AAON, Inc. (AAON) Earnings & Analysis

Latest quarter

AAON reported Q2 FY2026 revenue of $627.0 million, above the $514.7 million consensus. Adjusted earnings per share were $0.69, also above the consensus of $0.52. Revenue rose from $311.6 million a year earlier, while diluted earnings per share increased to $0.68 from $0.19.

The company attributed the sales increase to demand for BASX-branded products and increased production. BASX-branded sales rose 216.2% year over year, and AAON-branded sales grew 39.3%. CFO Chung Cheung said Coil Products sales included $126.6 million of BASX-branded liquid cooling products.

Gross margin fell to 24.3% from 26.6%. AAON’s filing attributed pressure in part to overhead from the ramping Memphis plant and higher material costs at Coil Products. Operating margin rose to 11.0% from 7.57%. AAON reported free cash flow of −$28.7 million, compared with −$60.9 million a year earlier; Cheung said first-half capital expenditures totaled $102.6 million as the company invested in additional capacity.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Matthew Tobolski said higher production across AAON’s facilities helped the company convert backlog faster. He said BASX bookings were below the elevated levels of recent quarters, but that large projects can make bookings and award timing uneven. Asked about lighter data center orders, he said customer activity remained high and the pipeline included both existing and new customers.

For the AAON brand, Tobolski said bookings rose approximately 16% year over year and backlog increased 6% sequentially despite higher production. He attributed bookings growth primarily to the company’s traditional transactional business and said the brand was gaining share in a relatively soft commercial HVAC market. He said increased production also helped shorten lead times.

On margins, Tobolski told analysts that growing revenue from Memphis was reducing the consolidated margin because the facility was still ramping and operated at a lower margin than Oklahoma. He said outsourcing, onboarding staff and bringing equipment online added pressure as Memphis expanded. Cheung said the facility was performing ahead of plan when its revenue and associated expenses were considered together.

Asked about Coil Products, Tobolski identified raw-material inflation and freight as sources of margin pressure and said, “we were behind on pricing actions to recover those.” He said the company had taken pricing actions and continued to monitor costs. Cheung added that a meaningful rebound in the segment’s margins would probably come toward year-end.

For the second half, Tobolski said price and cost would be the biggest driver of margin improvement because the current backlog carries different pricing from orders completed in the first half. He expected improvement in Q3, with more of it weighted toward Q4. Discussing quarter-to-date bookings, he said, “I don’t have it specifically in front of me,” while describing activity with customers planning future deliveries.

Guidance

AAON raised its FY2026 sales-growth outlook and now expects growth of 55.0% to 60.0%. Tobolski said the vast majority of the increase in the top-line outlook was coming through Memphis.