What Earnings Season Is Signaling About HVACR in 2026

We are in the midst of earnings season, with quarterly reports and management commentaries being released by publicly traded companies daily across the HVACR value chain. While individual results vary, a consistent tone is emerging from manufacturers, distributors, and component suppliers. This may provide a clear lens into how industry leadership is positioning for 2026. A future post will examine similar signals across the plumbing value chain.

The Residential Reset of 2025

The residential reset of 2025 has been broadly acknowledged. Carrier noted that “the short-cycle Residential and Light Commercial markets softened more than we expected in the second half of the year,” estimating industry volumes of roughly 7.5 million units(referring to U.S. residential central air conditioners and air-source heat pumps) and assuming that 2026 units could be “down 10% to 15%” under current macro conditions. Lennox reported similar trends in its Home Comfort Solutions segment, where fourth-quarter revenue declined 21%, citing “expected channel destocking,” softness in new construction, and “an increase in deferred system replacements.”

Distributor commentary aligned with that view. Watsco reported HVAC equipment sales down 7% for the year, while inventory levels “declined by 30%” from peak levels. Management stated that it expects “a more conventional industry environment and better prospects for growth as 2026 unfolds.”

Component and contractor-facing suppliers described comparable dynamics. CSW Industrials cited “consumers' shift to repair of HVAC units versus replacement” alongside year-end customer destocking.

Inventory Normalization

Importantly, inventory normalization appears largely complete. Carrier reported that “field inventories for the residential segment were down roughly 30% year-over-year… and we believe that field destocking is now substantially behind us.” Lennox similarly indicated that one-step channel destocking is “nearly complete,” with two-step inventories expected to normalize by the second quarter. The inventory overhang that amplified 2025 softness is no longer a central risk entering 2026.

At the same time, commercial and applied markets remain comparatively resilient. Trane reported strong bookings and record backlog levels. Carrier highlighted “continued double-digit growth in global commercial HVAC and aftermarket.” Lennox’s Building Climate Solutions segment delivered 8% fourth-quarter growth, supported by service demand and favorable mix. Johnson Controls raised its fiscal 2026 guidance following sustained commercial strength. Diversified manufacturers such as Dover projected 5–7% revenue growth and 3–5% organic growth for 2026, reflecting constructive but measured expectations across climate-related portfolios.

Product mix and pricing have also provided support. Lennox reported $356 million in mix/price benefit for the year, while Carrier referenced “aggressive cost and pricing actions” to mitigate tariff and volume impacts. Even in a lower-volume residential environment, margin discipline appears intact.

When companies turned explicitly to 2026 guidance, the message is consistent: stabilization rather than surge. Carrier assumes continued residential weakness into the first half of 2026. Lennox anticipates 6–7% revenue growth. Others point to commercial strength and aftermarket durability as balancing forces.

Earnings Commentary

Taken together, earnings commentary across OEMs, distributors, and suppliers suggests several working assumptions as we advance in 2026:

• The residential reset of 2025 appears cyclical rather than structural, with replacement timing still the key swing factor.

• Channel inventory normalization is largely complete, removing a significant headwind.

• Commercial strength and pricing discipline continue to support overall margin stability.

For HARDI members, the value lies in convergence. When OEMs, distributors, and suppliers independently describe the same reset, the same inventory normalization, and the same measured outlook, it clarifies the baseline assumptions shaping 2026 planning decisions.

HARDI’s 2026 State of the Channel Report, available now for purchase, examines these themes in greater depth, including distributor expectations, contractor sentiment, inventory trends, and regulatory impacts shaping replacement behavior. Earnings commentary does not offer certainty. But when leadership across the HVACR ecosystem aligns around a similar set of assumptions, it offers valuable insight into the trajectory of the channel in 2026.

Get the Full Picture with the 2026 State of the Channel Report

Dive deeper into the data that's shaping the year ahead with the 2026 State of the Channel Report. This comprehensive report explores distributor expectations, contractor sentiment, inventory trends, and the regulatory impacts influencing replacement behavior across the HVACR ecosystem.