Heating and cooling solutions company AAON (NASDAQ:AAON) reported Q4 CY2025 results beating Wall Street’s revenue expectations , with sales up 42.5% year on year to $424.2 million. Its non-GAAP profit of $0.39 per share was 15.2% below analysts’ consensus estimates.

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Revenue: $424.2 million vs analyst estimates of $374.1 million (42.5% year-on-year growth, 13.4% beat)

Adjusted EPS: $0.39 vs analyst expectations of $0.46 (15.2% miss)

Adjusted EBITDA: $64.44 million vs analyst estimates of $76.3 million (15.2% margin, 15.5% miss)

Operating Margin: 10.4%, in line with the same quarter last year

Free Cash Flow was -$43.18 million compared to -$95.44 million in the same quarter last year

Backlog: $1.83 billion at quarter end, up 111% year on year

Market Capitalization: $8.25 billion

Backed by two million square feet of lab testing space, AAON (NASDAQ:AAON) makes heating, ventilation, and air conditioning equipment for different types of buildings.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, AAON’s sales grew at an incredible 22.9% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. AAON’s annualized revenue growth of 11.1% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. AAON’s backlog reached $1.83 billion in the latest quarter and averaged 95.5% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for AAON’s products and services but raises concerns about capacity constraints.

This quarter, AAON reported magnificent year-on-year revenue growth of 42.5%, and its $424.2 million of revenue beat Wall Street’s estimates by 13.4%.

Looking ahead, sell-side analysts expect revenue to grow 8.7% over the next 12 months, a slight deceleration versus the last two years. Despite the slowdown, this projection is above average for the sector and implies the market is baking in some success for its newer products and services.

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AAON has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 15.2%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Looking at the trend in its profitability, AAON’s operating margin decreased by 3.7 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, AAON generated an operating margin profit margin of 10.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

AAON’s EPS grew at an unimpressive 6.5% compounded annual growth rate over the last five years, lower than its 22.9% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of AAON’s earnings can give us a better understanding of its performance. As we mentioned earlier, AAON’s operating margin was flat this quarter but declined by 3.7 percentage points over the last five years. Its share count also grew by 3.7%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For AAON, its two-year annual EPS declines of 21.5% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, AAON reported adjusted EPS of $0.39, up from $0.30 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects AAON’s full-year EPS of $1.35 to grow 48%.

We were impressed by how significantly AAON blew past analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 2.7% to $98.41 immediately after reporting.

AAON may have had a tough quarter, but does that actually create an opportunity to invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.