadership emphasized that the growing commercial backlog is heavily weighted toward applied systems, which typically carry higher margins and longer service tails. 

“Our exceptional bookings, record backlog, and rapidly expanding pipeline give us a high level of confidence that 2026 will be another strong year,” said Dave Regnery, chairman and CEO, during their Q4 earnings call. “Based on customer delivery timing and year-over-year comparisons, we expect solid growth in the first half and even stronger growth in the back half [of the year].” 

Residential Reset 

While commercial results were strong, Trane took steps in the fourth quarter to address softness in the residential HVAC market. Their residential bookings in the Americas rose mid-single digits in Q4, but revenues declined in the mid-teens as the company worked to normalize channel inventory. 

“Residential markets were a tale of two halves in 2025, with a significantly weaker second half,” said Regnery. “We expect 2026 to get progressively better, with tailwinds building later in the year as comps ease.” 

To accelerate that reset, the company significantly reduced factory production days during the quarter. Those actions weighed on margins but were described as a strategic move to correct inventory levels rather than a response to weakening demand. 

“Margins were impacted by proactive measures taken to normalize residential inventory, which reduced factory production days by one-third and resulted in roughly 60% deleverage in that business,” said Chris Kuehn, executive vice president and CFO. 

Despite industry anecdotes suggesting increased discounting in residential HVAC, company leadership said pricing remained intact during the quarter.  

“We’ve not seen pricing fade in the business,” said Kuehn, noting that fourth-quarter pressure in residential was driven primarily by lower volumes rather than price concessions. 

Kuehn declined to speculate on potential residential price increases, saying the company has not announced any pricing changes for 2026. He added that tariffs, inflation, and higher commodity costs could put pressure on equipment pricing, though the company is working with suppliers to mitigate those costs. 

The Year Ahead 

For 2026, Trane expects full-year organic revenue growth of 6% to 7%, with total reported revenue growth expected to range from approximately 8.5% to 9.5%, including the impact of foreign exchange and acquisitions. 

“As we enter 2026, we are well-positioned for growth, especially in areas where disciplined execution to our business operating system is a key driver of success,” said Regnery. “In commercial HVAC, exceptional bookings growth and record backlog give us strong visibility to future revenues and market outgrowth. Projected pipelines remain robust and continue to build. Even after two consecutive quarters of more than 100% applied growth, Americas commercial HVAC, we continue to see substantial opportunities ahead.” 

Kuehn added that commercial HVAC in the Americas should gain momentum as the year progresses, moving from 7% to 8% growth in the first quarter to roughly 10% in the second quarter and low-teens growth later in the year. 

The services business, which comprises about one-third of enterprise revenue, remains a durable and consistent growth engine, with a low-teens compound annual growth rate since becoming Trane Technologies in 2020, said Regnery.  

“We continue to invest heavily in services and expand our digital capabilities to deliver advanced solutions with compelling value and attractive paybacks. We are confident services will remain a strong growth driver in 2026 and beyond.” 

In residential, Regnery noted that even though channel inventory was largely normalized as the company entered Q1, the outlook for 2026 is flat to modestly lower.  

“Q1 is expected to be the trough, down about 20%, given the high-teens growth we saw Q1 2025. We expect the market to return to growth in the second half [of 2026].” 

He added, “For the full year, we believe that residential will be flat to down as much as 5%. We'll see how the year plays out. But we believe that inventory is in the position we want it to be, and we were very, very intentional in getting there.”