Watsco Reports Mixed Q2 Results Amid HVAC Industry Stabilization — Watsco, Inc.

Event summary

Watsco's Q2 revenue increased 2% to $2.1 billion, but gross profit decreased 4% due to normalized pricing actions and A2L refrigerant transition impacts.
Operating income declined 12% to $238 million, with operating margin dropping from 13.2% to 11.3%.
E-commerce sales grew 13% in the first half of 2026, reaching $2.7 billion annually (37% of total sales).
Watsco acquired Jackson Supply Company, a Sunbelt HVAC distributor with $230 million in annualized sales across 25 locations.
The company maintained a debt-free balance sheet with $464 million in cash and cash investments.

The big picture

Watsco's Q2 results reflect broader industry stabilization following regulatory transitions to A2L refrigerants. The company's strategic focus on e-commerce, AI-driven initiatives, and a 'buy-and-build' acquisition strategy positions it for long-term growth in the highly fragmented HVAC distribution market. With a debt-free balance sheet and strong cash position, Watsco is well-equipped to capitalize on consolidation opportunities and technological advancements.

What we're watching

E-Commerce Growth: The pace at which Watsco's e-commerce sales outpace overall revenue growth will determine the scalability of its digital platforms.
Operational Efficiency: Whether Watsco can sustain improved inventory turns and enhanced returns on invested capital following supply-chain normalization.
Acquisition Strategy: How the integration of Jackson Supply and other recent acquisitions will impact Watsco's market presence in key Sunbelt regions.