Watsco Revenue Hits Record $2.22 Billion in Third Quarter
Key Facts
Watsco posted record revenue of $2.22 billion in the third quarter of 2026, up 7% year over year, while same-store sales rose 4%, according to the company. Operating income, however, fell 4% to $225 million, and its margin declined to 10.1% from 11.4% in the same period a year earlier. The results showed sales growth alongside pressure on operating profitability. Gross profit also rose 3% to a record $586 million, but its margin fell to 26.4% from 27.5% a year earlier. The company said sales of residential heating and cooling equipment increased 7% during the quarter.
Watsco attributed some of the pressure on gross margin to customer and end-market mix, as well as the timing and magnitude of original equipment manufacturers' pricing actions. It said those actions came later in 2026 and had less impact than in 2025. In the sales breakdown, HVAC equipment sales rose 5%, excluding the impact of acquisitions, while sales of other heating and cooling products increased 2%. Commercial refrigeration product sales also climbed 10% on the same basis. The divergence between expanding sales and declining margins came as gross profit increased but operating income fell. The company said growth in residential equipment reflected increases in both units sold and prices.
Watsco said sales of residential heating and cooling equipment grew 7%, with unit volume up 5% and average selling prices rising 2%. That means growth in the business combined higher volumes with an improved average price during the quarter, according to the company. For the first nine months of 2026, revenue rose 3% to $5.86 billion, while earnings per share fell 7% to $9.72. The figures place the quarter's performance within a broader period of higher overall revenue but lower earnings per share. The company reported second-quarter results on July 29, describing them as reflecting further stabilization in the sector. Revenue that quarter was $2,104.859 million, compared with $2,062.442 million in the second quarter of 2025.
In the second quarter of 2026, operating income fell 12% to $238 million, and gross margin declined to 27.5% from 29.3% in the second quarter of 2025. Comparing margins in the second and third quarters shows gross margin continued to fall year over year, reaching 26.4% in the third quarter, versus 27.5% in the third quarter of 2025. The company also said e-commerce sales increased 10% in the third quarter. Those sales totaled $2.75 billion in the twelve months ended September 30, 2026, equivalent to 37% of revenue. The figures indicate the scale of the e-commerce channel in the company's business over the twelve-month period.
On expansion, Watsco said its two most recent acquisitions, Jackson Supply and Granite Group, added 107 locations and an annual revenue run rate of $730 million. The company had expected the deals to increase annual revenue by about 10%. On demand, management described early fourth-quarter demand as improving, without providing a quantitative figure for that assessment. Watsco shares closed at $305.33 on October 26, 2026, according to EL7 data. The company is scheduled to hold its third-quarter earnings call on October 27, 2026, at 10:00 a.m. Eastern time. It also announced on October 1 a quarterly cash dividend of $3.30 per share, payable October 30.