AAON Restates Two Quarters as Data Center Cooling Surges

By Nathan Brooks

AAON reported third-quarter 2026 net sales of $707.4 million, up 84.1% from $384.2 million, as BASX-branded sales rose 218.3% to $397.2 million. The accounting answer was less tidy. AAON restated its first- and second-quarter 2026 financial statements and disclosed a material weakness in internal control over financial reporting.

What changed in the restatement?

Management, under the oversight of the board's audit committee, concluded on Nov. 3 that the two quarterly reports should no longer be relied upon. AAON cited errors in calculating revenue under the percentage-of-completion method and in accounting for software subscriptions.

AAON filed amended Forms 10-Q for both quarters on Nov. 9 and said its third-quarter Form 10-Q would describe the weakness. The same filing carried the record third-quarter results.

The corrections cut first-quarter net sales by $4.4 million, to $492.5 million, and net income by $3.4 million, to $36.5 million. They raised second-quarter net sales by $15.2 million, to $642.1 million, and net income by $10.5 million, to $67.1 million. Together, the restatements increased first-half net sales by $10.7 million and diluted EPS by $0.09.

Revenue also moved between reported segments. Second-quarter BASX sales rose $9.5 million, while first-quarter Coil Products sales fell $16.0 million and BASX sales rose $11.5 million.

AAON said it found no evidence of fraud or misconduct and has started remediation. The reporting-control weakness still requires repair.

How large was the BASX surge?

BASX-branded sales made up more than half of AAON's revenue. AAON tied the custom-engineered line's growth to data center demand, while AAON-branded sales rose 19.6% to $310.2 million. Within the Coil Products segment, BASX-branded liquid cooling sales rose 255.6% to $165.5 million.

The mix carried a margin cost. Gross margin fell to 26.7% from 27.8% a year earlier because more BASX revenue came from newer, less-utilized plants. It still rose 0.6 percentage points from the restated second quarter's 26.1%.

The income statement strengthened despite the margin pressure. AAON reported:

• Operating income rose 129.3% to $100.0 million, compared with $43.6 million in Q3 2025 and $81.7 million in restated Q2 2026.
• Net income reached $69.0 million, against $30.8 million a year earlier and $67.1 million in restated Q2.
• Diluted EPS rose 124.3% to $0.83, compared with $0.37 a year earlier and $0.80 in Q2.

Rounded net sales reached $322 million in Q1 2025 and $312 million in Q2. They then moved to $384 million in Q3, $424 million in Q4, $492 million in Q1 2026, $642 million in Q2 and $707 million in Q3. The Q1 and Q2 2026 figures were the restated amounts.

What does the backlog show?

Total backlog reached $1.85 billion, up 40.5% from a year earlier but down 5.9% from June. AAON attributed the sequential decline to faster conversion of orders into revenue and the uneven timing of large BASX awards. BASX backlog reached $1.36 billion, up 51.1% year over year.

AAON raised its 2026 net-sales growth outlook to 72%-75% from 55%-60%, with gross margin of about 26%. Against 2025 net sales of about $1.44 billion, MLQ calculated implied 2026 sales of about $2.48-$2.52 billion and fourth-quarter sales of roughly $638-$682 million. The implied fourth-quarter range sits below the third-quarter record.

Chief Executive Matt Tobolski said: “At BASX, customer engagement remains strong, our opportunity pipeline is healthy, and we continue to strengthen our position with strategic data center customers.” The statement is directional. Backlog, conversion and margin provide the measurable tests.

Management expects order strength to continue in the fourth quarter and into 2027. The next test is whether BASX's $1.36 billion backlog converts while gross margin holds near the 26% full-year target and AAON closes the control weakness.