Aaon 2025 Q2 Earnings Misses Targets as Net Income Slumps 70%

Aaon reported its fiscal 2025 Q2 earnings on Aug 11th, 2025. The company fell short of expectations, with revenue declining and earnings shrinking significantly. The firm also lowered its full-year guidance, citing operational challenges and ERP implementation hurdles.

Aaon’s Q2 results reflect a difficult operating environment. Revenue slightly declined, and net income dropped 70.3% year-over-year. The company now anticipates lower production and margin pressures for the remainder of 2025.

Revenue
Aaon’s revenue fell by 0.6% to $311.57 million in Q2 2025, compared to $313.57 million in the same period last year. The AAON Products segment accounted for the majority of sales with $202.53 million, while the BASX Products segment contributed $109.04 million. This distribution highlights the continued strength of the BASX division, which supports the company’s strategic shift toward higher-margin offerings.

Earnings/Net Income
Aaon’s earnings took a sharp hit, with EPS declining 70.3% to $0.19 in Q2 2025 from $0.64 in Q2 2024. Net income also dropped by the same margin to $15.49 million, compared to $52.23 million the prior year. Despite these declines, the company remains profitable for more than two decades in the quarter, a testament to its operational resilience amid recent challenges. The significant drop in profitability indicates the impact of production bottlenecks and ERP-related disruptions.

Price Action
The stock price of Aaon surged 15.50% on the latest trading day but fell 12.16% during the most recent full trading week and 9.89% month-to-date. This mixed performance reflects investor uncertainty about the company’s near-term challenges and recovery timeline.

Post-Earnings Price Action Review
The historical strategy of buying AAON shares following a revenue increase quarter-over-quarter on earnings report date and holding for 30 days generated a 30.19% return over the past three years. However, the strategy underperformed the benchmark by 19.99%, indicating limited upside potential. Still, it maintained a maximum drawdown of 0.00%, a Sharpe ratio of 0.18, and a 9.35% compound annual growth rate, suggesting a low-risk, steady approach despite the modest returns.

CEO Commentary
CEO Matthew J. Tobolski attributed the Q2 performance to ERP implementation challenges at Longview and supply chain disruptions, which slowed production of AAON branded equipment and coils. He emphasized that the phased ERP rollout was intentional to ensure operational stability, with full implementation expected by late 2026. Tobolski also pointed to strong underlying business fundamentals, including a 127% year-over-year increase in BasX branded data center sales, growth in liquid cooling solutions, and momentum in national accounts and Alpha Class heat pumps. While expressing confidence in overcoming near-term hurdles, he maintained a cautious outlook regarding recovery timelines and ongoing ERP-related headwinds.

Guidance
For 2025, Aaon revised its full-year guidance to reflect lower production rates and ERP-related impacts. The company now expects low teens revenue growth and a gross margin of 28% to 29%. Adjusted SG&A is anticipated to range between 16.5% and 17% of sales, with CapEx remaining around $220 million. Aaon expects a sequential recovery in production, with gross margins improving through the second half of the year. Tobolski also outlined expectations for BasX branded sales to grow year-over-year by approximately 40%, with AAON branded sales expected to significantly increase in Q3 and Q4 as production ramps and pricing benefits materialize.

Additional News
On August 11th, 2025, the Punch newspaper reported the interception of N10 billion worth of arms and expired drugs by Nigerian customs. This incident highlights ongoing concerns about illegal imports and national security risks. In another notable development, the Federal Government announced the recruitment of permanent secretaries for new ministries, signaling efforts to restructure and enhance administrative efficiency. Additionally, marketers and stakeholders criticized the Nigerian National Petroleum Corporation (NNPC) for failed refinery rehabilitation projects and neglect, raising questions about the government’s ability to improve energy infrastructure. These events underscore the broader economic and political landscape in Nigeria, which may influence investor sentiment and operational conditions for international companies like Aaon.