Price Increases Remain Part of the Residential HVAC Outlook

Carrier Reports 

Carrier expects both its U.S. residential and light commercial HVAC businesses to post high-single-digit growth this year, with performance running ahead of expectations. CEO Dave Gitlin said the residential business is performing “far better” than Carrier had expected internally, and light commercial surprised the company as well.  

“The third quarter looks quite good,” he said. 

Gitlin said part of the residential improvement reflects easier comparisons, because Carrier is no longer dealing with the destocking that affected results last year. He also credited higher pricing, noting that “we’re usually the first to drive price in a competitive, aggressive way,” as well as market share gains. 

For example, in new construction, Gitlin said the company has added customers and won business based on relationships, delivery, quality, and cost rather than simply price. Despite taking an aggressive approach to pricing, Carrier estimates it has gained about 30 basis points of residential market share. 

Higher prices remain necessary as Carrier faces increased input costs, including tariffs, fuel, copper, steel, and aluminum, Gitlin reported. He said the company has been pushing through price increases and may consider additional out-of-cycle increases. However, he emphasized that current conditions are different from 2022, when Carrier raised prices by roughly 8% several times over an 18- to 24-month period.  

“We can’t raise price 8% every four months, but we can and will continue to raise price,” he said. 

Underlying residential demand is also stronger. Gitlin said the U.S. market is now tracking at about 7.5 million units this year, above Carrier’s earlier expectation of roughly 6.5 million to 7 million. While that remains below the 9.2 million units sold in 2024, he said conditions are improving. Gitlin attributed the stronger-than-expected market partly to pent-up housing demand and said the repair-over-replace trend seen last year has “largely subsided.” 

Carrier also expects continued strong growth in its U.S. commercial HVAC business, with data centers playing a major role in the company’s outlook. Gitlin said global commercial HVAC orders were up more than 50% in the first half of the year, helping push Carrier’s total company backlog to a record $8 billion. He described U.S. commercial HVAC demand as particularly strong and said commercial sales in the Americas are expected to exceed residential sales within the next couple of years. 

Data centers are a key driver. Carrier expects about $2 billion in data center revenue this year, with roughly $1.5 billion coming in the second half. Gitlin said the company feels confident in delivering that volume because it has passed key customer-witnessed technical tests, expanded sourcing for critical components, adjusted parts stocking strategies, and trained technicians for every production shift.  

“We are very well positioned there,” he said. 

Looking to 2027, Gitlin said $3 billion in data center revenue would be a reasonable minimum based on Carrier’s current backlog, pipeline, and capacity. The company plans to open a new U.S. site in either Texas or Alabama that will double existing capacity. That facility is being designed to produce both data center and non-data-center equipment, giving Carrier flexibility to serve sectors such as health care, higher education, semiconductor manufacturing, renewable energy, and infrastructure. 

Trane Update 

Trane Technologies is also experiencing continued strength in its U.S. commercial HVAC business, with data centers contributing to a broader increase in demand across multiple vertical markets. CEO Dave Regnery said the company’s pipeline is “probably the most I’ve seen in my career in this industry,” while second-quarter commercial HVAC Americas orders were up 50%. 

Data centers remain a major growth driver, but Trane emphasized that the opportunity extends well beyond that sector. CFO Chris Kuehn said all 14 commercial verticals that Trane tracks grew in the second quarter, specifically pointing to continued strength in higher education and improving conditions in the office market.  

Within data centers, Trane is focusing on complete thermal management systems rather than individual pieces of equipment. Regnery said the company is working with hyperscalers and chip manufacturers on designs that combine chillers, coolant distribution units (CDUs), cold plates, and electrical infrastructure.  

“We’re not selling a product. We’re selling a solution. We’re selling a system,” he said. 

Regnery also said most current data center projects use air-cooled or closed-loop systems, with “smart” chillers increasingly able to optimize when to use compressors versus free cooling.  

“That same technology is being deployed right now not only in data centers, but in schools, in hospitals, wherever it’s applicable,” he said. “It’s all about efficiency. It’s all about how you generate a system that’s different and more competitive for our customers.” 

To meet the demand, Trane has expanded its applied-system manufacturing capacity fourfold over the past three years and continues to add capacity where needed.  

“We know what our pipeline is,” said Regnery. “We know what our commitments are, and we have a business operating system that helps us make sure that we stay in front of that, and we plan on doing that.” 

The strength is not limited to commercial HVAC. Residential, which accounts for about 15% of Trane Technologies’ business, is expected to grow at a mid-single-digit rate this year, with channel inventories now back in balance. Regnery said Trane made the decision late last year to reduce production and “get our inventory right going into 2026,” and he said the company now considers residential inventory levels to be in good shape. 

On pricing, Trane has already implemented two residential increases this year: one effective April 1 and another July 1, both for up to 5%. Kuehn said pricing decisions are based on input costs, demand, and what the company can offset through supply-chain actions.  

“Pricing is a lever that we’ll kind of have to implement to ultimately have that cost versus inflation balance out,” he said. 

Kuehn said price versus inflation was a headwind in the first half of the year and is expected to remain a headwind in the second half. He also emphasized that residential pricing is highly localized, describing it as “really a zip code by zip code space where you’re making decisions on price.” Through the end of July, however, Trane was achieving the pricing yield it expected from the increases already announced. 

While Regnery declined to provide intra-quarter residential demand guidance, he noted, “It’s been pretty hot out this summer. In North Carolina, I was out walking yesterday, and it was 100ºF. I was like, ‘This is crazy.’ So we’ll see.” For now, Trane is maintaining its full-year outlook for mid-single-digit residential growth.