Dow Inc. (DOW) shares took a beating Thursday after the chemical giant reported fourth-quarter 2025 results that were, well, pretty grim. And in response to the pain, the company rolled out a major restructuring plan that signals some serious soul-searching about how to run the business going forward.

The Numbers Tell a Tough Story

Let's start with the headline: Dow posted a GAAP net loss of $1.48 billion for the quarter, compared to just $35 million in losses during the same period last year. That's not a typo. The loss ballooned by more than $1.4 billion year-over-year.

On an adjusted basis, the company lost 34 cents per share, which actually beat Wall Street's expectation of a 46-cent loss. So there's that silver lining, at least in the world of "less bad than expected."

Revenue dropped 9% year-over-year to $9.460 billion, just barely missing the $9.462 billion consensus estimate. Overall volumes fell 2% on the back of declines in Packaging & Specialty Plastics, largely due to lower merchant olefins sales in Europe, the Middle East, Africa, and India after the company idled a regional cracker earlier in the year.

Operating EBIT plunged to just $33 million from $454 million a year ago. Operating cash flow from continuing operations came in at $298 million, down $513 million year-over-year thanks to lower earnings. The company still managed to return $251 million to shareholders through dividends during the quarter.

Enter "Transform to Outperform"

When things get this tough, companies usually launch initiatives with motivational names. Dow's version is called "Transform to Outperform," and it's aiming to boost operating EBITDA by $2 billion. About two-thirds of those benefits are expected to come from productivity improvements, with the remaining third from growth.

Here's the catch: this transformation will cost money upfront. The company anticipates $1.1-$1.5 billion in one-time costs, including $600-$800 million for severance affecting roughly 4,500 roles, and another $500-$700 million in other one-time expenses. That's a substantial headcount reduction and a big bet that leaner operations will pay off down the road.

Segment Breakdown

The pain was spread across the business. Packaging & Specialty Plastics revenue fell 11% year-over-year to $4.7 billion, as local prices dropped 9% driven by weaker downstream polymer prices.

Industrial Intermediates & Infrastructure revenue declined 9% year-over-year to $2.7 billion, with declines across both businesses in the segment.

Performance Materials & Coatings revenue dropped 6% year-over-year to $1.9 billion, though operating profit actually rose from the year-ago quarter due to lower fixed costs.

Management's Take

Jim Fitterling, Dow's chair and CEO, tried to strike an optimistic tone: "In 2025, we achieved well over half of our more than $6.5 billion in near-term cash and cost support actions, including the accelerated delivery of more than $400 million in cost savings from our $1 billion program."

He continued: "At the same time – by reducing complexity, adopting the best available technologies and streamlining our end-to-end processes – Transform to Outperform is expected to provide step-change productivity gains while enabling consistent growth. We will make breakthrough improvements across our company to fundamentally simplify Dow's operating model."

Looking Ahead

Dow expects first-quarter 2026 net revenue of $9.40 billion, which is notably below the consensus estimate of $10.32 billion. Not exactly the kind of outlook that inspires confidence.

DOW Price Action: Dow shares were down 4.66% at $26.48 at the time of publication on Thursday.