Watsco Posts Record 2025 Gross Margin, Credits A2L Pricing and Sunbelt Deals
Record 28% gross margin on lower volume. That's a flex.
Watsco reported full-year 2025 results February 17: 28.0% gross margin (+120 bps YoY), record Q4 cash flow, dividend raised to $13.20/share. And it did all of that while equipment unit volumes were down.
Two drivers, per the company. One: the A2L refrigerant transition let distributors price new equipment at a premium to outgoing R-410A stock, and Watsco held its slice. Two: internal pricing-optimization tech that dynamically adjusts by SKU and market. A lot of distributors say they have dynamic pricing. Few can show it on the P&L.
Three acquisitions closed during the year: Southern Ice, Lashley & Associates, Hawkins HVAC. All Sunbelt regional distributors. Together they add about $47M in annualized sales.
What it means if you're a contractor: wholesale equipment pricing isn't softening in 2026. If you're a homeowner, expect replacement quotes to stay elevated for another year minimum.
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