Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

First Quarter 2026 in Summary			39
First Quarter 2026 Results of Operations			41
Reconciliations of Non-GAAP Financial Measures			48
Liquidity and Capital Resources			52
Pension Benefits			56
Critical Accounting Policies and Estimates			57

This Management’s Discussion and Analysis contains “forward-looking statements” within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding business outlook. These forward-looking statements are based on management’s expectations and assumptions as of the date of this Quarterly Report on Form 10-Q and are not guarantees of future performance. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management. These factors include, without limitation, those described in "Forward-Looking Statements" and Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended 30 September 2025 (the "2025 Form 10-K"), which was filed with the SEC on 20 November 2025, as well as in "Forward-Looking Statements" and Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q.

This discussion should be read together with the accompanying interim consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. Financial information is presented on a continuing operations basis. Unless otherwise stated, amounts are stated in millions of U.S. Dollars, except for per share data, which is calculated and presented on a diluted basis in U.S. Dollars per weighted-average common share.

The financial measures discussed below are presented in accordance with U.S. generally accepted accounting principles ("GAAP"), except as noted. We discuss certain financial measures on an "adjusted", or "non-GAAP", basis, which exclude gains or losses that management does not consider to be representative of our underlying business operations. These adjustments, which are described below for the periods presented, are not reflected in the results of our reportable segments. When viewed together with our GAAP results, we believe these non-GAAP financial measures offer a more complete understanding of the factors and trends affecting our financial performance and support analysis of our results on a more consistent basis. For each non-GAAP financial measure, including adjusted operating income, adjusted operating margin, adjusted earnings per share, the adjusted effective tax rate, and capital expenditures, we present a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. These reconciliations and further explanations of our use of non-GAAP financial measures are presented under the “Reconciliations of Non-GAAP Financial Measures” section beginning on page 48.

Comparisons included in the discussion that follows are for the first quarter of fiscal year 2026 versus ("vs.") the first quarter of fiscal year 2025. The disclosures provided in this Quarterly Report on Form 10-Q are complementary to those made in our 2025 Form 10-K.

We manage our operations, assess performance, and report earnings under five reportable segments: Americas, Asia, Europe, Middle East and India, and Corporate and other. Refer to Note 16, Business Segment Information, to the consolidated financial statements for additional information.

For information concerning activity with our related parties, refer to Note 15, Supplemental Information, to the consolidated financial statements.

FIRST QUARTER 2026 VS. FIRST QUARTER 2025

FIRST QUARTER 2026 IN SUMMARY

• Sales of $3.1 billion increased 6%, or $171.0, due to higher energy cost pass-through to customers of 3%, a favorable impact from currency of 2%, and higher pricing of 1%. Volumes were flat on a percentage basis as higher on-sites were offset by lower helium demand and a significant prior year, non-recurring helium sale to an existing merchant customer in the Americas segment.

• Operating income of $734.5 increased 14%, or $90.9, primarily due to favorable business mix, lower costs, and higher non‑helium merchant pricing. Operating margin of 23.7% increased 170 basis points ("bp") from 22.0% in the prior year. On a non-GAAP basis, adjusted operating income of $756.5 increased 12%, or $83.0, and adjusted operating margin of 24.4% increased 140 bp compared to 23.0% in the prior year. These non-GAAP results exclude charges recorded in fiscal year 2026 to update cost estimates related to prior-year business and asset actions as well as prior-year shareholder activism-related costs as discussed below.

• Earnings per share ("EPS") of $3.04 increased 10%, or $0.27 per share. A summary table of changes in EPS is presented on page 40. On a non-GAAP basis, adjusted EPS of $3.16 increased 10%, or $0.30 per share, and also excludes non‑operating adjustments for a prior‑year gain on certain de‑designated hedging instruments and non‑service pension cost as discussed below.

Summary of Changes in EPS

The per share impacts for the items presented in the table below were calculated independently and may not sum to the total change in EPS due to rounding.

			Three Months Ended						Change vs. Prior Year
			31 December
			2025			2024
EPS			$3.04			$2.77			$0.27
% Change from prior year									10		%
Operating Items
Underlying business:
Volume									0.10
Price, net of variable costs									0.08
Other costs									0.08
Currency									0.04
Business and asset actions(A)									(0.09)
Shareholder activism-related costs									0.10
Total Operating Items									$0.31
Other Items
Equity affiliates' income									0.08
Interest expense									(0.05)
Other non-operating income/expense, net:
Gain on de-designation of cash flow hedges(B)									(0.05)
Non-operating expense associated with business and asset actions(A)									(0.02)
Non-service pension cost, net									0.03
Other non-operating									(0.01)
Change in effective tax rate									0.01
Noncontrolling interests(B)									(0.03)
Total Other Items									($0.04)
Total Change									$0.27
% Change from prior year									10		%

(A)EPS impacts associated with charges for business and asset actions were calculated based on a total after-tax charge of $24.6 ($0.11 per share).

(B)EPS impact reflected within "Gain on de-designation of cash flow hedges" was calculated based on an after-tax gain attributable to Air Products of $10.3. The gain attributable to our noncontrolling partners was $25.2.

The table below summarizes the per share impact of our non-GAAP adjustments for the first quarter of fiscal years 2026 and 2025. These impacts were calculated independently and may not sum to totals due to rounding.

						Three Months Ended						Change vs. Prior Year
						31 December
						2025			2024
EPS						$3.04			$2.77			$0.27
Business and asset actions						0.11			—			0.11
Shareholder activism-related costs						—			0.10			(0.10)
Gain on de-designation of cash flow hedges						—			(0.05)			0.05
Non-service pension cost, net						0.01			0.04			(0.03)
Adjusted EPS						$3.16			$2.86			$0.30
% Change from prior year												10%

FIRST QUARTER 2026 RESULTS OF OPERATIONS

Discussion of First Quarter Consolidated Results

						Three Months Ended
						31 December												Change vs. Prior Year
						2025						2024						$						%
GAAP Financial Measures
Sales						$3,102.5						$2,931.5						$171.0						6		%
Operating income						734.5						643.6						90.9						14		%
Operating margin						23.7		%				22.0		%										170		bp
Equity affiliates’ income						$172.2						$150.6						$21.6						14		%
Non-GAAP Financial Measures
Adjusted operating income						$756.5						$673.5						$83.0						12		%
Adjusted operating margin						24.4		%				23.0		%										140 bp

Sales

The table below summarizes the major factors that impacted consolidated sales for the periods presented:

Volume			—		%
Price			1		%
Energy cost pass-through to customers			3		%
Currency			2		%
Total Consolidated Sales Change			6		%

Sales of $3.1 billion increased 6%, or $171.0, due to higher energy cost pass-through to customers of 3%, a favorable impact from currency of 2%, and higher pricing of 1%. The increase in energy cost pass-through to customers primarily reflects higher natural gas prices in North America, which are contractually recoverable under our on-site agreements. Currency was favorable as the U.S. Dollar weakened, most notably against the Euro. The 1% total company price improvement, which equates to a 2% improvement for the merchant business, was driven by non-helium pricing actions in the Americas and Europe segments. Volumes were flat as higher on-sites were offset by lower helium demand and a significant, non-recurring helium sale to an existing merchant customer in the Americas segment in the prior year.

Cost of Sales and Gross Margin

Cost of sales of $2.1 billion increased 5%, or $91.0, primarily due to higher energy cost pass-through to customers of $79 and an unfavorable currency impact of $47. These increases were partially offset by $22 of lower costs related to sales volumes and $10 driven by productivity improvements and lower maintenance, which more than offset fixed-cost inflation. Gross margin of 32.1% increased 90 bp from 31.2% in the prior year as the benefits from favorable business mix and higher pricing were partially offset by higher energy cost pass-through to customers.

Selling and Administrative Expense

Selling and administrative expense of $228.7 decreased 6%, or $13.7, as productivity improvements were partially offset by labor inflation. Selling and administrative expense as a percentage of sales decreased to 7.4% from 8.3% in the prior year.

Research and Development Expense

Research and development expense of $20.4 decreased 7%, or $1.6. Research and development expense as a percentage of sales decreased to 0.7% from 0.8% in the prior year.

Business and Asset Actions

During the first quarter of fiscal year 2026, we recorded charges of $28.3 ($24.6 after tax, or $0.11 per share) related to updated estimates for prior year project exits as described in Note 4, Business and Asset Actions, to the consolidated financial statements. These charges are not reflected in the results of our reportable segments.

Of the first quarter charge, $22.0 was recorded to operating income and related to the settlement of project‑related commitments and sale of associated assets. The remaining $6.3 was recorded to "Other non‑operating income (expense), net" and reflects losses on cross‑currency interest rate swaps terminated in connection with the early repayment of related intercompany loans for one of the affected gasification projects.

Our estimates reflect our best judgment based on information available as of 31 December 2025. Final settlement of these items may differ materially from current estimates, which could impact our consolidated financial statements in future periods.

Prior Year Shareholder Activism-Related Costs

During the first quarter of fiscal year 2025, we recorded shareholder activism-related costs of $29.9 ($21.9 after tax, or $0.10 per share) in connection with a proxy contest. These costs, which were not reflected in the results of our reportable segments, included legal and other professional service fees and proxy solicitation expenses.

Other Income (Expense), Net

Other income of $10.6 decreased 54%, or $12.3, primarily due to the prior year sale of a U.S. equity method investment.

Operating Income and Operating Margin

Operating income of $734.5 increased 14%, or $90.9, due to favorable business mix of $26, lower costs of $23, higher pricing, net of power and fuel costs, of $22 driven by non-helium merchant, and favorable currency of $12. The lower costs include productivity improvements and lower maintenance, partially offset by fixed-cost inflation and the prior year sale of a U.S. equity method investment. A charge of $22 recorded in fiscal year 2026 to update cost estimates related to prior-year business and asset actions was more than offset by prior-year shareholder activism-related costs of $30. Operating margin of 23.7% increased 170 bp compared to 22.0% in the prior year, despite an approximate 50-basis-point headwind from higher energy cost pass-through to customers driven by the Americas segment.

On a non-GAAP basis, which excludes the charge for business and asset actions and prior year shareholder activism-related costs discussed above, adjusted operating income of $756.5 increased 12%, or $83.0, and adjusted operating margin of 24.4% increased 140 bp compared to 23.0% in the prior year.

Equity Affiliates' Income

Equity affiliates' income of $172.2 increased 14%, or $21.6, driven by affiliates in the Americas and Europe segments.

Interest Expense

												Three Months Ended
												31 December
												2025			2024
Interest incurred												$168.0			$139.9
Less: Capitalized interest												113.5			97.3
Interest expense												$54.5			$42.6

Interest expense increased 28%, or $11.9, driven by higher interest incurred on principal borrowings from Euro- and U.S. Dollar-denominated senior fixed-rate notes issued in fiscal year 2025. Higher interest incurred was partially offset by a higher carrying value of ongoing projects under construction.

Other Non-Operating Income (Expense), Net

Other non-operating expense of $1.4 decreased $40.3 compared to income of $38.9 in the prior year, which included a $38.8 gain ($10.3 attributable to Air Products after tax, or $0.05 per share) on certain interest rate swaps held by the NEOM Green Hydrogen Company joint venture. The majority of these swaps were re‑designated as cash flow hedges by the end of fiscal year 2025, and the impact of any swaps that remained de‑designated in the first quarter of fiscal year 2026 was not material. Refer to Note 3, Variable Interest Entities, and Note 8, Financial Instruments, to the consolidated financial statements for additional information.

Lower interest income on short-term investments and a loss on cross‑currency interest rate swaps terminated in connection with business and asset actions were partially offset by lower non-service pension costs, which decreased to $3.4 ($2.5 after tax, or $0.01 per share) for the first quarter of fiscal year 2026 compared to $10.5 ($7.9 after tax, or $0.04 per share) in the prior year.

Effective Tax Rate

The effective tax rate equals the income tax provision divided by income before taxes. Equity affiliates' income is primarily included net of income taxes within income before taxes on our consolidated income statements.

Our effective tax rate was 18.7% and 17.8% for the three months ended 31 December 2025 and 2024, respectively. Our effective rate was higher in fiscal year 2026 primarily due to higher net costs on foreign-related income taxed in the U.S. and lower U.S. tax benefits for foreign-derived income, which were impacted by tax deductions for prior year business and asset actions. Also contributing to the higher current year rate were prior-year non-recurring gains on the de-designation of cash flow hedges in jurisdictions with lower tax rates. These increases were partially offset by the release of certain unrecognized tax benefits resulting from tax settlements in the current year.

Our adjusted effective tax rate, which excludes the impact of adjustments presented in the "Reconciliations of Non-GAAP Financial Measures" section beginning on page 48, was 18.5% and 18.7% for the three months ended 31 December 2025 and 2024, respectively.

Discussion of First Quarter Results by Business Segment

Americas

						Three Months Ended
						31 December												Change vs. Prior Year
						2025						2024						$						%/bp
Sales						$1,341.7						$1,287.6						$54.1						4		%
Operating income						403.8						388.2						15.6						4		%
Operating margin						30.1		%				30.1		%										—		bp
Equity affiliates’ income						$51.7						$35.1						$16.6						47		%

The table below summarizes the major factors that impacted sales in the Americas segment for the periods presented:

Volume			(4		%)
Price			2		%
Energy cost pass-through to customers			6		%
Currency			—		%
Total Americas Sales Change			4		%

Sales of $1.3 billion increased 4%, or $54.1, as higher energy cost pass-through to customers of 6% and favorable pricing of 2% were partially offset by lower volumes of 4%. The higher energy cost pass-through reflects increased natural gas rates in the U.S. Gulf Coast and California. Pricing improved for non-helium products. The 2% total segment price increase equates to a 4% improvement in our merchant business. Volumes were unfavorable primarily due to a significant, non-recurring helium sale to an existing merchant customer in the prior year. Currency was flat compared to the prior year.

Operating income of $403.8 increased 4%, or $15.6, as higher pricing of $16 and favorable business mix of $3 were partially offset by higher costs of $4. Costs were modestly unfavorable as prior‑year income from the sale of an equity method investment and fixed-cost inflation more than offset lower maintenance. Operating margin of 30.1% was flat compared to prior year, as the benefits from favorable business mix and pricing were offset by a headwind of approximately 150 basis points from higher energy cost pass‑through to customers.

Equity affiliates’ income of $51.7 increased 47%, or $16.6, driven by an affiliate in Mexico.

Asia

						Three Months Ended
						31 December												Change vs. Prior Year
						2025						2024						$						%/bp
Sales						$831.5						$817.1						$14.4						2		%
Operating income						232.3						216.4						15.9						7		%
Operating margin						27.9		%				26.5		%										140		bp
Equity affiliates’ income						$13.8						$10.3						$3.5						34		%

The table below summarizes the major factors that impacted sales in the Asia segment for the periods presented:

Volume			—		%
Price			(1		%)
Energy cost pass-through to customers			2		%
Currency			1		%
Total Asia Sales Change			2		%

Sales of $831.5 increased 2%, or $14.4, as higher energy cost pass-through to customers of 2% and a favorable currency impact of 1% were partially offset by lower pricing of 1% primarily driven by helium. The 1% total segment price decrease equates to a 4% decline in our merchant business. Volumes were flat as new on-site assets were offset by lower demand for helium.

Operating income of $232.3 increased 7%, or $15.9, due to lower costs of $15 driven by productivity, favorable business mix of $7, and favorable currency of $4, partially offset by lower pricing of $10. Depreciation was reduced in fiscal year 2026 due to certain coal gasification assets being classified as held for sale. Operating margin of 27.9% increased 140 bp from 26.5% in the prior year.

Equity affiliates’ income of $13.8 increased 34%, or $3.5, driven by affiliates in China.

Europe

						Three Months Ended
						31 December												Change vs. Prior Year
						2025						2024						$						%/bp
Sales						$782.0						$697.2						$84.8						12		%
Operating income						223.5						186.5						37.0						20		%
Operating margin						28.6		%				26.7		%										190		bp
Equity affiliates’ income						$23.4						$18.2						$5.2						29		%

The table below summarizes the major factors that impacted sales in the Europe segment for the periods presented:

Volume			5		%
Price			1		%
Energy cost pass-through to customers			(2		%)
Currency			8		%
Total Europe Sales Change			12		%

Sales of $782.0 increased 12%, or $84.8, due to favorable currency of 8%, higher volumes of 5%, and higher pricing of 1%, partially offset by lower energy cost pass-through to customers of 2%, primarily due to lower natural gas rates. Favorable currency primarily reflected the weakening of the U.S. Dollar against the Euro. The higher volumes were driven by on-sites, including the impact of a prior-year turnaround, and non-helium merchant. Pricing improved for non-helium products. The 1% total segment price increase equates to a 2% improvement in our merchant business.

Operating income of $223.5 increased 20%, or $37.0, due to higher volumes of $21, higher pricing of $16, and favorable currency of $11, partially offset by higher costs of $11. The increase in costs was primarily due to higher depreciation and fixed-cost inflation, partially offset by productivity-driven improvements. Operating margin of 28.6% increased 190 bp from 26.7% in the prior year, as the benefits from higher volumes and pricing were partially offset by higher costs.

Equity affiliates’ income of $23.4 increased 29%, or $5.2, driven by an affiliate in Italy.

Middle East and India

						Three Months Ended
						31 December												Change vs. Prior Year
						2025						2024						$						%
Sales						$30.3						$32.8						($2.5)						(8		%)
Operating income (loss)						5.8						(0.6)						6.4						**
Equity affiliates' income						84.5						85.0						(0.5)						(1		%)

** Percentage change versus prior period is not meaningful.

Sales of $30.3 decreased 8%, or $2.5, due to lower volumes. Operating income was $5.8 compared to a loss of $0.6 in the prior year, primarily due to lower costs following the deconsolidation of Blue Hydrogen Industrial Gases Company ("BHIG") in the second quarter of fiscal year 2025 as well as productivity improvements.

Equity affiliates' income of $84.5 decreased 1%, or $0.5.

Corporate and other

						Three Months Ended
						31 December												Change vs. Prior Year
						2025						2024						$						%
Sales						$117.0						$96.8						$20.2						21		%
Operating loss						(108.9)						(117.0)						8.1						7		%
Equity affiliates' income (loss)						(1.2)						2.0						(3.2)						**

** Percentage change versus prior period is not meaningful.

Sales of $117.0 increased 21%, or $20.2. Operating loss of $108.9 decreased 7%, or $8.1, primarily due to productivity-driven cost improvements.

Equity affiliates' loss was $1.2 compared to income of $2.0 in the prior year, driven by an affiliate in Algeria.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

We present certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP") because they exclude items that management does not consider to be representative of our underlying business operations. We provide these adjusted non-GAAP financial measures to allow investors, potential investors, securities analysts, and others to evaluate our business in the same manner as management. When viewed together with our GAAP results, we believe these non-GAAP financial measures offer a more complete understanding of the factors and trends affecting our financial performance and support analysis of our results on a more consistent basis.

Readers are cautioned that non‑GAAP financial measures have inherent limitations and should not be considered in isolation or as a substitute for the corresponding GAAP measures. Our definitions and calculations of non‑GAAP financial measures may differ from those used by other companies, which may limit comparability.

Non-GAAP Performance Measures

Management uses non-GAAP performance measures, including adjusted operating income, adjusted operating margin, and adjusted earnings per share ("EPS"), to assess our performance because these measures exclude items that management does not consider to be representative of our underlying business operations. In addition, adjusted operating income and adjusted EPS are important components of our incentive compensation plans. We also use adjusted operating margin to assess operational efficiency, cost discipline, and overall profitability.

Our non‑GAAP performance measures are adjusted to exclude gains or losses that management believes are not associated with the ongoing operations of our business. These adjustments, which are described below for the periods presented, are not reflected in the results of our reportable segments. Although these items are often difficult to predict, readers should be aware that similar gains or losses may occur in future periods. The related tax effects reflect the expected current and deferred income tax impacts of our non-GAAP adjustments, which are primarily driven by the statutory tax rates of the applicable jurisdictions and the taxability of the underlying adjustments in those jurisdictions.

We reconcile each non‑GAAP performance measure to its most directly comparable GAAP measure in the table below, followed by descriptions of each non-GAAP adjustment. Margins are calculated by dividing the applicable line item by consolidated sales for the relevant period. In addition to our non-GAAP performance measures, we also present components used in calculating adjusted EPS to illustrate the per share effect of our non‑GAAP adjustments. All per share amounts are calculated on a diluted basis from continuing operations attributable to Air Products. Because margins and per share amounts are calculated independently, the individual components may not sum to the related totals due to rounding.

						Three Months Ended 31 December
Q1 2026 vs. Q1 2025						Operating Income			Operating Margin						Other Non- Operating Inc/Exp, Net			Income Tax Expense			Net Income Attributable to Air Products			EPS
Q1 2026 GAAP Measures						$734.5			23.7%						($1.4)			$159.4			$678.2			$3.04
Q1 2025 GAAP Measures						643.6			22.0%						38.9			140.7			617.4			2.77
$ GAAP Change						$90.9																		$0.27
%/bp GAAP Change						14%			170		bp													10%
Q1 2026 GAAP Measures						$734.5			23.7%						($1.4)			$159.4			$678.2			$3.04
Business and asset actions(A)						22.0			0.7%						6.3			3.1			24.6			0.11
Non-service pension cost, net						—			—%						3.4			0.9			2.5			0.01
Q1 2026 Adjusted Measures						$756.5			24.4%						$8.3			$163.4			$705.3			$3.16
Q1 2025 GAAP Measures						$643.6			22.0%						$38.9			$140.7			$617.4			$2.77
Shareholder activism-related costs						29.9			1.0%						—			8.0			21.9			0.10
Gain on de-designation of cash flow hedges(B)						—			—%						(38.8)			(3.3)			(10.3)			(0.05)
Non-service pension cost, net						—			—%						10.5			2.6			7.9			0.04
Q1 2025 Adjusted Measures						$673.5			23.0%						$10.6			$148.0			$636.9			$2.86
$ Adjusted Change						$83.0																		$0.30
%/bp Adjusted Change						12%			140		bp													10%
(A)Charge attributable to noncontrolling interests was $0.6. (B)Gain attributable to noncontrolling interests was $25.2.

Business and Asset Actions

During the first quarter of fiscal year 2026, we recorded charges for business and asset actions totaling $28.3 ($24.6 after tax, or $0.11 per share) related to project exits announced in fiscal year 2025. Of these charges, $22.0 were recorded within operating income to reflect updated cost estimates as we settle project‑related commitments and sell associated assets. The remaining $6.3 was recorded to "Other non‑operating income (expense), net" and reflects losses on cross‑currency interest rate swaps terminated in connection with the early repayment of related intercompany loans for one of the affected gasification projects.

Our estimates reflect our best judgment based on information available as of 31 December 2025. Final settlement of these items may differ materially from current estimates, which could impact our consolidated financial statements in future periods.

Prior Year Shareholder Activism-Related Costs

During the first quarter of fiscal year 2025, we recorded shareholder activism-related costs of $29.9 ($21.9 after tax, or $0.10 per share) in connection with a proxy contest. These costs included legal and other professional service fees and proxy solicitation expenses.

Prior Year Gain on De-designation of Cash Flow Hedges

In fiscal year 2024, we discontinued cash flow hedge accounting for certain interest rate swaps due to changes in the anticipated drawdown timeline for hedged borrowings related to the NEOM Green Hydrogen Project. These swaps are held by NEOM Green Hydrogen Company, a consolidated joint venture accounted for under the variable interest model, in which Air Products holds a one-third ownership interest. As a result, unrealized gains and losses for the de-designated swaps were recorded to "Other non-operating income (expense), net" on our consolidated income statements. During the first quarter of fiscal year 2025, we recorded an unrealized gain of $38.8 ($10.3 attributable to Air Products after tax, or $0.05 per share), with $25.2 attributable to our noncontrolling partners.

We re-designated the affected swaps as outstanding borrowings under the available project financing became commensurate with the swaps’ notional values. The unrealized gain on swaps that remained de-designated during the first quarter of fiscal year 2026 was not material. As of 1 January 2026, all swaps have been re-designated as cash flow hedges.

Non-Service Related Pension Items

Non-service related pension items resulted in net non-operating costs of $3.4 ($2.5 after tax, or $0.01 per share) in the first quarter of fiscal year 2026 compared to $10.5 ($7.9 after tax, or $0.04 per share) in the first quarter of fiscal year 2025. Non-service related components are recurring, non-operating items that include interest cost, expected returns on plan assets, prior service cost amortization, actuarial loss amortization, as well as special termination benefits, curtailments, and settlements. The net impact of non-service related components is reflected within “Other non-operating income (expense), net” on our consolidated income statements. Adjusting for the impact of non-service pension components provides management and users of our financial statements with a more accurate representation of our underlying business performance because these components are driven by factors that are unrelated to our operations, such as volatility in equity and debt markets. Further, non-service related components are not indicative of our defined benefit plans’ future contribution needs due to the funded status of the plans.

ADJUSTED EFFECTIVE TAX RATE

The effective tax rate represents income tax expense divided by income before taxes as reported under GAAP. We calculate our adjusted effective tax rate by adjusting both the numerator and the denominator to exclude the tax and pre‑tax effects of our non‑GAAP adjustments, respectively.

The table below presents a reconciliation of the GAAP effective tax rate to our adjusted effective tax rate:

						Three Months Ended 31 December
						2025			2024
Income tax expense						$159.4			$140.7
Income before taxes						850.8			790.5
Effective tax rate						18.7		%	17.8		%
Reconciliations of GAAP to Non-GAAP:
Income tax expense						$159.4			$140.7
Business and asset actions tax impact						3.1			—
Shareholder activism-related costs tax impact						—			8.0
Gain on de-designation of cash flow hedges tax impact						—			(3.3)
Non-service pension cost, net tax impact						0.9			2.6
Adjusted income tax expense						$163.4			$148.0
Income before taxes						$850.8			$790.5
Business and asset actions						28.3			—
Shareholder activism-related costs						—			29.9
Gain on de-designation of cash flow hedges						—			(38.8)
Non-service pension cost, net						3.4			10.5
Adjusted income before taxes						$882.5			$792.1
Adjusted effective tax rate						18.5		%	18.7		%

CAPITAL EXPENDITURES (NON-GAAP)

Capital expenditures is a non-GAAP financial measure that management uses to evaluate our deployment of capital and assess alignment with our strategic priorities. Our calculation of this measure begins as the sum of cash paid for additions to plant and equipment, including long-term deposits, acquisitions (less cash acquired), investment in and advances to unconsolidated affiliates, and investment in financing receivables, each of which are reported on our consolidated statements of cash flows.

We then adjust this amount to exclude spending for additions to plant and equipment by our consolidated joint venture, NEOM Green Hydrogen Company (“NGHC”), to the extent such spending is funded by sources other than Air Products’ cash. These other funding sources include NGHC’s project financing, which is non‑recourse to Air Products, as well as equity contributions from the other joint venture partners. Management believes this adjustment provides a more useful view of the capital we deploy to support the ongoing growth of our business.

The most directly comparable GAAP measure to our non‑GAAP capital expenditures is “Cash used for investing activities,” as reported on our consolidated statements of cash flows. The reconciliation of cash used for investing activities to our reported capital expenditures is provided below:

						Three Months Ended
						31 December
						2025			2024
Cash used for investing activities						$1,242.9			$2,182.1
Proceeds from sale of assets and investments						26.1			34.4
Purchases of short-term investments						—			(117.6)
Proceeds from short-term investments						—			5.0
Proceeds from other investing activities						2.2			29.0
NGHC expenditures not funded by Air Products' equity(A)						(360.5)			(923.1)
Capital expenditures						$910.7			$1,209.8

(A)Reflects the portion of "Additions to plant and equipment, including long-term deposits" that is associated with NGHC, less our approximate cash investment in the joint venture. Substantially all the funding we provide to NGHC is limited for use by the joint venture for its capital expenditures.

LIQUIDITY AND CAPITAL RESOURCES

We believe we have sufficient cash, cash flows from operations, and access to funding sources to meet our liquidity needs. As further discussed in the "Cash Flows From Financing Activities" section below, we are able to raise capital through a variety of financing activities, including accessing capital or commercial paper markets or drawing upon our credit facilities.

As of 31 December 2025, we held cash and cash items of $1.0 billion, substantially all of which was held outside the U.S. We do not expect a significant portion of the earnings from our foreign subsidiaries and affiliates to be subject to U.S. income tax upon repatriation. Depending on the country in which these entities operate, repatriation of earnings may be subject to foreign withholding and other taxes. However, we intend to indefinitely reinvest the majority of our foreign cash and cash items that would be subject to additional taxes outside the U.S.

Cash Flows From Operations

						Three Months Ended
						31 December
						2025			2024
Net income attributable to Air Products						$678.2			$617.4
Adjustments to reconcile income to cash provided by operating activities:
Depreciation and amortization						370.7			366.8
Deferred income taxes						78.2			(6.3)
Business and asset actions						22.0			—
Undistributed earnings of equity method investments						(28.5)			(48.4)
Gain on sale of assets and investments						(2.2)			(10.1)
Share-based compensation						10.6			16.4
Noncurrent lease receivables						12.0			15.0
Other adjustments						(25.2)			(122.6)
Changes in working capital accounts						(215.1)			(16.5)
Cash Provided by Operating Activities						$900.7			$811.7

For the first three months of fiscal year 2026, cash provided by operating activities was $900.7. The working capital accounts were a net use of cash of $215.1, primarily driven by a $191.3 use related to payables and accrued liabilities. This use included payments for incentive compensation under the fiscal year 2025 plan, contract terminations tied to our business and asset actions, and previously accrued severance actions under our global cost reduction plan.

For the first three months of fiscal year 2025, cash provided by operating activities was $811.7. Other adjustments of $122.6 primarily reflected non‑cash currency impacts on intercompany balances. The working capital accounts were a net use of cash of $16.5. A $47.8 use of cash for trade receivables, driven by the timing of cash collections, was partially offset by a $30.5 source of cash within payables and accrued liabilities. The source of cash for payables and accrued liabilities primarily resulted from higher accrued utilities and changes in the fair value of derivative contracts that hedge intercompany loans, partially offset by payments for incentive compensation.

Cash Flows From Investing Activities

						Three Months Ended
						31 December
						2025			2024
Additions to plant and equipment, including long-term deposits						($1,251.2)			($2,117.6)
Investments in and advances to unconsolidated affiliates						(20.0)			—
Investments in financing receivables						—			(15.3)
Proceeds from sale of assets and investments						26.1			34.4
Purchases of short-term investments						—			(117.6)
Proceeds from short-term investments						—			5.0
Proceeds from other investing activities						2.2			29.0
Cash Used for Investing Activities						($1,242.9)			($2,182.1)

For the first three months of fiscal year 2026, cash used for investing activities of $1.2 billion was primarily driven by additions to plant and equipment, including long-term deposits, as discussed in the "Capital Expenditures" section below.

For the first three months of fiscal year 2025, cash used for investing activities was $2.2 billion. The use of cash primarily resulted from additions to plant and equipment, including long-term deposits, of $2.1 billion as discussed in the "Capital Expenditures" section below. Purchases of investments of $117.6 consisted of time deposits with maturities between three months and one year.

Capital Expenditures (Non-GAAP Financial Measure)

The components of our capital expenditures are detailed in the table below. Refer to page 51 for a definition of this non-GAAP financial measure as well as a reconciliation to cash used for investing activities.

						Three Months Ended
						31 December
						2025			2024
Additions to plant and equipment, including long-term deposits						$1,251.2			$2,117.6
Investments in and advances to unconsolidated affiliates						20.0			—
Investments in financing receivables						—			15.3
NGHC expenditures not funded by Air Products' equity(A)						(360.5)			(923.1)
Capital Expenditures						$910.7			$1,209.8

(A)Reflects the portion of "Additions to plant and equipment, including long-term deposits" that is associated with NGHC, less our approximate cash investment in the joint venture. Substantially all the funding we provide to NGHC is limited for use by the joint venture for its capital expenditures. For additional information regarding this adjustment, refer to page 51.

Capital expenditures for the first three months of fiscal year 2026 totaled $910.7 compared to $1.2 billion in the prior year. Additions to plant and equipment in both periods primarily reflect cash deployed to support our clean energy initiatives, including the NEOM Green Hydrogen Project, and clean energy complexes in Louisiana, United States, and Alberta, Canada. Spending for the NEOM Green Hydrogen Project is lower in fiscal year 2026 as we near completion of the project.

Outlook for Investing Activities

It is not possible, without unreasonable efforts, to reconcile our forecasted capital expenditures to future cash used for investing activities because management is unable to identify the timing or occurrence of our future investment activity, which is driven by our assessment of competing opportunities at the time we enter into transactions. These decisions, either individually or in the aggregate, could have a significant effect on our cash used for investing activities. Accordingly, management is unable to fully reconcile, without unreasonable efforts, our forecasted capital expenditures to future cash used for investing activities.

We expect capital expenditures for fiscal year 2026 to be approximately $4.0 billion, reflecting continued investment in our energy transition projects, traditional industrial gas projects, and maintenance within our core business. Approximately $1 billion is expected to be dedicated to traditional industrial gas projects. We anticipate funding these expenditures through our existing cash balance and cash generated from continuing operations. We also have access to capital and money market financing as well as other sources of funding as discussed in the "Financing and Capital Structure" section below.

Cash Flows From Financing Activities

						Three Months Ended
						31 December
						2025			2024
Long-term debt proceeds						$382.5			$459.2
Payments on long-term debt						(569.6)			(12.1)
Net increase (decrease) in commercial paper and short-term borrowings						67.3			(21.5)
Dividends paid to shareholders						(398.4)			(393.6)
Investments by noncontrolling interests						61.0			280.9
Other financing activities						(32.9)			(38.7)
Cash (Used for) Provided by Financing Activities						($490.1)			$274.2

For the first three months of fiscal year 2026, cash used for financing activities was $490.1. The use of cash was driven by long-term debt repayments of $569.6, which included the repayment of $550.0 aggregate principal amount of our 1.50% senior notes due October 2025. Additionally, cash dividends paid to shareholders totaled $398.4. These uses of cash were partially offset by $382.5 of long-term debt proceeds driven by incremental borrowings under the project financing arrangement available to NGHC for the NEOM Green Hydrogen Project.

For the first three months of fiscal year 2025, cash provided by financing activities was $274.2. The source of cash was driven by long-term debt proceeds of $459.2 and investments by noncontrolling interests of $280.9, both of which primarily relate to capital spending by NGHC. These sources of cash were partially offset by dividend payments to shareholders of $393.6.

Financing and Capital Structure

Debt

Total debt decreased to $17.5 billion as of 31 December 2025 from $17.7 billion as of 30 September 2025. As noted above, we repaid at maturity $550.0 aggregate principal amount of our 1.50% senior notes due October 2025, plus accumulated and unpaid interest through the maturity date. This repayment was partially offset by approximately $365 in incremental long-term principal borrowings under a project financing arrangement related to the NEOM Green Hydrogen Project, which is non-recourse to Air Products, as further discussed below. Total debt included related party debt of $240.7 and $236.5 as of 31 December 2025 and 30 September 2025, respectively.

Various debt agreements to which we are a party include financial covenants and other restrictions, including restrictions pertaining to the ability to create property liens and enter into certain sale and leaseback transactions. As of 31 December 2025, we were in compliance with all the financial and other covenants under our debt agreements.

Committed Credit Facilities

During the second quarter of fiscal year 2025, we refinanced our existing 364-day $500 revolving credit agreement to extend its maturity date from 27 March 2025 to 26 March 2026 (the “364-Day Credit Agreement”). All other terms remain consistent with the original 364-Day Credit Agreement, including our ability to convert the facility into a term loan maturing 26 March 2027. Fees incurred in connection with the refinancing were not material.

We also maintain a five-year $3.0 billion revolving credit agreement that matures on 31 March 2029 (the “Five-Year Credit Agreement”). Both the 364-Day Credit Agreement and the Five-Year Credit Agreement are syndicated committed facilities that provide a source of liquidity and support our commercial paper program through the availability of senior unsecured debt to us and certain of our subsidiaries. No borrowings were outstanding under either of the agreements as of 31 December 2025 or 30 September 2025.

Separately, certain of our foreign subsidiaries maintain access to committed credit facilities with a combined maximum borrowing capacity of $363.3, all of which was borrowed and outstanding as of 31 December 2025. The amount available and borrowed as of 30 September 2025 was $394.0.

NEOM Green Hydrogen Project Financing

To support the NEOM Green Hydrogen Project, NGHC has access to project financing of approximately $6.1 billion, which is expected to fund about 73% of the project and is being drawn over the construction period, as well as additional credit facilities totaling approximately $500 primarily for NGHC's working capital needs. Creditors of NGHC do not have recourse to the general credit of Air Products. As of 31 December 2025, the joint venture had borrowed short- and long-term principal amounts totaling $5.3 billion compared to $4.9 billion as of 30 September 2025. Refer to Note 3, Variable Interest Entities, to the consolidated financial statements for additional information.

Dividends

We believe that providing a consistent dividend plays a critical role in creating shareholder value. The Board of Directors determines whether to declare cash dividends on our common stock, and the timing and amount of those dividends, based on our financial condition and other factors it deems relevant. Dividends are paid quarterly, typically during the sixth week following the close of the fiscal quarter.

On 19 November 2025, the Board of Directors declared a quarterly dividend of $1.79 per share that is payable on 9 February 2026 to shareholders of record at close of business on 2 January 2026.

In January 2026, the Board of Directors approved a $0.02 per share increase to our quarterly dividend, raising it to $1.81 per share and marking our 44th consecutive year of dividend increases. The first dividend at this increased rate was declared on 27 January 2026 and is payable on 11 May 2026 to shareholders of record at close of business on 1 April 2026.

In total, we expect to return approximately $1.6 billion to shareholders in 2026.

PENSION BENEFITS

We and certain of our subsidiaries sponsor defined benefit pension plans and defined contribution plans that cover a substantial portion of our worldwide employees. The principal defined benefit pension plans are the U.S. salaried pension plan and the U.K. pension plan. These plans were closed to new participants in 2005, after which defined contribution plans were offered to new employees. The shift to defined contribution plans is expected to continue to reduce volatility of both plan expense and contributions. For additional information, refer to Note 10, Retirement Benefits, to the consolidated financial statements.

Net Periodic Cost

The table below summarizes the components of net periodic cost for our U.S. and international defined benefit pension plans:

			Three Months Ended
			31 December
			2025			2024
Service cost			$4.9			$5.2
Non-service cost			3.4			10.5
Other			0.3			0.1
Net Periodic Cost			$8.6			$15.8

Net periodic cost was $8.6 and $15.8 for the three months ended 31 December 2025 and 2024, respectively. The lower non-service related costs are the result of higher expected return on plan assets from increases in the return assumption and a decrease in actuarial loss amortization. Non-service related components of net periodic cost are reflected within "Other non-operating income (expense), net" on our consolidated income statements.

Service costs result from benefits earned by active employees and are reflected as operating expenses primarily within "Cost of sales" and "Selling and administrative expense" on our consolidated income statements. The amount of service costs capitalized in the first three months of fiscal years 2026 and 2025 was not material.

Company Contributions

Management considers various factors when making pension funding decisions, including tax, cash flow, and regulatory implications. For the three months ended 31 December 2025 and 2024, our cash contributions to funded pension plans and benefit payments for unfunded pension plans were $5.1 and $8.2, respectively.

Total contributions for fiscal year 2026 are expected to be approximately $25 to $35. During fiscal year 2025, total contributions were $29.9.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A description of our major accounting policies, including those that we consider to be the most critical to understanding our financial statements, is included in our 2025 Form 10-K. There were no significant changes to our accounting policies during the first three months of fiscal year 2026.

Management’s Discussion and Analysis of our financial condition and results of operations is based on the consolidated financial statements and accompanying notes that have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates reflect our best judgment about current and/or future economic and market conditions and their effect based on information available as of the date of our consolidated financial statements. If conditions change, actual results may differ materially from these estimates.

Judgments and estimates of uncertainties are required to apply our accounting policies in many areas. However, application of policies that management has identified as critical places significant importance on management’s judgment, often as the result of the need to make estimates about the effects of matters that are inherently uncertain.

During the first quarter of fiscal year 2026, we recorded changes to project revenue and cost estimates on certain sale of equipment projects that are accounted for under the cost incurred input method. Accordingly, we recorded cumulative effect adjustments that unfavorably impacted operating results by approximately $33 for the three months ended 31 December 2025.

Additionally, we recorded a charge of $22.0 within operating income during the first quarter of fiscal year 2026 to update cost estimates related to previously announced project exit decisions as described in Note 4, Business and Asset Actions, to the consolidated financial statements. We estimate the value of certain long-lived assets associated with these decisions using Level 3 inputs under the fair value hierarchy due to the absence of observable market prices and significant reliance on management judgment and estimation techniques. For long-lived assets that met the held-for-sale criteria and are actively being marketed for sale, fair value, including costs to sell, was estimated using an internally developed discounted cash flow analysis as of 30 September 2025. There were no material changes to valuation assumptions related to assets held for sale during the first quarter of fiscal year 2026. For plant and equipment that did not meet the held‑for‑sale criteria but are capable of being sold through secondary equipment markets, we estimated the net realizable value of the assets as of 31 March 2025 using an orderly liquidation valuation approach. There were no material changes in the estimated net realizable value for any remaining assets not disposed as of 31 December 2025.

Estimates related to these actions are considered critical because they involve significant assumptions regarding future cash flows, asset disposition strategies, and market conditions, all of which are subject to change and could materially affect the amount and timing of impairment charges. Additionally, because the project review is ongoing, we may make further project-related decisions that could impact the intended use or recoverability of certain assets, potentially resulting in the recognition of additional charges in future periods.

There were no other changes to our estimates during the first three months of fiscal year 2026 that had a significant impact on our financial condition, change in financial condition, liquidity, or results of operations.