India's summer AC boom delivered strong volumes for Blue Star, but a relentless wave of input cost increases has taken a visible bite out of margins, and the company's MD says the pain isn't over yet.A strong season, a squeezed bottom lineSpeaking to ET Now, Blue Star Managing Director B. Thiagarajan confirmed that the room air conditioner industry posted roughly 35% volume growth and 30% value growth this summer, numbers that, by any measure, represent a strong season.The problem wasn't demand. It was costs.Input costs spanning copper, steel, aluminium, plastics, and petroleum-based materials, rose approximately 13% through May. Blue Star was able to pass on only around 8% of that increase to consumers. The remaining 5% has landed directly on margins."In a great summer season, normally it will be a double-digit operating margin, somewhere around 10%," Thiagarajan said. "That may drop by 2% to 2.5%. That is my concern."You Might Also Like:Compounding the issue: Blue Star, like most manufacturers, began building inventory as early as December. Material purchased at that point carried a lower cost. As the season peaked, the company was importing at significantly higher prices, meaning the weighted average material cost was at its worst precisely when the summer selling season hit its stride.No quick fix in sightThiagarajan was candid that a meaningful margin recovery won't happen overnight. He revised his full-year operating margin guidance from the 8–8.5% range he had indicated at the start of summer down to 7–7.5% for FY27.A recovery, he said, depends largely on how the festive season plays out, and he stopped short of declaring any optimism there. "We are keeping our fingers crossed," he said. "The lost margins to regain will always be very difficult. It can happen only with an extraordinarily great festival season."On the cost side, relief from softer crude prices has not yet flowed through to raw material inputs. Thiagarajan estimates it will take another three to four months before any meaningful correction sets in. Further price hikes to consumers are not ruled out.On a more reassuring note, dealer inventory levels have come down substantially, removing one potential overhang from the distribution pipeline.The data centre bet: ₹4,000-crore revenue target by FY29While the consumer AC business navigates margin pressure, Blue Star is making a determined push into data centre cooling — a segment it sees as a structural, long-term growth driver tied directly to India's AI and infrastructure buildout.Thiagarajan broke the data centre opportunity into three distinct parts.The first is MEP and EPC contracting, large-scale cooling infrastructure projects where Blue Star already claims market leadership, with an order book close to ₹2,000 crore in a market estimated at ₹3,000–4,000 crore. The second is conventional chillers for data centre cooling, a market Blue Star pegs at ₹1,250–1,500 crore, where it holds a 15–20% share.The third, and fastest-growing, is liquid and high-tech cooling for next-generation data centres, a segment Blue Star does not yet have a presence in. The company is currently finalising partnerships to enter this space, with the CDU market alone estimated at ₹250–500 crore today and expected to scale rapidly.Taken together, Thiagarajan expects data centres to contribute approximately 20% of Blue Star's total revenue by FY29, with the company targeting a minimum overall revenue of ₹20,000 crore by that year, implying roughly ₹4,000 crore from the data centre vertical alone.What to watchFor investors tracking Blue Star, the near-term story is margin recovery through the festive season. The longer-term story is whether its data centre pivot — anchored by an already-dominant EPC position, can insulate the company from the cyclical volatility of the consumer AC business.Both chapters are still being written.