The Aerospace Systems Segment demonstrated strong organic growth, with net sales increasing to $6,185 million in 2025 from $5,472 million in 2024, driven by higher volume across all market segments, especially commercial and defense aftermarkets. Conversely, the Diversified Industrial Segment's sales decreased by $435 million excluding divestitures and currency effects, indicating mixed organic performance.

Parker-Hannifin announced an agreement to acquire Curtis Instruments, Inc. for approximately $1.0 billion in cash, expected to close by the end of calendar year 2025. This acquisition is strategically aligned to complement Parker's strength in electric vehicle motors, hydraulic, and electrification technologies, signaling continued inorganic growth initiatives.

In 2025, the company divested its CFC business for net proceeds of $555 million and a non-core filtration business for $66 million, generating pre-tax gains of $241 million and $11 million, respectively. These divestitures reflect an ongoing strategy to optimize the business portfolio by shedding assets not considered a good long-term strategic fit.

Management's focus on cost containment and continued execution of 'The Win Strategy' led to an increase in gross profit margin to 36.9% in 2025 from 35.8% in 2024. Additionally, selling, general and administrative expenses decreased in 2025 primarily due to benefits from prior-year restructuring and acquisition-integration activities.

The company successfully reduced its recordable incident rate per 100 team members to 0.27 in fiscal year 2025, down from 0.31 in fiscal year 2024, representing a reduction of over 50% since fiscal year 2019. This highlights effective management execution of safety programs and a strong safety culture.

Business realignment charges, including severance costs and plant closures, were incurred in 2025, with approximately $45 million in payments made. Management anticipates that cost savings realized from these workforce reduction measures will increase operating income in 2026 by approximately two percent for both North America and International businesses.

The company's business remains highly sensitive to global macroeconomic conditions, including inflation, interest rates, and credit availability. These factors could negatively impact customer purchases, capital expenditures, and creditworthiness, potentially reducing revenues, operating profits, margins, and order rates.

With 36% of net sales from non-U.S. markets in 2025, the company is exposed to risks like currency exchange rate fluctuations, supply chain disruptions, and trade barriers (tariffs, import/export controls) in foreign countries. The uncertainty regarding the U.S.-China relationship is specifically highlighted as a potential adverse impact.

Increased cybersecurity threats and sophisticated computer crime continue to pose a risk to information technology systems, potentially leading to data breaches, operational disruptions, and financial losses. The increased adoption of generative artificial intelligence and remote work arrangements may further increase vulnerability to these risks.

Parker believes it is one of the market leaders in most major markets for both its Diversified Industrial and Aerospace Systems segments. This position is supported by a broad-based portfolio of core technologies, including hydraulics, pneumatics, and electromechanical systems, which allows effective competition against both large and small rivals.

The company competes effectively based on product quality and innovation, customer experience, manufacturing and distribution capability, aftermarket support, and price competitiveness. Its 'Win Strategy' business system and deep partnerships with customers to develop innovative products are cited as key differentiators.

While the Aerospace Systems Segment saw increased sales due to higher volume in commercial and defense aftermarkets, the Diversified Industrial Segment experienced lower demand in off-highway, transportation, and industrial equipment markets. This indicates varying competitive pressures and market share dynamics across its diverse end-markets.

Gross profit margin improved to 36.9% in 2025 from 35.8% in 2024, largely due to successful cost containment initiatives and benefits from prior-year restructuring activities. Selling, general and administrative expenses also decreased in 2025, further contributing to efficiency gains.

The company undertook workforce reductions in 2025, incurring business realignment charges, with an expectation that these measures will increase operating income in 2026 by approximately two percent. This indicates a proactive approach to optimizing the cost structure and improving productivity.

Parker employs a 'local for local' manufacturing strategy and actively monitors global trade policies and inflation to manage its supply chain. Despite potential risks, the company has not experienced significant operational disruptions due to energy curtailments or raw material availability, suggesting robust supply chain performance.

Independent research and development costs remained substantial at $240 million in 2025, following $253 million in 2024 and $258 million in 2023. This ongoing investment underscores the company's commitment to engineering innovative systems and products to maintain a competitive edge in rapidly changing technological markets.

As a global leader in motion and control technologies, Parker leverages a unique combination of interconnected technologies to provide highly engineered solutions across diverse markets. Its broad portfolio of core technologies, including hydraulics, pneumatics, and electromechanical, is a key factor in its ability to compete effectively.

Parker maintains a comprehensive cybersecurity program, led by its CDIO and CISO, utilizing the NIST Cyber Security Framework and globally deployed procedures. The company reported only immaterial information security breaches in the last three years, indicating effective digital asset protection and risk management.

The company significantly increased its share repurchases, buying back 2.5 million common shares for $1.6 billion in 2025, compared to 0.4 million shares for $200 million in 2024. The Board of Directors also approved an update to the repurchase authorization, increasing available shares to 20.0 million, reflecting confidence in the company's valuation and future cash generation.

Parker has paid cash dividends for 300 consecutive quarters and has increased its dividend yearly for the last 69 years, with the current annual dividend rate at $7.20 per common share. This long-standing policy highlights a strong commitment to returning capital to shareholders.

In 2025, the company repaid $490 million of its Term Loan Facility and $500 million of medium-term notes, while issuing new €700 million Senior Notes to refinance existing debt. The debt to debt-shareholders' equity ratio of 0.41 to 1.0 remains well below the 0.65 to 1.0 covenant, demonstrating sound capital structure management and an investment-grade credit profile.

Parker is working towards and intends to meet its goal of achieving near-total decarbonization (Scope 1 and 2 emissions) within its operations by 2040. This commitment highlights a significant environmental objective, though the filing notes that achieving these goals may require substantial resources and could increase operational costs.

The company achieved a recordable incident rate of 0.27 per 100 team members in FY2025, a reduction of over 50% since FY2019, demonstrating a strong commitment to employee safety. Additionally, the Global Engagement Survey in FY2025 reported a 75% overall engagement score, indicating positive human capital management.

Parker's Board of Directors maintains oversight of cybersecurity, receiving regular reports from the CDIO and CISO. The company has adopted a Global Code of Business Conduct, Corporate Governance Guidelines, and Independence Standards for Directors, ensuring robust governance practices are in place.

The Diversified Industrial Segment experienced lower demand in off-highway, transportation, and industrial equipment markets, while benefiting from increased demand in HVAC & refrigeration and aerospace & defense. Conversely, the Aerospace Systems Segment saw strength across all market segments, particularly commercial and defense aftermarkets, indicating a varied market landscape.

With 36% of net sales from non-U.S. markets, the company is exposed to political, economic, and trade policy risks in 43 countries, including potential increases in trade barriers and tariffs. The uncertainty surrounding the U.S.-China relationship is specifically cited as a factor that could adversely impact business results.

The company is subject to various federal, state, local, and foreign government regulations, including new data privacy, antitrust, and environmental laws. Upcoming regulations like the Pillar Two global minimum tax and the 'One Big Beautiful Bill Act' are being evaluated, with potential for increased costs and restrictions on operations in future periods.