Data center cooling meets richer software mix
- Q1 2026 revenue grew 17.4% year over year to $566.8 million.
- HVAC revenue rose 22.0%, helped by data center cooling demand and recent acquisitions.
- Detection and Measurement margin reached 27.0%, helped by more SaaS revenue in transportation systems.
- Thermolec and Crawford add more HVAC scale, but integration still has to prove itself.
- The stock story is strong, but the price already gives SPX some credit for that growth.
Cooling growth, tariff questions
SPX is a two-part industrial company. HVAC is the bigger piece, and it is getting a lift from data center cooling. In Q1 2026, total revenue grew 17.4% year over year, while HVAC revenue grew 22.0%. Organic HVAC growth was 9.6%, mainly from higher cooling volumes tied to data center demand.
The other piece, Detection and Measurement, is becoming more profitable. Its Q1 2026 margin rose to 27.0% from 22.9% a year earlier. Management tied that to a better mix, including higher software-as-a-service revenue in transportation systems. SaaS means software sold by subscription, and it often carries higher margins than hardware.
The bear case is less about demand today and more about what can go wrong next. Section 232 tariffs could hit HVAC margins in Q2 2026 and beyond. SPX also has a large capacity buildout underway, with about $160 million of capex planned across 2025 and 2026 to add roughly $700 million of future capacity. If that work runs late or costs too much, the data center upside could slip.
Buy, build, and deleverage
SPX makes money by selling engineered equipment and systems to commercial, industrial, and government-linked markets. HVAC sells cooling, heating, air movement, and handling products. Detection and Measurement sells transportation systems, location and inspection tools, communication technologies, and aids to navigation.
The company also uses an acquisition flywheel. It buys related businesses, folds them into a segment, looks for cost and sales benefits, then uses cash flow to pay down debt and get ready for the next deal. Kranze Technology Solutions expanded the communications technology platform in Detection and Measurement in January 2025. Thermolec and Crawford expanded HVAC in early 2026.
That model works when acquired businesses fit well and the core markets stay healthy. It can break if SPX pays too much, misses integration targets, or adds debt right before demand cools. Q1 showed strong execution, but the valuation looks less forgiving than the business quality.
Where the growth comes from
Data center cooling
Olympus Max is SPX's large-scale cooling product aimed at data centers. Management booked the first $50 million of orders in 2025 for 2026 revenue and expects data center revenue to grow about 50% in 2026.
Engineered air movement
Air handling and movement systems serve healthcare, institutional, commercial, and data center customers. Crawford adds more commercial air handling scale inside HVAC.
Electric heat
Thermolec adds electric duct heating and expands SPX's HVAC reach in Canada. This gives the segment another path to serve commercial building markets.
Location and inspection software
The Location and Inspection platform added locate performance management software. This can bring more real-time data tools and more recurring SaaS revenue.
Transportation systems
Transportation systems sit inside Detection and Measurement. In Q1 2026, higher SaaS revenue in this business helped lift D&M margin to 27.0%.
Communication technologies
Kranze Technology Solutions scaled this platform in 2025. The Q1 2026 filing also said Middle East conflicts have created added demand for some communication technology products.
Two segments, one bigger bet
Mix is based on Q1 2026 revenue from continuing operations: HVAC at $394.0 million and Detection and Measurement at $172.8 million. SPX said no one customer accounted for more than 10% of revenue in the periods shown.
What could break
Section 232 tariff hit
High impact · Medium oddsSPX says it has mostly offset past tariffs through pricing and other actions. The new Section 232 tariffs may be harder to offset because they can apply to the full customs value of goods, not only the metal content. Management expects the tariff issue to affect HVAC earnings in Q2 2026.
Capacity buildout delays
High impact · Medium oddsSPX is spending about $160 million across 2025 and 2026 to expand HVAC capacity. The plan is meant to add roughly $700 million of capacity once fully running. Delays, cost overruns, or poor startup efficiency could hurt margins and limit data center shipments.
SaaS mix fades
Medium impact · Medium oddsThe D&M margin jump to 27.0% is a key proof point for the bull case. If the SaaS mix in transportation systems falls back, that margin may not hold above 25%. SPX has not yet given a clear recurring revenue percentage or a medium-term SaaS target.
Acquisition digestion risk
Medium impact · Medium oddsSPX bought Thermolec for $140.2 million and Crawford for $299.4 million in early 2026. These deals add scale, but they also add integration work, purchase accounting, and debt usage. The company needs the acquired businesses to hit synergy and revenue goals.
Project and cycle swings
Medium impact · Medium oddsD&M includes project businesses where revenue can move around based on timing. Management has also noted softness in battery and semiconductor end markets. A weaker short-cycle demand signal could show up before the broader company slows.
Middle East supply pressure
Medium impact · Low oddsSPX does not have operations in the Middle East, but the company added risk language about the conflict involving the United States, Israel, and Iran. The concern is indirect: energy prices, inflation, shipping routes, and raw material costs. The filing said the direct impact was not material in Q1 2026, but the longer-term impact is unknown.
In one breath
What does SPX Technologies do?
SPX Technologies sells industrial equipment and systems through HVAC and Detection and Measurement. Its products include cooling systems, heating products, air handling, transportation systems, location tools, inspection software, communication technologies, and aids to navigation.
Why are data centers important to SPX?
Data centers need large cooling systems to keep servers running. SPX's Olympus Max product targets that demand, and management expects data center revenue to grow about 50% in 2026 and reach about 12% of total company sales.
Why did Detection and Measurement margins improve?
In Q1 2026, D&M margin rose to 27.0% from 22.9% a year earlier. SPX said the improvement came from a better product mix, including more higher-margin SaaS revenue in transportation systems.
What is the biggest near-term risk for SPX?
The clearest near-term risk is Section 232 tariffs, especially for HVAC. The company says these tariffs may be harder to offset than prior tariffs, so investors should watch Q2 2026 margin commentary closely.