Watsco reported lower Q2 sales as housing activity cooled, and the HVAC industry continued a rocky transition to new refrigerant systems.
But the company’s investment in digital tools and customer technology helped it deliver higher profits and position itself for a rebound. Watsco Q2 sales fell 4% to $2.13 billion, down from $2.21 billion in the same period last year. Net income rose 2% to $167 million, compared to $163.7 million a year ago.
CEO Albert Nahmad said the quarter reflected “a challenging mix of lower demand, slower summer weather, and a major product changeover.” However, he noted that the company’s tech investments helped it maintain pricing and improve efficiency.
“We improved profitability and continued investing in tools that help our contractor customers work smarter,” he said.
AI and ecommerce sales at Watsco in Q2
Watsco’s digital offerings were standout. Over the past 12 months, Watsco ecommerce sales reached $2.5 billion. They now make up 34% of the company’s total revenue. The company’s HVAC Pro+ mobile app grew to over 70,000 users, a 17% increase from last year.
Meanwhile, its OnCallAir digital sales tool — which contractors use to quote and sell equipment in homes — processed $1.6 billion in product volume over the past year, up 19%.
Watsco is also rolling out artificial intelligence across its business. Internally, over 2,000 employees now use its AI-powered assistant Ask.Watsco to handle customer requests more quickly. Contractors use AL.watsco, another AI tool, to find parts and technical specs in seconds.
“These tools are reshaping how we support customers,” said A.J. Nahmad, president of Watsco. “They’re making our team more efficient and helping contractors save time and win more jobs.”
HVAC industry’s refrigerant changes
Watsco’s sales were affected by the HVAC industry’s move to A2L refrigerants — new, lower-impact chemicals that require different equipment. That shifted disrupted buying patterns and slowed inventory turnover, particularly in new construction.
Still, Watsco said it expects the adjustment to level off in the second half of the year. The company expanded warehouse space, trained staff, and added new branches to manage the change. It has opened 10 new locations this year across key Sunbelt markets.
The company’s gross profit margin improved to 29.4%, up from 28.9% a year ago, aided by pricing tools and mixed improvements.
Looking ahead, Watsco is developing a new digital platform called WatscoOne, set to launch next year. The tool will support large-scale commercial buyers and include features for online ordering, pricing, and marketing.
The company is also expanding its sales of repair parts, tools, and supplies, which now make up 30% of its revenue and are growing faster than equipment sales.
Watsco ended the quarter with no debt and $104 million in cash, giving it flexibility to invest in growth and acquire regional distributors.
“We’re navigating a tough year with an eye on the future,” said Nahmad. “We believe our scale, culture, and digital focus will separate us as the market recovers.”
Check back for more earnings reports. Here’s last quarter’s update on Watsco ecommerce sales.
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