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Jun 30
Watsco Q2 2025 Earnings Report
Watsco reported second quarter 2025 results, achieving record gross profit margins and expanded operating margins amidst the A2L product transition, supported by a strong balance sheet.
Key Takeaways
Watsco experienced a 4% decrease in revenues to $2.06 billion in Q2 2025, primarily due to lower unit volumes from temperate weather, reduced homebuilding, and transition impacts. Despite this, the company achieved a record gross profit of $603 million and expanded operating income by 1% to $272 million, driven by improved gross margins from pricing technologies and OEM actions. Diluted EPS slightly increased to $4.52.
Revenues decreased 4% to $2.06 billion, influenced by lower unit volumes despite double-digit pricing realization.
Gross profit increased 4% to a record $603 million, with gross profit margin expanding 220 basis-points to a record 29.3%.
Operating income increased 1% to $272 million, and operating margin expanded 60 basis-points to 13.2%.
Diluted earnings per share rose slightly to $4.52 from $4.49 in the prior year, demonstrating resilience amidst market complexities.
Watsco
Watsco
Watsco Revenue by Segment
Watsco Revenue by Geographic Location
Revenue by Segment
HVAC Equipment Revenue
CapyFin.comOther HVAC Products Revenue
CapyFin.comCommercial Refrigeration Products Revenue
CapyFin.comRevenue by Geographic Location
United States Revenue
CapyFin.comInternational Revenue
CapyFin.com Forward Guidance
Watsco anticipates that the impacts of temperate weather, lower homebuilding activity, and transition-related effects on new system installations will diminish as the market fully converts to new A2L products over the second half of the year. The company is focused on boosting sales, sustaining margins, and improving operating efficiencies.
Positive Outlook
- Anticipated diminishing impacts from market conditions as A2L product transition completes in H2 2025.
- Continued investments in industry-leading technology platforms, including AI-driven initiatives, to enhance customer experience and efficiency.
- Leveraging extensive data assets to capture market share as contractors adopt digital tools.
- Strategic initiatives to grow sales of non-equipment products and enhance gross margins.
- New initiatives like Project 'WatscoOne' targeting the institutional channel for HVAC/R products, expected to launch in early 2026.
Challenges Ahead
- Ongoing complexities associated with the industry-wide transition to new A2L products.
- Increased operating expenses due to higher labor, facilities, and transportation costs, partly associated with the A2L product transition.
- Lower unit volumes resulting from more temperate weather conditions and lower homebuilding activity.
- Transition-related impacts on new system installations.
- Operating cash flow was a use of cash totaling $185 million for the six-months ended June 30, 2025, due to new A2L inventory investments and peak seasonal inventory buildup.
Revenue & Expenses
Visualization of income flow from segment revenue to net income