AAON Posted Record Sales and a Third Guidance Raise in the Release That Also Restated Its First Half

AAON reported record third-quarter net sales of $707.4 million on Monday, up 84.1 percent from a year earlier, in a release that also restated its first half.

AAON, Inc., the Tulsa-based maker of heating, ventilation and air-conditioning equipment, released the results after Monday's close. The quarter ran to September 30, 2026.

Diluted earnings were $0.83 a share, up 124.3 percent from $0.37 a year earlier. Adjusted earnings were also $0.83 a share, because the quarter had no adjusting items.

Net income was $69.0 million, against $30.8 million a year earlier. Analysts had expected earnings of $0.57 a share and sales of $601.19 million, according to FactSet reference data published by TradingView.

Gross margin improved in sequence but trailed last year

Gross profit rose 76.4 percent to $188.5 million. Gross margin - gross profit as a share of sales - was 26.7 percent.

That margin was 110 basis points below the 27.8 percent posted a year earlier. A basis point is one-hundredth of a percentage point.

It rose 60 basis points from the second quarter, the second straight sequential gain. The company said a higher share of BASX revenue from less mature, lower-utilization plants weighed on the year-over-year comparison.

Operating income rose 129.3 percent to $100.0 million. Operating margin - operating income as a share of sales - reached 14.1 percent, a TickerGrove calculation, from 11.3 percent.

Selling, general and administrative costs fell to 12.5 percent of sales, down 400 basis points. Adjusted EBITDA margin was 18.0 percent, from 16.5 percent a year earlier.

Data center demand drove the growth

BASX-branded sales grew 218.3 percent to a record $397.2 million on data center demand. AAON-branded sales rose 19.6 percent to a record $310.2 million.

AAON Coil Products sales rose 174.2 percent to $192.6 million, helped by BASX liquid cooling sales of $165.5 million. The BASX segment itself posted sales of $231.3 million, up 207.4 percent.

Backlog - orders received but not yet delivered as revenue - ended the quarter at $1.85 billion. That was up 40.5 percent from $1.32 billion a year earlier.

Backlog eased from $1.96 billion at the end of the second quarter. The company attributed the decline mainly to faster conversion of backlog into record revenue.

Operating cash flow for the first nine months reached $146.9 million. A year earlier, the same measure was a use of $18.8 million.

The same release restated the first half

During the third-quarter reporting process, the company identified errors tied to revenue recognition and accounting for software subscriptions. Revenue recognition is the set of rules for when sales may be recorded.

The errors lowered first-quarter net sales by $4.4 million, from $496.9 million to $492.5 million. They raised second-quarter net sales by $15.2 million, from $627.0 million to $642.1 million.

In aggregate, the restatements increased first-half net sales by $10.7 million. They added 71 basis points to first-half gross margin and $0.09 to diluted earnings a share, the company said.

Management concluded that a material weakness existed in its internal control over financial reporting. A material weakness is a control flaw that creates a reasonable chance of a material misstatement going uncorrected.

"We corrected those errors and determined that a material weakness existed in our internal control over financial reporting. We take that seriously," President and Chief Executive Matt Tobolski said.

The company said it found no evidence of fraud or misconduct. It said corrective actions are under way, with more detail in the third-quarter 10-Q filing.

Guidance rose for a third time, with a margin caveat

AAON now expects full-year net sales growth of 72 to 75 percent. That replaces the prior outlook of 55 to 60 percent growth.

It was the third straight raise, from an original outlook of 18 to 20 percent, Earnings Whispers reported. The growth range implies full-year sales of roughly $2.5 billion, a TickerGrove calculation.

Full-year gross margin is now guided to about 26 percent, up from 25 to 26 percent before. That guide sits well below the original 29 to 31 percent target, Earnings Whispers noted.

Selling, general and administrative costs are guided to about 13 percent of sales. The company credited strong backlog, expanded capacity and improving execution for the raise.

Shares surged when trading resumed

Shares rose 24.4 percent to $78.21 at 10:27 a.m. ET on Tuesday, Finnhub data showed. The comparison is Monday's $62.87 close, before the release.

The move is a single morning snapshot, not a close. Investors were weighing a record quarter and a raised outlook against a restated first half.

What remains unknown

What remains unknown starts with remediation. The company has not said when the material weakness will be considered fixed.

Whether the restated periods draw further regulatory or auditor scrutiny is also unknown. The release says the errors were self-identified, and no evidence of fraud was found.

Whether BASX order timing steadies after a lumpy year is also unknown. Backlog fell in sequence even as it rose sharply from a year earlier.

The control fix and the fourth quarter will test the story

What to watch: the third-quarter 10-Q filing for the full material-weakness disclosure and remediation plan. The restated first- and second-quarter 10-Q filings, made the same day, carry the detailed corrections.

Watch fourth-quarter bookings and backlog after the sequential decline. Watch also whether gross margin holds near 26 percent as the less mature plants ramp.