AAON, Inc. (AAON) Business Profile

What it does

AAON designs and manufactures heating, ventilation, air conditioning and liquid cooling equipment for commercial and industrial environments. Its customers use the equipment to control temperatures, airflow and indoor conditions in buildings ranging from schools and hospitals to factories and data centers. Founded in 1988 and headquartered in Tulsa, Oklahoma, AAON is led by President and CEO Matt Tobolski.

The company makes equipment to order rather than relying only on standardized models. Its AAON-branded products include rooftop units, which combine heating and cooling equipment in a package installed on a building’s roof, as well as air handlers, heat pumps, coils and controls. Customers can configure equipment for the needs of a particular building or application.

Its BASX brand focuses on more customized cooling and air handling systems. These include equipment for data centers, where cooling removes heat generated by computing hardware, and systems that control conditions in cleanrooms used for manufacturing and research. BASX also makes liquid cooling equipment that connects a facility’s water system to technology cooling loops.

AAON operates through three reporting segments: AAON Oklahoma, AAON Coil Products and BASX. Its manufacturing facilities include locations in Oklahoma, Texas, Oregon and Tennessee. The company also sells replacement parts and supports its equipment after installation through factory service organizations and independent representatives.

How it makes money

AAON earns revenue mainly by engineering, manufacturing and selling equipment for new buildings, replacement projects and specialized facilities. The equipment is built to customer specifications, and the company competes on performance and the cost of owning and operating a system over its life, rather than on the initial price alone.

In 2025, net sales were $1,442.1 million; in the second quarter of 2026, net sales were $627 million.

AAON Oklahoma manufactures configurable HVAC systems and controls and sells aftermarket parts. AAON Coil Products makes semi-custom and custom HVAC equipment and coils, including coils used by AAON’s other operations. BASX designs and sells customized cooling, air handling and cleanroom systems. Some BASX-branded equipment is also manufactured at facilities associated with the other segments, so the brands and reporting segments are not interchangeable.

Pricing differs by product. AAON has implemented price increases and surcharges on AAON-branded equipment; BASX products are priced by job and, in most cases, prices can increase when an order is outside normal lead times. A significant portion of revenue is recognized over time as the company fulfills contractual obligations. Revenue recognized before billing creates a contract asset, while prepayments can create contract liabilities.

The company also sells replacement parts through representatives, retail stores and online. Factory service organizations and representatives provide warranty work and customer support. Separately priced extended parts warranties generate revenue over the warranty period, though the available information does not quantify aftermarket or warranty revenue as a share of sales.

Orders enter backlog when a purchase order or commitment has been received but the product has not yet been delivered. Customers can sometimes cancel, reduce or defer orders, subject to applicable terms.

Customers and how it sells

AAON serves property owners and contractors in commercial and industrial construction and replacement markets. Its equipment is used in offices, hospitals, schools, warehouses, manufacturing facilities and data centers. BASX also serves cleanroom applications in fields including pharmaceuticals, biotechnology and semiconductors.

The company’s largest customers operate primarily in data center cooling and commercial air conditioning. In 2025, AAON had three customers that each accounted for 10 percent or greater concentrations of revenue. At December 31, 2025, it also had three customers that each represented 10 percent or greater concentrations of accounts receivable. The rest of its business includes thousands of customers and transactions through independent representatives.

AAON sells to property owners and contractors mainly through independent manufacturers’ representatives. Representatives also provide parts and service, while a smaller internal sales force supports channel relationships. BASX uses an internal sales force for its highly customized products and more concentrated customer base.

Sales have been primarily domestic. AAON sells products in all 50 states in the United States and certain provinces in Canada. Foreign sales were approximately $38.1 million in 2025, or approximately 2.6% of net sales. Its service network includes factory organizations at manufacturing facilities and representatives with their own service capabilities.

Suppliers and costs

AAON’s principal high-volume raw materials are steel, copper and aluminum. It also buys components such as compressors, motors, coils and electrical controls from other manufacturers. The company obtains its principal raw materials and components from domestic suppliers and says it is not dependent on a single source for its raw materials or major components.

Cost of sales includes labor, raw materials, components, factory overhead, outbound freight and engineering. The company assembles fabricated sheet metal and tubing with manufactured components, then tests and inspects units before shipment. Its facilities also make products for other AAON segments, including coils and BASX-branded equipment.

To limit material price fluctuations, AAON uses cancellable and non-cancellable supplier contracts. Such commitments can also leave it purchasing more material than needed in a downturn or unable to benefit fully when prices fall. Domestic suppliers can raise prices when tariffs increase, and component vendors can pass on costs tied to imported parts.

AAON said raw-material inflation and freight costs were the main drivers of quarter-over-quarter margin pressure at Coil Products in the second quarter of 2026. It also said it had been behind on pricing actions to recover those costs. The company has cited a tight market for production labor and has invested in hiring and retention.

Competitive position

AAON competes in commercial comfort cooling against Lennox, Trane, York Light Commercial, Johnson Controls, Carrier and Daikin. In thermal management, its competitors include Vertiv, STULZ, Munters, Silent Aire, Nortek and Modine. AAON says some competitors have greater financial and operational resources and sell a wider range of equipment, including less-featured products.

The company emphasizes equipment quality, performance, efficiency, serviceability and lifecycle cost rather than initial price. It says this approach has helped it gain share in replacement markets and owner-controlled purchases, while new construction has historically been more challenging because contractors emphasize upfront cost. AAON also says operating improvements have narrowed the price gap with standardized equipment.

Our reading: Configurable equipment and customer-specific engineering provide a meaningful basis for differentiation, but price remains a constraint where contractors control purchasing decisions. [item1]

AAON’s independent representative network sells and supports its products. The company trains representatives and works with them on service capacity. Its research laboratory tests equipment under environmental conditions, and BASX works with customers to validate customized systems. AAON says no single patent is material to the overall conduct of its business.

Our reading: Testing capabilities and the representative network support customer relationships, but they are not exclusive barriers to rivals with greater resources. [item1] Our reading: Patents appear to provide limited protection for the business as a whole because no individual patent is material to it. [item1]

Growth opportunities

AAON’s commercial HVAC opportunity includes both new construction and replacement of equipment in existing buildings. It also sells heat pumps and controls for customers seeking alternatives to conventional heating and cooling systems. The company says orders for its fully electric Alpha Class heat pump platform increased 50% during the second quarter of 2026 and 54% year-to-date.

Data centers are a growth market for BASX. Its products support air-cooled and liquid-cooled computing infrastructure, including systems for high-density workloads. In 2025, BASX introduced a coolant distribution unit and a water-free Free Cooling Chiller. AAON has invested in manufacturing capacity, including Memphis, to meet demand and convert orders into shipments.

In 2025, net sales grew 20.1%, driven by BASX-branded products, while AAON-branded sales decreased 8.3%. In the second quarter of 2026, BASX-branded sales increased 216.2% year-over-year and AAON-branded sales grew 39.3%. AAON said BASX bookings were below the unusually elevated levels of recent quarters and that large projects can make booking activity uneven.

The company expects 2026 sales growth of 55% to 60%. It expects higher facility utilization, productivity gains, sourcing initiatives and improved price realization to support margin improvement. AAON also says its data center opportunity pipeline includes conversations about liquid cooling, airside and chiller products. Backlog represents orders that have not yet been delivered and can be affected by customer timing changes or cancellations.

Structural risks

• Customer concentration and order timing. The loss of, or a significant reduction in sales to, a major customer or related customer group could affect results and cash flow. Large BASX orders can involve lengthy design and qualification processes, and customers may cancel or change plans.

• Backlog conversion. Customers can reduce, defer or terminate some orders, sometimes with penalties. Data center orders are particularly subject to timing shifts, cancellations and reissuances, so backlog is not necessarily indicative of future sales.

• Economic and construction cycles. A decline in economic activity can reduce both new construction and replacement purchases. Interest rates, inflation and other economic conditions influence demand for commercial and industrial buildings.

• Costs and execution. Material shortages, freight, tariffs and labor costs can raise expenses or disrupt production. AAON said capacity ramp-up, outsourcing and inflationary pressures affected its second-quarter 2026 gross margin; its Longview system implementation also disrupted coil production in 2025.

• Sales channel and competition. AAON depends on third-party representatives to market and sell its products. Losing a major representative could affect revenue, while competitors with greater resources may target representatives for exclusive channels.

• Facilities and regulation. The majority of operations are at Tulsa facilities exposed to natural disasters. Changes to refrigerant, energy-efficiency and other regulations can require product redesign, research spending and additional manufacturing costs.

Bottom line

Our reading

AAON is an equipment manufacturer combining configurable commercial HVAC products with customized data center cooling, sold through both representatives and a direct sales operation. [item1] Our reading: Data center demand and added capacity are expanding the business, but concentrated customers, variable large orders and the cost of ramping production make conversion into sustained margins important to watch. [item1a] [call_prepared]