Wesco Reports 2025 Q2. Data Center Story.

Wesco shared their 2025 Q2 performance yesterday and while the sum of the parts was a respectable 7%, the diversity of performance by the divisions highlights why the merger with Anixter was done … because sometimes the divisions grow in synch and other times, there are differences.

Overall, up 7% for the quarter (details show 7.7% organic) to $5.9 billion, an increase from 6% in Q1, but:

• CSS was up 17%, organically
• EES was up 6%, organically (in the details it shows 5.8%, so, “rounding up”.)
• UBS was down 4%

Some other data points:

• Overall data centers sales exceeded $1 billion.
• Price increases had nominal effect, due to timing, with the overall price benefit only being about 1.5%, hence overall organic growth, excluding price, was 4.5%.
• Overall gross margin was 21.1% due to “project and product mix.”
• Wesco’s overall EBITDA was 6.7%

Key Earnings Call Take Aways

The following is a review of the earnings transcript, and presentation, with a focus on the EES division:

• Sales were $2.258 billion, up from $2.065 billion in Q1 and up $123 million from 2024 Q2. EES EBITDA is 8.1%, excluding corporate allocation.
  • Growth was construction, OEM and “return to growth in Industrial.”
    • “Construction grew mid-single digits, supported by strong wire and cable sales tied to data center and infrastructure projects across the U.S. and Canada.” (and, as we know, wire / cable is lower margin as our these types of large, sometimes super-large, projects. From a Wesco perspective, hopefully winning the wire business in Q2 is the 1^st phase of winning other, more profitable, elements of the project in later quarters, otherwise they are winning this but losing other future elements.)
    • Continue to see good quotation activities.
  • Data center sales represented about 40% of CSS revenue in Q2, up from Q1’s 30%!
    • Data center’s represented 18% of Wesco’s total sales in Q2. (Data center revenues are reported in CSS and EES, depending upon the application.)
    • On a trailing 12 month basis, data centers have represented $3.5 billion in sales for Wesco.
• EES represents 29% of Wesco
• EES gross margin was 23%, up from 22.8% in Q1 but down from 24% in 2024 Q2. (Is the loss of 1 point mix, absorbing some price increases / timing of passing through price increases, customer dynamics or competitive pressures? With data center business up, and representing about 5% of overall business, this is project business and could be at lower margin.)
• CSS had sales of $2.265 billion, up 17% organically. Their Data Center Solutions group is based here and was up 60%. (Tough to determine data center business as some can be recorded in CSS and some in EES. Much depends upon the customer, the salesperson, the material purchased, and the phases of the project that Wesco is involved.
• Regarding tariffs
  • Are holding suppliers to contractual advance notices.
  • Seeking supplier alternatives, where appropriate to “source locally” or “lower tariffs / price increases.”
  • Average price increases of mid-high single digit.

2025 Outlook

• Overall expecting 5-7% growth with EES up mid-single digits. Up from 2.5-6.5% at the beginning of the year.
• Expect continued growth in data center business.

Analyst Q&A

• Good questions, and depth of answer by John, on the data center business.
  • EES, “gray space” grew at a 90% rate during the quarter (but majority of dollars are still in CSS, “white space”, meaning “more technical / engineered” products.)
• Questions about the UBS business.
• For EES
  • Q1 was up 3% organic
  • Q2 up 6% organic
  • OEM up double digits
  • Seeing increased “day to day” demand … momentum “picking up.”
• “Half of the business” (overall) is project (changes by division.)
• Wesco reprices copper weekly to its sales organization.

Take Aways

• Good performance but not overall market share taking performance when compared to the recently shared Rexel results (somewhat comparable) but it is important to highlight that the two companies are, for the most part within the electrical business, focused on different customer segments.
• And, on the switchgear side, Wesco has the alignment with Eaton whereas Rexel is more “diverse.”
• Wesco is benefiting from its data center experience and relationships. The question becomes, is it going after the “shiny coin” or staying diversified on the end-user markets / different applications? Historically, a sales organization focuses on where it is having success, but markets can change quickly.
• Wesco is not significantly impacted by changes in the residential market, except for mobile homes, so they are more “insulated” here vs a company like Rexel, which also has more smaller contractor customers.
• With much industry talk regarding digitalization, eCommerce and AI, there was no mention of these topics.

So, as the data center / AI construction market goes, so goes Wesco at this time.