Will Comfort Systems Maintain Its Margin Expansion in the Competitive HVAC Market?

Comfort Systems USA (FIX) has demonstrated remarkable margin improvement through 2025, with its gross margin reaching 23.6% in the first nine months—a 340 basis point jump year-over-year. The third quarter saw particularly strong expansion of 370 basis points, signaling a structural shift rather than temporary gains.

What’s Driving the Margin Surge?

The margin expansion stems from three interconnected factors. First, the company has strategically pivoted toward higher-value verticals, particularly technology infrastructure and advanced manufacturing. These segments now represent approximately 42% of revenues, compared to 32% previously, fueled by hyperscale data center builds and AI-driven infrastructure deployment. Such projects command premium pricing due to their scale, complexity and technical requirements.

Second, Comfort Systems’ backlog tells the story of disciplined growth. At $9.38 billion as of Q3 2025, it expanded 65% year-over-year from $5.68 billion, with 15.5% sequential growth. This backlog composition—heavily weighted toward technology and manufacturing—virtually guarantees continued margin strength into 2026.

Third, management’s willingness to walk away from low-margin work has fundamentally changed the company’s profit equation. Rather than chasing volume, the firm bids selectively on projects where it can maintain pricing discipline while leveraging its decentralized operating model for efficient labor deployment.

Competitive Positioning in a Consolidating Industry

Comfort Systems competes against larger, diversified players like Carrier Global and AECOM, yet maintains distinct advantages. Carrier Global pursues portfolio consolidation through M&A, assembling products, controls and services to compete in electrification. AECOM, meanwhile, dominates through engineering depth and global reach on massive infrastructure projects.

However, Comfort Systems occupies a pragmatic middle ground. Its tight pairing of acquisition strategy with specialized HVAC and electrical execution allows it to capture bundled, time-sensitive work faster than broader engineering firms. This focused approach has proven superior to competing against AECOM and Carrier Global on their preferred terrain.

Stock Valuation and Future Outlook

FIX shares have climbed 81.5% over six months, commanding a forward P/E ratio of 30.93—a premium to industry peers. Earnings estimates for 2025 and 2026 stand at $26.31 and $30.61 per share respectively, implying 80.2% and 16.4% year-over-year growth. These gains reflect market confidence in the structural nature of margin improvement.

The critical question: can gross margin remain above 24% indefinitely? While perpetual expansion faces challenges, Comfort Systems enters 2026 with robust cash generation, strong visibility and a backlog skewed decisively toward higher-margin verticals. The evidence suggests recent gains represent structural elevation rather than cyclical peaks—positioning the company well above its pre-2024 baseline regardless of near-term margin volatility.