Watsco (WSO) Q2 2026 earnings summary

Executive summary

• Revenue grew 2% year-over-year to $2.1 billion in Q2 2026, with residential HVAC equipment up 5% and same-store sales up 1%.

• Operating income reached $238 million, down 12% year-over-year, and EPS was $4.00, also down 12%.

• The acquisition of Jackson Supply added $20 million in June revenue and $230 million in annualized sales, expanding Sunbelt market presence.

• E-commerce sales grew 13% in the first half of 2026, reaching $2.7 billion for the trailing 12 months and 37% of total sales.

• The operating environment has normalized after years of volatility, with stabilizing markets and measurable results from digital investments.

Financial highlights

• Gross profit was $579 million, with a gross margin of 27.5% versus 29.3% last year.

• Operating income reached $238 million, with an operating margin of 11.3%, down from 13.2% last year.

• SG&A expenses rose 3% to $349 million (16.6% of sales), reflecting ongoing technology investments and the Jackson Supply addition.

• Net income attributable to shareholders was $163 million in Q2 2026, down from $184 million in Q2 2025.

• Operating cash flow for the first six months improved by $168 million due to lower seasonal inventory ramp-up; cash used in operations improved to $21 million YTD.

Outlook and guidance

• July organic growth was 4%-5% year-over-year, with expectations for continued unit growth into Q3.

• Management expects more conventional supply-chain trends for the remainder of 2026, aiming for better inventory turns and enhanced returns on invested capital.

• Focus remains on growth with existing and new customers, operating efficiencies, and leveraging technology.

• Management remains focused on achieving a long-term gross margin goal of 30%.

• No formal guidance provided, but the market is described as stable with regional differences.