AAON's Q1 2025: Navigating Contradictions in Supply Chain, Revenue, and Market Dynamics

Supply chain improvements, backlog conversion and revenue growth, market share and price competitiveness, supply chain and tariff impacts, data center order and revenue visibility are the key contradictions discussed in AAON's latest 2025Q1 earnings call.



Revenue Growth and Segment Performance:
- AAON, Inc. reported a 22.9% increase in net sales to $322.1 million for the first quarter of 2025, driven by a 374.8% increase in BASX-branded equipment sales.
- The growth was primarily due to strong demand for airside and liquid cooling solutions for data centers, while AAON-branded equipment sales were down 19.1%.

Backlog and Bookings:
- Total backlog finished at a record level of $1 billion, up 83.9% year-over-year and 18.4% quarter-over-quarter.
- The increase was driven by robust first quarter bookings of both AAON-branded and BASX-branded equipment, with AAON-branded equipment bookings up 23.4%.

Gross Margin and Production Challenges:
- Total gross margin contracted 840 basis points to 23.5%, with AAON-branded rooftop production volumes impacting operating leverage.
- Supply chain issues with new refrigerant components and weak production volumes were the main factors affecting gross margin.

Tariff Mitigation and Future Outlook:
- The company implemented a 6% tariff mitigation surcharge to neutralize the impact of tariffs on costs and margins.
- Despite ongoing supply chain uncertainties, AAON anticipates modest sales and earnings growth for the second quarter and maintains a full-year sales growth outlook in the mid- to high-teens.