SPXC

Q4 2025

Date: 2026-02-24Rank: #40Forward Promise: very_bullish

SPX Technologies delivered a strong finish to 2025, with Q4 revenue growing 19.4% year-over-year and full-year adjusted EPS increasing 21% to $6.76, landing at the top end of guidance. Adjusted EBITDA grew 21% for the year with 50 basis points of margin expansion, driven by robust performance in both HVAC and Detection & Measurement segments. The company closed strategic acquisitions (Thermalek, Air Enterprises, Ron Industries) and announced significant capacity expansions ($100M in CapEx for 2026) to support data center demand. For 2026, management guided for continued momentum, targeting ~20% adjusted EBITDA growth and ~15% EPS growth, with data center revenue expected to surge 50% and reach low double-digit mix.

Bullishness Score

90.32

μ Mean

95.76

σ Uncertainty

1.81

Forward Promise

8.5

Management Tone

Management exuded high confidence and operational control throughout the call. The prepared remarks were assertive regarding growth and capacity execution, and this tone was maintained and often amplified during the Q&A session. Executives provided specific, quantified answers to challenging questions about demand sustainability and margins, avoiding the defensive hedging typical of industrial cycles.

Confidence: HIGH — Management provided specific forward-looking data points (e.g., 50% data center growth, $700M capacity ramp) and directly addressed concerns about project pull-forwards and mix without retreating to vague language.

Strategic Signals

Management is aggressively positioning the company to capture the data center boom, signaling a strategic pivot where this end-market is becoming a primary growth driver. The company disclosed that data center revenue is expected to grow 50% in 2026 and reach 12% of the total mix, up from 9% in 2025. This is supported by the 'Olympus Max' product launch, which Lowe called a 'winner' with 'material amounts' of awards and locked-in multi-year demand from hyperscalers.

Capital allocation is heavily skewed toward capacity expansion to de-risk future growth. The commitment to invest $100 million in 2026 (on top of $60 million in 2025) to add $700 million of incremental capacity demonstrates a 'build it and they will come' confidence. This CapEx is not speculative but is backed by specific customer visibility, with Lowe noting that hyperscalers are 'pushing for acceleration' and locking in capacity for years.

The M&A strategy remains highly active and focused on 'tuck-in' acquisitions that enhance existing HVAC platforms rather than diversifying away. The additions of Thermalek and Air Enterprises/Ron Industries are described as 'down-the-center' deals that offer immediate channel synergies (e.g., cross-selling U.S. duct heaters into Canada) and vertical integration (coils). Management emphasized a leverage ratio of 1.0x pro forma, signaling ample dry powder for further deals.

In the Detection & Measurement (D&M) segment, management is navigating a temporary top-line headwind caused by a $20 million project pull-forward from 2026 into 2025. However, they highlighted that the underlying run-rate business is seeing 'GDP-plus growth' and that backlog is up 43% organically. The strategic focus here is on margin expansion, with guidance implying a 140 bps increase driven by mix and cost optimization, suggesting structural improvements beyond cyclical recovery.

Key Metrics

Q4 Revenue Growth19.4%YoY

FY2025 Adjusted EBITDA Growth21%YoY

FY2025 Adjusted EPS$6.76+21% YoY

HVAC Segment Backlog$585M+22% YoY Organic

D&M Segment Backlog$350M+43% YoY Organic

Data Center Revenue (2025)~$200M~9% of Total Revenue

Data Center Growth (2026 Est)~50%Implied vs 2025

Net Leverage Ratio0.3xYear-end 2025

Free Cash Flow Conversion90%Of Adjusted Net Income

Guidance

2026 Revenue: $2.535B - $2.605B

2026 Adjusted EBITDA: $590M - $620M (implies ~20% growth at midpoint)

2026 Adjusted EPS: $7.60 - $8.00 (implies ~15% growth at midpoint)

2026 HVAC Segment Margin: 24.5% - 25.0%

2026 D&M Segment Margin: 24.75% - 25.25%

2026 CapEx: ~$100M (for capacity expansion)

Bottom Line

Price Target: N/A

SPX Technologies is executing a compelling pivot into high-growth data center cooling markets, underpinned by proprietary technology (Olympus Max) and aggressive capacity expansion. The Q&A session revealed a management team with exceptional visibility into demand, evidenced by specific guidance for 50% data center growth and multi-year customer commitments. While the stock may face skepticism regarding the sustainability of AI-related capex, the company's fundamentals—21% EBITDA growth, 90% FCF conversion, and a robust M&A pipeline—provide a strong foundation. The shift in portfolio mix toward higher-margin engineered solutions and the disciplined use of capital (1.0x leverage) further de-risks the bull case. We view the current valuation as attractive given the visibility into 20%+ growth for 2026.

Forward Promise

Overall: 8.5 · very_bullish

Confident execution backed by multi-year visibility and specific growth metrics.

Management provided exceptional forward specificity, confirming 50% data center growth and quantifying capacity expansion, signaling a high-probability path to 20% EBITDA growth.

Red Flags

The HVAC segment's margin guidance for 2026 implies only 25 basis points of expansion, a deceleration from the 40 bps seen in Q4 2025. CFO Mark Carano explicitly attributed this to 'start-up costs related to bringing these plants online,' which will be a roughly 50 basis point headwind. Investors should monitor the ramp-up of the Madison and Tamco facilities closely, as execution risks in scaling new manufacturing lines could pressure margins if the ramp is slower than anticipated.

While data center demand is robust, management acknowledged softness in other HVAC end markets for 2026, specifically 'battery automotive, semiconductor, chemical, and commercial real estate.' This creates a mixed demand backdrop where the company is heavily reliant on the data center vertical to offset weakness in traditional industrial and commercial construction markets.

The D&M segment's organic growth outlook appears flattish for 2026 (roughly 5% excluding the project pull-forward), which lags the double-digit growth expected in HVAC. While management frames this as a timing issue, the segment's heavy reliance on large, multi-year projects introduces volatility and visibility risk, as evidenced by the $20 million shift between quarters.

Management noted that the Crawford United 'industrial and transportation products businesses are not included in our guidance' and will be reported as discontinued operations while they seek a buyer. While this cleans up the portfolio, it introduces execution risk regarding the divestiture process and potential for unexpected costs or delays in offloading these assets.

Macro Insights

Data Center Infrastructure: Management indicated that the shift to AI chips (Rubin) increases linear heat loads, driving demand for external heat rejection (cooling towers) regardless of internal chip architecture changes.

Industrial End Markets: Demand is bifurcated: Strength in healthcare, power, and heavy industrial vs. softness in battery automotive, semiconductors, and commercial real estate.

Supply Chain: No material supply chain bottlenecks seen; management noted they are largely U.S.-sourced and can pass through metal costs via real-time pricing.