WESCO's Record Q2: Riding the AI 'Super Cycle' with Grid Services as a New Engine

Broad-based double-digit growth, a landmark hyperscale grid-services win, and the Newark cooling acquisition set the stage for a second-half raise.

WCC · Earnings Call · 2026-07-30

A Breakout Quarter, Driven by More Than Data Centers

WESCO's second quarter was a record on every headline metric — sales, backlog, adjusted EBITDA, and adjusted EPS — and the company raised its full-year outlook accordingly. The tone on the call was unapologetically bullish, and for good reason: organic sales grew 13%, adjusted EBITDA rose 24%, and adjusted EPS jumped 35%. Yet the most striking line from CEO John Engel was his insistence that this is not a one-trick pony:“We are not a one-trick pony. We are benefiting from multiple secular growth trends and you are seeing that starting to contribute meaningfully to our results.” — John J. Engel, Chief Executive Officer · 2026-07-30 Indeed, excluding data centers, WESCO still grew mid-single digits, with all three business units contributing. The long cycle infrastructure buildout, reshoring, and an impending industrial "super cycle" were repeatedly cited as the tailwinds behind this diversification. The numbers back this up: Total Revenue of $6.7B in the quarter, up from $5.9B a year earlier.

Data Centers: The New Leader Effect and a Full-Lifecycle Play

Data center sales grew approximately 45%, now representing a little over 20% of total sales. The growth is broad-based across hyperscale, multitenant, and enterprise customers. Management attributed much of the margin improvement in CSS and EES to "new leader" effects — a recurring theme from prior calls. As Engel put it, “New leader effect — our new leader there, this is his fifth quarter under his belt — and he is very much driving all our margin initiatives.” — John J. Engel, Chief Executive Officer · 2026-07-30 The acquisition of Singapore-based Newark Engineering, closed July 1, adds engineered cooling solutions and strengthens Southeast Asia presence, extending the lifecycle position. This is a strategic continuation of the Rahi and Ascent deals, giving WESCO end-to-end capabilities from the grid to the rack. The global angle is critical: Newark Engineering is the tangible evidence of WESCO's ability to serve hyperscale customers in their global expansion plays.

We have got a leading position to serve global data center customers... If you look at the acquisitions we have done post Anixter, they are tuck ins, but they are more than tuck ins because they have been expanding the portfolio, and we are leveraging them our oneWesco selling model across the globe.
John J. Engel, Chief Executive Officer · 2026-07-30

The stock has responded — up 15% over the past 90 days — yet it remains about 7% below its June peak. The market is still pricing in execution risk, but the backlog (up 60% overall, CSS +95%, UBS +80%) provides unusual visibility.

Grid Services: The Landmark Win that Changes the Mix

The most novel and company-specific theme this quarter was the Grid services award. Engel described a multiyear, hyperscale data center grid services win in UBS — a direct-to-end-user deal, not through an integrator. This win diversifies UBS beyond its traditional utility and broadband base and, crucially, is margin accretive at the operating line. The management team has been building this organically for five to six years, and the pipeline is "very large." “So in terms of there is no one we are competing with directly one-for-one for what we are doing in grid services.” — John J. Engel, Chief Executive Officer · 2026-07-30 This is a contrarian insight: WESCO is staking out a new category, not just taking share. In prior calls, the focus was on public power margin pressure and transformer destocking; now the emphasis is on Power Solutions as a growth vector. The change is sharp and positive.

Margins, Leverage, and a Raise

Adjusted EBITDA margin expanded 60 basis points to 7.3%, driven by gross margin up 70 basis points. The company is lapping incentive comp payouts and expects operating leverage in 2027-2029. The raised guidance — organic sales growth of 9-11% (from 5-8%), adjusted EPS of $16-$17.50 (up $0.75 at the midpoint) — reflects confidence. Free cash flow was softer but positive, and management reiterated a target of improving working capital intensity; receivables to revenue ticked up to 70.3%, a slight headwind. Critically, leverage improved to ~3.0x net debt to adjusted EBITDA from 3.4x at year-end. The company is investing in growth, not just paying down debt, which is a change from the deleveraging story that dominated prior quarters.