Carrier Global Corporation (CARR) | The Buildout — AI Infrastructure
The Verdict
Carrier Global is a heating, cooling and cold-chain equipment company. Its AI-infrastructure role runs through global commercial HVAC, where it supplies the thermal backbone of data centers: air-cooled and water-cooled chillers, coolant distribution units, data-center infrastructure management software, and increasingly integrated systems under its QuantumLeap offering. Carrier is a supplier into the data-center buildout, not an AI company, and its own framing is that it is capacity-constrained rather than demand-constrained in that vertical.
| Market Cap | — |
| Revenue (TTM) | $22.1B |
| Revenue Growth | −1.6% |
| EBITDA Margin (TTM) | 12.9% |
| Net Debt | $11.1B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data-center revenue is guided to ~$2B in 2026, up from ~$1.5B, which management describes as a second year in a row of doubling; Q2 data center orders rose 4x year over year.
- Total backlog is over $8B, up about 40% year over year and about 20% sequentially, and it excludes expected orders from hyperscaler and colo long-term agreements.
- Global commercial HVAC has been transformed since the spin: sales up 80%, backlog up 130%, 500 basis points of share gained and margins up 3x; data centers are accretive within commercial HVAC margins.
- Guidance was raised across sales, adjusted operating profit, adjusted EPS and data-center revenue in a single quarter, and the 2026 data-center forecast is described as all in backlog.
- The portfolio is being reshaped toward commercial and data center: Riello and NORESCO divested, 75F acquired, and the ZutaCore liquid-cooling investment expanded.
What We’re Watching
- The second-half data-center ramp: the 2026 data-center target is back-end-loaded, which management calls 'purely an execution issue.'
- Margin mix: Q2 adjusted operating margin was 17.2% and is guided down to ~16.5% in Q3, because commercial and data-center growth is dilutive to the consolidated total.
- CSE margins were called 'disappointing' in both Q1 and Q2; the prior 100 basis point recovery promise was not reaffirmed and was replaced by a mid-teen target over the next few years under a new segment president.
- Two structural drags with no date for a turn: China residential/light commercial down about 25% in Q1 with no bottom called, and Global Truck/Trailer down low teens with recovery pushed to 2027.
The thesis is strengthening on demand and weakening on current profitability at the same time. Record orders, a record backlog and a raised full-year guide support the growth case, but the same quarter showed adjusted earnings per share declining year over year and operating margin contracting, and the second half depends on executing a back-end-loaded ramp. The open question is whether the data-center ramp converts on schedule and whether consolidated margins hold as the mix shifts toward commercial.
Earnings Beat
Carrier reported Q2 2026 revenue of $6.4B, up 3% organically, with gross margin of 27.2%. Adjusted operating profit was $1.1B at a 17.2% adjusted operating margin, and free cash flow was $810M. Adjusted EPS of $0.86 was down 7% year over year. Orders rose about 40% overall, with commercial HVAC up about 65% and data center orders up 4x.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $6.4B | $5.3B | $6.1B | +3.9% |
| Gross margin | 27.2% | 23.3% | 28.9% | -170bps |
| EBITDA | $1.1B | $555M | $1.1B | −2.5% |
| EPS | $0.60 | $0.28 | $0.68 | −12.5% |
| Total company backlog | >$8B | n/a | n/a | +40% YoY, +20% QoQ |
Our total company backlog, which excludes orders that we expect from long-term agreements with hyperscalers and colos, is now over $8 billion, up about 40% versus last year and up 20% sequentially.— David Gitlin, CEO, 2026-07-28
Management tone: Q1 2026 was a hold-the-line call, with the full-year guide explicitly reaffirmed. Q2 2026 was a raise-and-commit call, with sales, operating profit, adjusted EPS and data-center revenue guidance all raised and an unusual amount of forward project detail volunteered. Management also stated the soft spots plainly: CSE margins were called 'disappointing' in both quarters, and management quantified that 10 points of the second-half residential ramp comes from the absence of destocking.
Management Guidance
On the Q2 2026 call management raised full-year 2026 guidance to sales of ~$23B and organic growth up mid- to high single digits, from ~$22B and flat to low single digits. Adjusted operating profit was raised to ~$3.5B and adjusted EPS to ~$2.90. Data-center revenue guidance was raised to ~$2B, with about $500M in H1 and about $1.5B in H2. CapEx guidance rose about $100M to ~$600M, while the free cash flow outlook was unchanged at ~$2B. For Q3 2026 management guided revenue just below $6B, ~10% organic growth, ~16.5% operating margin and ~$0.75 adjusted EPS, on an assumed 24% tax rate. The guide assumes no change to the macro, including tariffs, and management said the additional 2 points of pricing is slightly margin-dilutive.
Trajectory
Revenue has reaccelerated: $5,341M in Q1 2026 and $6,351M in Q2 2026, up 18.9% sequentially after a soft second half of 2025. The computed signals show revenue accelerating and gross, operating and EBITDA margins expanding. The driver is mix — record orders and a record backlog are feeding commercial HVAC and data-center demand, while residential and light commercial returned to growth. The caveat is that the quarterly margin path is uneven: gross margin was 23.3% in Q1 and 27.2% in Q2, and management guides Q3 operating margin down to about 16.5% on a shift toward lower-margin commercial mix.
The Model
The model projects FY+1 revenue of $23,000M and EBITDA of $3,795M, a 16.5% margin. For FY+2 it projects revenue of $24,800M and EBITDA of $4,390M, a 17.7% margin. The near-term anchor is the raised 2026 guide and a data-center business at a ~$2.5B exit run-rate. The FY+2 step-up depends on the new U.S. data-center plant, due to be operational by the end of Q1 2027, and on the order book converting into 2027 and beyond.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $21.7B | $23.0B | $24.8B |
| YoY Growth | — | +5.8% | +7.8% |
| EBITDA | $3.2B | $3.8B | $4.4B |
| EBITDA Margin | 14.6% | 16.5% | 17.7% |
Projections are the median of 5 independent model runs. The model’s revenue sits 8.6% above analyst consensus.
On the Q2 2026 call management raised full-year 2026 guidance to sales of ~$23B and organic growth up mid- to high single digits, from ~$22B and flat to low single digits. Adjusted operating profit was raised to ~$3.5B and adjusted EPS to ~$2.90. Data-center revenue guidance was raised to ~$2B, with about $500M in H1 and about $1.5B in H2. CapEx guidance rose about $100M to ~$600M, while the free cash flow outlook was unchanged at ~$2B. For Q3 2026 management guided revenue just below $6B, ~10% organic growth, ~16.5% operating margin and ~$0.75 adjusted EPS, on an assumed 24% tax rate. The guide assumes no change to the macro, including tariffs, and management said the additional 2 points of pricing is slightly margin-dilutive.
What Could Go Right — and Wrong
- The second-half data-center ramp converts on schedule.
- Hyperscaler and colo long-term agreement orders begin appearing in reported backlog, which currently excludes them.
- CSE margin trajectory inflects under new leadership toward the mid-teen target, closing the largest identified margin gap in the portfolio.
- Residential and light-commercial growth proves to be underlying movement rather than a destocking comparison, sustaining into 2027.
- The new U.S. plant comes online at the end of Q1 2027, supports data-center growth beyond the ~$2.5B run-rate, and is absorbed, including through fungible commercial applications.
- A data-center delivery slip of a few weeks across enough sites moves a quarter, given the back-end-loaded profile.
- Mix keeps diluting consolidated margin as commercial and data center grow faster than residential, pushing conversion nearer 25% than 30%.
- CSE margins fail to reach mid-teens, or reach them only through cost cuts, leaving a structurally sub-scale European margin.
- The order surge embeds pull-forward or double-ordering rather than end demand; management says it is not a concern, but no disclosed data independently confirms it.
- The unnamed single-source proprietary components fail during the ramp; the 10-K says the company would be unable to obtain them for an indeterminate period of time.
Looking Ahead
Over the next 12 months the story is capacity and conversion. Carrier has to deliver a back-end-loaded data-center ramp, launch a 2.5/2.6 MW coolant distribution unit in Q3 2026 and a 5 MW unit around year-end, and bring a new U.S. data-center plant online by the end of Q1 2027. It also has to show that the residential and light-commercial recovery is demand rather than an easy comparison, and make progress on CSE margins under new leadership.
- ~Aug–Sep 2026New U.S. plant site — Texas-or-Alabama decision, with stated capacity.
- Q3 2026Q3 2026 results — First hard test of the back-end-loaded ramp and the raised guide.
- Q3 20262.5/2.6 MW CDU launch — Ships the rung the liquid-cooling narrative rests on.
- Fall 2026Vitocal 200 launch — European heat-pump launch ahead of the heating season.
- End of 20265 MW CDU — Top of the CDU ladder, targeted around year-end.
- End of Q1 2027New U.S. plant online — Adds data-center capacity beyond the ~$2.5B run-rate.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $22.5B | $21.7B | $22.1B | -3.3% |
| Gross Margin | 26.6% | 25.6% | 24.4% | 93bps |
| EBITDA | $3.5B | $3.2B | $2.8B | -8.7% |
| EBITDA Margin | 15.5% | 14.6% | 12.9% | 86bps |
| Net Income | $5.6B | $1.5B | $1.2B | -73.5% |
| Free Cash Flow | $44M | $2.1B | $1.9B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)24.4%
- EBITDA Margin (TTM)12.9%
- Net Margin (TTM)5.5%
- ROIC5.1%
- FCF Conversion66.9%
- SBC / Revenue0.2%
The Company
Carrier describes itself in its FY2025 Form 10-K as 'a global leader in intelligent climate and energy solutions.' It makes heating, cooling and cold-chain equipment under brands that include Carrier, Viessmann, Toshiba, Automated Logic and Carrier Transicold. For the year ended December 31, 2025, net sales were $21.7 billion and operating profit was $2.2 billion. Its role in AI infrastructure runs through commercial HVAC, where it supplies chillers, coolant distribution units and data-center management software to data-center operators including hyperscalers and colos.
Carrier operates four reportable segments: Climate Solutions Americas, Climate Solutions Europe, Climate Solutions Asia Pacific Middle East & Africa, and Climate Solutions Transportation. Three of the four sell the same product and service set — air conditioners, heat pumps, heating systems, building energy management, aftermarket components, repair and maintenance, rentals and modernization — in different regions; Transportation covers trucks, trailers, shipping containers and intermodal. The 10-K says approximately 29% of its significant properties are located in the U.S. The portfolio is being reshaped: Riello was sold to Ariston Group (completed 2026-07-01 for $440M), NORESCO to OPTERRA Energy Services (completed 2026-08-03), 75F was acquired and the ZutaCore investment expanded.
Business Segments
Competitive Landscape
Carrier competes in commercial HVAC and data-center cooling against established HVAC manufacturers and newer specialists. In discussing data-center capacity, management said Carrier would need to go from 10% to maintain share in a range of 15% to 20%, while peers starting at 30% would have to reach about 45% — a description of Carrier as the share gainer from a low base. Peers name Carrier in their own filings, and competitors are adding capacity in the same market at the same time.
- States in its own filing that its comfort cooling products 'primarily compete with … Carrier.' AAON revenue rose 101% and it raised its sales-growth guide to 55–60%.
- Johnson Controls (JCI)Names Carrier Global among its larger competitors; carries a $21B backlog, +27% orders and a $1B CDU pipeline shipping in Q3 2026.
- EMCOR (EME)States that within its mechanical services division it competes with entities such as Carrier Global Corporation.
- Trane TechnologiesNamed as a competitor in peer filings; not discussed in Carrier's own disclosures.
- VertivNamed as a competitor in peer filings; not discussed in Carrier's own disclosures.
Supply Chain
Carrier sits upstream of data-center construction, supplying cooling equipment to hyperscalers, colos and mechanical contractors. Comfort Systems names it among primary commercial MEP component manufacturers, and Modine names Carrier a top customer.
More on CARR: Earnings recap