AAON, Inc. (AAON) | The Buildout — AI Infrastructure
The Verdict
AAON designs and builds engineered heating, ventilation, air conditioning, and liquid-cooling equipment. Its BASX business supplies high-density data centers with coolant distribution units, free-cooling chillers, air handlers, and liquid-cooling coils; its AAON brand serves commercial and industrial buildings and is pushing into fully electric heat pumps.
| Market Cap | — |
| Revenue (TTM) | $1.6B |
| Revenue Growth | +28.3% |
| EBITDA Margin (TTM) | 14.2% |
| Net Debt | $451M |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- BASX-branded sales grew 216% year over year in Q2 2026 and 501% on a two-year stack; first-half growth was 137% y/y and 570% on a two-year stack.
- Total backlog was $2.0 billion at Q2 2026, up 98% year over year after record shipments converted the prior quarter's $2.1 billion.
- Memphis produced roughly half of Redmond's full-year 2025 BASX revenue in Q2 2026 and expanded margins for two straight quarters.
- AAON-branded sales grew 40% y/y in Q2 while the unitary HVAC market was only modestly up; Alpha Class heat pump orders rose 50% y/y.
- H1 2026 operating cash flow was $55.0 million versus negative $31.0 million in the prior-year period.
What We’re Watching
- BASX bookings came in below recent elevated levels in Q2 2026; management attributed this to large-project lumpiness, not a demand slowdown.
- Gross margin guidance has been cut twice to 25%–26%, with the more noticeable inflection now guided for Q4 2026 and Oklahoma's return toward mid-to-high 30s framed as Q4 2027.
- Capex guidance is unclear: the prior guide referenced on the Q1 call was ~$190 million, the Q1 call figure was $119 million, and Q2 did not restate it; H1 capex was $102.6 million.
- Fan and electrical-component constraints are flagged as a supply-chain watch item that could gate shipments.
The demand side of the thesis is strengthening: record revenue, a near-double backlog, and a Memphis ramp ahead of plan. The execution side remains unproven because gross margin guidance has fallen twice and the promised recovery has been pushed from near term to Q4 2026 and Q4 2027. The open question is whether Q4 2026 results show the margin story is one of timing or mix.
Earnings Beat
AAON reported record Q2 2026 revenue of $627.0 million, up 101% year over year, with gross margin of 24.3% versus 26.6% a year earlier. BASX segment sales grew 221% to $218.0 million, and BASX-branded sales rose 216% year over year.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $497M | $424M | $322M | +54.3% |
| Gross margin | 25.1% | 25.9% | 26.8% | -170bps |
| EBITDA | $78M | $64M | $54M | +44.2% |
| EPS | $0.48 | $0.39 | $0.35 | +36.2% |
| Total backlog | $2.0B | $2.1B | n/a | +98% y/y |
This is a timing issue tied to how we're choosing to ramp and execute. Not a reset in long-term margin structure.— Matthew Tobolski, President and CEO, 2026-05-07
Management tone: Management remained direct and confident from Q1 into Q2. In Q2, commentary became more explicit about the AAON Coil Products pricing lag, with management acknowledging the company was behind on pricing actions. Management also framed lower BASX bookings as large-project timing and reiterated that the pipeline is the strongest it has ever been.
Management Guidance
For fiscal 2026, management guides to year-over-year sales growth of 55%–60% and gross margin of approximately 25%–26%. SG&A is guided to 13%–14% of sales, depreciation and amortization to $95 million–$100 million. The guide assumes AAON-brand growth of roughly 20% and BASX more than doubling again. Full-year capex was not restated on the Q2 call.
Trajectory
Revenue is accelerating: from $311.6 million in Q2 2025 to $496.9 million in Q1 2026 and $627.0 million in Q2 2026. Gross margin compressed from 26.6% in Q2 2025 to 24.3% in Q2 2026 as temporary outsourcing and Memphis ramp overhead were absorbed to convert demand faster.
The Model
The model projects fiscal-year-plus-one revenue of $2,080 million and EBITDA of $368 million, a 17.7% EBITDA margin. For fiscal-year-plus-two, the model projects revenue of $2,800 million and EBITDA of $552 million, a 19.7% margin. The near-term path reflects the BASX and Memphis ramp converting a near-double backlog, while FY+2 assumes capacity absorption and margin normalization as pricing actions flow through.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $1.4B | $2.1B | $2.8B |
| YoY Growth | — | +44.2% | +34.6% |
| EBITDA | $206M | $368M | $552M |
| EBITDA Margin | 14.3% | 17.7% | 19.7% |
Projections are the median of 5 independent model runs. The model’s revenue sits 15.9% above analyst consensus.
For fiscal 2026, management guides to year-over-year sales growth of 55%–60% and gross margin of approximately 25%–26%. SG&A is guided to 13%–14% of sales, depreciation and amortization to $95 million–$100 million. The guide assumes AAON-brand growth of roughly 20% and BASX more than doubling again. Full-year capex was not restated on the Q2 call.
What Could Go Right — and Wrong
- BASX bookings re-accelerate in Q3/Q4 and book-to-bill returns toward recent levels, extending the 2027/2028 pipeline.
- Q4 2026 consolidated gross margin expands as pricing actions already in backlog flow through.
- Memphis keeps scaling ahead of plan while its allocated overhead drag fades.
- AAON brand share gains continue, and Alpha Class heat pump orders sustain 50%+ growth.
- A named hyperscaler or multi-year capacity agreement is confirmed, hardening data-center revenue durability.
- BASX bookings stay below shipment levels for another quarter or two, signaling a demand or competitive-loss shift.
- Q4 2026 gross margin inflection fails, suggesting the lower margin is mix-driven rather than temporary.
- A 10%+ customer loss or large project cancellation occurs; three customers were 10%+ of FY2025 revenue.
- Fan or electrical component shortages delay shipments and backlog conversion.
- Capex ambiguity resolves negatively, and the Memphis ramp becomes capacity-constrained.
Looking Ahead
The next twelve months test whether AAON can convert its order book without further margin erosion. Management expects modest gross margin improvement in Q3 2026 and a more noticeable improvement in Q4 2026 as pricing actions embedded in backlog flow through. Through 2027, the focus shifts to BASX pipeline conversion for 2027 and 2028 deliveries and whether Oklahoma margins move back toward historical mid-to-high 30s by Q4 2027.
- Q3 2026Q3 earnings and bookings — Tests whether BASX bookings rebound and consolidated gross margin improves modestly as guided.
- Q4 2026Q4 margin inflection — Management says the more noticeable margin improvement is weighted here from backlog pricing.
- H2 2026BASX 2027/2028 pipeline conversion — Tests whether existing-customer pipeline converts into durable BASX orders.
- Full year 2026FY26 guide delivery — Tests 55%–60% sales growth and 25%–26% gross margin guide.
- 2027ERP and capex clarity — Prior ERP go-lives Redmond 2026, Tulsa 2027; capex ambiguity needs resolution.
- Q4 2027Oklahoma margin recovery — Management framed return toward mid-to-high 30s as a Q4 2027 event.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $1.2B | $1.4B | $1.6B | +20.1% |
| Gross Margin | 33.1% | 26.8% | 26.2% | 630bps |
| EBITDA | $254M | $206M | $1.5B | -19.1% |
| EBITDA Margin | 21.2% | 14.3% | 14.2% | 692bps |
| Net Income | $168M | $108M | $118M | -36.1% |
| Free Cash Flow | $1M | −$190M | $25M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)26.2%
- EBITDA Margin (TTM)14.2%
- Net Margin (TTM)7.3%
- ROIC9.6%
- FCF Conversion-63.2%
- SBC / Revenue1.1%
The Company
AAON designs and manufactures highly engineered, configurable, and custom HVAC and liquid-cooling equipment. Its BASX brand supplies data centers with coolant distribution units, free-cooling chillers, airside systems, and liquid-cooling coils; its AAON brand serves commercial and industrial buildings with rooftop units, air handlers, heat pumps, and the fully electric Alpha Class line. The company reports three segments: AAON Oklahoma, AAON Coil Products, and BASX.
AAON operates plants in Tulsa, Oklahoma; Memphis, Tennessee; Longview, Texas; Redmond, Oregon; and a leased controls facility in Parkville, Missouri. The Tulsa site covers roughly 87.3 acres. BASX-branded liquid cooling products are made both in the BASX segment and inside AAON Coil Products, so data-center content is spread across two segments. BASX manufactures its own fans in-house at Redmond, and the new Memphis facility is ramping ahead of plan.
Business Segments
Competitive Landscape
AAON's 10-K separates competitors into comfort-cooling names—Lennox, Trane, York Light Commercial, Johnson Controls, Carrier, and Daikin—and thermal-management names—Vertiv, STULZ, Munters, Silent Aire, Nortek, and Modine. The intel file notes competition is escalating, particularly from full-solution thermal and power-infrastructure players.
- VertivNamed in the 10-K as a thermal-management competitor.
- ModineNamed in the 10-K as a thermal-management competitor.
- TraneNamed in the 10-K as a comfort-cooling competitor.
- CarrierNamed in the 10-K as a comfort-cooling competitor.
- Johnson ControlsNamed in the 10-K in both comfort-cooling and thermal-management competitor lists; Silent Aire is a Johnson Controls unit.
Supply Chain
AAON sits upstream of data centers and commercial buildings as a physical equipment supplier. The supplied neighbor read-throughs corroborate data-center cooling demand but do not show a neighbor naming AAON.
More on AAON: Earnings recap