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WESCO INTERNATIONAL INC (WCC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered accelerating topline with net sales $5.90B (+7.7% YoY) and organic +7.2%, led by CSS (+17%) and EES (+6%); data center revenue surpassed $1.0B (+~65% YoY) while UBS declined 4% organically .
  • Gross margin held flat sequentially at 21.1% but fell 80 bps YoY; adjusted EBITDA margin improved 90 bps QoQ to 6.7% but remained 60 bps below last year due to large project mix effects .
  • Adjusted diluted EPS was $3.39 (+6% YoY); GAAP diluted EPS $3.83 included a $27.6M gain from preferred stock redemption; operating cash flow was $107.8M for the quarter .
  • Guidance raised: FY25 organic growth to 5–7% (from 2.5–6.5%), reported sales to $22.7–$23.1B (from $21.8–$22.7B); adjusted EPS midpoint maintained ($12.50–$14.00), FCF $600–$800M maintained .
  • Near-term catalysts: sustained AI/data center strength with record backlog (+36% CSS YoY) and preliminary July sales per workday +~10%; tariff-related pricing not in outlook—potential upside to margins as inventory turns and supplier volume rebates accrue .

What Went Well and What Went Wrong

What Went Well

  • “Total data center sales eclipsed $1B…up 65% versus the prior year,” underpinning strong CSS growth and broader secular AI/data center tailwinds .
  • Sequential margin improvement: “adjusted EBITDA margin was up 90 basis points” on strong SG&A leverage and stable gross margin .
  • Backlog strength across SBUs and early Q3 momentum: record backlog up YoY and sequentially; preliminary July sales per workday +~10% across all three SBUs .

What Went Wrong

  • Gross margin down 80 bps YoY to 21.1% due to project/product mix in CSS and EES tied to large hyperscale deployments and wire/cable projects .
  • UBS remained soft: organic sales −4% and adjusted EBITDA margin fell to 10.4% (−160 bps YoY; −40 bps QoQ), as customer destocking and cautious utility spending persisted .
  • Adjusted EBITDA down 1.5% YoY and adjusted EBITDA margin −60 bps YoY despite sales growth, reflecting mix pressure; gross margin only flat sequentially .

Financial Results

Consolidated Performance vs Prior Year, Prior Quarter, and Estimates

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$5.480 $5.344 $5.900
Diluted EPS (GAAP) ($)$4.28 $2.10 $3.83
Adjusted Diluted EPS ($)$3.21 $2.21 $3.39
Gross Margin (%)21.9% 21.1% 21.1%
Adjusted EBITDA ($USD Millions)$400.1 $310.7 $394.2
Adjusted EBITDA Margin (%)7.3% 5.8% 6.7%
Operating Cash Flow ($USD Millions)$(223.8) $28.0 $107.8

Estimates vs Actuals (Wall Street Consensus – S&P Global)

MetricQ2 2024Q1 2025Q2 2025
Revenue Consensus Mean ($USD Millions)5,563.65,263.55,819.3
Revenue Actual ($USD Millions)5,479.75,343.75,899.6
Primary EPS Consensus Mean ($)3.6202.3193.362
Primary EPS Actual ($)3.212.213.39

Values retrieved from S&P Global.*

Interpretation: Q2 2025 was a slight beat on EPS and a clear beat on revenue; Q1 2025 beat revenue but missed EPS; Q2 2024 missed both.*

Segment Breakdown and Margins

SegmentMetricQ2 2024Q1 2025Q2 2025
EESSales ($USD Millions)$2,134.5 $2,065.3 $2,257.8
EESAdjusted EBITDA Margin (%)8.9% 6.9% 8.1%
CSSSales ($USD Millions)$1,904.3 $2,000.3 $2,265.2
CSSAdjusted EBITDA Margin (%)8.2% 7.9% 8.8%
UBSSales ($USD Millions)$1,440.9 $1,278.1 $1,376.6
UBSAdjusted EBITDA Margin (%)12.0% 10.8% 10.4%

KPIs and Operating Metrics

KPIQ2 2024Q1 2025Q2 2025
Data Center Sales ($USD Billions)——>$1.0 (up ~65% YoY)
Backlog Change+11% YoY Up across SBUs +11% YoY; ~+5% seq
Preliminary July Sales per Workday—+7% YoY (April) ~+10% YoY
Financial Leverage Ratio (TTM)—3.1 3.4
TTM Free Cash Flow ($USD Millions)——$643.8
Net Working Capital / TTM Sales——19.9%
Operating Cash Flow ($USD Millions)$(223.8) $28.0 $107.8

Guidance Changes

MetricPeriodPrevious Guidance (May)Current Guidance (July)Change
Organic Sales Growth (%)FY 20252.5% – 6.5% 5% – 7% Raised
Reported Sales Growth (%)FY 20250% – 4% 4% – 6% Raised
Reported Sales ($USD Billions)FY 2025$21.8 – $22.7 $22.7 – $23.1 Raised
Adjusted EBITDA Margin (%)FY 20256.7% – 7.2% 6.6% – 6.8% Lowered
Adjusted Diluted EPS ($)FY 2025$12.00 – $14.50 $12.50 – $14.00 Midpoint maintained
Free Cash Flow ($USD Millions)FY 2025$600 – $800 $600 – $800 Maintained
Interest Expense ($USD Millions)FY 2025~$340–350 ~$360–370 Raised
Other Expense, net ($USD Millions)FY 2025~$10–20 ~$0 Lowered
Share Count (Diluted, Millions)FY 202549–50 49–49.5 Narrowed

Management also raised WDCS (data center) full-year growth expectation from ~20% to ~40% and shifted CSS to up low double-digits, while UBS outlook moved to down low-single digits to flat (H2 recovery expected) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
AI/Data Center MomentumDouble-digit data center growth; gross margin up sequentially; backlog healthy Data center +70%; ~16% of company sales TTM; CSS backlog +32% Data center >$1B; +65% YoY; ~18% of company sales; CSS backlog +36% Strengthening
Utility Destocking/RecoveryUBS weakness offset growth; end markets mixed UBS −5% organic; H2 recovery expected; backlog up seq +13% IOUs returned to growth; UBS preliminary July positive; H2 growth expected Improving
Tariffs/Pricing—Price increase notices up 150% in Q2-to-date; importer-of-record <4%; pass-through strategy Q2 notices up ~300%; average mid–high single-digit; not in guidance; mitigation actions detailed Intensifying, mitigated
Margins & MixQ3 gross margin +50 bps YoY, adjusted EBITDA margin 7.3% Gross margin stable QoQ; mix pressure; EBITDA −60 bps YoY Gross margin flat QoQ (−80 bps YoY); EBITDA margin +90 bps QoQ (−60 bps YoY) Sequentially improving, YoY pressured
Security & ENI—Security down LSD ex-DC; ENI up low SD Security up double-digits; ENI down HSD (ex-DC) Mixed: Security improved, ENI softer
Working Capital/FCFQ3 FCF $279.5M; leverage ~2.9x NWC intensity −50 bps YoY; FCF positive TTM FCF $643.8 (~96% of adjusted NI); NWC intensity 19.9% Improving cash conversion

Management Commentary

  • “Total data center sales eclipsed $1B…up 65% versus the prior year…enduring secular growth trends of AI-driven data centers.” – John Engel, CEO .
  • “Adjusted EBITDA margin was up 90 basis points sequentially as we generated strong operating cost leverage and stable gross margin.” – John Engel, CEO .
  • “IOU customers returned to growth…we anticipate public power customers will follow suit in the back half of the year.” – Dave Schulz, CFO .
  • “The number of price increase notifications was up 300%…average mid to high single digit rate…our outlook does not include any potential benefit.” – Dave Schulz, CFO .
  • “Gray space grew at a 90% rate…white space was still north of 60%.” – John Engel, CEO .

Q&A Highlights

  • Tariff-related pricing explicitly excluded from H2 outlook; any sequential gross margin benefit from price increases and inventory gains would be upside if realized .
  • UBS margin cadence: SG&A merit increases and customer mix weighed in Q2; management expects operating leverage and margin expansion as utility returns to growth in H2 .
  • Data center breadth: expansion from white space into gray space (EES) with 90% YoY growth; customers shifting to GPU builds increasing power density and WESCO content .
  • Pricing dispersion: more pronounced in EES/UBS (commodity and electrical chains) than CSS; copper exposure mid-single-digit % of revenue and repriced weekly, limiting volatility impact .
  • Working capital targets: management aims to approach pre-COVID ~19% NWC intensity; sequential gross margin improvement expected in H2 primarily via supplier volume rebates .

Estimates Context

  • Q2 2025 beat: EPS $3.39 vs $3.362 consensus; revenue $5,900M vs $5,819M consensus.*
  • Q1 2025 mixed: EPS $2.21 vs $2.319 consensus (miss), revenue $5,344M vs $5,263M (beat).*
  • Q2 2024 missed: EPS $3.21 vs $3.620 consensus; revenue $5,480M vs $5,564M consensus.*

Values retrieved from S&P Global.*

Implication: Street likely raises revenue forecasts for H2 on stronger AI/data center momentum; EPS revisions may be modest pending visibility on tariff pass-through and mix normalization.

Key Takeaways for Investors

  • Momentum is accelerating: organic +7.2%, data center >$1B (+~65% YoY), backlog at records—supports H2 sales growth and potential upside to Street revenue expectations .
  • Margin path: sequential EBITDA margin improvement (90 bps) with stable gross margin; mix pressure remains YoY, but H2 should benefit from supplier rebates and possible price pass-through tailwinds not embedded in guidance .
  • Utility turning: IOUs returned to growth; management expects broader utility recovery in H2—UBS margins could expand quickly on operating leverage .
  • Capital structure optimized: preferred redeemed; no major maturities until 2028; leverage 3.4x TTM, supporting continued deleveraging and selective buybacks/M&A .
  • Guidance raised: FY25 organic 5–7% and sales $22.7–$23.1B; adjusted EPS midpoint maintained—watch Q3 margin trajectory and tariff dynamics for possible upside .
  • Trading lens (near term): Positive setup into Q3 on record backlog and July strength; headline risk from tariffs manageable; watch segment mix and UBS recovery pace for margin sensitivity .
  • Medium-term thesis: AI-driven data center build cycle (white and gray space) and electrification/resilient electrical markets position WESCO to outgrow peers; continued digital transformation and cross-sell initiatives support sustained ROIC improvement .