Data centers are increasingly relying on behind-the-meter power to fuel their operations, but it’s not a trend that will stop with them, Trane Technologies Chair and CEO David Regnery said on the company’s first-quarter earnings call Thursday.
“We … have a philosophy that it will happen in all buildings,” Regnery said while discussing Trane’s last-quarter financial and operational performance with analysts. “Behind-the-meter needs are not only in data centers…. Long term, we [also] believe all buildings will be smarter and more resilient…. That is part of our future growth projections because most buildings waste about 30% of the energy they pay for.”
Trane reported $5 billion in revenue for the quarter, led by growth in its commercial HVAC business for the Americas, according to the company’s earnings release.
In the Americas, applied commercial HVAC bookings grew more than 160%, enterprise organic bookings were up nearly 70% and the company’s backlog in the business was up 40%, the company said.
“Our America's commercial HVAC business is executing at a very high level, significantly outperforming end markets,” Regnery said.
Data centers are a big driver of that growth, but the company also saw strong performance in higher education, government and healthcare, among other verticals, he said.
Operationally, it helps that the company owns 20 manufacturing facilities in the United States, Regnery said. That gives it control to meet its backlog and manage price fluctuations. “Localized manufacturing [gives us] advantages amid cost pressures,” he said. “We expect to mitigate tariff and inflationary pressures through our business operating system.”
CFO Christopher Kuehn said the company expects raw material costs to go up and to face impacts from tariffs, but those shouldn’t lead to a change in its pricing strategy. “We expect to manage this for the full year, and it is baked into our guide,” he said.
The company is competing heavily in the data center space and the service contracts it enters into with its customers are helping it generate about a third of its revenue from services, Kuehn said.
“Complex applied systems [like data centers] require the [original equipment manufacturer] to be connected,” he said. “They require the OEM to provide service and maintenance, and the last thing a data center wants is to ever have a fault or go down.”
The company is working with hyperscalers and chip makers on reference designs — cooling systems based on where data center computing technology is heading — which helps keep it front and center with the companies fueling data center growth, Regnery said.
“The data center vertical keeps moving with innovation, and we keep pushing and developing that innovation,” he said.
Its newest competitive advantage, Regnery said, comes from its acquisition earlier this year of Stellar Energy Americas, a designer of chiller systems that can be inserted into data centers in modular components. That part of Trane’s business has a $1 billion backlog and it’s poised to expand to other property types, partly in response to skilled labor shortages that make the modular components attractive for less labor-intensive installation, Regnery said.
“Skilled labor scarcity is not unique to the data center vertical — it applies to all of our verticals — and we know this is a great solution to help alleviate some of those shortages,” he said.
