AAON delivered a record quarter that is the most violent mix shift in our recent coverage: Q2 FY2026 net sales of $627.0M more than doubled the $311.6M posted a year ago, with the BASX data-center cooling brand up 216.2% to a record $345M and the AAON commercial brand up a more measured 39.3% to a record $282.2M. Operating income of $68.9M (up 192.1%) outran the top line at a 11.0% margin (versus 7.6% in Q2 FY2025), but consolidated gross margin actually compressed 230 basis points to 24.3% - the Memphis plant is still burning through pre-utilization overhead ($18.1M of cost flowed through AAON Oklahoma for products ultimately booked under the BASX banner) and the company is buying outsourced components to support the throughput ramp.
We see the quarter as the inflection the operating-leverage thesis has been waiting for. Backlog at June 30 stood at $1,970.8M, up 98.0% year-over-year even after the record burn of $627M in three months; the BASX slice of that book is up 185.4% to $1,430.4M and 92.5% of BASX backlog is now in the data-center liquid-cooling category. Management raised the FY2026 sales-growth guide to 55%-60% (from 40%-45%) but cut the gross-margin guide to 25%-26% (from 27%-28%), explicitly trading near-term margin for share. The stock at $85.78 on August 9 is down 32% from its 52-week high of $150.46 and trades at roughly 33x trailing EPS (an estimated $2.62 LTM) and 13.4x the LTM Adjusted EBITDA pace of ~$249M - a multiple compression that already reflects most of the margin-guide reset, in our view.
The question the next two quarters have to answer: does the gross-margin floor sit at 24% in Q2, or does it slide to 23% as outsourcing and Memphis overhead compound before utilization kicks in? The falsifiable clock is the Q3 FY2026 report in early November, when management prints the first quarter of revenue at the new ~60% growth run-rate and either confirms or walks back the 25%-26% full-year gross-margin floor.