3M Faces Margin Squeeze as Rising Costs Erode Efficiency Gains

3M is taking steps to boost its operating efficiency and strengthen margins by reducing its corporate center size, streamlining geographic footprints, simplifying supply chains, and optimizing manufacturing roles. These initiatives are expected to lower operating costs while supporting margins and cash flow in the long term.

The company completed most of these restructuring actions by the end of 2025 and is now shifting focus towards longer-term transformation, including supply-chain network redesign and AI-driven tools deployment across operations.

However, rising costs may challenge the company's ability to sustain its margin momentum. In the second quarter of 2026, cost of sales increased 4.7% year over year, while cost of sales as a percentage of total revenues rose 120 basis points to 58.7%. Higher tariff-related costs, rising oil prices, and dis-synergies from PFAS manufacturing exit contributed to this increase.

Compared to its peers, Carlisle Companies Incorporated saw elevated raw-material and freight costs due to the Middle East conflict and supply disruptions, while Honeywell Technologies faced high cost of sales and operating expenses. Despite these challenges, 3M's restructuring efforts are supporting margins, with adjusted operating margin expanding by 40 basis points year over year in the second quarter of 2026.