Electrical supply company WESCO (NYSE:WCC) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 10.3% year on year to $6.07 billion. Its non-GAAP profit of $3.40 per share was 12.6% below analysts’ consensus estimates.
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WESCO (WCC) Q4 CY2025 Highlights:
- Revenue: $6.07 billion vs analyst estimates of $6.04 billion (10.3% year-on-year growth, in line)
- Adjusted EPS: $3.40 vs analyst expectations of $3.89 (12.6% miss)
- Adjusted EBITDA: $408.6 million vs analyst estimates of $420 million (6.7% margin, 2.7% miss)
- Operating Margin: 5.3%, in line with the same quarter last year
- Organic Revenue rose 9.2% year on year (miss)
- Market Capitalization: $13.9 billion
StockStory’s Take
WESCO’s fourth quarter saw a muted market response, as the company's non-GAAP earnings per share fell short of Wall Street’s expectations despite sales growth in line with analyst forecasts. Management attributed the positive revenue trend to exceptional performance in its data center solutions business, which reported approximately 30% year-over-year growth, as well as solid results from communications, security, and electrical solutions. However, CEO John Engel acknowledged that ongoing sales and margin pressures in the utility and broadband segment, particularly with public power customers, remained a significant challenge. Engel also noted, "We saw a clear inflection back to growth with our investor-owned utilities in the second quarter of last year."
Looking forward, WESCO’s guidance is anchored by confidence in continued demand for digital infrastructure, especially AI-driven data centers, and a recovering utility segment. Management expects mid- to high-single-digit organic sales growth, with significant contributions from data center and grid services, alongside improved operating leverage. CFO David Schulz emphasized, “We expect this momentum to continue as investment in digital infrastructure accelerates,” but cautioned that public power customers are not expected to return to growth until year-end. The company also highlighted ongoing digital transformation initiatives and capital allocation priorities such as debt reduction and a planned dividend increase, signaling an intent to balance growth with shareholder returns.
Key Insights from Management’s Remarks
WESCO’s management identified strong secular trends in digitalization and electrification as catalysts for the quarter, but acknowledged public power market pressures as the main source of margin drag.
- CFO transition announced: WESCO disclosed that CFO David Schulz will retire in 2026, with Neil Deve set to join as the new CFO, bringing experience across WESCO’s key end markets. The transition is expected to support continuity amid ongoing transformation efforts.
- Data center solutions excelled: The communications and security (CSS) segment achieved approximately 30% sales growth in data center solutions, fueled by rising AI infrastructure investments and increased demand for next-generation connectivity and security products.
- Public power weakness persists: The utility and broadband (UBS) unit continued to face sales and margin challenges with public power customers, driven by inventory normalization and competitive pricing, particularly in transformer products. Investor-owned utilities, however, showed three consecutive quarters of growth.
- Grid services gaining traction: WESCO’s Grid Services business, which provides end-to-end support for utility infrastructure projects, grew at a mid-single-digit rate for the year and double digits in Q4. Management expects this segment to further accelerate as grid modernization spending rises.
- Digital transformation advances: The company deployed a new technology stack in pilot locations, including a data lake leveraging AI to improve operational efficiency. Management expects the full rollout to boost cross-selling, pricing, and working capital efficiency.
Drivers of Future Performance
Management anticipates that robust demand for data centers, grid modernization, and ongoing digital investments will drive growth, while competitive pressures in public power remain a risk.
- Data center expansion: WESCO forecasts mid-teens growth in data center sales, emphasizing its comprehensive offerings across both power infrastructure and IT connectivity. Management believes continued AI investment and large-scale cloud projects will sustain momentum, with the business positioned as a one-stop partner for global deployments.
- Utility and grid modernization: The company expects double-digit growth in its Grid Services segment, supported by major infrastructure initiatives and a rising power demand curve. However, public power customers are projected to remain weak until late in the year, offset by strength in investor-owned utilities and grid projects.
- Operational discipline and cash flow: Management is focused on improving free cash flow through better working capital management, including enhanced digital tools for inventory and receivables planning. The company also plans to increase its dividend and maintain a disciplined approach to capital allocation, prioritizing organic investment and debt reduction.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace of adoption and margin impact from WESCO’s digital transformation rollout, (2) the performance of grid services and data center segments as indicators of secular demand strength, and (3) signs of recovery in public power sales and margins. Execution on working capital initiatives and continued share gains in data center infrastructure will also serve as key milestones.
WESCO currently trades at $278.23, down from $301.69 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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