SPX Technologies (SPXC): A High-Conviction Play on Data Center Cooling and HVAC Expansion

The global data center cooling market is on a meteoric trajectory, projected to grow at a 12% annual rate through 2030. With AI-driven infrastructure demands surging and hyperscale data center deployments accelerating, companies positioned to address this need are poised for outsized gains. SPX Technologies (SPXC) stands at the intersection of innovation and industrial scalability, leveraging a dual strategy of product differentiation and operational efficiency to dominate a $60 billion market. For investors, SPX's alignment with structural trends—coupled with its disciplined margin expansion—makes it a compelling high-conviction play in the industrial sector.

Strategic Growth: Product Innovation and Production Scalability

SPX's OlympusV Max cooling solution is a cornerstone of its growth narrative. This product, designed to optimize energy and water usage for large-scale data centers, has already secured early adopters and is generating strong customer feedback. By addressing the twin challenges of efficiency and sustainability, SPX is capturing a critical share of the market as data center operators grapple with rising operational costs and regulatory pressures. The OlympusV Max is not just a product—it's a strategic lever to expand SPX's addressable market and accelerate revenue growth.

To meet surging demand, SPX is aggressively scaling production capacity. New facilities in the U.S. and Quebec for its Tamco and Ingenia businesses are set to come online, with the latter's automated plant in Mirabel, Quebec, already targeting a $300 million run rate by 2026. These expansions are not merely about volume—they're about reducing lead times and improving cost efficiency. For instance, Ingenia's automated production is expected to drive down labor costs while maintaining quality, a critical factor in maintaining margins in a capital-intensive industry.

Margin Expansion: Operational Discipline and M&A Synergies

SPX's Q2 2025 results underscore its ability to balance top-line growth with margin preservation. The company reported a 10% year-over-year revenue increase to $552.4 million, with adjusted EBITDA expanding to $136 million—a 110-basis-point improvement in segment margin. This performance reflects disciplined cost management, including automation investments and supply chain optimizations.

The recent acquisition of KTS further amplifies SPX's margin potential. By integrating KTS into its Detection & Measurement segment, SPX added $175.7 million in Q2 2025 revenue, contributing to a 21.3% year-over-year growth in that unit. While operating margins dipped slightly due to project mix, the segment's 22.8% margin remains robust, demonstrating SPX's ability to maintain profitability even during transitional phases.

SPX's M&A strategy is a key driver of its margin expansion. CEO Gene Lowe has emphasized that mergers and acquisitions are a “critical component of value creation,” allowing the company to fast-track access to new technologies and markets. With a robust pipeline of targets, SPX is well-positioned to replicate the KTS success story, further diversifying its revenue streams and enhancing profitability.

Financial Strength and Guidance Revisions: A Vote of Confidence

SPX's financial health is a testament to its strategic execution. A current ratio of 1.88 and manageable debt levels provide flexibility for reinvestment and shareholder returns. The company's recent upward revision of full-year 2025 guidance—from $2.2 billion in revenue to $2.225–$2.275 billion—reflects confidence in demand for its cooling solutions. Adjusted EBITDA is now projected at $485–$510 million, with adjusted EPS expected to rise 16.5% to $6.35–$6.65. These metrics not only validate SPX's market positioning but also signal its ability to outperform in a high-growth environment.

Investment Thesis: A High-Conviction Play

For investors, SPX Technologies presents a rare combination of structural tailwinds and operational execution. The company's OlympusV Max is a game-changer in a market that is both large and accelerating. Meanwhile, its margin expansion strategies—rooted in automation, M&A, and production scalability—ensure that growth is not just volume-driven but also profit-driven.

The risks are not negligible. Data center cooling is a capital-intensive sector, and SPX's aggressive expansion requires significant upfront investment. However, the company's strong balance sheet and recurring revenue model mitigate these concerns. Furthermore, its ability to innovate in response to customer needs (e.g., water-efficient cooling solutions) gives it a competitive edge over peers.

Conclusion: Positioning for the Future

SPX Technologies is not just riding the wave of data center growth—it is shaping it. With a product portfolio that aligns with AI and cloud computing trends, a disciplined approach to margin expansion, and a strategic focus on inorganic growth, SPX is uniquely positioned to outperform in a high-demand industrial market. For long-term investors seeking exposure to the next phase of the digital infrastructure boom, SPXC offers a compelling opportunity.

Investment Recommendation: Buy. SPX Technologies' strategic positioning, margin discipline, and strong guidance revisions make it a high-conviction play. Investors should consider initiating positions with a 12–18-month horizon, with a target price based on 18x 2025 adjusted EPS.

This article is based on publicly available data and should not be construed as financial advice. Investors should conduct their own due diligence.