AAON (AAON) reported a first quarter on May 7 that looked much bigger than a routine HVAC earnings beat. The company posted record sales, strong EPS growth, and a sharp increase in backlog, with its BASX unit continuing to emerge as the center of the growth story because of demand tied to data-center cooling.
Net sales rose 54.3% year over year to a record $496.9 million, according to AAON’s first-quarter 2026 results release. GAAP diluted earnings per share increased 37.1% to $0.48. The headline numbers were strong enough on their own, but the real reason investors are treating the quarter as more than a cyclical HVAC update is the way BASX is changing AAON’s revenue mix and growth profile.
BASX-branded sales increased 72.4% to $228.6 million in the quarter, while AAON-branded sales rose 41.6% to $268.4 million. Total backlog climbed 107.4% from a year earlier to $2.129 billion and increased 16.5% sequentially. That is the sort of backlog expansion that tends to shift the conversation from near-term shipment timing to multi-quarter capacity and execution.
Why AAON’s quarter stood out
AAON’s quarter stood out because the company produced unusually strong growth across both its legacy and newer platforms, but with much more momentum coming from the higher-attention BASX business.
A 54.3% increase in sales to nearly $497 million is already enough to put the quarter in focus. What made it more notable was that the growth was not narrowly tied to a single one-off contract. AAON-branded sales still grew 41.6%, showing that the core business contributed meaningfully, while BASX delivered an even faster 72.4% increase.
That matters because investors increasingly see AAON less as a conventional HVAC manufacturer and more as an industrial growth story tied to specialized cooling infrastructure. The company is still rooted in HVAC, but the earnings profile is starting to look different as higher-value commercial demand becomes a larger driver.
The 37.1% rise in diluted EPS to $0.48 reinforces that point. Even with some margin pressure during the quarter, AAON still converted strong revenue growth into meaningful earnings growth, which suggests that scale is beginning to offset some of the near-term operating friction.
How BASX and data-center cooling are driving the story
The clearest reason AAON is getting more attention is BASX.
BASX-branded sales reached $228.6 million in the quarter, up 72.4% year over year. Management also said BASX backlog increased 160% from a year earlier. That is a major signal that data-center cooling demand is not just helping reported revenue now; it is also shaping the company’s production and delivery profile well beyond a single quarter.
The data-center angle matters because cooling infrastructure has become a bottleneck in AI and cloud expansion. As data-center operators add capacity for denser workloads, cooling systems become more specialized and more critical. BASX gives AAON direct exposure to that trend.
That exposure changes the valuation story. Traditional HVAC names are often judged on replacement cycles, construction exposure, and standard commercial demand. AAON still has those factors, but BASX ties part of the business to a faster-moving capital-spending cycle where demand can be supported by hyperscale, enterprise, and AI infrastructure buildouts.
The total backlog number shows how strong that pull has become. At $2.129 billion, up 107.4% year over year, AAON’s backlog now represents a significant revenue reservoir that can support growth even if quarterly timing moves around.
Why margins dipped even as earnings grew
The quarter was not perfect, and AAON’s margin profile explains why.
Gross profit margin fell to 25.1% from 26.8% a year earlier. That decline came even as sales and earnings rose sharply. On the surface, that might look contradictory, but it is consistent with a company that is ramping quickly and absorbing temporary inefficiencies while trying to meet demand.
AAON pointed to temporary outsourcing and underabsorbed fixed costs as pressures on margins. That is important context because it suggests the issue was not weak pricing or collapsing demand. Instead, it reflects the cost of scaling production fast enough to keep up with backlog growth, especially in a business mix that is becoming more dependent on BASX and specialized cooling systems.
There was also a more favorable signal beneath the gross-margin decline. Selling, general and administrative expense as a percentage of sales improved by 220 basis points to 13.7%. That tells investors the company is still getting leverage lower in the cost structure even while manufacturing margins are under pressure.
In other words, the quarter showed some friction, but not the kind that usually breaks a growth case. If anything, it looked more like execution strain from expansion than deterioration in the underlying demand environment.
What the raised outlook implies for investors
AAON updated its 2026 outlook in a way that supports the bull case.
The company now expects sales growth of 40% to 45%, gross margin of 27% to 28%, SG&A as a percentage of sales of 14% to 15%, and depreciation and amortization of $95 million to $100 million.
That guidance matters for two reasons. First, it implies management sees the strong first-quarter demand environment continuing. Second, it suggests the margin pressure from Q1 is not being treated as a new normal. If AAON expects gross margin to move back into a 27% to 28% range for the year, management is signaling that some of the outsourcing and fixed-cost inefficiencies should moderate as volume ramps and production normalizes.
For investors, the central question is no longer whether BASX is contributing. It clearly is. The real question is how fast AAON can convert backlog into shipments without giving up too much margin along the way. If the company executes that balance well, the market may continue treating AAON as a data-center infrastructure beneficiary rather than just another HVAC name.
Key Signals for Investors
- BASX sales growth of 72.4% and BASX backlog growth of 160% show data-center cooling is becoming the main force behind AAON’s expansion story.
- Gross margin pressure looks tied to temporary outsourcing and fixed-cost absorption, so the key test is whether margins recover as capacity catches up.
- The updated 2026 outlook suggests management expects both strong growth and better margin structure as the year progresses.
Sources
Source references reviewed from AAON’s May 7, 2026 first-quarter earnings release on PR Newswire.
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