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AAON: AAON's Q4 2025 Earnings: Strong Growth Amidst Transformational Investments

AAON, Inc.'s Q4 2025 financial performance was marked by a 42.5% year-over-year increase in net sales to $424.2 million. The company's gross margin stood at 25.9%, slightly down from 26.1% in the prior-year period, primarily due to unabsorbed fixed costs associated with the new Memphis facility. Non-GAAP adjusted EBITDA margin was 15.2%, down from 15.8% a year ago. Diluted EPS was $0.39, up 30% from 2024, although actual EPS came in at $0.3854, slightly below estimates of $0.45.

AAON

USD 104.73

3.49%

A-Score: 4.0/10

Publication date: March 2, 2026

Full Report

Author: Analystock.ai

šŸ“‹ Highlights
  • Basics Branded Sales Surge: Sales rose 143% to $548 million in 2025, driven by strong demand for custom solutions and a 141% backlog increase to $1.3 billion.
  • Q4 2025 Revenue Growth: Net sales jumped 42.5% YoY to $424.2 million, despite an 8% decline in AAON branded sales amid industry-wide volume drops.
  • Gross Margin Pressure: Q4 2025 gross margin dipped to 25.9% from 26.1% due to unabsorbed costs at the new Memphis facility, with adjusted EBITDA margin falling to 15.2%.
  • 2026 Guidance: Projects sales growth of 18ā€“20% and gross margin improvement to 29ā€“31%, with Basics revenue growth midpoint at ~25% and $225 million in 2025 working capital reductions.
  • Backlog and Capacity Constraints: Basics backlog of $1.3 billion includes long-duration projects, with only half expected to ship in 2026 due to data center market dynamics and lead times exceeding 20 weeks in Oklahoma.

Segment Performance

The Basics branded sales saw a significant increase of 143% to $548 million in 2025, while the backlog grew 141% to $1.3 billion. In contrast, AAON branded sales declined 8% despite a 16% decline in overall industry volumes, showcasing the company's resilience. The robust bookings and revenue momentum were driven by demand for its custom solutions.

Outlook for 2026

For 2026, AAON expects sales growth of 18% to 20%, with a gross margin of 29% to 31%. The company anticipates SG&A as a percent of sales to be around 16% and depreciation and amortization expenses in the range of $95 million to $100 million. The focus in 2026 will be on execution, leveraging its foundation, improving throughput, and continuing progress towards its margin objectives.

Valuation Insights

With a P/E Ratio of 79.36 and an EV/EBITDA of 41.65, the market seems to be pricing in significant growth expectations. The company's ROE stands at 12.63%, indicating a decent return on equity. As AAON continues to invest in capacity and improve its operations, the near-term focus will be on executing its strategy in a profitable manner. The 2026 sales growth guidance implies sales dollars above the three-year Investor Day targets for 2027, reinforcing the growth trajectory.

Operational Updates

The company has made significant investments in capacity, including the Longview expansion and Memphis facility. The gating mechanism for growth is not the square footage but the ramp rate, which is crucial for executing its strategy. Lead times in the Oklahoma business are longer than desired, around mid-20 weeks for some high-volume lines, and the company aims to drive throughput and bring them down throughout the year.

AAON's A-Score