WESCO International, Inc. (WCC) | The Buildout — AI Infrastructure
The Verdict
WESCO International is a business-to-business distributor and logistics provider that supplies the electrical, communications, and utility products AI data centers need. It does not make chips or servers; it moves and integrates the physical layer across the full data center lifecycle. That puts it directly in the path of AI infrastructure spending without requiring it to win a specific compute or silicon cycle.
| Market Cap | — |
| Revenue (TTM) | $25.0B |
| Revenue Growth | +12.5% |
| EBITDA Margin (TTM) | 6.3% |
| Net Cash | $784M |
| Earnings Beats | 4 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data center is now the largest end market across all three business units, with Q2 data center sales of $1.5B, up ~45% year over year.
- Record total backlog rose ~60% year over year in Q2, with CSS up ~95% and UBS up ~80%.
- The hyperscale grid-services award is direct to an unnamed hyperscaler; management says no traditional competitor matches WESCO one-for-one in grid services.
- CSS reached a 10.2% adjusted EBITDA margin, its first double-digit margin quarter in company history.
- Management raised FY2026 guidance twice; organic sales are now guided to 9%–11% and adjusted EBITDA margin to 6.9%–7.1%.
What We’re Watching
- Free cash flow: full-year guide cut from $500–800M to $300–600M; working capital intensity remains about 20% of sales.
- Data-center growth stepped down from ~70% y/y in Q1 to ~45% in Q2; management attributes this to project timing.
- Q3 2026 adjusted EBITDA margin is expected to be slightly lower sequentially on mix.
- The grid-services pipeline is described as very large, but no additional award size or timing has been disclosed.
The thesis is strengthening on demand and margins but is now being tested on cash conversion. Management has delivered two consecutive guidance raises, record backlog, and broad-based segment margin improvement. The central unresolved question is whether the DSO/DIO initiatives can convert faster P&L growth into stronger free cash flow while power and labor constraints govern revenue timing.
Earnings Beat
WESCO reported Q2 FY2026 revenue of $6,665.1 million, up 13% year over year and 10% sequentially. Gross margin expanded 70 basis points year over year. Adjusted EBITDA reached $487 million, up 24% year over year, and total backlog rose a record ~60% year over year.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $6.7B | $6.1B | $5.9B | +13.0% |
| Gross margin | -18.6% | 20.4% | 20.1% | -3870bps |
| EBITDA | $433M | $344M | $384M | +12.7% |
| EPS | $4.22 | $3.11 | $3.53 | +19.5% |
| Data center sales | $1.5 billion | $1.4 billion | n/a | ~45% y/y |
| Total company backlog growth | ~+60% y/y | +22% y/y | n/a | Accelerated from +22% y/y in Q1 |
Wesco’s differentiated power to compute model positions us across the full data center lifecycle. From the grid to the building to the rack and equipment.— Indraneel Dev, CFO, July 30, 2026
Management tone: Management's tone shifted from bullish in Q1 to more expansive in Q2. It described results as exceptional, called the grid-services award a landmark win, and used phrases like eye popping growth numbers for backlog. The CEO volunteered leadership-change effects as a driver of CSS and EES margin improvement, while declining to name the hyperscale customer and giving limited detail on project timing.
Management Guidance
Management raised FY2026 organic sales growth to 9%–11%, reported sales growth to 10%–12%, adjusted EBITDA margin to 6.9%–7.1%, and adjusted diluted EPS to $16.00–$17.50. Full-year free cash flow guidance was cut to $300–600 million from $500–800 million. For Q3 2026, management guided low-double-digit year-over-year sales growth and a slightly lower sequential adjusted EBITDA margin due to mix.
Trajectory
WESCO's revenue direction remains stable with an upward step: Q2 FY2026 revenue was $6,665.1 million, up 9.6% sequentially and 13% year over year, following Q1's 13.8% reported growth. Management's adjusted EBITDA margin rose to 7.3% from 6.4% in Q1. The main pressure is cash conversion; Q2 free cash flow was $25.5 million, and working capital intensity remains about 20% of sales.
The Model
The model projects FY+1 revenue of $25,800 million and EBITDA of $1,754 million, a 6.8% margin, followed by FY+2 revenue of $28,100 million and EBITDA of $2,051 million, a 7.3% margin. The near-term path is anchored by record backlog and data-center-led growth; FY+2 depends on continued grid-services expansion, Newark Engineering integration, and working capital coming under control.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $23.5B | $25.8B | $28.1B |
| YoY Growth | — | +9.7% | +8.9% |
| EBITDA | $1.5B | $1.8B | $2.1B |
| EBITDA Margin | 6.3% | 6.8% | 7.3% |
Projections are the median of 5 independent model runs. The model’s revenue sits 4.1% above analyst consensus.
Management raised FY2026 organic sales growth to 9%–11%, reported sales growth to 10%–12%, adjusted EBITDA margin to 6.9%–7.1%, and adjusted diluted EPS to $16.00–$17.50. Full-year free cash flow guidance was cut to $300–600 million from $500–800 million. For Q3 2026, management guided low-double-digit year-over-year sales growth and a slightly lower sequential adjusted EBITDA margin due to mix.
What Could Go Right — and Wrong
- Additional grid-services awards convert the very large pipeline into repeat multiyear wins.
- DSO/DIO initiatives lower working capital intensity from about 20% of sales and lift free cash flow.
- Newark Engineering cross-sells cooling and lifecycle services into existing hyperscale and data-center accounts.
- Digital transformation begins contributing to the P&L, delivering the step-function margin expansion management described.
- Industrial growth broadens beyond OEM; EES ex-data-center growth holds at high-single digits.
- Data-center project timing keeps shifting; growth already stepped from ~70% y/y in Q1 to ~45% in Q2.
- Power and labor constraints slow backlog conversion even as demand remains strong.
- Grid services remains a single landmark award and the pipeline does not produce another win.
- Working capital intensity persists and full-year free cash flow lands at the low end of $300–600M.
- Public power competition returns and pressures UBS margin again.
Looking Ahead
The next twelve months hinge on backlog conversion and cash generation. WESCO enters the period with record backlog across all three segments, a hyperscale grid-services award shipping over multiple years, and Newark Engineering integration underway. The most important signposts are whether additional grid-services awards arrive, whether DSO/DIO initiatives improve free cash flow, and whether CSS can hold its first double-digit EBITDA margin.
- October 29, 2026Q3 2026 earnings — Tests low-double-digit sales growth and the expected sequential EBITDA margin dip.
- H2 2026Free cash flow delivery — Tests the $300–600M full-year range after first-half free cash flow of $246M.
- Through 2026 into early 2027Digital transformation design/build completion — First CSS P&L is already live; benefits are still ahead.
- Timing undisclosedNext grid-services award — Converts a very large pipeline into repeat multiyear wins.
- OngoingNewark Engineering integration — Tests cross-selling into existing hyperscale and data-center relationships.
- 2026–2027Record backlog conversion — Tests revenue visibility from CSS +95% and UBS +80% backlog growth.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $21.8B | $23.5B | $25.0B | +7.8% |
| Gross Margin | 21.6% | 20.4% | 9.9% | 120bps |
| EBITDA | $1.4B | $1.5B | $9.7B | +4.9% |
| EBITDA Margin | 6.4% | 6.3% | 6.3% | 17bps |
| Net Income | $718M | $640M | $710M | -10.8% |
| Free Cash Flow | $1.0B | $25M | $2.8B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)9.9%
- EBITDA Margin (TTM)6.3%
- Net Margin (TTM)2.8%
- ROIC24.2%
- FCF Conversion9.8%
- SBC / Revenue0.2%
The Company
WESCO International is a B2B distributor and provider of logistics and supply-chain solutions, not a manufacturer. It sits between more than 35,000 suppliers and nearly 130,000 customers, distributing electrical equipment, connectivity, wire and cable, utility hardware, security, and now cooling and lifecycle services. Data center is its largest end market across all three business units, making it a physical-layer supplier to AI infrastructure rather than a compute or silicon vendor.
The company operates through three segments: Electrical & Electronic Solutions, Communications & Security Solutions, and Utility & Broadband Solutions. It runs a CapEx-light footprint of more than 700 sites in approximately 50 countries and 63 large distribution and fulfillment centers between 100,000 and 500,000 square feet. Management's OneWesco model cross-sells the segments across the power-to-compute lifecycle, extended by Rahi, Ascent, and the July 2026 Newark Engineering acquisition.
Business Segments
Competitive Landscape
WESCO describes itself as shifting from a traditional distributor toward an infrastructure-solutions provider. Its power-to-compute model spans grid, building, rack, and equipment. On grid services, management says no firm competes directly one-for-one with WESCO, though different companies do pieces of the work. The Rahi, Ascent, and Newark acquisitions are intended to extend WESCO from product distribution into lifecycle services.
Supply Chain
WESCO sits between more than 35,000 suppliers and nearly 130,000 customers as a distribution and logistics intermediary. No supply-chain neighbor in the source mentioned WESCO by name.
More on WCC: Earnings recap