Johnson Controls (NYSE: JCI) is benefitting from the rapid build-out of data centers as more industries adopt the use of artificial intelligence.
A manufacturer of heating, ventilation, and air conditioning equipment, the company reported revenue rose by 7% to $5.8 billion and organic sales increased by 6% on adjusted net income of $547 million. Shares of the company, which also provides building automation products and technology solutions, rose by 52% over the past year.
The company reported that its systems orders increased by 84% year over year in its Americas region, resulting in a 26% rise in its backlog in the fiscal first quarter.
Data center buildout grows
The rise in building infrastructure for AI, such as data centers, has proven to be advantageous for Johnson Controls, said CEO Joakim Weidemanis during the company’s earnings call.
Data centers require a significant amount of energy to operate continuously, especially in high-density compute environments, necessitating the use of machinery from Johnson Controls that manages the various energy levels to maintain optimal cooling.
“Managing energy consumption while sustaining performance is essential, and that is exactly where our technologies remain critical,” he said. “Against that backdrop, our data center momentum reflects not only strong demand from existing customers but also success in reaching new customers as our differentiated solutions gain traction.”
One of the company’s customers is chipmaker Nvidia (NASDAQ: NVDA). Johnson Controls is providing its thermal management expertise to support the company’s specialized data centers, which utilize AI to generate data analysis and faster outputs through their “AI factories.”
Johnson Controls also launched two chillers that demonstrate how their products can help maintain temperature levels and keep high-density data centers cool, said Weidemanis.
“You can see that impact clearly in the places where technology demonstrates its value today: energy efficiency and decarbonization,” he said. “In an increasingly energy-constrained world, where energy costs continue to rise, our customers are under pressure to manage energy more effectively, reduce their carbon footprint, but also need strong operational returns.”
As data centers continue to consume large amounts of energy, tech companies are still seeking to lower their emissions output.
As more industries integrate AI into their operations to make them run faster and more efficiently, Johnson Controls anticipates that the need for its equipment will rise. The growth will occur not just from the construction of data centers, but also from companies working to lower their own energy costs.
The industrial conglomerate reported that the number of orders keeps rising, increasing by 39% from a year ago, and estimates that organic sales growth for 2026 will reach the mid-single percentage digits.
“We are building a faster-growing, more profitable, and more disciplined company that is easier to run,” he said.
Services, life sciences units growing
Johnson Controls also generates revenue from servicing its equipment. In the Americas, its services sales revenue rose by 10% year over year, including a 4% rise in systems revenue, according to the company’s earnings.
Growth also occurred in the conglomerate’s life sciences sector and mission-critical verticals, Weidemanis said.
“With the rise of biologics-based therapies, the manufacturing environments are materially different … and that’s why large pharmaceutical manufacturers are building new plants in many parts of the world,” he said. “And the indoor operating conditions that they require to be able to effectively manufacture these biologics-based drugs really require very strong thermal management, which is not just HVAC, but also controls.”
The potential for growth for Johnson Controls remains high as the company will likely reap the rewards of more data centers being built, as the company provides additional equipment for data centers and pharmaceutical companies to optimize the temperature and energy use of their buildings.
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