AAON Bets Big on Data Centers, Sacrifices Profit for Record Backlog

TULSA, Okla. – March 02, 2026 – HVAC solutions leader AAON, Inc. today announced a year of contrasts, reporting record-breaking sales growth for 2025 alongside a notable dip in profitability. The company’s full-year results reveal a deliberate strategy of sacrificing short-term earnings for long-term dominance, particularly in the booming data center market. With a staggering $1.83 billion in backlog orders, AAON is signaling immense confidence in its aggressive investment plan, projecting a strong rebound in growth and margins for 2026.

For the full year 2025, net sales climbed an impressive 20.1% to $1.44 billion. However, this top-line success was overshadowed by a decline in GAAP diluted earnings per share to $1.29, down from $2.02 in 2024. The divergence between sales and profit underscores a year of intense capital expenditure and operational transformation.

The Price of Future Growth

AAON’s 2025 financial story is one of strategic investment. The company poured resources into expanding its manufacturing footprint by approximately 25% and implementing a new Enterprise Resource Planning (ERP) system. These initiatives, while essential for future scaling, came with significant upfront costs and temporary operational disruptions that compressed gross margins to 26.7% for the year, compared to 33.1% in 2024.

“2025 represented a year of record growth for AAON, driven by strong bookings and sales reflecting expanding market share and growing demand for our products and custom solutions,” said AAON President and CEO Matt Tobolski in the company's announcement. “During the year, we executed on targeted investments to support long-term growth and profitability. These actions included strengthening our leadership team, enhancing supply chain management capabilities, and expanding manufacturing capacity.”

The most significant of these investments was the renovation and commissioning of a new 787,000-square-foot facility in Memphis, Tennessee. While this facility is key to the company’s future, its ramp-up phase contributed to unabsorbed fixed costs, weighing on near-term margins. Similarly, the ERP system upgrade, intended to boost long-term efficiency, initially impacted production at the company's Longview, TX facility. AAON has since moderated the pace of future ERP rollouts to ensure smoother integration.

Cooling the Digital Revolution

The primary driver behind AAON's aggressive investment is the explosive growth of the digital economy. The company is strategically positioning itself to become a dominant supplier for the data center market, a sector experiencing unprecedented demand for advanced cooling solutions. The global data center cooling market is projected to grow at a compound annual rate of over 16%, fueled by the proliferation of AI, cloud computing, and hyperscale facilities.

AAON’s BASX brand, which provides customized air-side and liquid cooling solutions, is at the forefront of this strategy. In 2025, the BASX brand more than doubled its revenue. More tellingly, its year-end backlog skyrocketed by 141.3% to a massive $1.3 billion. This indicates a powerful market adoption of its specialized equipment, which is critical for managing the intense heat generated by high-density computing racks.

The new Memphis facility was instrumental, more than doubling the production capacity for BASX-branded data center equipment. While the facility's initial costs impacted Q4 margins, it also reached profitability ahead of schedule, validating the investment strategy. “Production at our new Memphis facility is ramping rapidly,” Dr. Tobolski noted, highlighting the plant's role in meeting accelerating demand.

Navigating Operational and Industry Headwinds

While the long-term picture appears bright, AAON’s 2025 was not without its challenges. Beyond the self-inflicted pressures of its ERP rollout, the company navigated broader industry headwinds. The press release noted that Q4 2024 results for its AAON-branded equipment were adversely impacted by the industry's refrigerant transition, providing a favorable comparison for Q4 2025's 9.5% sales growth in that segment.

This transition is part of a sweeping regulatory change across the HVAC industry. Driven by the EPA’s AIM Act, manufacturers are phasing out high-GWP (Global Warming Potential) refrigerants like R-410A in favor of mildly flammable but more environmentally friendly A2L alternatives. This shift, which has deadlines in 2025 and 2026, requires significant product redesign, new safety systems, and adjustments to manufacturing processes, creating a complex operating environment for all industry players.

Despite these challenges, AAON demonstrated resilience. The AAON Coil Products segment, which includes the Longview facility, saw its gross margin improve year-over-year in the fourth quarter to 21.3%, reflecting better operating leverage on higher production throughput, even with a temporary plant shutdown for an inventory count.

A Strong Outlook Built on a Record Backlog

Looking ahead, AAON is leveraging its record $1.83 billion backlog as a springboard for a robust 2026. This massive order book, more than double the prior year's, provides exceptional revenue visibility and allows the company to focus squarely on execution and delivery.

This confidence is reflected in the company’s ambitious 2026 outlook. AAON is forecasting revenue growth of 18% to 20% and a significant recovery in gross margins to a range of 29% to 31%. This anticipated margin expansion suggests that the heaviest costs of the 2025 investments are in the rearview mirror and that the new capacity will begin generating substantial operating leverage.

CFO and Treasurer Rebecca Thompson commented on the company’s financial position, stating, “As returns on these investments begin to materialize, we expect operating cash flow to improve significantly in 2026, supported by higher earnings and improved working-capital efficiency.” This improved cash flow will support continued investment, with the company earmarking $190 million for capital expenditures in 2026 to sustain its growth trajectory.