In its recent Q4 2025 earnings call, Modine Manufacturing delivered a confident and forward-looking narrative, underpinned by record-breaking financial performance and a bullish outlook on the data center market. For the third consecutive year, the company achieved its highest-ever sales and profitability, signaling a strategic transformation in how Modine is positioning itself for long-term success.
A highlight of the earnings call was the robust performance of the Climate Solutions segment, which for the first time outpaced the traditionally dominant Performance Technologies division. The primary driver behind this seismic shift? The booming demand for cooling systems in data centers—especially in North America.
Modine’s data center revenues skyrocketed by 119% year-over-year to $644 million. Notably, around half of this surge came from organic growth, signaling strong demand fundamentals rather than solely relying on acquisitions. President and CEO Neil Brinker emphasized, “We’re seeing strong momentum in the data center space, with growth opportunities tied to AI infrastructure and hyperscaler expansions.”
With cloud giants racing to build out AI-ready server farms, Modine is poised to be a critical partner. The company even secured a multi-phase, multi-location deal with a major cloud provider, cementing its footprint in a sector where precision cooling is mission-critical.
To support this demand spike, Modine is actively ramping up production capacity. Facilities in Rockbridge, Virginia and Grenada, Mississippi are being expanded, and new production lines are in the pipeline to meet the relentless pace of North American chiller demand.
Brinker noted, “It’s no longer a question of whether there’s demand—it’s about executing and delivering at scale.” The company is also rolling out a modular data center cooling solution, designed for fast deployment and higher energy efficiency, with its first North American orders already underway.
With visibility extending up to five years with certain customers, Modine’s confidence in its data center growth narrative is anchored in long-term contracts and robust project pipelines.
The Climate Solutions segment reported a 30% annual increase in revenue and a striking 45% jump in adjusted EBITDA, benefiting from both organic momentum and the acquisition of Scott Springfield. This segment also saw a quarterly adjusted EBITDA margin of 21.4%, with CFO Mick Lucareli calling it “another strong quarter.”
The strength in Climate Solutions is not limited to data centers. Heating systems for educational institutions and heat transfer products are also contributing, albeit at a slower growth rate. Lucareli expects the school heating segment—currently valued at $200 million—to grow in the low double digits in fiscal 2026.
While Climate Solutions continues to shine, Performance Technologies is under pressure. Supply chain disruptions, global trade tensions, and a sluggish ramp in electric vehicle (EV) programs are taking a toll. Modine now expects this segment’s revenues to decline between 2% and 12% in fiscal 2026.
The company is responding with structural changes and cost-cutting measures to maintain profitability. Brinker acknowledged delays in EV-related projects but reiterated the company’s long-term commitment to the automotive thermal management space, even hinting at potential divestitures or strategic repositioning in the coming quarters.
Despite uncertainties in Performance Technologies, Modine projects overall company sales growth between 2% and 10% in fiscal 2026. Climate Solutions is expected to grow 12% to 20%, with data center-related revenues anticipated to increase more than 30%.
The company is also targeting adjusted EBITDA of $420 to $450 million, translating to an 11% rise at the midpoint. Gross margin improvements, enhanced operational efficiency, and a favorable business mix continue to fuel this earnings momentum.
From a financial standpoint, Modine’s fundamentals are solid. The company closed Q4 2025 with a 7% increase in total revenue, a 330 basis point improvement in gross margins (up to 25.7%), and a 45% year-over-year jump in adjusted EPS to $1.12. Free cash flow stood at $129 million for the year, while net debt fell by $92 million, ending at $279 million.
In a sign of shareholder confidence, the company announced a $100 million stock buyback program, with $18 million repurchased during the fourth quarter alone.
Modine is actively scouting bolt-on acquisitions to strengthen its core Climate Solutions offerings. The recent acquisition of AbsolutAire—specialized in heating products—adds another layer to its portfolio. CFO Mick Lucareli mentioned high confidence in executing at least one more transaction in the first half of fiscal 2026.
On the flip side, management hinted that it may consider divestitures in underperforming areas, with a strong emphasis on aligning the portfolio with high-growth, high-margin verticals.
Despite the upbeat forecast, Modine’s management flagged several potential headwinds:
Modine’s strategic pivot toward Climate Solutions and data centers is yielding tangible results. As AI and cloud infrastructure reshape global demand for cooling solutions, Modine’s ability to scale efficiently and innovate could place it among the top beneficiaries of this technological wave.
With an increasingly diversified product mix, a clear expansion roadmap, and a sharpened focus on profitability, Modine is well-positioned to navigate challenges and deliver sustainable growth in fiscal 2026 and beyond.
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