10-Q · May 8, 2026
Watsco, Inc. reported Q1 2026 with revenues of $1.533 billion and EPS of $1.87, surpassing estimates. Despite a slight decrease in gross margin and net income, the company demonstrated a significant improvement in cash…
Earnings analysis · 10-Q
WSO earnings analysis
Filed August 7, 2026 · Our reading of the company's report
The latest report
Watsco delivered Q2 revenue of $2.105 billion, up approximately 2% year over year, but diluted EPS of $4.00 missed the $4.35 consensus estimate. Gross margin declined 180 basis points year over year to 27.5%, and…
Read full summary
Watsco delivered Q2 revenue of $2.105 billion, up approximately 2% year over year, but diluted EPS of $4.00 missed the $4.35 consensus estimate. Gross margin declined 180 basis points year over year to 27.5%, and operating income was $238 million, indicating continued margin pressure. Jackson expands the company’s platform but had not yet been assessed for internal-control reporting; management provided no quantitative forward guidance and reported no material risk-factor changes from the December 31, 2025 10-K.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $4.0
What stood out
-
Revenue grew, but missed consensus
Q2 revenue was $2.105 billion, up approximately 2% year over year and above Q1 2026 revenue of $1.53 billion. Revenue nevertheless missed the $2.154 billion consensus estimate by approximately $49 million.
-
Operating profitability remained pressured
Gross margin was 27.5%, down 180 basis points from 29.3% in Q2 2025 and 40 basis points from 27.9% in Q1 2026. Operating income was $238 million, implying an operating margin of approximately 11.3%.
-
EPS declined year over year
Diluted EPS was $4.00 versus $4.52 in Q2 2025 and $1.87 in Q1 2026. EPS was $0.35 below the $4.35 consensus estimate.
-
Jackson expands the platform
Jackson was acquired on June 1, 2026 and represented approximately 4% of consolidated assets at June 30, 2026 and approximately 1% of consolidated revenue for the quarter.
-
Controls remained effective
Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2026, and reported no material changes to internal control over financial reporting during the quarter.
What to watch
-
Quarterly results missed expectations
Revenue of $2.105 billion was approximately $49 million below the $2.154 billion consensus estimate, while diluted EPS of $4.00 was $0.35 below the $4.35 estimate.
-
Margin compression weighs on earnings
Gross margin fell to 27.5% from 29.3% a year earlier, a 180-basis-point decline, while operating income was $238 million. Continued margin pressure could limit earnings growth even if revenue expands.
-
Jackson integration and controls risk
The company stated that risk factors for the quarter ended June 30, 2026 did not differ materially from those in the Annual Report for the year ended December 31, 2025. However, Jackson had not yet been assessed for internal-control reporting and represented 4% of consolidated assets at June 30, 2026.
Management's outlook
The 10-Q does not provide quantitative revenue or EPS guidance; no numeric outlook was disclosed.
Earlier filings 4
10-K · February 27, 2026
Watsco reports scale and market leadership with revenues of $7.2 billion in 2025 and a network of 695 locations, supported by continued digital investment (≈300 technology employees) and a deep JV relationship with…
10-Q · November 7, 2025
Watsco, Inc. reported a slight decline in third-quarter revenue with total revenues of $2.07 billion, down 4.3% from $2.16 billion year-over-year. Operating income fell 6.2% to $234.76 million, with a diluted EPS of…
10-K · February 28, 2025
Watsco positions itself as the largest HVAC/R distributor in North America with scale (690 locations) and a buy-and-build strategy that produced $7.6 billion of revenues in 2024. The company highlights investments in…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.