Watsco Reports Improved Profitability in Q4 2025

HVAC distributor sees margin gains and inventory reductions amid industry transitions

Published on Feb. 21, 2026

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Watsco (NYSE:WSO) executives reported the company exited fiscal 2025 with improved profitability, a strengthened balance sheet, and a more stable operating backdrop after several years of regulatory and supply chain disruptions tied to HVAC efficiency and refrigerant transitions. The company achieved double-digit pricing gains on new A2L products, increased gross margin, and met a $500 million inventory reduction goal.

Why it matters

As the largest HVAC distributor in the U.S., Watsco's performance provides insight into the health of the broader industry, which has faced significant challenges in recent years due to regulatory changes and supply chain issues. The company's ability to navigate these transitions and improve its financial position is a positive sign for the sector.

The details

Watsco reported that it grew its scale and market share in 2025, completing 12 acquisitions representing more than $1.6 billion in sales. In the fourth quarter, the company achieved 'double-digit pricing gains' on new A2L products and increased gross margin by 40 basis points to 27.1%. Management said Watsco was debt-free for all of 2025 and met a $500 million inventory reduction goal. The company also reported record fourth-quarter cash flow of $400 million.

  • Watsco exited fiscal 2025 with improved profitability.
  • In the fourth quarter of 2025, Watsco achieved double-digit pricing gains and increased gross margin.

The players

Watsco

The largest distributor of heating, ventilation, air conditioning and refrigeration (HVAC/R) equipment, parts and supplies in the United States, headquartered in Miami, Florida.

Albert Nahmad

Chairman and CEO of Watsco.

Barry Logan

Executive at Watsco.

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What they’re saying

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The takeaway

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