3M adjusted earnings rise 12% as company raises annual outlook
Key Facts
3M reported a 12% year-on-year increase in third-quarter adjusted earnings per share in results released on October 20, 2026, and raised its annual outlook as margins improved. Adjusted earnings per share were $2.50, according to the company's filing with the U.S. Securities and Exchange Commission. The result was $0.11 above analysts' forecast of $2.39 per share, according to Investing.com. Adjusted sales for the quarter were $6.6 billion, up 4.2% year on year, according to the same filing. Adjusted earnings per share thus grew faster than adjusted sales during the period. The company's shares rose 2.7% before the opening of trading on October 20, according to Reuters, alongside the release of results and updated guidance.
The adjusted operating margin reached 26.2% in the third quarter, according to the company's earnings presentation covered by Investing.com. That represented an increase of 110 basis points from the same period a year earlier. Reuters attributed the support for margins to cost controls and price increases, the two drivers that accompanied the improvement in operating performance. The company also reported adjusted free cash flow of $1.2 billion for the quarter in its earnings filing. On the earnings call, the chief financial officer outlined an update to the accounting treatment used to calculate adjusted results, saying: "We now exclude amortization of intangible assets from adjusted results." The company's definition of adjusted results therefore includes this accounting exclusion, alongside its reported earnings per share growth and improved operating margin.
The earnings announcement followed 3M's expansion of its commercial relationship with a wholly owned Amazon subsidiary under an agreement signed on October 19, 2026. According to 3M's filing with the U.S. Securities and Exchange Commission, the arrangement includes granting an Amazon subsidiary options to purchase shares in 3M. These options allow the purchase of up to 3,162,015 shares, subject to the terms set out in the filing. The agreement set an exercise price of $164.89 per share over a period of 7 years. Vesting of the shares covered by the options is subject to purchase-related conditions and specified event-based milestones. 3M shares rose more than 5% in after-hours trading on October 19 following the announcement of the expanded relationship, according to Reuters.
The agreement ties the vesting of 85% of the shares covered by the options to Amazon's payments for optical interconnect and data center products, according to the regulatory filing. This portion becomes fully vested when cumulative payments for those products reach $6 billion during the term of the agreement. The amount represents a purchase threshold required for full vesting of the payment-linked portion, rather than the value of a realized sales contract or guaranteed revenue for 3M. Vesting of this portion of the stock options is therefore linked to the volume of payments Amazon makes for products covered by the commercial arrangement. Vesting of the remaining shares covered by the options is subject to the achievement of specified event-based milestones, according to the same filing. The agreement thus separates the conditions tied to product payments from those governing vesting of the remaining shares.
The expanded commercial relationship centers on optical interconnect products used in data centers, in the context of the technology's use in artificial intelligence infrastructure. During the earnings call, 3M management explained the features of its optical interconnect technology that support this use. Management said the technology "enables faster installation, greater durability and higher-density optical connections," according to the call transcript published by Investing.com. The benefits outlined by management include faster installation of connections, alongside improved durability within the infrastructure using them. The technology also enables greater optical connection density, one of the features management linked to its use in artificial intelligence equipment. Optical interconnect and data center products are among the product categories for which Amazon's payments are tied to stock option vesting under the agreement.
For 2026, 3M raised its adjusted earnings per share forecast range to $9.10–9.15, according to the earnings presentation covered by Investing.com. The company had set its previous range at $8.80–8.95 per share in its July guidance, according to its regulatory filing at the time. The bottom of the new range exceeds the top of the previous guidance, as the company raised its annual earnings estimate following its third-quarter results. The company also expects organic growth of more than 3.5% during 2026, according to the earnings presentation. Regarding its investments in optical technology, its investment in GSEO is expected to close in the fourth quarter of 2026, according to Investing.com. Completion of the investment within the expected timeframe remains subject to customary closing conditions.