Rockwell Automation: Data Centers Doubling, Broad CapEx Recovery Still Missing — Here Is What Actually Matters
Baird Global Consumer Conference, June 2, 2026 — SVP Tessa Myers and IR Head Aijana Zellner lay out the demand picture and where margins go from here
Rockwell Automation showed up at the Baird Global Consumer Conference with a straightforward message: pockets of demand are genuinely strong, the guidance raise was earned, and margins are expanding for structural rather than cyclical reasons. But investors hoping for a broad industrial CapEx recovery story will need to keep waiting. The honest read from management is that two very different recoveries are happening simultaneously inside the same company, and conflating them would be a mistake.
Data Centers Doubled in the Quarter — But Context Matters
The single most striking data point from the session came from Aijana Zellner, Rockwell's Head of Market Strategy and IR, who disclosed that the company's data center business more than doubled in the fiscal second quarter. That is the kind of growth rate that commands attention, though Zellner was careful to frame it correctly: "It's not a big part of our revenue yet. It's low single digits, that's sort of our total revenue, but it's growing strong double digits." Alongside data centers, semiconductor, e-commerce, warehouse automation, and energy were the four verticals that genuinely surprised to the upside and gave management the confidence to raise core growth guidance by roughly three points at the midpoint, pushing the full-year top-line outlook to 7% growth at the midpoint.
The energy vertical, which represents approximately 15% of total revenue, is increasingly seen as an opportunity rather than a drag. Management raised its semiconductor outlook for the year, and e-commerce and warehouse automation was already penciled in as the fastest-growing segment. None of this is accidental — Rockwell has been deliberately building exposure to these verticals as part of a growth framework introduced in fiscal 2023 that targets 5% to 8% organic growth through the cycle.
The Honest Caveat: Food and Beverage and Automotive Are Not There Yet
Where Rockwell's presentation was most valuable for investors was in its candor about what is not working. Food and beverage, roughly 20% of total revenue, and automotive, about 10%, are seeing only tentative activity. "We're seeing some activity, some program releases, great wins, but not quite the CapEx activity that is really needed to change our guide even further," Zellner said. The macro culprits are familiar — trade uncertainty, geopolitical volatility, input cost inflation, and consumer health concerns — but the framing matters. Rockwell is not calling an all-clear on broad industrial CapEx. The higher guidance is a function of specific verticals outperforming, not a macro turn. If food and beverage and automotive do release programs more broadly, Zellner indicated that would push results toward the higher end of guidance, but that is upside optionality, not a base case.
Production Logistics: The Strategic Bet Gaining Real Traction
One of the more substantive discussions at the session centered on production logistics, a strategy Rockwell formally launched at the start of 2024. Tessa Myers, SVP of Intelligent Devices, described it as "the concept of fully automating end-to-end material movement throughout a manufacturing plant," combining autonomous mobile robots, independent cart technology, operations management software, and consulting capabilities into a single integrated offering. The insight for investors is that this is not a bolt-on product line — it is a deliberate attempt to solve a problem that has historically been a barrier to automation adoption: the integration of mobile equipment with existing fixed automation assets.
Automotive was the first industry to adopt this approach at scale. What is new and worth noting is that in the first half of fiscal 2026, large-scale CPG implementations have followed. Myers described this as a genuine diversification of the customer base pursuing production logistics, and it aligns with Rockwell's broader push into mid-market CPG customers through cloud-native software offerings like Plex, its manufacturing execution system, and Fiix, its CMMS platform. The pitch to smaller manufacturers is straightforward: modular, cloud-managed software that delivers faster time to value without requiring a large internal IT team.
AI Is Already Embedded — Not a Roadmap Item
Rockwell's AI narrative is more mature than the typical industrial company positioning. Myers was pointed on this: "We've been doing machine learning, which correlates with AI, for quite some time, really focused around process optimization." The practical applications span the full automation lifecycle. On the design side, Rockwell claims first-mover advantage with cloud-based design software, now augmented with AI agents that can evaluate and generate automation code, compressing system design and deployment from weeks to hours or days. On the operations side, the company has launched Vision AI, an inline quality inspection product, and offers process optimization tools embedded in the control system. On the maintenance side, Guardian AI monitors electrical signals from variable frequency drives to predict bearing or motor failures before they cause downtime, while an asset risk predictor in the CMMS software flags maintenance needs based on historical failure patterns.
Zellner framed the competitive moat explicitly: "Our focus on software was different than some of our competitors. Some of our peers are really focused on other areas of the technology stack, on product design or chip design or computer-aided design. We focus on manufacturing and production environment." The agentic AI layer being built on top of the existing cloud-native design platform is the most forward-looking piece — the infrastructure was purpose-built for this kind of AI extension in a way that legacy on-premise architectures are not.
ARR Growing But Services Decelerating — A Split Picture Inside the 10%
Annual recurring revenue now represents over 10% of Rockwell's total revenue, a combination of SaaS software and high-value managed services. Recurring software, driven by Plex and Fiix, is growing high single digits and is the clean part of the story. The services component is decelerating, with customers deferring cybersecurity, safety, and remote monitoring services as they manage near-term cost pressures. Rockwell is guiding to high single-digit ARR growth for the full year but expects recurring software to outpace services in the near term. For investors modeling the ARR trajectory, this split matters — the software portion has structural momentum while services recovery remains a function of macro stability.
Margins: Structural Work, Not Just Volume Leverage
Incremental margins exceeded 50% in the quarter, which is an exceptional figure for an industrial company. Tessa Myers was careful to describe this as the result of deliberate, multi-year work rather than volume leverage alone. The levers include product redesigns to reduce direct material costs, supply chain negotiations, indirect spend rationalization, logistics efficiency, and in-sourcing of previously outsourced subassemblies. A structural headcount action taken prior to this fiscal year is also contributing. Rockwell is investing $2 billion over five years, with 80% in capital expenditure, including a new greenfield manufacturing facility in Wisconsin and automation and AI investments in its own plants. The intent is to build a self-sustaining pipeline of productivity projects rather than rely on any single initiative.
On price-cost, Rockwell is guiding to 250 basis points of price for the year — 150 basis points from underlying price and 100 basis points specifically tied to tariff pass-through. Memory chip costs are rising sequentially, and management acknowledged the timing mismatch between cost increases and price realization in any given quarter. The full-year view is that these offset, but quarterly volatility in price-cost is a real risk to monitor.
Intelligent Devices, Myers' segment, grew 9% organically in the second quarter with broad-based strength across motion control, I/O platforms, sensing and safety, and data center power infrastructure products. A newly launched next-generation I/O platform is gaining adoption, and autonomous mobile robot revenues grew notably in the half. The segment is executing against its margin targets, and Myers' message on future priorities is unambiguous: productivity improvements are a permanent program, not a temporary initiative.