Record Watsco Revenue Rises 7% to $2.22 Billion as EPS Falls 5%
Key Facts
Watsco reported results on October 27, 2026, for the third quarter and nine months ended September 30, posting record quarterly revenue of $2.22 billion, up 7% year over year and 4% on a same-store basis. But earnings per share fell 5% to $3.77, below analysts’ estimate of $4.12, according to a report published by Investing.com and attributed to Reuters. The company’s operating income and margins also declined, underscoring the contrast between sales growth and weaker profitability. Revenue topped the $2.2 billion estimate cited in the same report. The company’s shares fell 4.22% in after-hours trading following the results announcement, according to the report.
Gross profit rose 3% to a record $586 million, but its margin fell to 26.4% from 27.5% in the third quarter of 2025. Operating income declined 4% to $225 million, and its margin narrowed to 10.1% from 11.4% a year earlier. The company attributed margin pressure to customer and end-market mix, as well as the timing and magnitude of original equipment manufacturer pricing actions. It said pricing actions in 2026 came later and had less impact than in 2025. Different growth rates for equipment and other products also weighed on the sales mix, according to the results statement.
Heating, ventilation and air conditioning equipment accounted for 67% of sales, with sales rising 5% excluding the impact of acquisitions. The increase came from residential products, whose sales rose 7%, while commercial products declined 5%. In residential equipment, units sold rose 5% and the average selling price increased 2%, the company said. Sales of other heating and cooling products also rose 2%, while commercial refrigeration products increased 10%, excluding acquisitions. The divergence between growth in residential activity and declines in commercial products highlights differing demand trends across the company’s business categories.
For the nine months ended September 30, revenue rose 3% to $5.86 billion, while earnings per share fell 7% to $9.72. Operating cash flow, by contrast, increased 79% to $304 million over the same period. Watsco said e-commerce sales rose 12% during the nine months. E-commerce sales totaled $2.75 billion in the twelve months ended September 30, equivalent to 37% of revenue. Merchandise sold through the OnCallAir platform totaled about $1.6 billion during the nine months, up 14% from the same period a year earlier.
The company expanded its network through the acquisitions of Jackson Supply and The Granite Group, which added 107 locations and $730 million in annual revenue to the network, according to Watsco’s statement. The statement said The Granite Group acquisition closed in October 2026. This follows a 4% decline in Watsco’s third-quarter 2025 revenue, when the company said unit declines were largely offset by pricing on its new A2L systems products. That earlier decline provides a comparison point as residential units return to growth in the current quarter. Chief Executive Albert Nahmad described early fourth-quarter sales trends as pointing to continued improvement in end-market demand.
Nahmad said the company was encouraged by residential equipment unit volumes returning to growth and gradually improving during the season. Investor relations scheduled the third-quarter results call for October 27, 2026, at 10:00 a.m. Eastern Time. Watsco shares closed at $305.33 on October 26, according to EL7 data. That close came before the results announcement, while the stock declined in after-hours trading, according to the Investing.com report attributed to Reuters. Early fourth-quarter demand indicators provide management’s latest reading of the market trend following third-quarter results.