Worthington's Liquid-Cooling Engine Ramps Up as AI Data Centers Become a Multi-Year Growth Platform

ASME tank shipments for data centers are inflecting, while temporary A2L comps and a ClarkDietrich trough mask a structurally improving margin story.

WOR · Earnings Call · 2026-06-24

A Quiet Inflection in Liquid Cooling

Worthington Enterprises reported a solid fiscal Q4 on June 24, with sales up 17% and organic growth of 3%. The headline was steady, but beneath it a genuinely new growth platform is taking shape: ASME tanks for data centers. CEO Joe Hayek put a clear number on it—“We shipped approximately $13 million of ASME tanks for data centers during fiscal 2026, and we currently expect to ship at least that much in the first quarter of fiscal 2027.” — Joe Hayek, President and Chief Executive Officer · 2026-06-24 That's a meaningful acceleration from the prior year, when the business was barely on the map. Hayek framed it as a multi-year opportunity, noting that liquid cooling is just beginning to replace air cooling in AI data centers. The data center theme has been building quietly across the portfolio—WAVE, ClarkDietrich, Elgen, LSI, and Amtrol all contribute—but this is the first time management has put a dollar figure on the ASME line. “Our ASME water tanks are increasingly becoming a critical component of the liquid cooling systems being deployed to support next-gen computing infrastructure.” — Joe Hayek, President and Chief Executive Officer · 2026-06-24 The company is deliberately keeping capital intensity low by partnering with manufacturers while providing engineering expertise, positioning itself as a "default solution provider" to integrators. This is a classic data centers story, but with a specific industrial twist—Worthington is selling physical tanks, not chips. Compare this to where the conversation was six months ago. In the Q3 call, Hayek was more tentative: “ASME tanks in data centers. That's just not us raising price or having more value of the same thing. That's having new products that are available to either defend our existing businesses.” — Joseph Hayek, President and Chief Executive Officer · 2026-03-25 Now it's a disclosed revenue line with visibility. The market seems to be underappreciating this ramp—the stock has been range-bound, up just 3% over the last 90 days and sitting about 7% below its late-June peak, even as global keyword momentum around "AI data centers" climbs (49 positive mentions in the tape).

The A2L Hangover and a JV Trough

The quarter wasn't without noise. Building Products organic growth slowed to 5% from mid-teens, which management attributed to a difficult comparison from the A2L refrigerant transition. CFO Colin Souza quantified the EBITDA drag:

From an EBITDA standpoint, we estimate the impact was approximately $5 million relative to the prior year quarter.
Colin Souza, Chief Financial Officer · 2026-06-24

That's a one-time normalization, and the company noted that the installed base of A2L equipment continues to grow, supporting a future service and repair opportunity. More importantly, ClarkDietrich—the joint venture that drove equity earnings down $7 million in the quarter—is being called as a trough. Hayek said, “We're pretty confident that's a trough for the business. We see a bit of upside with limited downside, assuming market conditions stay where they are.” — Joe Hayek, President and Chief Executive Officer · 2026-06-24 The JV is losing share to smaller competitors in a weak new-construction environment, but it continues to gain share in data centers and other large projects. Combined with the A2L comp fading by Q2, the earnings drag looks period-specific, not structural.

Financial Strength Backs the Growth Ambition

Worthington's balance sheet and cash flow are quietly improving. Revenue grew 24% YoY to $379M, with free cash flow of $55M in the quarter—a 102% conversion rate on adjusted net earnings. The company also reduced SG&A as a percentage of sales by 200 basis points, and wholly-owned Building Products EBITDA margin expanded 220 basis points. FCF totaled $170M for the year, and management expects CapEx to return to normalized levels after the modernization project completes by mid-FY27. Net debt stands at just under 1x trailing EBITDA, leaving room for both buybacks and M&A. This financial flexibility matters because the data center story is still early. The company sees "a real lag from when you see something in the media to when the revenue opportunity materializes for us." If liquid cooling adoption follows the trajectory that AI server demand suggests, Worthington's ASME tanks could become a standard component in every new data center build—a high-margin, low-capital attach to a booming end market.

Why It Matters

At ~$2.7B market cap and trading at 23x trailing net earnings, Worthington is not expensive for a company with a new growth engine. The market is still modeling it as a cyclical metal fabricator, but the A2L transition commentary and the ClarkDietrich trough call suggest the cyclical headwinds are peaking. Meanwhile, the liquid cooling opportunity is inflecting from concept to revenue. If the $13M ASME run rate doubles or triples over the next few years, it will move the needle on a portfolio that is already generating 100% free cash flow conversion. The stock's recent plateau offers investors a chance to buy a structural growth story at a value price—if they look past the comp noise.