Carrier Global Corporation (CARR) | The Buildout — AI Infrastructure
The Verdict
Carrier provides intelligent climate and energy solutions across heating, cooling, ventilation, controls, and services. In the AI buildout, its commercial HVAC equipment removes heat from data center halls through chillers, coolant distribution units, and integrated liquid-cooling platforms such as QuantumLeap. It also supplies building-management systems, data center infrastructure software, and aftermarket lifecycle services. The AI exposure sits inside the global commercial HVAC segment rather than as a standalone business, which means Carrier rides the data center buildout through a diversified climate-solutions franchise.
| 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 guide raised to about $2B for FY2026, and management says the forecast is all in backlog.
- Total backlog above $8B, up about 40% y/y and 20% q/q, excluding expected hyperscaler and colo long-term agreement orders.
- Capacity build is visible: existing U.S. capacity supports about $2.5B of data center run-rate, Charlotte was expanded 50%, and a new U.S. facility is targeted for end of Q1 2027.
- Residential and light commercial inflected: Q2 CSA residential sales rose 9% and light commercial rose 10%; the full-year outlook swung from down high single digits to up high single digits.
- Aftermarket and digital tailwinds: management expects a sixth consecutive year of double-digit aftermarket growth, and Lynx subscriptions at about 240,000 units are expected to triple.
What We’re Watching
- H2 data center execution: about $1.5B of the FY2026 data center plan is scheduled for Q3-Q4.
- CSE margin recovery: Q1 and Q2 margins were both called disappointing; new leadership targets mid-teen margins over the next few years.
- China RLC remains the main CSAME drag; management is still evaluating required investment and the housing headwind.
- Legal investigation notices from multiple plaintiff firms followed the Q2 print; these are allegations, not findings, and are a watch item.
The thesis is strengthening. Orders, backlog, and the raised FY2026 guide show data center demand translating into committed work, while North American residential and light commercial inflected earlier than expected. The unresolved question is whether Carrier can execute the back-half-loaded data center shipment ramp and fix CSE margins without giving back the revenue gains.
Earnings Beat
Reported Q2 FY2026 revenue was $6,351M, with organic sales up 3% year over year. Gross margin was 27.2%. Adjusted operating profit was $1.1B, and total company orders rose about 40% year over year. Data center orders rose 4x year over year.
| 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 backlog | >$8B | n/a | n/a | +40% y/y, +20% q/q |
We're fully booked for the second half. There is huge demand from our customers. So they are pushing us to accelerate deliveries, not risking pushing those out into ’27.— David Gitlin, Chief Executive Officer, 2026-07-28
Management tone: Management moved from a Q1 hold-guide posture to a Q2 beat-and-raise posture. They described the data center ramp as 'purely an execution issue,' and were direct on weak spots: CSE margins were called disappointing for a second consecutive quarter, and tariff pricing was described as slightly margin-dilutive.
Management Guidance
For FY2026, management guided to about $23B of sales, about $3.5B of adjusted operating profit, about $2.90 of adjusted EPS, and unchanged free cash flow. The raise reflects over $1B of additional organic sales above the prior guide, about half from improved CSA residential and light commercial and about half from higher data center sales, offset by about $200M of divestiture impact. Q3 is guided to revenue just below $6B, organic growth about 10%, operating margin about 16.5%, adjusted EPS about $0.75, and a 24% tax rate.
Trajectory
The sequential path turned up sharply: revenue rose from $4,837M in Q4 FY2025 to $5,341M in Q1 FY2026 and $6,351M in Q2 FY2026. The increase reflects a surge in orders — total Q2 orders up about 40% — and stronger data center delivery. Management's Q2 adjusted operating margin of 17.2% was better than expected, but down year over year on unfavorable mix and tariff timing.
The Model
The model projects FY+1 revenue of $22,400M with EBITDA of $4,032M (18.0% margin), and FY+2 revenue of $24,000M with EBITDA of $4,464M (18.6% margin). The FY+1 path is anchored by the raised data center revenue guide and record backlog; FY+2 is driven by the new U.S. facility running from end of Q1 2027, long-term agreement conversion, and continued residential and light-commercial recovery.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $21.7B | $23.1B | $25.4B |
| YoY Growth | — | +6.2% | +10.0% |
| EBITDA | $3.2B | $3.9B | $4.6B |
| EBITDA Margin | 14.6% | 17.0% | 18.1% |
Projections are the median of 5 independent model runs. The model’s revenue sits 8.6% above analyst consensus.
For FY2026, management guided to about $23B of sales, about $3.5B of adjusted operating profit, about $2.90 of adjusted EPS, and unchanged free cash flow. The raise reflects over $1B of additional organic sales above the prior guide, about half from improved CSA residential and light commercial and about half from higher data center sales, offset by about $200M of divestiture impact. Q3 is guided to revenue just below $6B, organic growth about 10%, operating margin about 16.5%, adjusted EPS about $0.75, and a 24% tax rate.
What Could Go Right — and Wrong
- Q4 data center revenue annualizes to well north of $2.5B, anchoring 2027 above the 2026 guide.
- Expected long-term agreements with hyperscalers and colos convert into booked backlog, adding disclosed future revenue.
- The new U.S. facility starts on schedule by end of Q1 2027, unlocking visible 2027–2029 data center demand.
- CSE margins recover under new leadership toward the mid-teen margin target framed over the next few years.
- Vitocal 200 launch and European heat pump order strength extend the European residential recovery.
- About $1.5B of the roughly $2B FY2026 data center plan slips out of H2 into 2027 on execution issues.
- Data center order growth decelerates sharply or AI capex pauses, removing the main incremental growth engine.
- CSE margin recovery fails again, confirming a structural profitability problem.
- China RLC requires a larger restructuring or strategic exit, creating a visible revenue and earnings headwind.
- Existing U.S. data center capacity remains not enough for visible 2027–2029 demand; any delay in the new facility would constrain the ramp.
Looking Ahead
The next year turns on capacity and conversion. Site selection for the new U.S. data center facility is expected within one to two months, with the plant targeted to be running by end of Q1 2027. The 2.5/2.6 MW CDU launches in Q3 2026 and the 5 MW unit around end of 2026. Vitocal 200 and a high-tier Viessmann heat pump launch in fall 2026. Q3 FY2026 results are the first read on the back-half execution the guide assumes.
- Within 1–2 months from Jul 28U.S. facility site selection — Texas or Alabama choice tests the 2027 data center capacity plan.
- Q3 2026Q3 FY2026 earnings — Tests revenue just below $6B, organic growth about 10%, and 16.5% margin.
- Q3 20262.5/2.6 MW CDU launch — Next CDU step for colocation and hyperscaler demand.
- Fall 2026Vitocal 200 heat pump launch — Tests European heat pump inflection and TAM expansion.
- End of 20265 MW CDU launch — Tests the larger liquid-cooling roadmap.
- End of Q1 2027U.S. facility operational — Unlocks capacity for visible 2027–2029 data center demand.
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 | $25.1B | -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 | $11.5B | — |
| 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 provides heating, cooling, ventilation, controls, and service solutions through Climate Solutions Americas, Climate Solutions Europe, Climate Solutions Asia Pacific/Middle East/Africa, and Climate Solutions Transportation. Its AI-infrastructure relevance comes from the data center vertical inside global commercial HVAC — air-cooled and water-cooled chillers, coolant distribution units, and integrated liquid-cooling platforms such as QuantumLeap. These systems remove heat from data centers, and Carrier adds controls, building-management software, and aftermarket lifecycle services.
Carrier operates a portfolio of brands including Carrier, Viessmann, Toshiba, Automated Logic, and Carrier Transicold, and sells digital platforms Abound and Lynx. It is shifting capacity toward data centers: an existing facility was repurposed for air- and water-cooled chillers, Charlotte was expanded 50%, and a new U.S. facility is planned for Texas or Alabama to run by end of Q1 2027. About 29% of significant properties are in the U.S.; a new India facility was announced with details not yet disclosed.
Business Segments
Competitive Landscape
Trane, JCI, Vertiv, and SPXC are named as alternative chiller and CDU suppliers for data center cooling. Management frames Carrier's position through its commercial HVAC transformation, citing global commercial HVAC sales up 80% since the spin, backlog up 130%, and about 500 basis points of share gain.
- TraneNamed as an alternative chiller and CDU supplier; no Carrier-specific detail in the provided sources.
- JCINamed as an alternative chiller and CDU supplier; no Carrier-specific detail in the provided sources.
- VertivNamed as an alternative chiller and CDU supplier; no Carrier-specific detail in the provided sources.
- SPXCNamed as an alternative chiller and CDU supplier; no Carrier-specific detail in the provided sources.
Supply Chain
Carrier sits between component suppliers and data center end users. The 10-K discloses reliance on unnamed single-source suppliers for certain proprietary components; no adjacent transcript in the supplied material mentioned Carrier by name.
More on CARR: Earnings recap