AAON Earnings Recap
Beat 4 of last 7 quarters
The Buildout is a website built on agentic AI tools, currently in beta, and could have factual errors.
AAON's record quarter underscores the accelerating demand for data center thermal management, with BASX branded sales up 216% YoY and the company rapidly scaling capacity at its Memphis facility. The company's ability to convert backlog faster and expand margins at BASX (30.0% gross margin, up from 27.9%) signals strong pricing power and operational leverage in the AI infrastructure cooling market. Management's raised guidance and record pipeline suggest sustained momentum in the data center buildout, though supply chain constraints and lumpy order timing remain watch items.
AAON delivered record Q2 revenue of $627 million, up 101% year-over-year, driven by 216% growth in BASX branded sales and 40% growth in AAON branded sales. Gross margin declined to 24.3% from 26.6% a year ago, pressured by ramp-up costs at Memphis, outsourcing, and inflation, partially offset by strong volume leverage. Adjusted EBITDA more than doubled to $94.2 million, and adjusted EPS rose 213.6% to $0.69. Bookings were strong for AAON brand (+16% YoY) but BASX bookings were below recent elevated levels, which management attributed to lumpiness in large orders. Operating cash flow improved to $55 million in the first half, and leverage fell to 1.48x.
AAON raised its full-year 2026 revenue growth guidance to 55%–60% (from prior expectations) and provided gross margin guidance of 25%–26%, reflecting stronger-than-expected production, backlog conversion, and execution across the enterprise. Management expects gross margin to improve sequentially in Q3 with more meaningful improvement weighted to Q4, driven by better price/cost realization, productivity gains, and higher utilization. The company reiterated its long-term margin expansion thesis, targeting a return to 30%+ consolidated gross margins, with Oklahoma segment margins expected to reach mid-to-high 30s by Q4 2026 and into 2027. Cash generation is expected to improve as growth investments normalize and working capital efficiency gains continue. Management expressed confidence in the durability of demand, citing a record pipeline and strong customer engagement, while acknowledging potential supply chain constraints and lumpiness in large data center orders.
“These results are tangible evidence that the investments we have made are translating into measurable operating progress.”
on Operational execution
“The pipeline itself is the strongest that it's ever been.”
on Data center demand
“We are not simply growing revenue. We are building a stronger operating company with scale, infrastructure, systems and discipline to support higher revenue, stronger execution, improved margins, greater cash generation and durable earnings growth over time.”
on Long-term strategy
Data center orders were weaker than expected. Was there a large order that slipped, and do you expect orders to improve in Q3?
Matt explained that the prior four quarters had a book-to-bill approaching 3, and the current quarter's lighter bookings reflect lumpiness in large orders, not a change in the long-term opportunity. He noted the pipeline is the strongest it's ever been, with no specific order pushouts, and that activity remains high with existing and new customers.
What changed versus May to cut gross margin guidance by 200 basis points?
Matt attributed the cut to accelerated backlog conversion at the Memphis facility, which is ramping and carries a lower margin than Oklahoma. He noted that while consolidated margins are pressured by mix, operational margins are improving across segments, and the ramp is a deliberate investment to build capacity for data center customers.
What does the sales outlook embed for AAON and BASX brands, and what informs confidence in delivering that growth?
Matt said the guidance assumes ~20% growth for AAON brand and BASX more than doubling again. He cited improving visibility from Memphis ramp-up, lean manufacturing, and supply chain discipline, while acknowledging the back half growth is moderate and reflects caution around supply chain and operational pressures.