Artificial intelligence is significantly accelerating the expansion of data centers, with effective cooling solutions becoming a paramount challenge. As the demand for computing power surges, managing heat has transitioned from a technical detail to a critical element that can restrict the growth capacity of hyperscalers. Modine Manufacturing Company is strategically positioning itself to capitalize on this evolving landscape, reporting record orders and planning aggressive capacity expansions that could transform its earnings profile over the next five years.
In its fiscal third-quarter of 2026, Modine’s data center sales experienced a remarkable 31% sequential increase. Management anticipates continued growth, with projected quarterly revenues exceeding $400 million in the fourth quarter. More crucial than the short-term surge, however, is the company’s robust order book, which has reached record levels and is comprised of a balanced mix of chillers and broader data center products. This order intake has granted the company visibility extending approximately five years, with many engagements structured as long-term supply agreements, underscoring a significant shift in customer behavior.
For hyperscalers, securing adequate cooling capacity is becoming as vital as ensuring power availability. The importance of production slots and delivery timelines is now on par with technology performance, a structural change that solidifies demand durability in the sector. Modine’s management has guided for an ambitious annual growth rate of 50-70% in its data center business over the next two fiscal years. They expect the capacity necessary to support this trajectory to be fully operational by the end of fiscal 2027, with additional chiller lines anticipated to come online in fiscal 2028.
The company’s current capital plan aims for potential data center revenues of up to $3 billion, with long-term capacity agreements enhancing revenue predictability. Beyond core cooling products, Modine is broadening its Climate Solutions portfolio to include various heating, ventilation, and air handling solutions. Recent acquisitions, such as Scott Springfield Manufacturing and key assets from Napps Technology, as well as the addition of AbsolutAire, L.B. White, and Climate by Design International in fiscal 2026, expand Modine’s capabilities into direct-fired heating, specialty heating, and critical process air handling.
Execution will be key to Modine’s growth strategy. The company has already commissioned four new chiller lines in fiscal third-quarter 2026, with plans for four more in the fourth quarter, targeting a total of eight lines by fiscal year-end. Looking further ahead, the roadmap includes aspirations for around 20 chiller lines by early fiscal 2028, which would represent a cumulative capacity expansion of about 125% over two years. The flexibility of these lines will allow them to be converted into modular data center units or large air handling systems as needed.
While the opportunity is substantial, the rapid scaling of operations introduces complexities related to supply chain management, labor, and quality control. Modine is not alone in the field; it competes with established players like Vertiv Holdings and Johnson Controls in the AI-driven data center cooling sector. Vertiv has emerged as a direct beneficiary of hyperscale and AI capacity expansions, offering integrated thermal management and power infrastructure solutions tailored for high-density data centers. Its strong relationships with hyperscalers provide it with valuable visibility into future buildouts.
Johnson Controls, although it operates on a broader scale, remains a major global provider of HVAC and building solutions with growing involvement in mission-critical cooling systems. Its diversified platform, service network, and scale contribute to its stability, even as data centers represent just a fraction of its overall business.
As Modine scales its operations to meet the demands of AI-driven data center cooling, it does so with a multi-year visibility and expanding capacity that could facilitate significant growth in earnings. With an expected long-term earnings per share growth rate of 34%, the company’s prospects appear promising. Modine currently holds a Zacks Rank #1 (Strong Buy), indicating strong market sentiment surrounding its future potential. The company is poised to leverage its cooling solutions expertise as it navigates this rapidly growing segment of the technology landscape.
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