Watsco Q3 Earnings Miss Estimates as Margin Pressure Weighs on Profit Despite Record Sales

Watsco reported third-quarter 2026 GAAP earnings per share of $3.77, missing analyst estimates by $0.32 and marking a 5% decline from the prior-year period. Revenue came in at a record $2.22 billion, a 7% year-over-year increase that edged past consensus by roughly $10 million, with same-store sales rising 4%.

Margin compression drove the earnings shortfall. Gross profit margin contracted to 26.4% from 27.5% a year earlier, while operating income fell 4% to $225 million, pushing the operating margin down to 10.1% from 11.4%. SG&A expenses rose 8%, reflecting costs tied to 30 new and acquired locations, including the recently added Jackson Supply Company and The Granite Group.

Shares fell sharply on the results, dropping roughly 4% in regular trading and as much as 8.3% in premarket activity, as investors focused on the earnings miss and deteriorating margins despite the top-line record. The company framed the quarter positively, citing improving demand trends and its technology platforms as competitive advantages in the fragmented $74 billion North American HVAC/R distribution market.