AAON Q3 Deep Dive: Data Center Demand and Capacity Expansion Drive Growth Amid Margin Pressures

Core Insights - AAON reported Q3 CY2025 revenue of $384.2 million, exceeding analyst expectations by 17.4% year-on-year and beating estimates by 13.8% [1][6] - Non-GAAP profit per share was $0.37, which is 14.9% above analysts' consensus estimates of $0.32 [1][6] Revenue and Financial Performance - Revenue growth of 17.4% year-on-year, surpassing analyst estimates of $337.5 million [6] - Adjusted EBITDA was $63.55 million, with a margin of 16.5%, beating estimates by 3.8% [6] - Operating margin decreased to 11.4% from 20% in the same quarter last year [6] - Backlog at the end of the quarter reached $1.32 billion, reflecting a 104% increase year-on-year [6] - Market capitalization stands at $8.16 billion [6] Operational Highlights - Sales momentum attributed to improved production throughput at Tulsa and Longview facilities, along with strong demand for the BASX brand [3][5] - BASX-branded backlog grew to $896.8 million, up 119.5% from a year ago, indicating strong performance in data center cooling solutions [3][5] - Despite facing margin pressures due to operational inefficiencies and ramp-up costs at the new Memphis facility, there was a sequential improvement in gross margin [3][4] Future Outlook - Management expects continued double-digit revenue growth and further margin improvement as new manufacturing capacity ramps up [4] - The BASX segment is anticipated to remain a key growth driver, supported by robust demand for data center cooling products and a strong order pipeline for 2026 [4] - Company plans to address ERP implementation challenges and optimize manufacturing processes to support long-term profitability [4]