Watsco achieves record gross margin of 28% in 2025, raises dividend 10%

Watsco (NYSE:WSO) posted full-year 2025 revenues of $7.24 billion, down 5% from the prior year, reflecting headwinds in equipment volumes offset partially by an 11% increase in average domestic selling prices and contributions from parts and supplies.

Gross profit decreased 1% to $2 billion, but the gross margin expanded 120 basis points to a record 28%, driven by pricing optimization technologies, OEM pricing actions, and favorable product mix shifts during the A2L refrigerant transition.

Operating income totaled $720 million, while diluted earnings per share came in at $12.25 compared with $13.30 in 2024.

The company highlighted exceptional cash generation, with operating cash flow of $570 million for the full year—including a record $400 million in the fourth quarter—supported by aggressive inventory management.

Inventory declined 30% from its 2025 peak to $1.4 billion by year-end, meeting reduction targets and enhancing working capital efficiency.

Watsco ended 2025 with $780 million in cash and investments and no debt, providing significant financial flexibility for investments in technology, acquisitions, and shareholder returns.

Meanwhile, e-commerce sales reached approximately $2.5 billion, representing about 35% of total sales and underscoring the success of its digital platforms in serving contractors and dealers.

The board also approved a 10% increase in the annual dividend to $13.20 per share, effective with the next quarterly payment in April 2026.

This marks Watsco's 52nd consecutive year of paying dividends, reinforcing its long-standing commitment to returning capital to shareholders.