Acuity Inc. (NYSE:AYI) stock surged more than 21% on Thursday after the industrial technology company reported fiscal third-quarter results that beat earnings expectations, driven by strong growth in its Acuity Intelligent Spaces business.

Quarterly net sales rose 1.6% year over year to $1.198 billion, topping the consensus estimate of $1.177 billion. Adjusted earnings increased to $5.31 per share from a year earlier, beating analysts’ expectations of $5.19.

Intelligent Spaces Drives Growth

Acuity operates through two segments: Acuity Brands Lighting & Controls (ABL) and Acuity Intelligent Spaces (AIS).

AIS revenue climbed 14.9% year over year to $303.5 million, fueled by continued momentum at Distech and QSC. Meanwhile, ABL revenue declined 1.9% to $905.2 million.

Margins Improve Despite ABL Pressure

Operating margin expanded 420 basis points to 16.1%, while operating profit increased 38.3% from the prior year. Consolidated adjusted operating margin edged down 10 basis points to 18.7%.

At the segment level, ABL adjusted operating margin slipped 60 basis points to 18.2%. In contrast, AIS adjusted operating margin improved 150 basis points to 25.1%.

Adjusted EBITDA increased to $241.2 million from $236.3 million a year earlier, with margin rising 10 basis points to 20.1%. Operating cash flow totaled $290.3 million during the quarter.

The company ended the quarter with $411.9 million in cash and cash equivalents as of May 31, down from $422.5 million at the start of the fiscal year.

CEO Highlights Growth Strategy

During the earnings call, CEO Neil Ashe highlighted data centers as an increasingly important growth market for Acuity, citing expanding opportunities in both its lighting and intelligent controls businesses.

The company has broadened its portfolio with programmable logic controllers for mission-critical cooling applications and said it is winning business with hyperscale customers.

Ashe said the company’s entry into the data center market should become “a predictable portion of our growth going forward,” signaling confidence that demand from AI infrastructure projects will provide a steady long-term growth driver.

Ashe said Acuity’s performance reflects stronger product offerings, improved service levels, technology-driven enhancements and productivity gains.

He said the company has streamlined its Contractor Select, Design Select and Made to Order portfolios to reduce complexity and improve efficiency for distributors, retailers, architects, specifiers and contractors.

Ashe said Acuity Intelligent Spaces continues to gain momentum, led by Distech and QSC.

He added that Distech is gaining market share through its open-architecture strategy, winning business in universities, sports venues, data centers and enterprise campuses while expanding through OEM partnerships and new products such as Eclipse Resilience.

Looking ahead, Ashe said Acuity will continue investing in growth, pursuing acquisitions, increasing dividends and repurchasing shares when appropriate.

He said acquisition efforts will remain focused on expanding Acuity Intelligent Spaces, particularly Distech and QSC, while prioritizing quality over volume.

AYI Price Action: Acuity shares were up 21.52% at $347.97 at the time of publication on Thursday, according to Benzinga Pro data.

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