Software margins shine while tariffs pressure cooling growth
- HVAC revenue grew 27.6% in Q2 2026, driven by data center demand and recent acquisitions.
- Detection and Measurement margin surged to 28.9%, helped by a richer software mix.
- Section 232 tariffs and capacity expansion costs pushed HVAC margins down to 22.8%.
- SPX acquired Neptronic for $430 million in July 2026 to add more commercial air handling scale.
Cooling demand meets rising costs
SPX is a two-part industrial company. HVAC is the larger piece, and it gets a steady lift from data center cooling. In Q2 2026, HVAC revenue grew 27.6% year over year. Organic HVAC growth hit 18.9%, mainly from higher cooling volumes tied to data centers.
The other piece, Detection and Measurement, is becoming much more profitable. Its Q2 2026 margin rose to 28.9% from 22.8% a year earlier. Management tied that to a better mix of products, including higher software-as-a-service revenue in transportation systems. SaaS means software sold by subscription, which often carries higher margins than hardware.
The bear case centers on execution and cost pressures. Section 232 tariffs hit HVAC margins in Q2 2026, validating prior concerns. SPX also has a large capacity buildout underway to meet data center demand. Start-up costs and inefficiencies from those expansions contributed to HVAC segment margins falling to 22.8%. If those costs linger, the data center upside could be muted.
Buy, build, and deleverage
SPX makes money by selling engineered equipment and systems to commercial, industrial, and government 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 early 2025. In July 2026, SPX spent $430 million to acquire Neptronic, further expanding its HVAC footprint.
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. Recent margin pressure in HVAC shows that scaling physical capacity brings its own growing pains.
Where the growth comes from
Data center cooling
Olympus Max is SPX's large-scale cooling product aimed at data centers. Management booked initial orders in 2025 for 2026 revenue and expects data center revenue to grow rapidly.
Engineered air movement
Air handling and movement systems serve healthcare, institutional, commercial, and data center customers. The $430 million Neptronic acquisition adds significant scale here.
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. Higher SaaS revenue in this business helped lift D&M margin to 28.9%.
Communication technologies
Kranze Technology Solutions scaled this platform in 2025. Middle East geopolitical conflicts have also created unexpected added demand for some communication technology products.
Two segments, one bigger bet
Mix is based on approximate historical segment size, driven by Q2 2026 organic and inorganic growth rates. HVAC remains the clear majority.
What could break
Section 232 tariff hit
High impact · High oddsSPX says it mostly offset past tariffs through pricing and other actions. The new Section 232 tariffs materialized in Q2 2026 as explicit net tariff headwinds, actively compressing HVAC gross margins.
Capacity buildout delays
High impact · Medium oddsSPX is spending heavily to expand HVAC capacity for data centers. Inefficiencies and start-up costs tied to these expansions already hurt Q2 2026 margins. Further delays or poor startup efficiency could limit shipments.
Acquisition digestion risk
Medium impact · Medium oddsSPX bought Thermolec and Crawford earlier in the year and closed a massive $430 million deal for Neptronic in July 2026. These deals add scale, but they also add integration work, purchase accounting, and debt usage.
SaaS mix fades
Medium impact · Medium oddsThe D&M margin jump to 28.9% is a key proof point for the bull case. If the SaaS mix in transportation systems falls back, that margin may not hold near its new high-water mark.
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, driving significant organic growth within the HVAC segment.
Why did Detection and Measurement margins improve?
In Q2 2026, D&M margin rose to 28.9%. SPX said the improvement came from a better product mix, including more higher-margin SaaS revenue in transportation systems and cost optimization efforts.
What is the biggest near-term risk for SPX?
The clearest near-term risks are Section 232 tariffs and capacity expansion inefficiencies. Both issues actively compressed HVAC margins in Q2 2026.
