WESCO’s Data‑Center Surge Powers Record Q1, Fuels Raised 2026 Outlook

“**We delivered an exceptional start to 2026**,” CEO John J. Engel said at the opening of the call, and the numbers he presented left little doubt that the statement was more than rhetoric. First‑quarter revenue rose 14 % year‑over‑year to $6.1 billion, with organic growth of 12 % that outpaced the usual seasonal dip.

The surge was anchored by the data‑center franchise, which generated $1.4 billion—up roughly 70 % from a year earlier—and now accounts for 24 % of total sales, making it the company’s largest end market across all three strategic business units (SBUs).

The top line was matched by a sharp improvement in profitability. Adjusted EBITDA climbed 25 % to $389 million, expanding the adjusted EBITDA margin by 60 basis points to 6.4 % of sales.

Adjusted diluted earnings per share jumped 52 % to $3.37, helped by a lower effective tax rate and the elimination of a preferred‑stock dividend after last year’s redemption. Free cash flow came in at $213 million, or 128 % of adjusted net income, underscoring the company’s disciplined working‑capital management.

**Segment performance** painted a nuanced picture of where the growth is coming from. The **Customer Solutions & Services (CSS)** unit, the primary driver of the data‑center story, posted reported sales of $1.5 billion, up 24 % YoY and 22 % organically.

CSS adjusted EBITDA surged 41 % to $223 million, lifting the unit’s margin 110 basis points to 9 %—the highest in the company’s history. “We are seeing healthy and accretive EBITDA margins for WESCO International’s data‑center solutions,” Engel noted, adding that the unit’s backlog grew 40 % YoY to a record level, reflecting strong project pipelines.

The **Electrical & Electronic Solutions (EES)** segment delivered a steadier 9 % YoY sales increase (7 % organic). Growth was powered by mid‑teens OEM expansion in semiconductor and data‑center markets, and low‑double‑digit construction gains tied to wire‑and‑cable demand. Notably, EES data‑center sales more than doubled YoY, now representing about 10 % of the unit’s revenue. Adjusted EBITDA rose 30 % to $185 million, with the margin expanding 130 basis points to 8.2 %.

In contrast, **Utility & Broadband Solutions (UBS)** posted 6 % organic sales growth but saw adjusted EBITDA dip 5 % to $131 million, trimming its margin by 120 basis points to 9.6 %. The decline stemmed from pressure on gross margins in transformer and wire‑and‑cable categories and a higher SG&A share of sales. Nonetheless, UBS backlog grew 16 % YoY, and the segment’s grid‑services capabilities are attracting interest from hyperscalers looking to secure power for AI‑driven data centers.

Management used the strong first‑quarter backdrop to **raise the full‑year outlook**. Reported sales are now expected to grow 6 %–9 % (organic 5 %–8 %), translating to a $24.9 billion–$25.6 billion revenue range.

Adjusted EBITDA margin is projected at 6.6 %–7 %, up from prior guidance, and adjusted diluted EPS is lifted to $15–$17. Free cash flow guidance was broadened to $500 million–$800 million, with the company noting that roughly 70 % of annual cash flow traditionally comes in the second half of the year.

Capital allocation also featured prominently. WESCO completed a $1.5 billion bond refinancing that was “upsized relative to the initial launch,” achieving the lowest coupon ever for a senior note at its rating level. The proceeds will retire 2028 senior notes, improve liquidity, and strengthen the balance sheet, delivering more than $20 million of annualized interest‑expense savings. Net debt now stands at 3.2 × adjusted EBITDA, and the company repurchased $25 million of stock during the quarter.

A leadership transition was highlighted as well. After a decade at the helm, CFO Dave Schulz retired, and the new CFO—who introduced himself as an “operations guy” rather than a “deal guy”—said his priority is “partnering with the leadership team to scale our business in attractive end markets, drive profitable growth, and deliver strong cash flow with disciplined capital allocation.” He underscored a focus on operating leverage, cost‑structure improvement, and tighter working‑capital processes.

Analysts probed several themes. Baird’s David Manthey asked about “pinch points” in switchgear lead times; Engel replied that extended lead times have been a pandemic‑era reality and are now “specific intra‑quarter project timing issues,” but emphasized a “very strong book‑to‑bill” in EES and a “double‑digit backlog growth” that should smooth future execution.

RBC’s Kenny Stemen pressed on data‑center share‑of‑wallet and the “step down” in growth guidance for the back half of the year. Engel explained that the 70 % Q1 surge reflects project timing and that the company has already “stepped up” guidance based on the exceptional start.

Questions about pricing, M&A appetite, and ERP implementation also surfaced. The CFO noted that the modest 3 % net price benefit was largely a carry‑over from prior periods, while the company remains “very active, but also very disciplined” on acquisitions that are “margin‑accretive.” Regarding the digital transformation initiative, Engel said a single end‑to‑end operation in CSS has already gone live on the new platform, and the phased rollout will deliver a “two‑speed EBITDA margin improvement” once the design‑build phase concludes.

The market reacted enthusiastically. WESCO’s shares climbed **14.36 %** on the day of the release, up **9.72 %** for the week and **42.71 %** year‑to‑date, hovering just 1.8 % below its 52‑week high. The rally reflects investors’ appetite for a distributor that can convert the AI‑driven data‑center wave into tangible earnings momentum while keeping balance‑sheet risk in check.

Looking ahead, the company’s narrative hinges on sustaining data‑center momentum, navigating lingering supply‑chain lead times, and translating the record backlog into second‑half revenue. With a refreshed CFO, a newly‑priced debt structure, and a clarified growth roadmap, WESCO appears positioned to ride the secular AI‑infrastructure tailwinds into a robust 2026.