Watsco Reports Slight Revenue Increase but Decline in Net Income for Q1 2026

Watsco, Inc. reported a slight increase in revenue for the first quarter of 2026, achieving $1.533 billion compared to $1.531 billion in the same period of 2025. The company's net income attributable to Watsco, Inc. shareholders decreased to $79.1 million, or $1.87 per share, down from $80.1 million, or $1.93 per share, in the prior year. The gross profit for the quarter was $427.6 million, reflecting a gross margin of 27.9%, a decrease from 28.1% in the previous year. The decline in profitability was attributed to a shift in the sales mix of HVAC equipment and lower unit volumes, particularly in residential products.

In terms of operational changes, Watsco's total current assets increased to $3.181 billion as of March 31, 2026, up from $2.955 billion at the end of 2025. This increase was primarily driven by a rise in accounts receivable and inventories. The company also reported a decrease in cash and cash equivalents, which fell to $392.7 million from $433.3 million at the end of the previous fiscal year. Watsco's employee headcount remained stable, with no significant changes reported in staffing levels.

Strategically, Watsco has continued to expand its footprint through acquisitions, having acquired Southern Ice Equipment Distributors, Inc. and Hawkins HVAC Distributors, Inc. in 2025. The company is also in the process of acquiring Jackson Supply Company, which is expected to close in the second quarter of 2026. This acquisition will add approximately $230 million in annual sales and expand Watsco's customer base to around 5,000 across 25 locations in the Sunbelt region.

Looking ahead, Watsco's management remains cautious about market conditions, particularly regarding the impact of tariffs and inflation on product costs. The company is actively monitoring these factors and has implemented pricing actions to mitigate potential adverse effects. Watsco's focus on the HVAC replacement market is expected to provide some stability, as demand for these essential products tends to be resilient. The company anticipates that regulatory changes aimed at improving energy efficiency will further drive sales of higher-efficiency HVAC systems, contributing positively to future revenue growth.