Mayville Engineering's Data Center Surge: Sustaining Growth Momentum in a Rapidly Expanding Market

The global data center market presents a massive growth runway, valued at $347.6 billion in 2024 and forecast to surge to $652 billion by 2030 at an 11.2% CAGR from 2025 to 2030 according to Grand View Research. This expansion is fueled by relentless cloud adoption and the buildout of hyperscale and edge computing infrastructure, with hardware dominating revenue and North America leading the market.

Against this backdrop, Mayville Engineering is strategically pivoting towards this high-growth sector. The company emphasizes its U.S.-based manufacturing network as a key advantage for navigating tariff risks and boosting margins. Crucially, Mayville positions itself as a sole-sourced provider for 95% of its products within the data center and critical power markets, leveraging this deep integration to capture demand.

This strategic shift is already showing tangible results. The Data Center & Critical Power segment exploded to $22.6 million in Q3 2025, a dramatic increase from $4.7 million reported in the year-ago quarter. This surge is the primary driver of overall net sales growth for the quarter, even as organic sales across other segments declined sharply by 9.1%, reflecting persistent weakness in commercial vehicle and agriculture markets. The CEO has flagged significant future potential, targeting $20–30 million in 2026 revenue synergies from the recent acquisition, signaling the segment's central role in Mayville's future growth narrative. While margin pressure from restructuring costs and lower-margin legacy demands remains a near-term friction, the pivot towards the booming data center space represents Mayville's core thesis for capturing explosive growth in this multi-hundred-billion-dollar market.

Segment Growth and Margin Pressures

Total revenue rose 6.6% in Q3 2025 to $144.3M, but this growth was entirely driven by the Accu-Fab acquisition according to Mayville Engineering's report. Organic sales actually declined 9.1%, reflecting weak demand in commercial vehicle and agriculture markets. The bright spot was the Data Center & Critical Power segment, which surged to $22.6M from just $4.7M a year earlier, representing 381% annual growth.

This rapid expansion is central to the company's future strategy, with CEO Jag Reddy citing a $20–30M 2026 revenue synergy target from the acquisition. However, the aggressive scaling came at a significant cost to profitability. Adjusted EBITDA margin compressed to 9.8% from 12.6% in the prior-year period, pressured by two main factors: restructuring expenses and the mix shift toward lower-margin legacy market demand.

The margin compression highlights the challenging trade-off between capturing high-growth opportunities and maintaining profitability. While data center demand is surging, the costs associated with scaling operations and restructuring legacy businesses are currently outweighing the revenue gains. This pattern suggests that sustaining overall profitability will require not just growth, but also successful execution of cost controls and margin improvement initiatives in the critical power segment.

Sustainability Risks & Market Constraints

Building on prior growth narratives, the data center sector faces mounting sustainability and market constraints that could challenge long-term viability. Rising development costs are a primary concern, with large land parcels (50+ acres) seeing a 23% price surge in 2024, pushing average land costs to $5.59 per square foot. This inflation forces developers toward larger, tertiary-region sites – typically 224 acres – to secure adequate power capacity, adding logistical complexity to multi-building campus projects.

Power availability emerges as a critical bottleneck, fundamentally reshaping site selection strategies. The 2025–2026 Construction Cost Index identifies constrained grid capacity as a key driver forcing expansion into less developed regions, where infrastructure and cooling solutions require greater innovation. Paradoxically, this operational friction coexists with strong sector optimism – 73% of industry leaders still perceive data centers as recession-proof. However, Mayville Engineering faces distinct vulnerabilities; its exposure to adjacent markets like commercial vehicles and agriculture creates margin sensitivity during broader economic downturns, contrasting sharply with the industry-wide resilience perception.

These challenges demand strategic adaptation. Developers must navigate escalating land acquisition costs while overcoming tertiary-location supply chain frictions and power delivery uncertainties. The margin pressure from volatile input pricing, particularly for land and electrical infrastructure, directly tests the sector's recession-resistant reputation when end-user demand softens. Success will likely favor operators with flexible designs, diversified power sourcing, and regional market diversification to mitigate these structural headwinds.