Madison Air Raises Outlook as Backlog Doubles on Data Center Cooling

Madison Air Solutions (NYSE:MAIR) raised its full-year outlook after third-quarter net sales rose 25% to $1.127 billion and backlog more than doubled to $3.2 billion, driven by data center cooling demand. Adjusted EBITDA of approximately $299 million was up 19% year over year, on a 26.5% margin. The company now guides to full-year net sales of $4.05 billion to $4.125 billion and adjusted EBITDA of $1.04 billion to $1.07 billion — roughly a 26% margin.

For finance teams watching working capital, the signal is a record backlog with a long conversion tail. President and CEO Jill Wyant said more than 70% of the $3.2 billion backlog will convert to revenue in 2027 or later. CFO JJ Foley attributed the year-over-year margin decline almost entirely to mix: the data center cooling business, now the fastest-growing piece, carries lower margins while Madison Air ramps production and brings new programs online.

What did the quarter deliver in earnings and cash?

Adjusted net income doubled to $199 million, or $0.38 per adjusted share, helped by sales growth and tax benefits. Free cash flow for the first nine months of 2026 reached $298 million, and the company continues to expect full-year free cash flow conversion above 100% of net income. Capital expenditures are now projected at less than 1.5% of sales.

Balance sheet capacity also improved. Adjusted net leverage stood at 2.6 times at quarter end, excluding proceeds from its private investment in public equity (PIPE, a sale of shares to private investors), and management expects to finish the year below 2.5 times. Companywide orders grew 26% in the quarter.

How fast is the commercial business growing?

Commercial is where the story concentrates. Commercial orders rose 37% year over year, and segment backlog climbed 125% to $3.1 billion. Commercial net sales reached $772 million, representing 39% organic growth, while segment adjusted EBITDA rose 24% to $200 million at a 26% margin.

Data center cooling was the largest driver of commercial orders, but Wyant said the majority of the company's 15 commercial end markets grew in the quarter. Commercial orders outside data centers increased more than 20%, which matters for anyone assessing concentration risk in the story. Foley said he expects a few percentage points of margin expansion in the data center business over the next several quarters, assuming parts availability and cooperative supply chains. He cited four levers:

• lower unit costs;
• improved labor productivity;
• better use of existing capacity;
• a growing services business.

Residential told a quieter story. Net sales increased 3% to $356 million, with pricing in the low single digits and volume roughly flat. Adjusted EBITDA rose 12% to $105 million, and margin expanded by 225 basis points (one-hundredth of a percentage point each), which Foley credited to productivity, cost actions, pricing, tariff refunds and continuing synergies from the AprilAire acquisition.

What does the raised outlook assume?

Beyond the headline sales and EBITDA ranges, Foley said the company expects low double-digit sales growth in the fourth quarter. One comparison is worth flagging for modelers: fourth-quarter orders are expected to decline year over year because a large order received in the fourth quarter of 2025 will not recur. The order dip is arithmetic, not demand deterioration, and the backlog coverage into 2027 underpins that reading.

Where does the ebm-papst deal stand?

Wyant said Madison Air expects to close its previously announced acquisition of ebm-papst soon after the end of the year. Funding is in place: the company raised approximately $2.25 billion through its PIPE offering, which, together with roughly $2.8 billion of debt and cash, covers the deal. Management remains confident in its target of $160 million in annual cost synergies exiting the third year after closing. Wyant noted that potential revenue synergies from cross-selling and broader customer relationships are not included in current accretion expectations — a conservative posture for anyone modeling the transaction.

Foley said ebm-papst is executing well against estimated 2026 revenue of approximately $2.8 billion and EBITDA of $343 million, with possible upside to those figures.

Is data center demand durable?

Asked about potential data center development restrictions following elections, Wyant said the backlog provides visibility into 2027 and noted that cooling equipment generally arrives toward the end of construction. She said the company focuses on a small group of hyperscale and colocation customers rather than speculative demand — committed buyers, in other words, not hope.

Madison Air is also not contemplating massive capacity investments for 2027. The company expects to accommodate planned growth within its existing manufacturing footprint through efficiency improvements, productivity and some additional production lines. That capex discipline, at less than 1.5% of sales, pairs with the above-100% cash conversion target to frame a quarter built on demand strength rather than spending to chase it.