Five American makers of heating, cooling and water equipment reported summer quarters within nine days of one another, and every one of them spent part of the call talking about data centers. What separated them afterward was not how much artificial-intelligence work they had won. It was whether that work was showing up in gross profit yet.

Carrier won the orders and lost the margin

Carrier Global, the Palm Beach Gardens maker of residential and commercial air conditioning, transport refrigeration and Kidde fire safety, spun out of United Technologies in 2019, delivered the loudest demand quarter in the group. Total orders rose 40%. Backlog passed $8bn, and roughly 40% of it is data-center work. Commercial heating-and-cooling orders rose about 65%, and data-center orders came in at four times the prior year. Management raised its disclosed 2026 data-center revenue to about $2bn from $1.5bn — a second consecutive doubling, and near 9% of guided sales — with a 2.5-megawatt coolant distribution unit launching this quarter and a 5-megawatt version due at year-end.

And reported gross profit fell 2.3% year over year, on revenue up 3.9%. Gross margin compressed 173 basis points to 27.2%. The cause is specific and mechanical: expanded Section 232 tariffs of up to 50% now apply to the full value of imported equipment rather than only its metal content, and Carrier's pricing lagged the April tariff date by weeks. New-construction work also carries thinner margin than replacement. The shares fell 5.1% the session after the print despite beats across the board and a raised guide, and have drifted since. At 9.30x trailing gross profit against roughly 10.0x six months ago, part of that de-rating is honest — the denominator is shrinking.

Johnson Controls converted it

Johnson Controls, the Cork-domiciled building-systems group that installs and services chillers, controls and fire-detection systems, is doing what Carrier has not yet done: turning campus construction into margin. Organic revenue rose 10% in the June quarter, adjusted operating margin widened 260 basis points to 17%, and backlog reached a record $21.0bn, up 32% organically. Reported revenue growth has accelerated four quarters running, from 3.1% to 9.3%. Data-center revenue is tracking to a high-teens share of the fiscal year, and management expects roughly a third of the company within three to five years. It holds over 20.9% of the data-center chiller market, the largest single share, and its coolant-distribution pipeline exceeds $1bn with Nvidia certification in hand. The shares are up 37% over twelve months, yet price per dollar of trailing gross profit is 9.50x, below the 9.98x of six months ago. Earnings did the work.

SPX is the divergence

SPX Technologies is the small one: a $10.3bn maker of Marley cooling towers, industrial air movement and boilers, plus a detection-and-measurement arm that locates buried pipe. It does not sell transformers — that business went in 2021. Second-quarter revenue rose 22.9% and operating income 34.6%. Cooling backlog reached $919m, up 59% organically, on a 1.4x book-to-bill. Management raised 2026 data-center revenue to $430m from $300m, against $150m two years ago, and lifted eventual capacity to $1.1bn.

The shares are down 15.0% over six months. Price per dollar of trailing gross profit has compressed from about 13.3x to 10.4x while trailing gross profit grew 8.6% — a 22% de-rating paid for by nothing in the numbers. Forward earnings are priced at 24.6x against 36.6x trailing, a 33% expected step-up. The stock jumped 10.2% on the Q2 release and has since given the entire move back.

The controls weren't controls

Watts Water Technologies, a maker of valves, backflow preventers and flow control for plumbing systems, was supposed to have no compute exposure. On 6 August it said data-center sales tripled year over year, now 8% of year-to-date revenue versus 3% for all of last year, and doubled its addressable estimate to $2bn. Content runs $25,000 to $100,000 per megawatt. It raised organic growth guidance to 8–11%. It is the best performer in the group — and the only one whose multiple genuinely expanded, to 9.55x gross profit from 8.23x in May.

That leaves A.O. Smith, the 1874 Milwaukee water-heater maker, as the sole business here with no compute load. Its revenue fell 0.7%, operating income fell 18.6%, Chinese sales fell 28% in local currency, and it narrowed guidance on soft residential demand. The stock rose 5.9% on the month, at 5.97x gross profit and 16.9x forward earnings — the cheapest in the group by a distance.

The backdrop explains the shape. Money rotated violently out of the thermal pure-plays over three months — Vertiv down 23.7%, Modine 21.0%, Lennox 17.4% — and into diversified books, before the whole complex sold off together over four sessions to 21 August as investors reassessed whether near-term revenue justifies AI capital spending. Flat is not calm here.

The setup

Where it stands — The two largest disclosed data-center books in commercial HVAC, at Carrier and SPX, carry the group's weakest six-month share performance. Would confirm — SPX's third-quarter cooling backlog holding above $900m with organic growth above 15%. Would invalidate — Carrier's gross margin failing to recover from 27.2% as tariff pricing catches up in the second half. Watch next — Johnson Controls' fiscal fourth quarter in early November, the first with coolant-distribution units shipping. Valuation — SPX at 10.4x trailing gross profit versus 13.3x six months ago; forward earnings 24.6x against 36.6x trailing.