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Get filing alertsWatsco reports Q2 2026 results: 2% revenue growth, 12% EPS decline to $4.00
Filed July 29, 2026 · Period ending July 29, 2026 · ~1 min read
Key Changes
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Q2 2026 revenue rose 2% to $2.1B, but EPS fell 12% to $4.00 as gross margin compressed 180bp to 27.5%, driven by normalized OEM pricing versus 2025's inflation/tariff-driven pricing actions.
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Completed Jackson Supply acquisition in June 2026, adding ~$230M in annualized sales and 25 Sunbelt locations to the distribution network.
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E-commerce sales grew 13% in H1 2026, reaching $2.7B (37% of total sales) for the trailing twelve months, with some regions exceeding 70% e-commerce penetration.
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Operating cash flow improved $164M year-over-year to a $21M use in H1 2026; company increased annual dividend 10% to $13.20/share and maintains debt-free balance sheet with $464M cash.
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A2L refrigerant transition largely complete; domestic residential HVAC equipment sales rose 5% in Q2 with 2% unit volume growth and 2% higher average selling prices.
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Summary
Watsco reported mixed second quarter 2026 results, with revenue growing 2% to $2.1 billion but earnings per share declining 12% to $4.00. The profit compression stems from a 180-basis-point gross margin decline to 27.5%, which management attributes primarily to the normalization of OEM pricing dynamics.
In 2025, manufacturers implemented substantial price increases to capture inflation and tariff impacts, while 2026 pricing has returned to historical trends. The company estimates approximately 130 basis points of the margin decline relates to these pricing dynamics and the A2L refrigerant transition.
The quarter included the completion of the Jackson Supply acquisition, adding approximately $230 million in annualized sales and 25 locations in high-growth Sunbelt markets. This continues Watsco's buy-and-build strategy, which has added 13 companies representing approximately $1.8 billion in annualized sales in recent years. The company's digital transformation continues to outpace overall growth, with e-commerce sales up 13% in the first half and reaching 37% of total sales on a trailing twelve-month basis. Operating cash flow improved $164 million year-over-year, and the company maintains a debt-free balance sheet while increasing its dividend 10% to $13.20 per share annually.
Section-by-Section Diff
Event · Item 2.02 — Results of Operations and Financial Condition
Watsco reported Q2 2026 financial results via press release.
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On July 29, 2026, Watsco, Inc., a Florida corporation (the “Company”), issued a press release reporting its financial results for the quarter and six months ended June 30, 2026.
Watsco disclosed financial results for the second quarter and first half of 2026. The 8-K itself does not contain specific financial figures; those are in the attached press release (Exhibit 99.1), which was not provided in the filing body.
Event · Exhibit 99.1
Watsco reported Q2 2026 results with 2% revenue growth, 12% EPS decline, and completed the Jackson Supply acquisition for ~$230M annualized sales.
Added in current filing · view on EDGAR →
Revenues increased 2% to $2.1 billion (1% on a same-store basis) • Gross profit decreased 4% to $579 million (gross profit margin of 27.5% versus 29.3% last year) • SG&A increased 3% to $349 million (16.6% as a percentage of sales versus 16.4% last year) • Operating income decreased 12% to $238 million (operating margin of 11.3% versus 13.2% last year) • Earnings per share decreased 12% to $4.00
Watsco reported second quarter 2026 revenues of $2.1 billion, up 2% year-over-year, but operating income fell 12% to $238 million and diluted EPS declined 12% to $4.00. Gross margin compressed 180 basis points to 27.5% due to the timing and magnitude of OEM pricing actions in 2025 versus 2026, with 2025 pricing capturing substantial inflation and tariffs while 2026 pricing normalized to historical trends. The company attributes approximately 130 basis points of the gross margin decline to these pricing dynamics and A2L refrigerant transition impacts.
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During the second quarter, Watsco closed on the acquisition of Jackson Supply Company, a market-leading HVAC distributor with annualized sales of approximately $230 million across 25 Sunbelt locations.
Watsco completed the acquisition of Jackson Supply Company in June 2026, adding approximately $230 million in annualized sales and 25 locations in high-growth Sunbelt markets. Jackson Supply serves approximately 5,000 customers and offers a balanced product mix of HVAC equipment, parts, and supplies. The acquisition adds to Watsco's recent buy-and-build strategy, which has added 13 companies representing approximately $1.8 billion in annualized sales and 145 locations in recent years.
Added in current filing · view on EDGAR →
E-commerce sales grew 13% during the first six months of 2026, far outpacing overall revenue growth, and reached $2.7 billion for the 12 months ended June 30, 2026 (37% of sales), with outperforming regions exceeding 70% in e-commerce sales.
Watsco's e-commerce sales grew 13% in the first half of 2026, significantly outpacing the company's 1% overall revenue growth. For the twelve months ended June 30, 2026, e-commerce reached $2.7 billion, representing 37% of total sales, with some regions exceeding 70% e-commerce penetration. The company's OnCallAir digital sales platform generated $1 billion in gross merchandise value in the first half of 2026, up 14% year-over-year, with contractors presenting quotes to approximately 342,000 households.
Added in current filing · view on EDGAR →
Operating cash flow was a cash-use of $21 million for the six-month period ended June 30, 2026, reflecting the customary seasonal buildup of working capital, compared to a cash-use of $185 million for the same period in 2025, a $164 million improvement.
Operating cash flow improved by $164 million year-over-year, with a cash use of $21 million in the first half of 2026 versus $185 million in the prior year period, both reflecting seasonal working capital buildups. In April 2026, the company increased its annual cash dividend by 10% to $13.20 per share, marking 52 consecutive years of dividend payments. The company maintains a debt-free balance sheet with $464 million in cash and cash investments.
Added in current filing · view on EDGAR →
Second quarter sales reflect stabilizing end-market demand following last year’s transition to next generation HVAC systems containing A2L refrigerants, which affected virtually all domestic HVAC equipment products sold across 650 domestic locations and impacted our customers’ business as well. Domestic residential HVAC equipment sales increased 5% during the quarter, including 2% growth in unit volume and a 2% increase in average selling prices.
The company reported that the A2L refrigerant transition, which affected virtually all domestic HVAC equipment products across 650 domestic locations, is now largely complete. Domestic residential HVAC equipment sales increased 5% in Q2 2026, driven by 2% unit volume growth and 2% higher average selling prices, indicating stabilizing end-market demand. The transition required adding more than 10,000 new SKUs to the company's digital platforms during the first half of 2026.
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Figures/quotes linked to EDGAR · Narrative written by AI · Jul 30, 2026 · How we verify