Artificial intelligence is fueling an expansive growth in data centers, intensifying the importance of efficient cooling systems. As computing demands escalate, managing heat has transitioned from a mere technical consideration to a vital constraint that can restrict the capacity expansions of hyperscale operators.
Modine Manufacturing is strategically positioning itself to capitalize on this trend. With unprecedented order volumes, clear multi-year visibility, and an aggressive expansion strategy, the company is poised to transform its earnings trajectory significantly over the next five years.
In its fiscal third-quarter 2026, Modine’s data center sales surged by 31% compared to the previous quarter. Management is optimistic, anticipating additional significant volumes in the fourth quarter, with projected quarterly revenues surpassing $400 million.
More pivotal than the quarterly growth is Modine’s robust order book, which has reached record levels. This intake is approximately evenly divided between chillers and other data center products, extending visibility to nearly five years. The approach to securing business has shifted as well, with clients increasingly favoring long-term supply agreements.
For hyperscalers, ensuring sufficient cooling capacity is now as critical as securing power. As a result, production timelines and delivery schedules have become as vital as the performance of the technology itself. This evolving demand landscape is solidifying the durability of cooling solutions.
Management forecasts annual growth of 50-70% in its data center business over the next two fiscal years. The necessary capacity to support this growth trajectory is expected to be established by the conclusion of fiscal 2027, with additional chiller lines set to come online in fiscal 2028. The current capital plan anticipates potential data center revenues of around $3 billion, with long-term agreements enhancing revenue predictability.
Modine is also expanding its Climate Solutions portfolio beyond core cooling technologies. In fiscal 2024, the company acquired Scott Springfield Manufacturing and key operating assets of Napps Technology. In fiscal 2026, it added AbsolutAire, L.B. White, and Climate by Design International to its roster. These acquisitions broaden its capabilities into direct-fired heating, specialty heating and ventilation, desiccant dehumidification, and critical process air handling.
The result is a more comprehensive platform encompassing chillers, air handling units, modular data center systems, and broader commercial HVAC solutions. Execution remains a critical element of Modine’s strategy, with four new chiller lines commissioned in fiscal third-quarter 2026 and four more set to be operational in the fourth quarter. Management aims to have eight lines active by the end of the fiscal year.
The long-term vision includes approximately 20 chiller lines by early fiscal 2028, representing about 125% cumulative capacity expansion over a two-year period. These lines are designed to be flexible, convertible to modular data center units or large air handling systems as needed.
This rapid scaling of operations introduces complexities across the supply chain, labor, and quality control. While the opportunity is significant, disciplined execution will ultimately determine how much of this cooling demand translates into sustainable earnings growth.
In the competitive landscape of AI-driven data center cooling, Modine operates alongside established players such as Vertiv Holdings and Johnson Controls. Vertiv is one of the primary beneficiaries of the hyperscale and AI capacity expansion, providing integrated thermal management, power infrastructure, and monitoring systems tailored for high-density data centers. Its comprehensive positioning and deep ties with hyperscalers afford it considerable visibility into upcoming buildouts.
Johnson Controls, while broader in focus, is a major global provider of HVAC and building solutions with increasing exposure to mission-critical cooling systems. The company’s scale, extensive service network, and diversified building technology platform deliver stability, although data centers represent just one segment of its overall portfolio.
As Modine aggressively scales to meet the demand for AI-driven data center cooling, it is backed by multi-year visibility and expanding capacity. The prospect is significant; however, sustained execution will ultimately dictate how effectively this cooling cycle translates into durable earnings growth. Currently, analysts project a long-term expected EPS growth rate for Modine at 34%.
Modine holds a Zacks Rank #1 (Strong Buy), underscoring the positive outlook from market analysts. This growing momentum in data center solutions reflects broader trends in AI and cloud computing, highlighting the vital role of cooling technologies in supporting the digital infrastructure of the future.
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