Resideo Q2 2026 earnings: Adjusted EBITDA rises 19% on margin gains

Resideo Technologies (NYSE: REZI) reported fiscal Q2 2026 revenue of $1.981 billion, up 2% from $1.943 billion, while GAAP diluted EPS was $0.51 versus a diluted loss of $5.59 a year earlier. Gross margin reached 30.0% and adjusted EBITDA rose 19% to $249 million, although operating cash flow declined 26% to $148 million. The results, released August 12 for the quarter ended July 4, still consolidate ADI Global Distribution because the spin-off closed after quarter-end.

Core financial results

Revenue growth was modest, but gross profit increased 5% as consolidated gross margin expanded 70 basis points. The margin improvement included $27 million of tariff refunds, meaning part of the gain did not come from recurring volume, pricing or productivity improvements.

GAAP operating income fell 26% because total operating expenses rose by $72 million to $464 million, including $31 million of business separation costs and $22 million of restructuring expenses. The swing from a large GAAP net loss to a profit is also not directly comparable: Q2 2025 included an $882 million Indemnification Agreement expense, while Q2 2026 included a $77 million gain related to terminating the Tax Matters Agreement.

Adjusted net income, which excludes the major indemnification, separation and restructuring items, increased to $128 million from $99 million. This provides a more comparable view of underlying earnings than the GAAP net-income swing.

Business and segment performance

Products & Solutions delivered the faster revenue growth and higher adjusted EBITDA, supported by product demand and manufacturing performance. ADI’s revenue increased slightly, but its operating income and adjusted EBITDA declined as expenses and freight costs offset part of the gross-margin benefit.

Products & Solutions grew across substantially all sales channels and product families, primarily because of higher volumes reflecting customer demand. Foreign exchange contributed approximately 35 basis points to revenue growth. Its gross margin rose 70 basis points on volume, favorable manufacturing and supply-chain variances, and tariff refunds, partly offset by unfavorable product mix. Inflationary input costs were only partially offset by pricing actions.

Despite the margin expansion, Products & Solutions operating income declined because research and development spending increased by $5 million, SG&A rose by $6 million—primarily due to higher legal settlement costs—and restructuring expenses increased by $10 million. Adjusted EBITDA margin nevertheless edged up to 25.5% from 25.1%.

ADI’s average daily sales increased 2%, but the quarter contained one fewer sales day. Security, professional audio-visual and data communications drove growth, while residential audio-visual remained weak because of softness in the U.S. residential housing market. Approximately $20 million of tariff refunds supported ADI’s gross margin, but unfavorable pricing and mix and higher freight fuel costs were offsets.

Profitability, cash flow and balance sheet

Operating cash flow fell to $148 million even as net income improved. The decline reflected approximately $45 million of nonrecurring separation costs and settlement payments, including the payment associated with terminating the Honeywell Tax Matters Agreement, as well as $20 million of higher cash interest. Higher net income and lower cash taxes provided only a partial offset.

Resideo ended the quarter with $949 million of cash, cash equivalents and restricted cash, but that amount included $400 million of ADIG note proceeds held in escrow. Those proceeds were subsequently released to ADIG and should not be viewed as ongoing Resideo liquidity. Total debt was $3.62 billion at July 4, 2026.

The post-quarter separation materially changed that debt position. The $400 million of ADIG notes moved to ADIG, while Resideo received a $900 million dividend from ADIG and used it to repay Term Loan B principal. Resideo also expects to repay approximately another $200 million by the end of fiscal Q3 after completing the separation agreement’s post-closing cash adjustment.

ADI separation resets the reporting base after Q2

Resideo completed the ADI spin-off on August 3, after the Q2 reporting period. Consequently, the reported quarterly figures include both Products & Solutions and ADI and are not directly comparable with Resideo’s future consolidated results.

Beginning in Q3, Resideo will stop consolidating ADI and will present its historical results as discontinued operations. The remaining Products & Solutions business will be reported as continuing operations, with revenue adjusted to treat ADI as an external customer and with corporate costs allocated to the standalone company.

The company’s Q2 bridge illustrates the difference. Reported Products & Solutions revenue was $695 million, while standalone adjusted revenue was $738 million after including $43 million of sales to ADI. Reported segment adjusted EBITDA was $177 million, compared with standalone adjusted EBITDA of $157 million after accounting for $20 million of incremental SG&A. These adjustments are important when comparing Q2 with the new standalone outlook.

Earnings guidance

Resideo initiated a standalone outlook for Q3 and full-year 2026. The annual outlook is presented as though the post-spin company had operated independently throughout the first half, combined with management’s standalone expectations for the remainder of the year.

Because this is a newly initiated standalone outlook, the release did not provide a directly comparable previous standalone range.

Risks investors need to watch

• Tariff refunds supported reported margins. Consolidated gross margin benefited from $27 million of refunds, including approximately $20 million at ADI. Future margin performance may not receive the same benefit.
• Costs are offsetting part of the operating improvement. Products & Solutions posted revenue and gross-margin growth, but higher R&D, legal settlement and restructuring expenses still reduced GAAP operating income.
• The separation complicates comparisons. Q2 includes ADI, while Q3 will report ADI as discontinued operations. Investors will need to distinguish underlying performance from accounting and cost-allocation changes.
• Cash conversion and leverage remain relevant. Operating cash flow declined because of separation payments and higher cash interest. The balance sheet should improve after the announced debt repayments, but the additional approximately $200 million repayment remains subject to completing the post-closing adjustment.

Summary

Resideo’s Q2 2026 results combined modest revenue growth with higher gross margin, adjusted EBITDA and adjusted EPS, led by Products & Solutions. However, tariff refunds helped profitability, rising operating expenses reduced GAAP operating income, and separation-related payments weighed on cash flow. With ADI now separated, the main points to monitor are execution against the standalone outlook, the durability of Products & Solutions margins and the pace of debt reduction.