Watsco (WSO) Q4 2025 earnings summary

Executive summary

• Achieved record gross margin and Q4 operating cash flow despite challenging market conditions, regulatory transitions, and macroeconomic headwinds.

• Increased annual dividend by 10% to $13.20 per share, marking 52 consecutive years of dividend payments.

• Maintained a debt-free balance sheet throughout 2025, with $780 million in cash and investments, supporting ongoing investments in technology and growth.

• Completed 12 acquisitions totaling over $1.6 billion in sales and acquired three distributors in key Sunbelt markets.

• Scaled digital platforms, with 73,000 contractors engaging digitally and e-commerce sales reaching $2.5 billion (35% of total sales).

Financial highlights

• Full-year 2025 revenues decreased 5% to $7.24 billion; gross profit decreased 1% to $2.03 billion.

• Gross profit margin expanded 120 basis points to a record 28.0%.

• Record Q4 cash flow of $400 million and operating cash flow of $570 million for the year.

• SG&A expenses dropped 2% in Q4, reflecting improved operating efficiency.

• E-commerce accounted for 35% of sales, exceeding 60% in some U.S. markets.

Outlook and guidance

• Management expects a more conventional industry environment and improved growth prospects in 2026, with further opportunities to optimize inventory and operating efficiency.

• Expect gradual margin improvement as A2L transition matures in 2026.

• Early 2026 sales down mid-single digits (~5%), attributed partly to severe weather, but not seen as indicative of full-year trends.

• Focus remains on sales growth, customer engagement, and leveraging technology for efficiency.