Watts Water Technologies, Inc. Class A Q2 2026 earnings show record sales of $763M, with data center sales tripling YoY. Guidance raised for full-year growth.
Watts Water Technologies, Inc. Class A reported Q2 2026 sales of $763 million, reflecting a 19% increase year-over-year and surpassing consensus expectations. The robust growth was driven by a significant surge in data center sales, which more than tripled compared to the prior year, underscoring the company’s strategic focus on high-growth markets despite ongoing challenges in residential and non-institutional construction.
Key Takeaways
- Sales growth reached $763 million, up 19% YoY, driven by strong data center demand and organic sales growth of 12%.
- Data center sales represented 8% of total sales, with a threefold increase YoY, showcasing accelerated demand for cooling solutions.
- Adjusted EPS was $3.66, reflecting an 18% increase YoY, bolstered by operational performance and acquisitions.
- Guidance Update: The company raised its full-year organic sales growth outlook to 8-11%, up from prior guidance, indicating confidence in continuing growth trends.
- Margin pressures were noted with adjusted operating margin decreasing 60 basis points to 21%, primarily due to acquisition dilution and a challenging comparison from the prior year.
Record Sales Driven by Data Center Expansion
Watts Water Technologies achieved record sales of $763 million in Q2 2026, marking a 19% increase compared to the prior year. Organic sales rose 12%, supported by favorable pricing and increased volume, particularly in the data center segment. Adjusted EBITDA totaled $177 million, with a margin of 23.1%, slightly down from the previous year primarily due to acquisition impacts and inflationary pressures.
| Metric | Q2 2026 | YoY | QoQ |
|---|---|---|---|
| Revenue | $763 million | +19% | N/A |
| Adjusted EPS | $3.66 | +18% | N/A |
| Adjusted Operating Margin | 21% | -60 bps | N/A |
The Americas region experienced strong organic growth of 12%, benefiting from increased data center sales and pull-forward demand. This growth was complemented by a reported sales rise of 17%, including contributions from acquisitions.
Data Center Initiative’s Accelerated Growth
Watts’ data center sales have become a critical growth driver, accounting for 8% of total sales, up from 3% last year. The company’s data center sales more than tripled year-over-year, reflecting significant demand for its cooling solutions, including the recently launched CoolVault thermal storage tanks. The addressable market for data centers has been revised to approximately $2 billion, highlighting the company's expanding opportunities in this segment.
Management noted, > "Our expanding global data center organization along with investments in new product launches have been paying off and we feel confident in our ability to scale with our customers."
The company expects data center sales to represent mid to high single digits as a percentage of overall sales for the full year, indicating robust growth momentum.
Guidance Adjustments Reflecting Strong Performance
In light of the strong first half of 2026 and an optimistic outlook for the third quarter, Watts has raised its full-year sales and margin expectations. The updated guidance anticipates organic sales growth of 8% to 11%, a significant increase from previous estimates. Adjusted EBITDA margin guidance has also been raised to reflect better-than-expected performance in Europe and APMEA regions.
Specifically, management now forecasts reported sales growth of 14% to 17% and an adjusted operating margin expansion of 20 to 80 basis points. This outlook assumes stability in tariff structures and ongoing geopolitical challenges, particularly in the Middle East.
Analyst Q&A Highlights Key Market Dynamics
During the Q&A session, analysts focused heavily on the data center segment's growth trajectory and the company's market positioning. One analyst from Deutsche Bank inquired about the increase in the total addressable market for data centers from $1 billion to $2 billion, to which management confirmed that the expansion now includes European markets and highlights the company's comprehensive global strategy.
Additionally, another analyst from Barclays noted the strong adoption of new products, prompting management to elaborate on their development efforts in liquid cooling solutions. This ongoing innovation is expected to further bolster growth in the data center segment and drive profitability.
Closing Perspective
As Watts Water Technologies continues to capitalize on the growing demand for data center solutions, the company faces headwinds from residential market softness and macroeconomic uncertainties. The ability to maintain margins while expanding in high-growth sectors will be crucial in the coming quarters, especially as competition intensifies in the data center space.
This analysis is based on public earnings call materials and is not investment advice.
