Watsco Reports Q2 2026 Revenue Growth to $2.1 Billion, Net Income Declines

Watsco, Inc. reported its financial results for the second quarter and first half of 2026, revealing a revenue increase to $2.1 billion for the quarter, up from $2.06 billion in the same period last year. For the first half of 2026, revenues reached $3.64 billion, compared to $3.59 billion in the first half of 2025. Despite the revenue growth, net income attributable to Watsco, Inc. decreased to $163.3 million for the second quarter, down 11% from $183.6 million in the prior year, and $242.4 million for the first half, an 8% decline from $263.7 million in 2025. The decline in profitability was attributed to lower gross profit margins and increased selling, general, and administrative expenses.

The company experienced a gross profit of $578.9 million for the second quarter, a decrease of 4% from $603.5 million in the same quarter of 2025, resulting in a gross margin of 27.5%, down from 29.3%. The increase in costs was primarily due to inflationary pressures passed through by original equipment manufacturers (OEMs). Selling, general, and administrative expenses rose to $349 million, representing 16.6% of revenues, compared to 16.4% in the previous year. Other income, which includes the company's share of net income from its joint ventures, increased to $8.4 million from $7.4 million.

Watsco's operational footprint expanded with the acquisition of Jackson Supply Company on June 1, 2026, which added 25 locations and is expected to enhance the company's market presence in the HVAC sector. The acquisition was valued at approximately $186.2 million, paid in common stock and cash. The company also reported a total of 723 locations across the U.S., Canada, Mexico, and Puerto Rico as of June 30, 2026, reflecting a net increase of 25 locations from the previous year.

In terms of cash flow, Watsco reported a net cash used in operating activities of $21.4 million for the first half of 2026, a significant improvement from $185.1 million in the same period of 2025. The company had $364.2 million in cash and cash equivalents at the end of the quarter, with $100 million in short-term cash investments. Watsco's working capital increased to $2.37 billion, driven by the acquisition and seasonal inventory buildup.

Looking ahead, Watsco remains focused on leveraging its acquisitions and expanding its market share in the HVAC/R distribution industry. The company continues to monitor macroeconomic conditions, including trade policies and inflation, which may impact its operations and pricing strategies. Watsco's management expressed confidence in its ability to navigate these challenges while maintaining a strong financial position.