Madison Air Solutions Corporation (MAIR) | The Buildout — AI Infrastructure
The Verdict
Madison Air makes air-quality and air-management equipment — air movement, air handling, thermal management and energy efficiency — for buildings and mission-critical facilities. In the AI buildout its most direct role is cooling: the Nortek Data Center Cooling business sells equipment into data centers and sends Madison Air's own personnel in to start up, commission and service those assets. The company also supplies cleanroom air handling for semiconductor manufacturing, an adjacent linkage rather than direct data-center demand. Management positions the portfolio as diversified, describing data centers as one of 15 commercial end markets rather than an identity.
| Market Cap | — |
| Revenue (TTM) | $3.4B |
| EBITDA Margin (TTM) | 23.3% |
| Net Debt | $2.8B |
| Earnings Beats | 1 of 1 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Record backlog: $2,868.4M at Q2 2026, up 133% year over year and above the $2,520.2M reported in Q1.
- Combined orders accelerated from +29% in Q1 to +45% in Q2; Q1 book-to-bill was 1.4x.
- Balance sheet reset: net leverage fell from 5.7x before the April 2026 IPO to 3.0x pro forma and 2.8x by Q2, after roughly $2.6B of IPO net proceeds went entirely to debt repayment.
- Margin progress: adjusted EBITDA margin moved from 25.3% in Q1 to 27% in Q2, matching the full-year guided rate.
- Demand breadth: management describes Q1 commercial growth as broad-based across institutional, government, clean energy and other end markets, and aftermarket is about 10% of revenue growing at a double-digit CAGR.
What We’re Watching
- Harder second-half order comps: Q4 2025 Commercial book-to-bill was 2.2x, so order growth may decelerate even while backlog supports revenue.
- Tariff recovery: FY2026 guidance assumes ~$100M of gross tariff costs, ~$50M incremental, and the ~27% margin guide depends on recovering them in-year.
- Backlog conversion: data-center backlog runs 4–5 quarters, raising the bar on component supply and field-service capacity.
- Housing sensitivity: Residential volume was roughly flat in Q1 and the guide assumes only “slow but steady improvement” in housing.
The demand side of the thesis is strengthening, and the balance sheet was repaired faster than the IPO messaging implied — leverage fell from 5.7x pre-IPO to 2.8x by the second quarter. What keeps it from being clean is disclosure: the company does not break out data-center revenue, so its strongest growth driver cannot be sized. Either the extended backlog converts on schedule and the story compounds, or the combination of tougher second-half comparisons, tariff recovery and a housing-sensitive residential segment makes that disclosure gap matter more. The open question is whether management starts disclosing the data-center share.
Earnings Beat
Q2 2026 net sales were $991.3M, up 21% reported and 14% pro forma, with gross margin of 39.0%. The order book carried the quarter: total backlog reached $2,868.4M, up 133% year over year, and combined orders rose 45%. Management had guided Q2 net sales growth to “mid-single-digit plus,” and the quarter came in above that.
| Metric | Q2 FY2026 | Q1 FY2026 | YoY |
|---|---|---|---|
| Revenue | $991M | $924M | — |
| Gross margin | 39.0% | 38.2% | — |
| EBITDA | $250M | $208M | — |
| EPS | $0.15 | $0.07 | — |
| Backlog | $2,868.4M | $2,520.2M | +133% y/y |
Data centers were a primary commercial orders and revenue growth driver in the quarter.— Jill Wyant, President and CEO, May 14, 2026
Management tone: There is no Q2 2026 call on record; the most recent call is Q1 2026, dated May 14, 2026. On that call management came across as confident and deliberate, guiding FY2026 above the mid-single-digit revenue and high-single-digit EBITDA ambitions discussed during the IPO process. They quantified the tariff headwind explicitly, flagged the tougher second-half order comparisons themselves, and disclosed softer Q1 air-handling sales rather than glossing over them.
Management Guidance
Guidance was initiated on the May 14, 2026 call and was not formally updated in the Q2 press release. FY2026 net sales are guided to $3,750M–$3,850M, adjusted EBITDA to $1,020M–$1,065M, and adjusted EBITDA margin to about 27%, on free cash flow conversion above 100% of net income. The stated assumptions include capex below 2% of sales, interest expense of about $250M, a 29% adjusted effective tax rate, roughly 510M diluted shares, about $40M of central expenses, and roughly $100M of gross tariff costs — about $50M incremental versus 2025 — which management expects to recover on a dollar basis in the year and a rate basis exiting the year, excluding potential refunds.
Trajectory
Reported revenue ran $690.4M in Q1 FY2025, $819.6M in Q2 FY2025, $923.7M in Q1 FY2026 and $991.3M in Q2 FY2026. Those reported growth rates overstate the underlying trend: the AprilAire acquisition closed in May 2025, so Q1 FY2026's 33.8% reported growth compares with 13% pro forma, and Q2 FY2026's 21% reported growth compares with 14% pro forma. On the reported figures' basis (operating income plus D&A), EBITDA margin widened from 22.5% in Q1 FY2026 to 25.2% in Q2 FY2026, and free cash flow rose from $50.4M to $84.6M.
The Model
The model projects FY+1 revenue of $3,964M and EBITDA of $999M, a 25.2% margin, then FY+2 revenue of $4,475M and EBITDA of $1,164M, a 26.0% margin. The near-term anchor is backlog conversion: total backlog was at a record Q2 2026 level, about two-thirds of the company is backlog-driven, and management expects the data-center business to ramp through the year. The FY+2 step-up depends on that conversion continuing, plus services growth — aftermarket is about 10% of revenue and has been compounding at a double-digit CAGR.
| Metric | TTM | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $3.4B | $4.0B | $4.5B |
| YoY Growth | — | +15.7% | +12.9% |
| EBITDA | $797M | $999M | $1.2B |
| EBITDA Margin | 23.3% | 25.2% | 26.0% |
Projections are the median of 5 independent model runs.
Guidance was initiated on the May 14, 2026 call and was not formally updated in the Q2 press release. FY2026 net sales are guided to $3,750M–$3,850M, adjusted EBITDA to $1,020M–$1,065M, and adjusted EBITDA margin to about 27%, on free cash flow conversion above 100% of net income. The stated assumptions include capex below 2% of sales, interest expense of about $250M, a 29% adjusted effective tax rate, roughly 510M diluted shares, about $40M of central expenses, and roughly $100M of gross tariff costs — about $50M incremental versus 2025 — which management expects to recover on a dollar basis in the year and a rate basis exiting the year, excluding potential refunds.
What Could Go Right — and Wrong
- Management discloses data-center or AI revenue and it proves larger, faster-growing or higher-margin than the “1 of 15 end markets” framing implies.
- Order growth holds through the second half after +29% in Q1 and +45% in Q2, with Commercial book-to-bill staying healthy against the tough Q4 2025 comparison.
- Backlog converts faster than guided, helped by supply-chain readiness and field-service capacity.
- Tariff costs are recovered faster than planned and the full-year adjusted EBITDA margin tracks above the ~27% guided rate.
- AprilAire keeps growing low-double-digits: 92% of U.S. homes have no Madison Air healthy-air solution, and contractor penetration is only about 15%–20% of more than 70,000 U.S. HVAC contractors.
- Data-center orders stall or push out, removing the primary growth driver despite the 15-end-market diversification.
- Backlog conversion slips as 4–5 quarter data-center orders meet extending component lead times, moving revenue out and pressuring margin.
- Tariff recovery fails and the full-year adjusted EBITDA margin falls below the ~27% guide.
- Residential volume turns negative and healthy-air penetration cannot offset a housing downturn.
Looking Ahead
The next twelve months are mostly about converting the order book. Management has to turn the record backlog into revenue while keeping the data-center ramp on schedule, recover the gross tariff costs, and bring net leverage from 2.8x to below 2.5x within 12 months of the May 2026 call. The second half brings tougher order comparisons because Q4 2025 Commercial book-to-bill was 2.2x, so the composition of the backlog matters alongside the headline order rate. Management has also said a more formal guidance framework is not expected until 2027, and it keeps M&A as an upside lever once the leverage target is reached.
- Q3 2026Q3 earnings release — First clean read on orders against the tough Q4 2025 comp.
- 2H 2026Order comps tighten — Q4 2025 Commercial book-to-bill was 2.2x; order growth may slow.
- FY2026Full-year margin test — Guide assumes ~27% margin with ~$100M gross tariff costs.
- Within 12 months of May 2026Leverage below 2.5x — Path from 2.8x; creates optionality for M&A.
- 2027Formal guidance framework — Management plans a more structured annual framework.
Financials
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)38.4%
- EBITDA Margin (TTM)23.3%
- Net Margin (TTM)4.8%
- ROIC7.4%
- FCF Conversion35.7%
- SBC / Revenue0.0%
The Company
Madison Air describes itself as building and scaling superior air-quality businesses in high-value niches adjacent to traditional HVAC. Its brand portfolio includes Addison, AprilAire, Big Ass Fans, Broan-NuTone, Nortek Air Solutions, Nortek Data Center Cooling and Reznor, organized into two reportable segments. Commercial is the larger segment and spans air movement, air handling, thermal management and energy-efficiency platforms for mission-critical end markets including data centers, hospitals, clean energy, logistics and semiconductor cleanrooms. Residential is built around healthy-air products, with AprilAire at the center, sold through HVAC contractors and channel partners.
Operations are deliberately asset-light. FY2026 capital spending is guided below 2% of sales, the company runs an 80/20 operating model with a decentralized structure, and about two-thirds of the business is backlog-driven. It employs more than 8,800 people, roughly 600 of them in research and development, and its footprint is mainly North American: Q1 2026 net sales were $819.7M in the U.S., $70.8M in non-U.S. Americas, $19.5M in Europe and $13.7M in Asia Pacific.
Business Segments
Competitive Landscape
Management did not spend much of the Q1 2026 call on competitors, and the competitor names in the source material come from an auto-generated supply-chain map that is explicitly unverified. Management describes the company's edge instead as application engineering, Return on Air customer outcomes, customer relationships, aftermarket and service networks, and brand strength in niches such as AprilAire, Big Ass Fans and Nortek Data Center Cooling. The criticality assessment in the financial facts is blunt: if Madison Air disappeared, data-center thermal needs would be absorbed by Vertiv, Modine and others without materially slowing the buildout.
- Cited in the financial facts' criticality assessment as an absorber of data-center thermal demand.
- Cited in the financial facts' criticality assessment.
Supply Chain
Madison Air sits between component and industrial suppliers and the data-center operators, contractors and channel partners that buy its equipment. Neighbor companies in the source describe extending lead times and rising prices, though none of them mentions Madison Air by name.