Waste Management, Inc. (WM) Income Statement

The sequential acceleration in revenue growth, from 3.5% to 4.0%, suggests that pricing power remains intact despite a mature market. The 19.0% year-over-year growth in 2025Q2 was likely inflated by acquisitions, but the recent moderation to mid-single digits indicates a more sustainable organic trajectory. Investors should monitor whether the Stericycle acquisition contributes incremental revenue without diluting margins.

The dramatic expansion in gross margin, from 29.3% in 2025Q2 to 40.8% in 2026Q2, is not typical for the waste industry and may indicate a change in accounting treatment or a significant improvement in operational efficiency. The stability of operating margin around 18-19% suggests that the gross margin improvement is being offset by higher SG&A or other costs, which could be related to the Stericycle integration. Analysts should verify whether this margin expansion is sustainable or a one-time benefit from lower fuel costs or recycling commodity prices.

The reduction in SG&A intensity, from 10.9% to 10.2% of revenue, suggests that WM is leveraging its fixed cost base as revenue grows. However, the absolute SG&A dollar amount increased slightly, which may reflect investments in technology or integration costs. The operating margin has remained relatively stable, implying that the gross margin improvement is being partially reinvested in the business, possibly to support the RNG expansion.

The sharp increase in COGS in 2025Q4, which drove gross margin down to 29.3%, appears to be an anomaly given the subsequent recovery to 40.8% in 2026Q2. This could be due to higher fuel costs, landfill operating expenses, or a change in revenue mix. The sustainability of the lower cost structure in 2026 is uncertain, and investors should monitor whether the gross margin can remain above 40% or if it reverts to historical levels.

The jump in gross margin from 29.3% in 2025Q4 to 40.8% in 2026Q2 is the most significant inflection in the provided data. This could be driven by the Stericycle acquisition, which may have higher-margin medical waste services, or by improved recycling commodity prices. However, the operating margin did not expand correspondingly, suggesting that SG&A or other costs absorbed the benefit. The durability of this margin expansion is critical for the investment thesis.