HVAC market: What recent earnings reveal about residential, commercial demand

But unlike building and construction, there’s no single permits series, data sets of starts, or backlog index that captures where the market is heading. Instead, the most useful signals tend to surface indirectly.

Even in this fragmented end market, management commentary frames 2026 around backlog, mix and production discipline rather than a uniform market recovery.

For that reason, recent earnings from the largest publicly traded HVAC manufacturers offer some insights into how this end market is shaping up this year.

OEMs

Carrier’s recent earnings results show a sharp split between residential and commercial HVAC activity in North America.

In Climate Solutions Americas (CSA)—one of four operating segments that include a European division, an Asia/Middle East/Africa division, and a transportation division—the company tied fourth-quarter performance to lower residential volumes and distributor destocking across the region. Residential volumes dropped by roughly 38%. Light commercial volumes fell by about 20%.

Management said those declines translated into much lower manufacturing output, indicating reduced demand flowed directly into fewer production days rather than being absorbed elsewhere in the system.

At the same time, commercial activity moved in the opposite direction.

Carrier reported total company orders increased by more than 15% during the quarter, driven by CSA’s Commercial segment. Within that category, commercial HVAC orders rose nearly 50% year over year, with management citing data center-related projects as a contributor.

While Carrier does not disclose unit shipments or material usage, the contrast between declining residential output and rising commercial orders provides a practical proxy for where physical equipment volumes contracted and expanded.

Carrier’s outlook

Carrier set a conservative baseline for 2026, assuming total HVAC industry units decline by 10% to 15%.

Even so, the company expects roughly 40% of its portfolio, mainly commercial HVAC and aftermarket activity, to post double-digit growth. Management also expects 2026 to benefit from the absence of channel destocking that weighed on 2025 results.

As a result, residential and light commercial volumes may face fewer inventory-related headwinds, even if end-market demand remains uneven.

Trane Technologies

Trane framed demand primarily through orders and backlog rather than unit shipments, offering some volume-related signals among large HVAC manufacturers.

Organic bookings increased 22% year over year in the fourth quarter, pushing backlog to a record $7.8 billion. In the Americas, commercial HBAC bookings rose more than 35%, while applied solutions bookings—custom, engineered systems—increased more than 120%. That resulted in a book-to-bill ratio of 200%, meaning bookings were roughly twice the level or revenue recognized.

It should be noted “organic” bookings are a dollar-based measure and can reflect pricing effects. The metric excludes the impact of acquisitions, foreign-currency translation and similar non-recurring items. Price inflation alone, however, typically does not account for a 22% increase, and sustained gains in bookings generally translate into higher future production as backlog converts.

As at Carrier, residential conditions diverged sharply from commercial trends.

Residential bookings increased at a mid-single-digit rate, while residential revenues declined in the mid-teens.

Management attributed that gap to channel inventory normalization rather than a breakdown in underlying demand. That echoed Carrier’s assessment of worked-down inventories translating into reduced output rather than a buildup elsewhere in the system.

To bring production in line with those conditions, Trane cut factory production days by roughly one-third. That move offers a direct indication of how inventory adjustments flowed through to physical output, reinforcing the same pattern seen at Carrier: weaker residential demand resulted in lower production, while commercial activity followed a separate trajectory.

Trane’s outlook

For 2026, Trane management expects a softer start, followed by stronger growth as backlog converts later. The company pointed to record backlog and a growing pipeline as sources of visibility.

In addition, Trane highlighted its acquisition of Stellar Energy, which expands its exposure to modular and prefabricated data center cooling systems.

Otherwise, the company guided to organic revenue growth of 6% to 7%.

Lennox International

Lennox framed recent performance around volume rather than pricing. Management attributed 2025 results largely to channel destocking and softer residential end markets.

In the Building Climate Solutions segment, the company said favorable mix and pricing offset lower organic sales volumes.

Light commercial industry shipments remained below normal levels, while Lennox’s own organic volume declines stayed in the mid-single-digit range. Although the company did not disclose shipments counts, that commentary offers an implied volume reference point.

In Home Comfort Solutions, Lennox reported a fourth-quarter revenue decline tied to channel destocking and weaker new residential construction.

Management described the inventory adjustments as occurring in two stages.

The first involved distributors working down inventory at the manufacturer level, which reduced shipments and led to lower factory output. That phase, the company said, was largely complete by year-end.

The second stage involved dealers and installers drawing down inventory already purchased from distributors, a process management expects to extend into the middle of the year.

That is an important nuance. Not all HVAC manufacturers provided the same level of detail on channel inventory dynamics.

While several companies described residential destocking as nearing completion, Lennox distinguished between distributor-level and dealer-level inventory adjustments.

The completion of the initial destocking does not necessarily coincide with a recovery in production, particularly if inventory normalization continues further downstream, where completion would be required before residential production meaningfully increases.

Lennox’s outlook

Lennox said organic volumes are expected to decline at a low-single-digit rate. This volume outlook incorporates roughly one percentage point of offset from initiatives such as parts and accessories growth, commercial emergency replacement activity and expansion in ductless and heat pump offerings, executives said.

The company anticipates the first half of 2026 to be weaker than the full-year average, with volume trends improving and turning positive in the second half. By segment, Lennox expects Home Comfort Solutions revenue growth of around 2% and Building Climate Solutions revenue growth of roughly 15%, the latter supported by expectations that industry shipments return to growth.

Upstream

Modine Manufacturing Company

While often described alongside automotive thermal-management suppliers serving automotive markets, Modine Manufacturing’s revenue mix tells a more HVAC- and building-oriented story. Its Climate Solutions segment represents the largest share of company revenue, driven primarily by data-center cooling and other building-focused applications.

Modine tied recent performance more directly to production volumes than many HVAC-adjacent peers, particularly in data center cooling and heat transfer products.

Management said results reflected higher data center production volumes and indicated significant incremental volumes were expected in the next quarter.

Within Climate Solutions, Modine reported data center-related revenue increased $130 million, or 78% year over year. Beyond data centers, Modine said HVAC technology sales increased $35 million, or 48% year over year, driven by recent acquisitions and stronger heating product demand.

Heat Transfer Solutions sales grew 14%. The company attributed the growth to higher demand for coils and coatings—components that serve as practical physical-volume proxies even without explicit material disclosures.

Modine’s outlook

Modine raised its outlook for fiscal 2026, which runs through March 31, and expects total sales growth of 20% to 25% for the full fiscal year.

Climate Solutions sales are projected to increase 40% to 45%, with data center-related revenue expected to rise by more than 70% by fiscal year end.

At the same time, management said underlying market volumes in other parts of the portfolio were not recovering yet, reinforcing the gap between traditional HVAC and industrial demand and the faster growth tied to data center applications.

Gränges

In contrast to HVAC-adjacent equipment and component manufacturers such as Modine, Gränges provide visibility into upstream demand that sells directly into HVAC manufacturing.

Briefly touched upon in their AMU’s analysis of their most recent earnings, Gränges discloses sales volume by end market, including HVAC, allowing changes in HVAC manufacturing activity to be observed directly through shipped tonnages.

In Q4’25, Gränges reported sales volumes to HVAC customers declined 28% year over year, even as total group volumes increased.

Management attributed the HVAC decline to a combination of soft demand and significant destocking across the supply chain, particularly in North America. Executives noted HVAC manufacturing activity fell sharply in the second half of the year following inventory buildup earlier in 2025, leading to a correction that weighed on shipments.

The regional data reinforce that point. In Gränges Americas, HVAC volumes fell to 14,400 metric tons in fourth quarter 2025 from 19,900 metric tons in the prior year period, while all other end markets recorded volume growth.

Shipment patterns over the course of the year reinforce management’s description of an inventory-driven correction. Quarterly HVAC volumes increased year over year in Q1 and Q2, before shifting to year-over-year declines in the second half as that inventory was worked down. As a result, full-year shipments to the HVAC end market finished slightly higher than the prior year, even as underlying manufacturing activity weakened.

Gränges’ outlook

Gränges did not provide discrete full-year 2026 outlook for HVAC volumes. But management noted HVAC demand remains difficult to predict and dependent on the pace of inventory normalization downstream.

HVAC demand for 2026

In theory, the completion of distributor-level destocking would be expected to send an early signal upstream, given lead times and the need to prepare for replenishment, while dealer-level inventory adjustments complete the final phase of normalization.

Across recent earnings calls, however, OEM commentary makes clear this destocking narrative is largely confined to residential HVAC. Carrier and Lennox both framed inventory normalization in residential channels, noting distributor-level destocking largely wrapped up toward the end of 2025. Lennox expects the next downstream stage to conclude around mid-year.

While supply-chain level of destocking may ease pressure on OEM shipments and distributor inventory, it does not, on its own, trigger a replenishment cycle for raw materials.

Instead, the upstream signal appears more closely tied to dealer-level residential inventory normalization, which marks the point at which inventory adjustments translate into renewed production and input demand.

The limited HVAC visibility cited by a supplier as far upstream as Gränges suggests, while residential channel conditions may be stabilizing, the production response directly tied to aluminum demand has yet to fully materialize. That uncertainty persists even as Gränges continues to supply aluminum into commercial-grade HVAC applications, where demand is more driven by an equally opaque building and construction market.

Otherwise, across the HVAC value chain, management commentary points to a clear split between commercial and residential end markets.

Commercial HVAC demand, particularly tied to data center construction, remains the most consistent source of growth. Multiple management teams described strong order pipelines and elevated backlog in the Americas.

In several cases, management tied that momentum to the Americas, where commercial demand continues to offset residential softness and provide the clearest source of volume demand heading into 2026.