DNOW’s (NYSE:DNOW) Q2 CY2026: Strong Sales, Stock Soars

Energy and industrial distributor DNOW (NYSE:DNOW) announced better-than-expected revenue in Q2 CY2026, with sales up 108% year on year to $1.31 billion. Its non-GAAP profit of $0.12 per share was 41.2% above analysts’ consensus estimates.

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Company Overview

Spun off from National Oilwell Varco, DNOW (NYSE:DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, DNOW grew its sales at an incredible 23.8% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. DNOW’s annualized revenue growth of 32.1% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, DNOW reported magnificent year-on-year revenue growth of 108%, and its $1.31 billion of revenue beat Wall Street’s estimates by 3.1%.

Looking ahead, sell-side analysts expect revenue to grow 25.6% over the next 12 months, a deceleration versus the last two years. Still, this projection is noteworthy and implies the market is forecasting success for its products and services.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses — everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

DNOW was profitable over the last five years but held back by its large cost base. Its average operating margin of 2.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, DNOW’s operating margin decreased by 8.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. DNOW’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, DNOW’s breakeven margin was 0.1%, down 5 percentage points year on year. Since DNOW’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.

DNOW’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for DNOW, its EPS declined by 23.8% annually over the last two years while its revenue grew by 32.1%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of DNOW’s earnings can give us a better understanding of its performance. DNOW’s operating margin has declined over the last two yearswhile its share count has grown 69.1%. This means the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q2, DNOW reported adjusted EPS of $0.12, down from $0.27 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Key Takeaways from DNOW’s Q2 Results

It was good to see DNOW beat analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 5.6% to $15.01 immediately after reporting.

DNOW put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).