Resideo's Q2 2026: Record results and ADI separation reshape the investment thesis

What happened

Resideo reported record Q2 2026 revenue of $1.98B, up 2% y/y, with P&S up 4% and ADI up 1%, exceeding the high-end of guidance. Gross margin hit a record 30.0%, marking 13 consecutive quarters of y/y expansion at P&S, while adjusted EBITDA surged 19% to a record $249M and adjusted EPS rose 26% to $0.83, both above outlook. The company swung to net income of $97M from a net loss of $825M in Q2 2025, which had included a massive charge related to indemnification obligations. Importantly, Resideo completed the separation of ADI Global Distribution on August 3, 2026, making this the last quarter with ADI included in results. The company initiated a standalone 2026 outlook for the remaining P&S business, signaling a new chapter and removing the complexity of distribution operations from the P&L.

Implication

The near-term risk/reward has improved as the company delivered results above high-end guidance and turned profitable, addressing the earlier GAAP loss concern from Q2 2025. The completion of ADI separation removes a low-margin business, allowing investors to value Resideo as a pure-play P&S company with higher quality earnings. However, the market will need details on the standalone 2026 outlook (revenue, EBITDA, leverage) to assess sustainability; current metrics like EV/EBITDA after separation may still appear elevated. The prior overhang of indemnification obligations appears to have been resolved or at least not recurring, as net income was positive and no charge was mentioned, which de-risks the balance sheet. Investors should monitor execution on the standalone strategy, including continued gross margin expansion and free cash flow generation, before becoming fully constructive; the previous HOLD may shift to a cautious BUY if the standalone P&S demonstrates consistency.

Thesis delta

The thesis has shifted from a guarded HOLD on the combined entity to a more constructive stance on the standalone P&S business. The record margin expansion and positive net income mitigate the prior GAAP loss and indemnification concerns, while the separation of ADI clarifies the core business's valuation. However, confidence in sustainability requires confirmation of the standalone outlook and deleveraging progress.