Dive Brief:

• The order backlog for HVAC giant Trane Technologies surged 70% from a year ago to more than $12 billion in the second quarter, most of that in its Americas commercial HVAC business, but company executives on Thursday said they see no capacity problem. 
• “We've expanded our applied capacity four times over the last three years,” Trane Technologies Chairman and CEO Dave Regnery said on the company’s second-quarter earnings call July 30. “That expansion continues to happen.”
• Bookings in its Americas commercial HVAC business grew 50% and its backlog surged 90%, much of that for data centers but all of the company’s 14 verticals saw strong growth, Regnery said. “We're not turning away orders,” he said. “We have enough capacity for the orders that are out there and … if you have any orders, then just bring them out.”

Dive Insight:

Trane reported $6.4 billion in revenue for the quarter, up 11% year over year, the lion’s share of that coming from its Americas business, which accounted for $5.3 billion.  

Its applied business, which includes data centers and other big operations that purchase enterprise solutions, increased bookings 130% year over year. 

The company has been working with hyperscalers and other data center developers to understand where their thermal needs are going and that’s helped it keep its product mix aligned with demand, Regnery said.

“We're constantly looking at reference designs,” said Regnery, referring to thermal system blueprints the company develops with its data center clients. “We're gaining a lot of visibility into what they need.”

Despite the attention on liquid cooling, air cooling remains the dominant product mix in the sector, and that technology has evolved to be as efficient as liquid cooling, Donald Simmons, Trane’s executive vice president and chief operating officer, said on the call.

“With air cooled technology today, we can get similar [or] better efficiencies” compared to liquid cooling, he said.

More air cooling systems today are closed loop, which makes them more efficient users of water than evaporative systems, a point that often gets missed when the media covers the resource demands of data centers, said Regnery. 

“If you read the press, you'll see that there's a lot of conversations about how data centers waste water,” he said. “And the reality of it is … that's not necessarily true in the majority of the cases.… Most systems that we're designing now [are] weighted towards closed-loop systems.” 

With the completion of its acquisition earlier this year of LiquidStack, which provides direct-to-chip and immersion cooling systems, Trane is positioned with products on the liquid cooling side as well, Regnery said.  

“We're in the CDU business,” said Regnery, referring to the coolant distribution units that LiquidStack manufactures as part of its cooling systems. “The LiquidStack acquisition is exceeding our expectations and the pipeline is strong.”

Meanwhile, the company is trying to make its thermal systems smarter to use fewer resources, Regnery said.  

“Think of it as building in control systems,” he said. “If you want to run in a free cooling mode — meaning that you could use the ambient air to do the cooling — that's great. If you need to do some vapor compression … we're able to do that.”

With the completion earlier this year of its acquisition of energy-optimization provider BrainBox AI, the company is moving beyond smart thermal systems to smart buildings more broadly, Regnery said.  

“In the future, we believe that buildings will have alternatives to what type of energy they're going to use at any one time, whether that be electricity or whether that be fossil fuel and/or storage,” he said. “BrainBox [is] a great starting point. In tomorrow's world, [buildings] are going to get smarter, and we're going to help them build the resiliency into how they operate. It's a massive opportunity for us.”

On the strength of its orders and backlogs, the company raised its revenue guidance for the year from 9.5% to 11.5%, Trane Technologies CFO and Executive Vice President Christopher Kuehn said on the call.

“This reflects the market dynamics and investment priorities we've [made] and consistent strong execution of our value creation flywheel,” he said.  

The company isn’t expecting to make major changes because of inflation, which it sees persisting through the year.  

“We have an operating system … around how we deal with inflation,” said Regnery. “We have an operating system around how we conduct pricing…. Right now, we're working … on the resiliency of our suppliers. We're working on our own internal productivity. It's a multipronged attack that we leverage.”