Watsco, Inc. said full-year 2025 results included a record gross profit margin amid what it described as challenging HVAC/R market conditions. In the year ended December 31, 2025, revenue decreased 5% to $7.24 billion, while gross profit decreased 1% to $2.0 billion and gross profit margin expanded 120 basis points to a record 28.0%. The company also announced a 10% increase in its annual dividend to $13.20 per share, effective with its next regular dividend payment in April 2026, marking its 52nd consecutive year of paying dividends.
Operating income decreased 8% to $720 million (operating margin of 10.0% versus 10.3% last year), and earnings per share were $12.25 compared to $13.30 last year. Operating cash flow was $570 million, which the company said represented 97% of net income. Watsco reported SG&A expenses increased 3%.
Watsco said sales declined 4% overall in U.S. markets and 10% in non-U.S. markets. By category, HVAC equipment sales decreased 7% (67% of sales), other HVAC product sales decreased 1% (29% of sales), and commercial refrigeration product sales were flat (4% of sales). The company said 2025 revenue reflected lower unit volumes of HVAC equipment that were partially offset by higher average selling prices following the A2L product transition, and was also impacted by slower homebuilding.
The company said the 2025 transition to A2L refrigerant products affected about 55% of products sold across 650 locations domestically and resulted in the conversion of over $1 billion of inventory to new products. Inventory peaked at $2.1 billion during 2025 and declined by 30% to $1.4 billion at December 31, 2025, which Watsco described as meeting its inventory reduction target. Watsco reported $780 million in cash and investments and no debt, and said it acquired three distributors in key Sunbelt markets during 2025.
Albert H. Nahmad, Chairman and CEO, said: “We raised margins, nearly doubled our profitability, invested $300 million in technology, nearly doubled our dividend and fortified our balance sheet to allow investment in most any-sized growth opportunity.”
