Dive Brief:

• Carrier Global Corp. is pushing further into the data center market with the introduction of 2-megawatt and 3-megawatt air-cooled chillers, adding to its roster of commercial HVAC products as it grew sales 12% year over year in the third quarter, the company’s top executive said last week.
• The company worked through supply chain hiccups in the rollout of the large-scale chiller systems, but those are behind it, CEO David Gitlin said October 29 on the company’s earnings call. “Were there some initial issues? Yes,” he said. “But as we go into 2027, a lot of those initial teething pains should start to subside now that … we can do more of our dual sourcing.”
• The company is also introducing a series of large-scale coolant distribution units that are becoming increasingly popular in data centers. “We introduced our 1-megawatt” CDU, Gitlin said. “We have a 2.6-megawatt, close to 3-megawatt unit that's coming out here in the next couple of months, and then we have a 5-megawatt unit that comes out towards the end of this year.” Both colocation facilities and hyperscalers are ordering the CDUs, he said.

Dive Insight:

Carrier in some ways has had a rough year, company executives indicated.  

The Section 232 tariffs that the Trump administration imposed last year hit it harder than others in the HVAC space, and although it recouped $130 million of the costs after the U.S. Supreme Court shot down the legal authority on which the tariffs were based, the refund will only partially offset what it couldn’t absorb in pricing, CFO Patrick Goris said. “We no longer see the impact of the IEEPA refund to offset increased input cost headwind,” he said.  

IEEPA refers to the 1977 International Emergency Economic Powers Act that the administration tried to base its tariffs on. Section 232 authorizes the President to impose trade restrictions if the Secretary of Commerce determines that imports of a good threaten to impair U.S. national security. 

Additional cost increases later in the year for HVAC-critical materials like steel, copper and aluminum, along with higher freight charges as gas and diesel prices rose, have also been a challenge, Gitlin said. But those challenges hit other companies in the space, too, he said. 

“Unlike tariffs, where perhaps we were impacted a bit more, we believe that the additional input costs have likely impacted the entire industry proportionally,” he said.  

The company raised prices to help offset the higher costs, but in some cases the pricing it was able to get in the market wasn’t as much as it was aiming for. 

“Lower-than-expected price realization [contributed to] pressure on margins,” Goris said.  

Overall, the company’s input costs were $800 million higher than it had planned for because of tariffs, inflation and higher fuel costs, the executives said. 

“When you wake up in April and, all of a sudden, you have a sudden influx — a sudden increase in input costs that is in the hundreds of millions of dollars — it proved to be very difficult to offset dollar-for-dollar right away.” Gitlin said. 

Strong foundation

The commercial HVAC business remains a stalwart for the company, Gitlin said, and its aftermarket business, which the company has been restructuring, is becoming a growth driver.  

Carrier’s Climate Solutions Americas segment’s commercial orders increased about 90% year over year, including a 400% jump in data center orders, according to the earnings presentation. 

Year-to-date data center orders have exceeded $3 billion, an increase of nearly 350%. “We delivered more than $550 million in data center sales in the third quarter, exceeding our target, and we remain on track to deliver our full year commitment of $2 billion,” Gitlin said. “This momentum has contributed to record backlog of more than $8.5 billion.... That backlog excludes minimum volume commitments under long-term agreements. Earlier this month, we signed an agreement with a hyperscaler for more than $3 billion.”

More broadly, the company’s commercial HVAC and aftermarket businesses are strong, having grown at double-digit rates every year since Carrier spun off its aerospace division in 2020. “By the end of this year, we expect these businesses to be approximately twice their size versus spin, and by the end of next year, we expect them to represent nearly half of our portfolio,” Gitlin said. 

Gitlin credited product innovations, like the 2- and 3-megawatt chillers and its line of CDUs, along with upgrades to its building management system software, for helping to drive sales. But it’s not just data centers that are growth areas for the company, he said. “Retail is good, healthcare is good, [as well as]… K through 12,” he said. 

To help manage demand, Carrier is opening a manufacturing facility in Fort Worth, Texas, that will employ 1,500 people and start delivering products next summer.  

The facility, Gitlin said, is to “keep up not only with the backlog that we've committed to over these coming couple of years, but it's also to keep up with the pipeline and the win rate that we're seeing. It's going to effectively more than double our capacity in the Americas, which we need. And it's a wonderful problem to have all the growth that we've seen.”

Gitlin credited the company’s business wins, especially in data centers, to its focus on delivering its new products to customers despite logistical hiccups.

“We designed and developed products that would have taken 18 months — we did them in six months,” Gitlin said. And … the customer was there to witness the first-of-kind-testing…. And then, even after we commission[ed] and the data center's [were] up and running, we stay there shoulder to shoulder with our customer to ensure that the units are performing as they expect.”

In addition to higher input costs, the company is absorbing a $3.1 billion non-cash goodwill impairment for its European HVAC operations, Climate Solutions Europe, which has been underperforming since Carrier acquired Viessmann Climate Solutions in 2024.

“I remain confident in the strategic rationale and the benefits of the acquisition,” Gitlin said. “In hindsight, our timing was unfortunate. I am, however, very encouraged by what we see ahead. Markets are improving, demand for heat pumps and air conditioning is very strong.”