Acuity Inc. (Acuity (AYI)) just gave investors a reason to celebrate. The industrial technology company's stock surged more than 21% on Thursday after it reported fiscal third-quarter results that blew past expectations, thanks to strong momentum in its 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 came in at $5.31 per share, beating analysts' expectations of $5.19. That's the kind of beat that gets the market's attention.

Intelligent Spaces Drives Growth

Acuity operates through two segments: Acuity Brands Lighting & Controls (ABL) and Acuity Intelligent Spaces (AIS). The story here is really about AIS. Revenue from that segment 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. So while the lighting business is a bit sluggish, the intelligent spaces side is picking up the slack.

Margins Improve Despite ABL Pressure

Overall, operating margin expanded 420 basis points to 16.1%, and operating profit jumped 38.3% from a year ago. Consolidated adjusted operating margin edged down 10 basis points to 18.7%, but that's still solid. At the segment level, ABL adjusted operating margin slipped 60 basis points to 18.2%, while AIS adjusted operating margin improved 150 basis points to 25.1%. That's a nice spread.

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 slightly 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. That's a big deal. Data centers are booming thanks to the AI arms race, and Acuity is positioning itself to be a key supplier.

Ashe also said Acuity's performance reflects stronger product offerings, improved service levels, technology-driven enhancements, and productivity gains. He noted that 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.

On the Intelligent Spaces front, Ashe said the segment continues to gain momentum, led by Distech and QSC. 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 market data.