Skip to content
    AAON
    Earnings call· Jun 2026(Q2 FY26)

    AAON Q2 FY26 earnings call AAON

    Aug 10, 2026 Source

    Executive summary

    AAON Q2 FY26 — Record Revenue & Strong Backlog Conversion Driven by Data Center Demand

    AAON delivered record Q2 FY26 results, driven by substantial volume growth and accelerated backlog conversion across its facilities, particularly in the BASX data center segment. While consolidated gross margins faced pressure from new capacity ramp-up and mix, operational improvements and pricing actions are expected to drive significant margin expansion in Q4 and into 2027. The company continues to invest in infrastructure and talent to support future growth and enhance cash generation.

    Highlights

    5

    • Record quarterly revenue of $627 million, up 101% year-over-year.

    • BASX branded sales increased 216% year-over-year, reflecting sustained data center demand.

    • Adjusted diluted EPS grew 213.6% to $0.69.

    • Operating cash flow was positive $55 million in H1 2026, a significant improvement from a $31 million use of cash in H1 2025.

    • AAON branded bookings increased approximately 16% year-over-year, leading to a 6% sequential increase in AAON branded backlog.

    Concerns

    3

    • Consolidated gross margin declined to 24.3% from 26.6% year-over-year, impacted by ramp-up costs at new facilities and mix shift.

    • BASX branded bookings were below unusually elevated levels of recent quarters, though pipeline remains strong.

    • AAON Coil Products gross margin declined to 16.0% from 17.5% year-over-year due to inflationary pressures and freight costs.

    Guidance & targets

    8
    CategoryTargetConfidence
    Sales growth
    55% to 60%
    high materiality
    High
    Gross margin
    25% to 26%
    high materiality
    High
    SG&A expense as percent of sales
    13% to 14%
    medium materiality
    High
    Depreciation and amortization expense
    $95 million to $100 million
    medium materiality
    High
    AAON brand sales growth
    approximately 20%
    medium materiality
    Medium
    BASX brand sales growth
    more than double
    high materiality
    High
    Gross margin improvement
    modest improvement in Q3, more noticeable improvement in Q4
    high materiality
    High
    BASX sales
    more flattish
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    AAON Oklahoma
    Driven by strong execution against a robust beginning backlog and accelerated conversion. Results benefited from favorable price realization and beneficial comparison to prior year. Gross margin impacted by $18.1 million in Memphis overhead allocation (vs $3 million prior year). Excluding these costs, gross margins expanded approximately 60 basis points to 31.2% compared to 30.5% last year, largely due to increased production rates, partially offset by elevated outsourcing and inflationary pressures.
    		$262.3 million42%—24.3% (gross margin), 31.2% (gross margin ex-Memphis overhead)
    AAON Coil Products
    Growth driven by BASX branded liquid cooling product sales. Gross margin was 16.0%, down from 17.5% in the prior year period, reflecting temporary inflationary pressures expected to moderate in Q3 and Q4. The segment continues to deliver strong profit growth supported by higher sales volumes.
    BASX branded liquid cooling product sales: $126.6 million (up 208%)AAON branded output within segment: up 15.1%
    		$146.7 million151%—16.0% (gross margin)
    BASX Segment
    Outsized growth driven by sustained demand for data center solutions and a robust backlog. Increased utilization at the Memphis facility contributed meaningfully. Gross margin was 30.0%, up from 27.9% in the prior year period, reflecting strong volume growth partially offset by incremental resources and investments to support future growth.
    		$218 million221%—30.0% (gross margin)

    Operational metrics

    23
    Gross profit
    $152.5 millionup 84.3% YoY from $82.7 million
    Q2 FY26

    Reflecting strong revenue growth.

    SG&A expenses as percent of sales
    13.3%down 570 bps YoY
    Q2 FY26

    Demonstrating strong operating leverage as revenue growth outpaced investments.

    SG&A expenses
    $83.6 millionup $24.5 million YoY
    Q2 FY26

    Company continues to make intentional investments to drive long-term growth.

    Adjusted EBITDA
    $94.2 millionup 102.3% YoY
    Q2 FY26
    Adjusted EBITDA margin
    15.0%compared to 14.9% YoY
    Q2 FY26
    Adjusted diluted EPS
    $0.69up 213.6% YoY
    Q2 FY26
    Memphis facility overhead impact on AAON Oklahoma gross margin
    $18.1 millioncompared to $3 million YoY
    Q2 FY26

    These costs are allocated to the Oklahoma segment.

    Cash, cash equivalents and restricted cash
    $12.7 million
    Q2 FY26

    As of June 30, 2026.

    Total debt
    $435 million
    Q2 FY26

    As of quarter-end.

    Leverage ratio
    1.48down from 1.71 (Q1 FY26) and 1.77 (Q4 FY25)
    Q2 FY26
    Capital expenditures
    $102.6 million
    YTD FY26

    Reflecting continued investment in incremental capacity to support future growth.

    BASX branded sales 2-year stack growth
    501%
    Q2 FY26
    BASX branded sales H1 2-year stack growth
    570%
    H1 FY26
    AAON branded sales sequential growth
    5%QoQ
    Q2 FY26
    AAON branded bookings 2-year stack growth
    45%
    Q2 FY26
    AAON branded bookings YTD growth
    12%YoY
    YTD FY26
    AAON branded bookings YTD 2-year stack growth
    25%
    YTD FY26
    Alpha Class orders growth
    50%
    Q2 FY26
    Alpha Class orders YTD growth
    54%
    YTD FY26
    BASX prior year growth rate
    140%
    Prior year

    Mentioned by analyst in Q&A.

    AAON revenue 5 years ago
    ~$500 million
    5 years ago

    Company's revenue has grown more than 4x since then.

    Liquid cooling product sales as % of ACP segment
    >85%
    Q2 FY26

    Analyst estimate, not disputed by management.

    Implied BASX branded sales (analyst estimate)
    $290 million to $330 millionbelow $345 million (Q2 FY26)
    Q3/Q4 FY26 (per quarter)

    Analyst's calculation for second half, management confirmed "more flattish" than a step down.

    Industry KPIs

    7
    MetricValueDetails
    Price costbehind on pricing actions
    Order backlognearly double prior year levels
    Book to bill ratioapproaching 3x
    Data center hvac exposure216%%
    Organic operating leverage570 basis pointsbps
    Order lead times placement horizonimproved
    Orders bookings growth by vertical16%%

    Orderbook & backlog

    3
    Total backlognearly double prior year levelsQ2 FY26

    declined sequentially

    Accelerated conversion due to increased production and shipments, which was the intended outcome.

    BASX branded bookings book-to-billapproaching 3Prior four quarters

    Reflects exceptionally strong bookings during ramp-up of capacity.

    AAON branded backlogincreased 6%Q2 FY26

    sequential increase

    Despite significantly higher production rates.

    Risks & headwinds

    4
    Consolidated margin pressureQ2 FY26

    Gross margin 24.3% (down from 26.6% YoY)

    Mitigation: Higher facility utilization, productivity gains, sourcing initiatives, improved price/cost realization, maturation of recently added capacity.

    BASX branded bookings variabilityQ2 FY26

    Below unusually elevated levels of recent quarters

    Mitigation: Pipeline remains healthy, customer engagement strong, improving ability to support customers with increased throughput and capacity.

    AAON Coil Products margin contractionQ2 FY26

    Gross margin 16.0% (down from 17.5% YoY)

    Mitigation: Temporary inflationary pressures (raw materials, freight) expected to moderate in Q3/Q4; pricing actions taken.

    Supply chain constraintsOngoing

    Discussed as a general market challenge

    Mitigation: Active and proactive management, multi-sourcing strategies, alternate vendor selections, vertical integration of fans.

    What to watch in Q3 FY26

    5

    Gross margin trajectory

    Q3 FY26, Q4 FY26
    Current24.3% (Q2 FY26 consolidated)
    TargetModest improvement in Q3, more noticeable improvement in Q4

    Why it matters

    Margin expansion is a key focus, driven by price/cost and productivity, essential for overall profitability.

    You'll see modest improvement in Q3, but really Q4 is going to be where the more noticeable improvement is going to be weighted.

    Q&A highlights

    6

    Analyst noted data center orders were weaker than expected; asked for clarification on lumpiness vs. specific order pushout and Q3 outlook.

    Management confirmed the weaker bookings were due to lumpiness in large-scale projects, not specific order pushouts. The pipeline remains the strongest ever, with expanding customer diversification and accelerating activity, suggesting no change in the long-term opportunity.

    “it's just lumpiness. There's no specific order pushout or movement. There's -- again, it's just really lining up the overall bookings in a given quarter.”

    asked by Ryan Merkel · answered by Matthew Tobolski

    2 min read6 chapters

    Detailed Narrative

    01

    Operational Excellence & Capacity Investments

    AAON's record revenue and volume growth are attributed to strategic investments in supply chain management, lean manufacturing, operational excellence, expanded capacity, and leadership development. These efforts have enabled faster backlog conversion and improved throughput across all four major facilities, demonstrating the value of recent investments and translating into measurable operating progress.

    02

    BASX Segment Performance

    The BASX brand achieved record sales, increasing 216% year-over-year and 501% on a 2-year stack, driven by sustained data center infrastructure investment and differentiated solutions. Despite BASX branded bookings being below unusually elevated levels of recent quarters due to project lumpiness, the long-term market opportunity and pipeline remain robust, with improving capacity and lead times.

    03

    AAON Brand Strength

    The AAON brand demonstrated strong performance with 40% year-over-year sales growth and 16% year-over-year bookings growth, indicating market share gains in a relatively soft commercial HVAC market. The Alpha Class fully electric heat pump platform saw 50% order growth during the quarter and 54% year-to-date, highlighting strong customer adoption and momentum in electrification.

    04

    Margin Dynamics & Outlook

    Consolidated margins were pressured by the mix impact of exceptionally strong BASX growth, ramp-up costs at new facilities (especially Memphis), and price/cost timing dynamics. However, management expects significant improvement in Q4 and into 2027 due to higher utilization, productivity gains, sourcing initiatives, and favorable pricing embedded in the backlog, with operational margins improving in core segments.

    05

    Cash Flow & Balance Sheet Improvement

    Operating cash flow improved significantly to a positive $55 million in the first half of 2026, a substantial turnaround from a $31 million use of cash in the prior year period. This improvement was driven by higher earnings and enhanced working capital efficiency. The company's leverage ratio also improved to 1.48x, providing a solid foundation for sustained long-term growth and increased cash generation.

    06

    Long-Term Strategic Vision

    AAON is undergoing a significant transformation, building a stronger operating company with enhanced scale, infrastructure, systems, and discipline to support higher revenues, improved margins, and durable earnings growth over time⏳. The investments made over the past several years are increasingly showing up in results, with a clear direction towards further margin improvement and cash generation.

    AI-generated summary of the company’s earnings call. Not investment advice.