How does the Newark Engineering acquisition enhance WESCO's international aspirations and data center capabilities globally, drawing parallels with the Rahi acquisition?

Engel explained that Newark Engineering systematically expands WESCO's end-to-end solutions for data center customers, particularly in mission-critical cooling and thermal management, a capability WESCO previously lacked. The acquisition strengthens WESCO's presence in Southeast Asia and allows for cross-selling globally, leveraging WESCO's existing footprint in 55 countries and relationships with hyperscale customers. “Newark, again, expands the portfolio meaningfully. Yes, it's in the Southeast portion of Asia today, very strong end-user customer relationships, our same customers that we have. So we essentially expanded the portfolio.”

Has the gross margin dynamic for data centers changed, with price/cost turning positive, and what is the gross margin for the grid services award compared to overall UBS?

Engel stated that CSS gross margin pressure from 6-7 quarters ago has reversed due to execution, increased services content, and a "one-stop shop" approach for data center projects. He confirmed that margins for grid services are accretive to UBS's operating margin, and as grid services accelerates, it will drive margin improvement for UBS. “the margins for grid services are accretive at the operating margin line to UBS. So as grid services kicks into gear and it will kick into gear very strongly, it's going to be margin accretive.”

Why is the Q3 EBITDA margin guide sequentially lower despite higher sales, and what initiatives are in place to improve working capital intensity?

Neel Dev attributed the Q3 sequential margin dip primarily to mix. John Engel added that incentive compensation true-ups impacted Q2. Dev detailed working capital initiatives, including diligent payment terms with customers, contract protections for inventory, and organizational changes to improve collections and resolve disputes faster, with a focus on DSO and DIO. “We have a series of initiatives. It starts with the commercial front end. And so we're being very diligent in terms of a lot of our payment terms with customers thinking through not only does the payment term, thinking through how long we hold inventory being [indiscernible] protections in the contracts to make sure we limit that et cetera, et cetera.”

WCC

WESCO (WCC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Jul 30, 2026

Source: earnings call transcript

Executive summary

WESCO Q2 FY26 — Record Performance Driven by Data Center and Broad-Based Growth, Full-Year Outlook Raised

WESCO delivered an exceptional second quarter, achieving record sales, profitability, and backlog, significantly raising its full-year outlook. The strong performance was fueled by continued momentum in data centers and broad-based mid-single-digit growth across its diversified portfolio. Strategic acquisitions and a major grid services award further strengthened its market position, positioning the company for sustained outperformance.

Highlights

Record sales of $6.7 billion, up 13% reported and organic.
Record adjusted EBITDA of $487 million, up 24%, with margin expanding 60 bps to 7.3%.
Record adjusted EPS of $4.57, up 35%.
Record backlog up 60% year-over-year, with all three business units posting double-digit growth.
CSS achieved a record 10.2% EBITDA margin, EES expanded to 9.2%, and UBS returned to 10%.

Concerns

Q3 FY26 adjusted EBITDA margin expected to be slightly lower sequentially due to anticipated mix of business.
Public power competitive dynamics remained a margin headwind in UBS in the near term.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 organic sales growth	9% to 11% high materiality	FY26	High
Full-year 2026 reported sales growth	10% to 12% high materiality	FY26	High
Full-year 2026 adjusted EBITDA margin	6.9% to 7.1% high materiality	FY26	High
Full-year 2026 adjusted diluted EPS	$16 to $17.50 high materiality	FY26	High
Full-year 2026 free cash flow	$300 million to $600 million medium materiality	FY26	Medium
CSS reported sales growth	mid- to high teens year-over-year medium materiality	FY26	High
CSS data center sales growth	30-plus percent year-over-year medium materiality	FY26	High
EES sales growth	high single-digit year-over-year medium materiality	FY26	High
UBS sales growth	mid-single-digit year-over-year medium materiality	FY26	High
Q3 FY26 sales growth	low double digits year-over-year medium materiality	Q3 · FY26	Medium
Q3 FY26 adjusted EBITDA margin	slightly lower sequentially medium materiality	Q3 · FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
WESCO (Total Company) Record sales, adjusted EBITDA, and adjusted EPS. Growth was broad-based, with mid-single-digit sales growth excluding data centers. Adjusted EBITDA: $487 million (+24%)Adjusted EPS: $4.57 (+35%)	$6.7 billion	13%	—	7.3% adjusted EBITDA margin
CSS (Communications and Security Solutions) Outstanding quarter driven by data center momentum. Achieved first double-digit EBITDA margin in CSS history. Data center sales growth: ~45%Security and enterprise network infrastructure growth: low single digit (high single digit including data center projects)	—	18%	—	10.2% adjusted EBITDA margin
EES (Electrical and Electronic Solutions) Excellent quarter with diversified strength. Strong gross margin expansion. Volume growth: ~6%Price contribution: ~5% (1% from commodity inflation)Construction growth: high single digitIndustrial growth: low single digitOEM growth: strong double digitsData center sales growth: >70%Data center sales as % of EES: ~8%Gross margin: 24.4% (record)	—	11%	—	9.2% adjusted EBITDA margin
UBS (Utility and Broadband Solutions) Strengthening demand trends. Returned to 10% EBITDA margin. Grid services award is a significant milestone. Utility growth: mid-single digitBroadband growth: strong mid-teens	—	7%	—	10% adjusted EBITDA margin

Orderbook & backlog

Total Backlog record level Q2 FY26

up 60% versus prior year

driven by strong double-digit growth across all 3 business units

CSS Backlog record level Q2 FY26

up 95%

essentially doubling, underscoring durability of demand in data center projects and providing meaningful revenue visibility

EES Backlog record level Q2 FY26

up 30% versus prior year

with double-digit backlog growth across industrial OEM and construction

UBS Backlog record level Q2 FY26

up 80% year-over-year

driven by a significant multiyear grid services award with a hyperscale data center customer

Deals & partnerships

Newark Engineering Group Strengthens capabilities in engineered cooling solutions and life cycle services for data centers.

Singapore-based company, strengthens presence in Southeast Asia, adds mission-critical cooling and thermal management expertise, design engineering capabilities for HVAC, in-house fabrication, installation, after-sales servicing.

Risks & headwinds

Public Power Competitive Dynamics near term

remained a margin headwind

Mitigation:strengthening demand trends, record backlog and accelerating momentum in grid services positions UBS well

Power and Labor Constraints for Data Centers

demand is outstripping supply across the value chain starts with power, followed by labor

Mitigation:WESCO is not seeing this impacting its business directly, but it's an industry-wide phenomenon that could shift timing of other construction projects.

What to watch in Q3 FY26

Working Capital Intensity

next quarter

Current 20% of sales

Target Improvement in DSO and DIO

Why it matters

Management is implementing initiatives to improve working capital intensity and cash flow conversion, which is crucial for funding growth.

Over the past few months, we've made several operational and organizational changes to drive more accountability around initiatives to improve working capital intensity and cash flow conversion. There are now a number of initiatives implied around improving day sales outstanding and days inventory outstanding.

Find out whether WCC delivers this. Inve re-checks your case every morning.

Q&A highlights

What are the drivers of WESCO's broad-based growth outside of data centers, what does it say about the macro, and what is the sustainability and visibility of this growth?

John Engel highlighted that WESCO is not a "one-trick pony," benefiting from multiple secular trends like infrastructure build-out, increased electricity demand, reshoring, and an impending industrial super cycle. He noted non-data center sales were up mid-single digits, and record backlog across all SBUs provides strong visibility, setting the stage for a strong 2027.

“We're not a one-trick pony. We're benefiting from multiple secular growth trends, and you're seeing that starting to contribute meaningfully to our results.”

asked by Deane Dray · answered by John Engel

2 min read 6 chapters

Detailed narrative

Record Performance and Broad-Based Growth

WESCO achieved record sales of $6.7 billion, adjusted EBITDA of $487 million, and adjusted EPS of $4.57 in Q2 FY26. Sales grew 13% organically and reported, driven by an estimated 3% price benefit and solid volume. While data centers were a key driver, non-data center sales grew mid-single digits for the company and high single digits for EES, highlighting the diversified portfolio benefiting from multiple secular trends.

Profitability Expansion Across Business Units

Gross margins expanded by 70 basis points, contributing to a 60 basis point adjusted EBITDA margin expansion to 7.3% for WESCO. CSS achieved a record 10.2% EBITDA margin, EES expanded to 9.2%, and UBS returned to a 10% EBITDA margin, demonstrating significant profitability improvements across all three business units. This was attributed to favorable sales mix and margin improvement initiatives.

Record Backlog and Future Visibility

The company reported a record backlog, up 60% year-over-year, marking the third consecutive quarter of record backlog. This growth was broad-based, with CSS backlog up 95%, EES up 30%, and UBS up 80%, providing strong revenue visibility and underscoring the effectiveness of the "One WESCO" cross-selling strategy and multiyear customer commitments.

Strategic Expansion in Data Center and Grid Services

WESCO strengthened its data center offerings through the acquisition of Singapore-based Newark Engineering, adding mission-critical cooling solutions and expanding its presence in Southeast Asia. Additionally, UBS secured a significant multiyear grid services award from a hyperscale data center customer, diversifying its customer base and expanding its power solutions portfolio for data centers.

Working Capital and Capital Allocation Focus

Despite double-digit top-line growth, working capital intensity remained at approximately 20% of sales. Management is implementing initiatives to improve day sales outstanding (DSO) and days inventory outstanding (DIO) to enhance free cash flow conversion. The company also repurchased $25 million of shares in Q2 and improved its net debt to adjusted EBITDA ratio to 3x.

Outlook and Momentum

WESCO significantly raised its full-year 2026 outlook for sales, adjusted EBITDA, and adjusted EPS, reflecting exceptional first-half performance and continued momentum. Preliminary July sales per workday were up mid-teens, with Q3 sales expected to grow low double digits year-over-year, indicating strong demand trends continuing into the second half.

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