Electrical
ADI Cites Residential Weakness as Profitability Slips, Guidance Cut
ADI posted solid sales growth in its first quarter as an independent public company, but residential weakness, unfavorable mix and higher costs weighed on margins and prompted a sizable reduction to its 2026 profit outlook.
ADI Global Distribution posted strong third-quarter sales growth but weaker profitability, prompting the low-voltage products distributor to lower its full-year revenue and adjusted EBITDA outlook.
Melville, NY-based ADI reported Nov. 12 that 3Q26 net revenue increased 8.6% year-over-year to $1.306 billion. Average daily sales increased 5%, while the quarter included two additional selling days.
The quarter ended Oct. 3 and included ADI’s first two months operating independently following its Aug. 3 spin-off from Resideo Technologies.
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Commercial markets again drove growth. Sales increased across security, professional audiovisual, fire and life safety and data communications, while residential audiovisual sales declined amid continued weakness in the U.S. housing market. Third-party brand average daily sales increased 7%, while Exclusive Brands declined 2%.
ADI noted that the year-over-year sales comparison also benefited from disruptions associated with the company’s Americas ERP conversion during 3Q25.
Profitability Falls
Gross profit edged up 0.4% year-over-year to $273 million, but gross margin contracted 170 basis points to 20.9%.
ADI attributed the decline primarily to unfavorable customer and product mix, inventory-related charges and a difficult comparison with a temporary tariff benefit in the year-ago period. Tariff refunds and a one-time spin-off inventory benefit helped 3Q26 margin; excluding those items, gross margin was 20.0%.
Standalone adjusted EBITDA fell 13% year-over-year to $66 million, while margin decreased 120 basis points to 5.1%.
ADI said cost-saving initiatives provided approximately $11 million of benefit during the quarter but were more than offset by inflation, higher facility costs and other pressures.
The company also recorded a $659 million non-cash goodwill impairment charge related to continued residential-market weakness, lower projected earnings and cash flows and changes in its market capitalization. Including that charge, ADI posted a $655 million net loss.
“Third-quarter profitability was below our expectations, primarily reflecting a continued challenging residential market and weaker-than-anticipated demand and product mix in our Exclusive Brands offering,” ADI President and CEO Rob Aernes said in the company’s financial statement. “A greater share of commercial sales from lower-margin national accounts and projects also weighed on profitability. These results fell short of our standards, and we are lowering our full-year outlook to reflect the third-quarter shortfall and further weakness in Exclusive Brands in the fourth quarter.”
ADI Cuts 2026 Guidance
ADI lowered both ends of the full-year guidance ranges it introduced alongside its second-quarter results in August.
| 2026 Guidance | 2Q Outlook | 3Q Revised Outlook | Midpoint Change |
|---|---|---|---|
| Net Revenue | $4.95B-$5.00B | $4.91B-$4.93B | -$55M (-1.1%) |
| Standalone Adjusted EBITDA | $275M-$295M | $230M-$240M | -$50M (-17.5%) |
At the revised midpoints, ADI expects approximately 3% full-year revenue growth and about a 20% decline in standalone adjusted EBITDA.
Management said residential demand weakened more than anticipated and continues to pressure the higher-margin Exclusive Brands portfolio. ADI expects Exclusive Brands average daily sales to decline by mid-single digits in 4Q26 after weakness continued into October.
For the fourth quarter, ADI forecast revenue of $1.112 billion-$1.132 billion and standalone adjusted EBITDA of $28 million-$38 million. Commercial demand is expected to remain resilient, supporting mid-single-digit average daily sales growth.
ADI said it expects to exit 2026 with approximately $60 million in annualized gross cost savings and remains on track for its previously announced $80 million run-rate savings target by the end of 2027. The company is also developing additional cost reductions beyond that program.
Its One ADI integration initiative continued during the quarter, including the consolidation of three stores and one distribution center and the elimination of one legacy platform.
ADI finished the quarter with $208 million in cash, $792 million in net debt and net leverage of approximately 2.9x.
