3M (MMM) Q3 2026 earnings review
3M earns more on every sale, but its growth slows
3M earned more on every sale, but its growth cooled and China turned down. Underlying sales rose 3%, after 5% last quarter, while the margin reached its highest level since at least early 2025. Chief executive William Brown credited productivity and new products, and the largest business, Safety and Industrial, supplied almost all of the growth. By our math the full-year plan now needs the fourth quarter to grow faster than this one.
| Underlying sales growth (before acquisitions, disposals and currency, excluding exited PFAS products) | +3.3% +5.4% last quarter |
|---|---|
| Profit per share, excluding one-offs | $2.50 +12% from a year ago |
| Operating margin, excluding one-offs | 26.2% +1.1 points from a year ago |
| Full-year profit-per-share outlook | Raised $0.10 like for like, to $9.10–9.15; a further $0.15 of the headline rise is an accounting change |
⚖️ Verdict: ⚪ Neutral
The story is unchanged, because the quarter's gains and its setbacks cancel each other. Productivity lifted the margin, and Amazon tied a $6 billion sales milestone to 3M's data-centre connectors, which puts a size on that business for the first time. But sales in China fell, consumer electronics got worse, cash from operations was weak, and most of the higher profit outlook comes from an accounting change rather than from operations.
The question now is whether the fourth quarter can deliver the faster growth the full-year plan requires. Either industrial and safety demand plus new products carry it, or the electronics slump in China spreads and 3M lands at its floor. January's results, with China's sales and the Electronics division, will tell.
🐂 Bull Case
Industrial and Safety Products Carry the Quarter
Safety and Industrial is 3M's largest business, about half of sales, and it sells respirators, industrial tapes, abrasives and electrical products. Chief executive William Brown pointed to "solid sales growth" and said "a stronger pipeline of differentiated technologies" supports the full-year outlook. Almost all of the quarter's growth came from this one segment.
Underlying sales in the segment, meaning sales before acquisitions, disposals and currency, rose 7.0% from a year ago, against 4.1% in the same quarter last year. Electrical markets grew by double digits, and the Madison purchase nearly doubled the fire-safety line.
- Personal safety: $848 million, up 7.8% from a year ago
- Electrical markets: $423 million, up 13.4%
- Industrial adhesives and tapes: $633 million, up 7.8%
- Segment operating margin: 30.1%, up 3.0 percentage points
This matters because the segment earned 56% of all segment profit by our math, so a margin gain there moves the whole group. The other two businesses stood still: Transportation and Electronics grew half a percent and Consumer shrank slightly, so without this segment 3M would have shown no growth at all.
What to watch: the segment's underlying growth next quarter, against the roughly 4% the full-year plan needs across the group by our math. A rate near 7% would mean the industrial recovery can carry 3M into 2027 without help from electronics or consumer.
Cheaper Production Lifts the Margin
3M's operating margin excluding one-offs reached 26.2%, up 1.1 percentage points from a year ago and the highest since at least early 2025. The gain came from the cost of making products, which took a smaller share of revenue. By our math cost of sales fell to 57.7% of sales from 58.2%. On its own adjusted measure, 3M reports gross margin up 2.3 points.
- Cost of poor quality: down 0.4 percentage points from a year ago
- Overall equipment effectiveness, a measure of factory uptime: up 0.2 points
- Profit per share bridge: growth and productivity added $0.39; stranded costs and investment took $0.17
- Oil-linked raw-material inflation: about $185 million this year, offset by price, the company says
Selling and administrative costs went the other way, rising to 14.0% of revenue from 12.6% by our math. That line carries the charges 3M removes from its adjusted figures, including transformation, amortization and litigation, so the clean margin still improved because the factory gains outran them.
What to watch: the fourth-quarter margin, which by our math the full-year plan puts near 22.7%. The fourth quarter is always 3M's weakest, so a figure above that would show the productivity gains hold when volumes dip.
Amazon Deal Puts a Number on Data-Center Optics
3M makes optical connectors that link servers inside data centres, a line it calls Expanded Beam Optics, or EBO. Until now it had put no dollar figure on that business. This quarter Amazon expanded its commercial relationship with 3M and received a warrant to buy up to 3.2 million shares.
The warrant pays out on "$6 billion in cumulative sales of optical connectivity and other Data Center related products over the next seven years", plus other milestones. That averages roughly $860 million a year by our math, in a business 3M has never reported as a separate line.
- Hyperscaler customers: deploying with Microsoft and AWS; "Proof-of-concept work with four additional hyperscalers"
- Industry standards group for EBO: 63 members, up from 17 in May
- Supply: a stake of about 4.7% in GSEO, an optical manufacturer, and "Doubling internal capacity"
This matters because the warrant costs shareholders nothing unless the sales arrive, so it ties a major customer to 3M at little risk. But $6 billion is a milestone ceiling, not a contract, and the segment that houses EBO, Transportation and Electronics, grew only 0.5% this quarter.
What to watch: whether 3M reports a data-centre revenue figure with fourth-quarter results in January, or names a third hyperscaler in deployment. A revenue line would turn the Amazon milestone from a target into something readers can track each quarter.
New Products Keep Arriving on Schedule
3M counts the products it launches because new products are meant to supply the growth above its markets that it promised investors through 2027. It launched 87 in the quarter, up 24% from a year ago. The pace is slower than the second quarter's 44% rise but keeps the year on course. By our math the total so far is 263, against a full-year target of more than 350. Sales of products launched in the last five years reached about $3 billion so far this year, a third more than a year earlier.
What to watch: the full-year launch count and the share of sales from new products, due with fourth-quarter results. Both would show whether the launch pace is turning into revenue, which management puts at a mid-teens share of sales this year.
🐻 Bear Case
China Sales Turn Negative on Electronics Weakness
Three months ago China was 3M's fastest-growing region, with underlying sales up 11.7%. This quarter they fell 7.3%, after removing the PFAS chemicals 3M stopped making. The company blames consumer electronics: device makers face "industry-wide memory shortages", so they build fewer phones and laptops that use 3M's films and tapes.
The Electronics division's sales dropped 7.8% from a year ago. That left the whole Transportation and Electronics segment almost unchanged, and its margin slipped. Growth outside the United States slowed almost everywhere, while US sales accelerated.
- China: down 7.3%, after up 11.7% last quarter
- Other Asia: up 1.3%, after 9.1%
- Europe, Middle East and Africa: up 1.0%, after 5.9%
- United States and Canada: up 6.8%, after 2.4%
- Electronics division: $616 million, down 7.8% from a year ago
This matters because semiconductors and data centres, where 3M reports strong demand, sit in the same segment, so they are now absorbing the electronics decline instead of adding to growth. 3M calls the softness "weaker than expected consumer electronics and auto", and it cut its own second-half view for consumer electronics to a mid-teens decline from a smaller one.
What to watch: China's underlying sales and the Electronics division's revenue in the fourth quarter. Another fall of about 7% would mean the memory shortage is a multi-quarter problem for 3M, not a one-quarter dip.
An Accounting Change Drives Most of the Raise
3M's headline says it raised its full-year profit outlook. The new range is $9.10–9.15 per share, excluding one-offs. July's range was $8.80–8.95, so the middle moved up $0.25.
But this quarter 3M stopped counting amortization of acquired intangibles, a non-cash charge, in its adjusted figures, because such figures "reflect the underlying operational performance of the business", it says. Restating July's range on that basis gives $8.95–9.10. The like-for-like rise is therefore $0.10 at the middle by our math.
The company attributes that $0.10 to volume and productivity, a "Lower share count and interest expense", and the newly consolidated Madison business. None of it comes from a higher sales plan, because the floor for underlying growth stayed at 3.5%. It is also the third change this year to how 3M measures segment profit, after PFAS activity and litigation costs moved to Corporate.
Reported profit per share of $2.63 needs the same care: $0.60 of it is a paper gain on 3M's remaining stake in Solventum, its former health-care unit. Strip that out and reported profit was closer to the adjusted figure than the headline suggests.
What to watch: fourth-quarter profit per share excluding one-offs, which by our math the plan puts at $1.99–2.04. A result at the top of that range would show the operating business, not the accounting, carried the raise.
Litigation Payments Cut Operating Cash by Two-Thirds
3M still pays out billions to settle lawsuits over PFAS chemicals and other legacy products. In the quarter it paid about $1 billion before tax on those matters. Reported operating cash flow fell to $486 million from $1.76 billion a year ago as a result.
Chief executive William Brown said: "We delivered another quarter of strong results, including solid sales growth, continued margin expansion, double-digit EPS growth, and robust free cash flow". The last claim is the weakest, because even the company's own measure that strips out litigation, adjusted free cash flow, slipped 9% to $1.2 billion. The share of adjusted profit that turned into cash fell below 100% for the first time since the first quarter.
- Litigation and PFAS payments: about $1 billion before tax in the quarter, $2.0 billion for nine months
- Reported operating cash flow: $486 million, down 72%
- Adjusted free cash flow: $1,197 million, down 9%; 92% of adjusted profit, against 109% a year ago
- Inventories: $4.08 billion, up 8% since June; receivables up 5%
3M blames "inventory and sales linearity", meaning shipments bunched late in the quarter and stock built up, and part of the build is Madison's balance sheet joining 3M's. Either way 3M borrowed to cover the gap, and buybacks slowed sharply. By our math the full-year plan now needs about $1.7 billion of adjusted free cash flow in the fourth quarter, the largest of the year, so the inventory build must reverse.
What to watch: fourth-quarter adjusted free cash flow against the roughly $1.7 billion the plan needs. A shortfall would mean the working-capital build is structural rather than seasonal, and buybacks would stay slow into 2027.
Risks This Quarter Did Not Answer
The quarter gave no numbers on four standing concerns and only a partial reading on a fifth, so each stays open until the next set of results or the quarterly filing adds the figure that would move it.
- Orders and backlog: described only as a "strong backlog"; a percentage for orders would show whether spring pre-buying ahead of price rises has faded.
- Oil-linked raw-material inflation: raised again, to about $185 million from $150–175 million, and said to be "fully offset by price"; fourth-quarter gross margin will show whether price held in auto and retail.
- Transformation programme: 16 sites closed or exited this year, with 3M "actioning 10 more over the next 12 months" and $224 million of charges so far; a total cost and savings figure would settle it.
- Consumer: underlying sales down 0.2%, better than last quarter's 2.1% decline, but "continued USAC retailer inventory rightsizing" persists; a return to growth in the fourth quarter would resolve it.
- Cottage Grove and Zwijndrecht permit limits: no update in these materials; the quarterly filing's legal note is where it would appear.
👓 Other Themes
Madison Fire-and-Rescue Business Now in the Numbers
The Madison Fire & Rescue purchase closed on July 1 inside a venture, 3M Sentorum, that 3M owns 50.1% with a partner holding the rest. By our math it added roughly $100 million of sales to the Fire Safety and Rescue division, which nearly doubled to $206 million. The partner's stake appears as $971 million of redeemable minority interest. 3M says the business is "executing to plan" and now sits in the full-year outlook.
💲 Other KPIs
Debt rose by $2.4 billion in the quarter by our math, after holding steady through the first half. The borrowing paid the $1.9 billion in cash for Madison while litigation payments drained operating cash. Net of cash, debt stands at $9.9 billion, up from $6.7 billion in December, so leverage is rising for the first time in two years.
Down 2.9% from a year ago, a slower decline than last quarter's 3.4%, because 3M bought back far fewer shares in the third quarter. The lower count added about $0.05 to profit per share, with tax timing eating part of that, the company said.
The lowest of the five quarters we track: about $0.4 billion of dividends and $0.2 billion of buybacks by our math. The second quarter returned $1.4 billion and the first $2.4 billion. Buybacks now total $3.2 billion for the year against a plan of about $2.5 billion set in January, so the slowdown may mean the year's budget is spent, while cash went to Madison and litigation.
🔮 Guidance
Unchanged. The plan still has underlying sales growing more than 3.5% this year. By our math that leaves more than 4.1% for the fourth quarter, above this quarter's 3.3%. The fourth quarter a year ago grew only 2.2%, so the comparison is easy. Third version of this figure in 2026: raised from about 3% in April to the current floor in July, and held now.
Unchanged. Total sales should grow more than 4.5%, with about 1 point from currency. 3M now includes Madison in the outlook, yet the floor did not move and the sales table still shows no acquisition contribution. By our math the year needs more than $25.4 billion of adjusted sales, so the fourth quarter must deliver roughly $6.3 billion.
Raised. The plan now has profit per share growing about 11% this year. Of the $0.25 rise at the middle of the range, $0.15 comes from no longer counting amortization. The remaining $0.10 comes from operations, a lower share count and lower interest, by our math. The fourth quarter then implies $1.99–2.04, up about 8% from a year ago and the slowest growth of the year. Three moves in 2026: held in April, raised $0.275 in July, raised $0.10 now.
Unchanged in substance. The plan calls for about 24.6% for the year, a gain of about 0.7 points, the low end of July's promise. By our math that leaves roughly 22.7% for the fourth quarter, well below this quarter's 26.2% because the fourth quarter is seasonally weakest. It would still beat last year's fourth quarter by 1.2 points. 3M also lifted its 2027 margin commitment to about 25.4% from 25%, entirely because of the amortization change.
Unchanged, now stated as a point of about $4.8 billion, the middle of July's range. By our math that leaves about $1.7 billion for the fourth quarter after $3.1 billion in nine months. That would be the largest quarter of the year and a third above last year's fourth quarter. 3M counts on "Net working capital improvement" and "Capex efficiency" to get there, after inventories rose this quarter. Operating cash flow of about $5.9 billion and capital spending of about $1.1 billion are also unchanged.
Unchanged. 3M still plans for about 20% for the year. The rate ran 21.1% this quarter after 19.4% in the second, and the presentation shows tax timing cut into this quarter's profit, offsetting part of the share-count benefit. Nine months sit at 19.5%, so the fourth quarter needs a rate near 21% to land on plan by our math.
❓ Key Questions
How much did orders and backlog grow this quarter?
3M describes a "strong backlog" but gives no percentage. The order rate is the first place a fade in spring pre-buying would show, and the fourth-quarter plan needs faster underlying growth than this quarter delivered.
What did Madison add to sales and profit?
The Fire Safety and Rescue line nearly doubled, but 3M has not split out Madison's revenue, margin or the interest cost of the debt that funded it. The terms of the partner's redemption right after five years also remain undisclosed.
How much data-centre revenue did 3M book?
The Amazon milestone sizes the opportunity at $6 billion over seven years, yet 3M still reports no data-centre or EBO revenue line. Without one, readers cannot tell whether the connectors are offsetting the consumer-electronics decline in the same segment.
When does the memory shortage stop hurting China?
China's underlying sales swung from up 11.7% to down 7.3% in one quarter. 3M blames memory shortages at device makers; it has not said how long it expects them to last or how much of China's sales depend on electronics.
What will the transformation cost and save in total?
Charges reached $224 million in nine months, 16 sites are closed and 10 more are planned. 3M has never given a total cost, an annual savings target or a completion date, so readers cannot judge the return on the programme.