Watsco Reports Revenue Decline in Q2 2025, Net Income Slightly Up

Watsco, Inc. reported its financial results for the second quarter and first half of 2025, revealing a decline in revenues and net income compared to the same periods in 2024. For the quarter ended June 30, 2025, the company generated revenues of $2.06 billion, a decrease of 4% from $2.14 billion in the prior year. Net income attributable to Watsco, Inc. rose slightly to $183.6 million, up from $181.4 million, reflecting a 1% increase. For the first half of 2025, revenues totaled $3.59 billion, down 3% from $3.70 billion, while net income decreased by 2% to $263.7 million from $268.4 million.

The decline in revenue was attributed to several factors, including a decrease in same-store sales, which fell by 4% in the second quarter and 3% in the first half. The company noted that sales of HVAC equipment, which accounted for 68% of total sales, experienced a 6% decline in the second quarter, primarily due to lower unit volumes driven by temperate weather conditions and reduced home building activity. Additionally, Watsco's gross profit margin improved to 29.3% in the second quarter, up from 27.1% in the prior year, largely due to effective pricing strategies and improved margins across various product categories.

Strategically, Watsco has been active in expanding its operations through acquisitions. In 2025, the company acquired Southern Ice Equipment Distributors, Inc. and Hawkins HVAC Distributors, Inc., which are expected to enhance its market presence and product offerings. The acquisitions contributed to a net increase of 10 locations, bringing the total to 701 locations across the U.S., Canada, and parts of Latin America and the Caribbean. The company continues to focus on integrating these new businesses to drive future growth.

Operationally, Watsco's employee headcount has increased, reflecting the company's expansion efforts. The company reported a rise in selling, general, and administrative expenses, which increased by 6% on a same-store basis, primarily due to higher headcount and associated costs. The company also noted a significant increase in inventory levels, which were driven by seasonal demand and the transition to new A2L product lines.

Looking ahead, Watsco remains cautiously optimistic about its future performance, despite the challenges posed by market conditions and competition. The company plans to continue leveraging its technology platforms to adapt to changing market dynamics and enhance operational efficiency. Watsco's management emphasized the importance of maintaining a strong focus on the HVAC replacement market, which is expected to provide stability amid fluctuating demand. The company is also evaluating the potential impacts of recent tax law changes and ongoing regulatory developments on its operations and financial performance.