Trane Technologies (NYSE:TT) raised its full-year revenue and earnings outlook after reporting second-quarter growth in bookings, revenue and adjusted earnings per share, supported by demand in commercial HVAC, services and residential markets.
Chair and CEO Dave Regnery said enterprise organic bookings rose 37% in the quarter, driving a record backlog of $12.1 billion, up 70% from a year earlier. Organic revenue increased 9%, while adjusted EPS grew 11%.
Commercial HVAC Bookings Drive Record Backlog
Commercial HVAC was the primary source of strength, particularly in the Americas. Regnery said Americas commercial HVAC bookings rose 50% year over year to an all-time high, while organic revenue increased by the low teens. Applied bookings rose 130%, marking the fourth consecutive quarter in which applied bookings exceeded 100% growth. On a two-year stacked basis, applied bookings have increased more than fourfold, he said.
About 90% of the company’s backlog is in commercial HVAC, according to Regnery. Approximately $6 billion of backlog is scheduled for 2027 and beyond, providing visibility beyond the current year.
Applied revenue grew more than 40% in the second quarter, and the company expects that growth rate to continue in the second half based on its current guidance, Regnery said. He added that Trane does not expect to turn away orders because of capacity limitations, citing a fourfold expansion of applied capacity during the past three years, along with continuing lean initiatives, brick-and-mortar investments and acquisitions.
Chief Operating Officer Donny Simmons said the company booked four orders greater than $100 million during the quarter, including one at Stellar Energy. Trane acquired Stellar, a provider of modular chiller plants, and expects the business to generate approximately $500 million of revenue in 2026 from the backlog it brought into the company.
Regnery said Stellar is currently focused almost entirely on data centers but has applications in other verticals. While the company previously expected the acquisition to be modestly accretive to EPS this year, he said Trane now expects it to be flat for EPS in 2026 as it pulls forward investments to implement its operating system and support future growth.
Data Center Demand Broadens, With Focus on Thermal Management
Management said data center demand remains important but emphasized that commercial HVAC growth was broad-based. Regnery said Trane tracks 14 verticals in the Americas, all of which posted booking growth of more than 20% during the quarter. On a year-to-date basis, 11 of the 14 verticals recorded order growth, with most of those increasing at double-digit rates.
The company is working with hyperscale and colocation customers on data center designs, including the full thermal-management system rather than only chillers, Simmons said. This can include chillers, air handlers and coolant distribution units, or CDUs.
Regnery said the market is increasingly weighted toward air-cooled systems and closed-loop designs, rather than evaporative cooling. He said Trane’s liquid cooling business is performing, that the LiquidStack acquisition is exceeding expectations, and that its pipeline is strong. The company did not provide a detailed breakout of CDU backlog or revenue.
Management acknowledged that construction schedules can shift as data center operators deal with site and power-connection requirements. Still, Simmons said the company has confidence in its backlog and incorporates an allowance for normal project “leakage” or breakage into its guidance.
Regional Trends and Margin Outlook
In EMEA, the Middle East conflict pressured results. CFO Chris Kuehn said the Middle East represents less than 3% of enterprise revenue but nearly 15% of the EMEA segment. Excluding the Middle East, EMEA bookings grew by the mid-teens and revenue was up by the low single digits, he said.
Revenue in the Middle East was down about 30% in the second quarter, and Trane expects a similar decline in the second half. The company took cost actions at the end of June, including rightsizing positions and infrastructure. Kuehn said those actions should move the expected second-half deleverage into gross margins rather than above gross margins.
Asia-Pacific produced bookings growth of 31% and organic revenue growth of 10% during the quarter. Regnery said China remains dynamic, while the rest of Asia is growing. The company is increasing channel investments in markets including India, Malaysia and Thailand.
Trane expects margins to strengthen in the second half. Kuehn said the company expects roughly 50 basis points of year-over-year margin expansion in the third quarter and more than a point of expansion in the fourth quarter, led primarily by the Americas. EMEA margins are expected to remain under pressure because of the Middle East revenue decline.
The company said it is investing in capacity, innovation and operational excellence, which affected near-term leverage but is intended to support longer-term growth. Kuehn said price versus inflation was a headwind in the second quarter and is expected to remain a smaller headwind through the rest of the year.
Residential, Transport and Capital Allocation
Residential bookings increased by the high 20s and organic revenue grew by the low teens in the quarter, exceeding management’s expectations. Kuehn said year-to-date sell-in was approximately equal to sell-through, and inventory at independent wholesale distributors was at an appropriate level at quarter-end.
Regnery said the residential business is primarily focused on replacement demand, with residential new construction representing a share in the teens as a percentage of the business. Trane now expects residential revenue to grow by the mid-single digits for the full year after previously anticipating a potentially flat market.
For Thermo King transport refrigeration, management expects market fundamentals to improve in late 2026 and support a multiyear recovery. Regnery cited sustained high rejection rates, improving spot-to-contract spreads and utilization rates that have trended positively for 10 months.
Trane reiterated a planned 2026 capital deployment range of $2.8 billion to $3.3 billion. The company increased its annualized dividend by 12% earlier this year to $4.20 per share and repurchased approximately $840 million of stock year to date. About $3.8 billion remains under its repurchase authorization.
Management expects capital expenditures to equal 2% to 3% of revenue in 2026, supporting capacity expansion and other investments.
About Trane Technologies (NYSE:TT)
Trane Technologies (NYSE: TT) is a global climate solutions company focused on heating, ventilation and air conditioning (HVAC) and transport refrigeration systems. The company develops, manufactures and sells a broad range of climate-control products under well-known brands, including commercial and residential HVAC equipment, building management systems and controls, and transport refrigeration units. Its product portfolio spans rooftop and packaged units, chillers, furnaces, air handlers, compressors, and related components designed for commercial buildings, industrial facilities, residences and transportation applications.
In addition to equipment, Trane Technologies provides lifecycle services that include installation, maintenance, parts, retrofit and aftermarket support, as well as digital and controls solutions for building performance and energy management.
