A maker of heating, ventilation, and air-conditioning equipment for commercial buildings, AAON builds semi-custom rooftop units used in schools, offices, hospitals, and retail stores, plus cooling gear for data centers through its BASX brand. It was founded in 1988 when Norman Asbjornson bought the heating-and-air division of the John Zink Company in Tulsa, Oklahoma. The name "AAON" was picked to put the firm first in phone directories and is pronounced "aye-on."
AAON revenue more than doubled to $627M on data center orders, but gross margin fell to 24.3% as expansion costs mounted.
The data center kept growing, but the cost of building that business is now the story. rose 101.2% to $627.0 million as BASX-branded product sales more than tripled, yet fell 2.2 points to 24.3% under the weight of Memphis facility overhead and higher material costs. The company is funding a $1.97 billion backlog with $435 million in debt, and each point of interest rates now costs $4.4 million in pre-tax income.
Key takeaways
BASX-branded product sales rose 216% to $344.7 million, driving the 101.2% total increase to $627.0 million, while AAON-branded products grew 39.3%.
fell to 24.3% from 26.6% a year ago, as unabsorbed overhead from the ramping Memphis facility and increased material costs at AAON Coil Products compressed profitability.
as a percentage of sales improved to 13.3% from 19.0%, though dollar spending rose $24.5 million on higher salaries, warranty, and profit sharing tied to growth.
Section summaries
Management's Discussion and Analysis
Q2 2026 net sales more than doubled to $627M, driven by a 216% surge in BASX-branded data center products.
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Consolidated grew 101.2% to $627.0M in Q2 2026, led by a $235.7M increase in BASX-branded products and a 39.3% rise in AAON-branded products.
Total reached $1,970.8M as of June 30, 2026, up 98.0% , with BASX-branded backlog surging 185.4% to $1,430.4M on data center liquid cooling orders.
The total reached $1.97 billion, up 98.0% , with BASX-branded backlog up 185.4% to $1.43 billion on continued data center liquid cooling orders.
Outstanding debt rose to $435.0 million, and each one percentage point increase in interest rates now reduces annual pre-tax income by approximately $4.4 million.
for the first half turned positive at $55.0 million, compared to a $31.0 million use of cash in the prior-year period.
What changed
The Q1 2026 watch item on whether AAON Oklahoma could sustain its 50.7% growth rate is partly answered: the grew 39.3% in Q2, confirming the rebound was not a one-quarter effect of an easy comparison.
continued to compress, falling to 24.3% from 25.1% in Q1 2026, as the Memphis overhead and material cost pressures flagged in prior quarters persisted.
The debt balance rose further to $435.0 million from $425.2 million at Q1 2026, and the interest rate sensitivity increased to $4.4 million per point from $4.3 million, reflecting continued borrowing to fund and .
The ERP-related production disruptions at AAON Coil Products in Longview, Texas, flagged repeatedly since Q2 2025, were not cited as a material this quarter, suggesting the issue may be resolving.
What to watch
Whether stabilizes near 24% as the $1.97 billion converts, or continues to fall as the lower-margin BASX mix grows and Memphis overhead persists.
The trajectory of the $435.0 million debt balance against the $600 million facility, and whether the company moderates its $190 million 2026 plan or share repurchases as interest costs rise.
Whether the AAON Oklahoma sustains its growth trajectory after two consecutive quarters of recovery, or if the nonresidential construction market softens further.
The path of interest rates and the effect on pre-tax income, with each one percentage point increase now reducing annual pre-tax income by $4.4 million.
Consolidated declined to 24.3% from 26.6% a year ago, pressured by higher overhead from the ramping Memphis facility and increased material costs at AAON Coil Products.
SG&A as a percentage of sales improved to 13.3% from 19.0%, demonstrating despite a $24.5M increase in absolute dollars driven by higher salaries, warranty, and profit sharing.
The company expanded its to $600.0M and had $163.7M in available borrowings at quarter-end, with a of 1.46, well within its limit.
for 2026 are estimated at $190.0M, focused on the Memphis facility build-out and Tulsa maintenance, while turned positive at $55.0M for the first half of the year.
Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk We are exposed to volatility in the prices of commodities used in some of our products and, occasionally, we use cancellable and non-cancellable contracts with our major suppliers for periods of six to 18 months to manage this exposure. Interest Rate Risk We…
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Commodity Price Risk
We are exposed to volatility in the prices of commodities used in some of our products and, occasionally, we use cancellable and non-cancellable contracts with our major suppliers for periods of six to 18 months to manage this exposure.
Interest Rate Risk
We are exposed to changes in interest rates related to our outstanding debt. As of June 30, 2026, we had an outstanding balance of $435.0 million. For each one percentage point increase in the interest rate applicable to our outstanding debt, our annual income before taxes would decrease by approximately $4.4 million.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. The risk factors described in our Annual Report could mat…
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In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. The risk factors described in our Annual Report could materially adversely affect our business, financial condition or future results. There have been no material changes to the risk factors included in our 2025 Annual Report.