Infrastructure equipment supplier SPX Technologies (NYSE: SPXC) met Wall Street’s revenue expectations in Q3 2026, with sales up 20.5% year on year to $714.5 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $2.78 billion at the midpoint. Its non-GAAP profit of $2.21 per share was 5.6% above analysts’ consensus estimates.

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StockStory’s take

SPX Technologies saw a positive market response after Q3 2026 results, as the company delivered solid revenue growth and exceeded non-GAAP profit expectations. Management cited robust demand in the HVAC segment, particularly for data center and custom air handling solutions, as a primary driver. CEO Gene Lowe attributed the strong quarter to “continued execution of our capacity expansions” and the successful integration of recent acquisitions. However, the company also faced higher input costs and operational inefficiencies tied to rapid production scaling, especially in its HVAC business.

Looking ahead, SPX Technologies’ guidance reflects both optimism for continued demand in key markets and caution over ongoing cost pressures. Management highlighted the ongoing ramp-up of new facilities, integration of the FIS Water acquisition, and a growing data center backlog as central to its growth strategy. CFO Mark Carano acknowledged that “growth-related inefficiencies and elevated input costs” will persist into the next quarter, while also emphasizing that efficiency gains and price increases are expected to improve margins in the future. The company remains focused on leveraging both organic and inorganic growth to drive long-term value.

Key insights from management’s remarks

Management attributed Q3 performance to exceptional HVAC demand, effective M&A integration, and proactive responses to production inefficiencies and supply chain pressures.

• HVAC segment momentum: The HVAC division saw strong organic growth, with demand for data center cooling and custom air handling solutions driving a significant increase in revenue and backlog. Management noted that capacity expansions and ramping production at new facilities, such as Madison, enabled the company to meet accelerating customer needs.
• Growth-related inefficiencies: Rapid scaling in the HVAC segment led to increased labor and outsourcing costs. These inefficiencies, described as “intentional decisions” to meet demand, weighed on margins in the short term, but are expected to support higher throughput in future periods.
• Acquisition integration: Recent acquisitions, including FIS Water, contributed to revenue growth and margin accretion. Management highlighted that the FIS Water deal expands SPX Technologies’ cooling platform with water management solutions, capitalizing on synergies across channels and product offerings.
• D&M segment margin improvement: The Detection & Measurement (D&M) segment achieved improved margins due to favorable project mix and ongoing synergy initiatives. However, revenue was impacted by timing differences in project completions versus the prior year.
• Proactive price management: Management responded to inflationary input costs—especially for steel and diesel—by raising prices across the HVAC portfolio. They emphasized that mechanisms in customer contracts allow for price adjustments to mitigate the impact of cost increases, supporting future margin recovery.

Drivers of future performance

SPX Technologies’ outlook is shaped by strong data center demand, ongoing operational investments, and persistent cost pressures in HVAC.

• Data center and HVAC expansion: Management expects continued robust demand for data center cooling solutions to drive HVAC segment growth. Capacity expansions at facilities like Madison are designed to support increasing order volumes, with backlog at record levels and further expansion planned for 2027.
• Margin recovery initiatives: The company is focused on improving productivity and insourcing previously outsourced work to address growth-related inefficiencies. Management anticipates labor productivity gains and scaling of new facilities will help offset elevated input costs and gradually restore margins.
• Inflation and pricing dynamics: Persistent inflation in key materials, such as steel, remains a headwind. However, management is leveraging contractual mechanisms to adjust pricing and expects improved price-cost alignment in future quarters, reducing risk to backlog margins.

Catalysts in upcoming quarters

Looking ahead, our analysts will focus on (1) execution of HVAC capacity expansions and onboarding at Madison, (2) management’s ability to resolve growth-related inefficiencies and margin pressures, and (3) sustained demand for data center cooling solutions reflected in backlog growth. We will also monitor integration progress for recent acquisitions and pricing discipline to offset input cost inflation.

SPX Technologies currently trades at $161.03, down from $167.53 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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