HVACR products distributor Watsco reported 2026 second-quarter sales of $2.10 billion, up 2% year-over-year and 1% on a same-store basis, as the company cited further stabilization in end-market demand.

Excluding acquisitions, HVAC equipment sales increased 3% and represented 68% of total sales. Sales of other HVAC products decreased 1%, while commercial refrigeration product sales jumped 19%.

With $7.2 billion in 2025 annual revenue, Watsco topped MDM’s 2026 Top Distributors List for HVACR.

Watsco said domestic residential HVAC equipment sales increased 5%, including 2% unit volume growth and a 2% increase in average selling prices. The company attributed the improvement to a more stable demand environment following last year’s industrywide transition to HVAC systems that use A2L refrigerants.

That transition affected virtually all domestic HVAC equipment sold across Watsco’s 650 U.S. locations and also disrupted its contractor customers. With the transition now largely complete, Watsco said it is focusing on growth with existing customers, acquiring new customers, improving operating efficiencies and optimizing inventory.

“Our performance during the second quarter is indicative of improving end-market stability after a busy period of regulatory transitions,” Watsco Chairman and CEO Albert Nahmad said. “We are now operating in a more conventional environment in which Watsco’s scale, OEM relationships and technology investments can add even more value.”

MDM Case Study: Watsco (Premium access here)

Watsco’s 2Q gross profit fell 4% to $579 million, while gross margin contracted 180 basis points to 27.5%. The company said pricing actions by its primary manufacturers captured substantial inflation and tariffs during 2025, creating an outsized benefit to the prior-year margin. Pricing actions normalized during 2026 to levels more consistent with historical trends.

The favorable 2025 comparison and other effects of the A2L transition accounted for approximately 130 basis points of the margin difference, Watsco said.

Operating profit fell 12% to $238 million, with operating margin declining to 11.3% from 13.2%. Earnings per share decreased 12% to $4.

Watsco’s eCommerce sales increased 13% during the first half of 2026 and reached $2.7 billion for the 12 months ended June 30, representing 37% of total sales. Leading regions generated more than 70% of sales through eCommerce.

Meanwhile, gross merchandise value transacted through Watsco’s OnCallAir digital sales platform increased 14% to $1 billion during the first half. Watsco also formally launched its SupplySync platform and continued introducing AI-supported tools across its operations.

The company closed its previously announced acquisition of Jackson Supply Company during June. The deal added 25 Sunbelt locations and approximately $230 million in annualized sales. Watsco announced the acquisition alongside its 1Q results in April.