Q1 HVAC and Water Systems Earnings Recap: Advanced Drainage Leads, AAON Surges
With the first-quarter earnings season coming to a close, it’s a natural time to step back and assess which companies delivered—and which fell short. In the HVAC and water systems space, a mix of essential infrastructure demand and cyclical construction trends shaped the results. Here’s how the sector fared, starting with Advanced Drainage Systems (NYSE:WMS).
These companies sell mostly non-discretionary equipment—water heaters, vents, drainage systems—that come with predictable replacement cycles. Energy efficiency regulations and clean-water initiatives have been driving incremental demand for years. Still, new installations remain tied to residential and commercial construction, which is sensitive to interest rates and broader economic swings. That backdrop made Q1 results particularly telling.
The nine HVAC and water systems stocks tracked by our team collectively beat revenue expectations by 6.9% in Q1, a strong showing given lingering macroeconomic headwinds. Shares have held up well, rising an average of 7.9% since the latest earnings reports were released.
Advanced Drainage Systems (NYSE:WMS)
Founded as a farm drainage company, Advanced Drainage now provides clean water management solutions across the U.S. It reported Q1 revenue of $676.8 million, up 9.9% year over year and 3.8% above analyst expectations. Growth was fueled by strong Allied product sales and the contribution from the NDS acquisition, which closed during the quarter. Adjusted EBITDA also rose 6%, driven by favorable volume and pricing. CEO Scott Barbour noted the company continues to focus on material conversion, new product introductions, and acquisitions amid a “challenging demand environment.” Shares have edged up 1.7% since the report to $139.15.
AAON (NASDAQ:AAON)
AAON, which makes HVAC equipment for commercial and industrial buildings, posted the most impressive beat of the group. Revenue surged 54.3% to $496.9 million, crushing analyst estimates by 29.5%. The company also topped expectations on EBITDA and EPS. AAON’s growth was fueled by its massive lab testing infrastructure and continued demand for energy-efficient systems. Shares have soared 44.2% since earnings to $141.75.
A.O. Smith (NYSE:AOS)
The inventor of the glass-lined water heater, A.O. Smith reported $945.6 million in revenue, a 1.9% decline year over year and a 3.5% miss versus consensus. It was a disappointing quarter: full-year EPS guidance came in well below expectations, and revenue guidance also missed. The stock dropped 10.6% to $56.94. While A.O. Smith raised its full-year guidance more than peers, the market punished the weakness against analyst estimates and slowest revenue growth in the cohort.
Carrier Global (NYSE:CARR)
Carrier Global, founded by the inventor of air conditioning, generated $5.34 billion in Q1 revenue, up 2.4% year over year and 6.8% above forecasts. The quarter was highlighted by an impressive beat on organic revenue and overall revenue estimates. However, Carrier’s full-year guidance update was the weakest among its peers. Shares have gained 4.3% since reporting, currently trading at $64.43.
Zurn Elkay (NYSE:ZWS)
Zurn Elkay, which claims to have saved over 30 billion gallons of water, delivered $433 million in Q1 revenue, up 11.4% from a year ago and 3.2% above expectations. The company also beat analysts’ adjusted operating income estimates. Shares have been flat since earnings at $48.27.
What Happened Next: AI Anxiety and Geopolitical Shift
Late in 2025 and into early 2026, markets were gripped by fears that artificial intelligence would erode pricing power for software companies and compress margins. Crypto investors worried that autonomous AI agents could render existing infrastructure obsolete. That narrative triggered a rotation into safer assets. But by spring 2026, attention pivoted sharply from technological disruption to geopolitical risk. Escalating tensions between the U.S. and Iran became the dominant market driver, shifting investor focus from growth rates to oil supply, inflation, and global stability.
For investors looking for companies with strong fundamentals that can weather any macro environment, our Hidden Gem Stocks list offers a starting point. These picks are designed to perform regardless of the political or economic climate.
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