Asked new CFO Neel Dev about WESCO's M&A process, pipeline, and thoughts on consolidation, given his perceived background as a 'deal guy.'

Neel Dev clarified he's more an 'operations guy' but emphasized WESCO's disciplined M&A approach, focusing on deals that accelerate growth and profitability, align with mega-trends, and integrate well into existing operations rather than stand-alone acquisitions. “We want to make sure that there is step in terms of our strategy and where we want to take the business. And we want to play into a lot of the mega trends that we are seeing in the marketplace, right? So it's all about how a deal accelerates our overall growth and profitability and not just something that we would buy to leave stand-alone.”

Asked to unpack data center strength, share gains, growth differences across gray/white space/services, and the step-down in data center growth rate in the back half guidance.

John Engel detailed strong growth in white space (CSS, >60% up) and gray space (EES, >100% up), attributing outperformance to WESCO's unique portfolio spanning datacom, electrical infrastructure, and power solutions. He reiterated that the full-year guidance step-down reflects initial conservative outlook and project timing. “We're uniquely positioned with our portfolio because we have the [ datacom ] related solutions allow white space with CSS. We have the core Electrical Infrastructure Solutions and Connectivity Solutions supported by our EES business, and we have the power solutions supported by our UBS business, which is our grid services in particular, that's tucked in under our UBS business.”

Inquired about the sustainability of double-digit incremental margins in CSS and potential for mid-teens, especially with large projects.

John Engel highlighted aggressive gross margin management and outstanding operating cost leverage as drivers for CSS's 9% EBITDA margin. He credited the new CSS leader for accelerating momentum and emphasized the focus on profitable growth and leveraging the business model. “We are very aggressively managing our gross margins... and we have outstanding operating cost leverage. And that's what I really wanted to highlight to you to be at 9% EBITDA for Q1, we're thrilled with that, quite frankly.”

WCC

WESCO (WCC) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Industrials· Apr 30, 2026

Source: earnings call transcript

Executive summary

WESCO Q1 FY26 — Exceptional Start Driven by Data Center Demand and Raised Full-Year Outlook

WESCO delivered an exceptional Q1 FY26, driven by booming data center demand and strong execution across its portfolio, leading to double-digit sales growth and significant profit expansion. The company raised its full-year outlook, confident in its market outperformance and disciplined capital allocation, despite ongoing macroeconomic uncertainties. Strategic investments in digital transformation and a focus on profitable growth are set to further enhance future performance.

Highlights

Record first quarter sales of $6.1 billion, up 14% year-over-year.
Data center sales up approximately 70% year-over-year to $1.4 billion, representing 24% of total sales.
Adjusted EBITDA grew 25% to $389 million, with margin expanding 60 basis points to 6.4%.
Adjusted diluted earnings per share increased 52% year-over-year to $3.37.
Free cash flow generation of $213 million, representing 128% of adjusted net income.
Record backlog, up 22% versus prior year, providing clear visibility.

Concerns

UBS adjusted EBITDA decreased 5% versus prior year, with adjusted EBITDA margin down 120 basis points to 9.6%.
Enterprise network infrastructure (within CSS) declined mid-single digits due to weakness in the service provider market.
Industrial (within EES) was down low single digits, primarily reflecting project timing impacts.
Public power (within UBS) was flat year-over-year, with competitive market and expected gross margin pressure.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Reported Sales Growth	6% to 9% high materiality	FY26	High
Full-year 2026 Organic Sales Growth	5% to 8% high materiality	FY26	High
Full-year 2026 Reported Sales	$24.9B to $25.6B high materiality	FY26	High
Full-year 2026 Adjusted EBITDA Margin	6.6% to 7% high materiality	FY26	High
Full-year 2026 Adjusted Diluted EPS	$15 to $17 per share high materiality	FY26	High
Full-year 2026 Free Cash Flow	$500M to $800M medium materiality	FY26	High
CSS 2026 Growth Outlook	low double-digit growth medium materiality	FY26	High
Data Center Sales Growth (within CSS) 2026 Outlook	up 20-plus percent high materiality	FY26	High
EES 2026 Outlook	unchanged low materiality	FY26	High
UBS 2026 Outlook	unchanged low materiality	FY26	High
Q2 Reported Sales Growth	high single digits medium materiality	Q2 · FY26	High
Q2 EBITDA Margin	about flat year-over-year medium materiality	Q2 · FY26	High
Q2 Adjusted EPS Growth	double-digit growth medium materiality	Q2 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
CSS Growth driven by WESCO data center solutions. Modest pressure on gross margin from large data center projects, but generally healthy and accretive EBITDA margins. Adjusted EBITDA increased 41% to $223 million, and adjusted EBITDA margin expanded 110 basis points. Data center sales growth: >60%Security growth: high single-digitEnterprise network infrastructure decline: mid-single digitsEnterprise network infrastructure (including data center): high teens growthVolume growth: ~21%Price contribution: ~1%Backlog growth: ~40% YoY	—	24% reported, 22% organic	—	9% Adjusted EBITDA margin
EES Growth driven by OEM (semiconductor, data center) and construction (wire and cable, infrastructure). Industrial backlog up double digits, supporting improving trend. Adjusted EBITDA increased 30% to $185 million, and adjusted EBITDA margin expanded 130 basis points. OEM growth: mid-teensConstruction growth: low double digitsIndustrial decline: low single digitsIndustrial stock and flow growth: mid-single digitsData center sales growth: >100%Data center sales as % of EES sales: ~10%Volume contribution: ~3%Pricing contribution: ~4%Backlog growth: ~14% YoY	—	9% reported, 7% organic	—	8.2% Adjusted EBITDA margin
UBS Growth supported by improving demand. Utility driven by investor-owned utilities and grid services. Public power flat and competitive. Adjusted EBITDA was $131 million, down 5% versus prior year, and adjusted EBITDA margin decreased 120 basis points, primarily due to gross margin pressure and higher SG&A as a percentage of sales. Utility growth: high single-digitInvestor-owned utilities growth: strong double-digitPublic power growth: flatBroadband growth: mid-single-digitVolume growth: ~3%Pricing contribution: ~3%Backlog growth: ~16% YoY	—	6% organic	—	9.6% Adjusted EBITDA margin

Orderbook & backlog

Total backlog Record level Q1 FY26 end

up 22% versus prior year

Reflecting continued effectiveness of cross-selling program and providing clear visibility of secular growth trends. Includes projects shipping in 2027.

CSS backlog Record level Q1 FY26 end

up ~40% versus prior year

Reflecting continued strong data center project activity and order rights.

EES backlog Record level Q1 FY26 end

up 14% versus prior year

Supported by strong order activity and pipeline conversion.

UBS backlog Increasing Q1 FY26 end

increased 16% year-over-year

Seeing increasing interest in grid services enabled power capabilities from hyperscalers and other data center customers.

Deals & partnerships

Investors $1.5 billion bond refinancing $1.5B 5-year note

Upsized relative to initial launch, reflecting strong investor demand and record pricing. Net proceeds used to redeem 2028 senior notes, improve liquidity, and strengthen balance sheet.

Capital programs

Digital Transformation Program underway

Start: prior to Investor Day a year before last

Benefit:increased capabilities, step function increase in margin expansion post-completion

Phased deployment to avoid business disruption. One end-to-end P&L operation (CSS) fully deployed on new digital platform in Q1 FY26.

Risks & headwinds

Macroeconomic uncertainty ongoing

no meaningful disruption to our revenue or profitability through Q1 and into April

Mitigation:monitoring closely, kept in mind for outlook

Middle East geopolitical situation ongoing

less than 1% of sales in the region

Mitigation:secondary impacts on transportation costs manageable; passing cost increases to customers; limiting quote validity

Tariff impact ongoing

not material

Mitigation:WESCO is importer of record for small percentage of COGS; typically increases prices to maintain margins; no material recoveries from IEPA decision expected

Public power market competitiveness ongoing

flat year-over-year

Mitigation:expected gross margin pressure given weak sales in transformers and wire and cable

Higher incentive compensation Q2 FY26

approximately 25 basis points

Mitigation:expected to cause Q2 EBITDA margin to be about flat year-over-year

What to watch in Q2 FY26

Industrial segment growth

next quarter

Current low single-digit decline (Q1 FY26)

Target improving trend

Why it matters

Management expects an industrial super cycle, and Q1's decline was attributed to project timing, with strong backlog supporting future growth.

Industrial was down low single digits, primarily reflecting project timing impacts. However, our industrial stock and flow business grew mid-single digits in the first quarter, and backlog was up double digits, supporting an improving trend.

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Q&A highlights

Inquired about specific issues causing the industrial segment's decline, particularly regarding extended lead times for components like switchgear, and if this relates to 'project timing.'

John Engel confirmed extended lead times persist but stated the Q1 industrial decline was due to specific intra-quarter project timing. He highlighted strong book-to-bill rates and double-digit backlog growth in EES industrial, supporting an improving future trend, and expressed belief in an industrial super cycle driven by AI, power generation, and reshoring.

“I really believe we're at the beginning of an industrial super cycle. In the U.S., in particular, it's driven by AI-driven infrastructure investments.”

asked by David Manthey · answered by John Engel

2 min read 6 chapters

Detailed narrative

Data Center Momentum and Strategic Positioning

WESCO's data center sales reached $1.4 billion in Q1 FY26, marking a 70% year-over-year increase and now constituting 24% of total company sales, making it WESCO's largest end market. On a trailing 12-month basis, data center sales are approximately $4.8 billion, representing 20% of total sales.

This growth is driven by strong secular demand and WESCO's comprehensive offerings across its CSS, EES, and UBS segments, supporting hyperscale, multi-tenant colocation, and enterprise customers with power, connectivity, and operational solutions.

CFO Transition and Strategic Priorities

Neel Dev joined WESCO as the new CFO, succeeding Dave Schulz. His immediate priorities include partnering with leadership to scale the business in attractive end markets, driving profitable growth, and enhancing working capital efficiency and cash conversion through tighter processes and analytics.

This strategic focus aims to leverage WESCO's existing capabilities to achieve higher operating leverage and margin expansion, particularly within high-growth areas like data centers.

Industrial Market Trends and Outlook

Despite a low single-digit decline in the industrial business within EES due to specific project timing issues in Q1, management expressed strong confidence in an emerging industrial super cycle. This cycle is anticipated to be driven by AI-driven infrastructure investments, increased power generation needs, and reshoring trends in the U.S.

The industrial stock and flow business, a short-cycle segment, showed mid-single-digit growth, and EES industrial backlog increased double digits, supporting an improving future trend.

Digital Transformation Program Progress

WESCO reported significant progress on its digital transformation program, which was initially outlined at its Investor Day. A notable milestone in Q1 FY26 was the full deployment of a new digital platform in one end-to-end P&L operation within the CSS segment.

The company is pursuing a phased deployment strategy to ensure business continuity and manage change effectively, with design-build activities continuing through this year and into early next year, and benefits expected to phase in over a multi-year period.

Balance Sheet Strengthening and Capital Allocation

During the quarter, WESCO successfully executed a $1.5 billion bond refinancing, achieving the lowest coupon rate in company history for a senior notes offering and for a BB-rated 5-year note since 2021. This refinancing is expected to generate over $20 million in annualized interest expense savings, improve liquidity, and strengthen the balance sheet, with net debt to adjusted EBITDA at 3.2x.

The company also repurchased $25 million of shares to offset dilution.

Q2 Outlook and Macroeconomic Considerations

For Q2 FY26, WESCO anticipates high single-digit reported sales growth and expects EBITDA margin to be approximately flat year-over-year, primarily due to higher incentive compensation (a 25 basis point headwind). The company is closely monitoring macroeconomic uncertainties, the manageable impacts of Middle East transportation costs, and tariffs, which are not material and are typically passed through to customers.

No meaningful disruption to revenue or profitability has been observed through April.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.