Modine Rises As Data-Center Cooling Becomes AI’s Next Big Bottleneck

The hottest trade on Wall Street may now need a cooling contractor, and Modine is making a strong pitch for the job. The thermal-management company announced a long-term agreement to supply more than $4 billion of Airedale data-center cooling products to a strategic customer from 2027 through 2029. Artificial intelligence needs more than chips, servers, and power. It also needs somebody to keep all that machinery from cooking itself, and Modine is happy to take on the task. Shares jumped nearly 14% Tuesday after the deal was announced and were pointing higher again in Wednesday premarket trading after Modine added a strong fiscal fourth-quarter report after the close.

Behind the big contract headline, Modine’s core numbers were already running hot. The company reported record quarterly net sales of $954.4 million, up 47% from a year earlier, while adjusted earnings rose 53% to $1.71 per share and adjusted EBITDA climbed 40% to $146.1 million. The biggest driver was Climate Solutions, where sales rose 87% to $665.9 million. Within that segment, data-center sales increased 158%, turning the AI buildout from a theme investors talk about into something already moving through Modine’s income statement.

That does not mean the growth came without heat of its own. Gross margin fell to 22.5%, down 320 basis points from a year earlier, as Modine dealt with temporary costs tied to data-center capacity expansion, tariffs, and higher material costs. Climate Solutions also saw gross margin pressure, partly from the rapid manufacturing ramp needed to meet data-center demand. That is the cost of chasing demand this hot — Modine is riding one of the strongest infrastructure markets on the board, but scaling fast enough to serve it is not free.

The outlook keeps Modine from looking like a one-quarter heat wave. Modine expects fiscal 2027 net sales to grow 20% to 35%, with adjusted EBITDA of $650 million to $680 million, up 38% to 44%. The new capacity agreement gives the company a longer runway into the next wave of data-center spending, while the pending Performance Technologies spin-off could give investors a more direct look at Modine’s Climate Solutions business, the segment benefiting most from data-center demand. The AI boom may run on silicon, but Modine’s quarter showed it cannot run for long without cold air.

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