The Volume Guide Is Gone, the Earnings Guide Is Not, and the Margin Raise Is the Revenue Cut Restated

Results vs. Consensus

The headline pairing is the same as last quarter, an earnings beat against a revenue miss, but the composition reversed and that reversal is the story. In April the beat was manufactured below the operating line by a tax rate management itself described as lower than planned. This quarter the tax line was a headwind of 150 basis points and the beat survived it. The revenue miss, meanwhile, was smaller in percentage terms and larger in consequence, because it came with a guidance reduction rather than a reaffirmation.

One qualification on the bar itself. Three consensus marks were in circulation for the quarter and they span three cents: $1.98, $1.99 and $2.01. Against the highest of them the $2.02 print is a one-cent beat. The correct reading of the earnings line is in line to modestly ahead, not a clean beat, and nothing in the quarter's operating detail depends on which mark is used.

Year-over-Year Comparison

Sequential Comparison

Unlike the April report, no restatement caveat is needed here. WM moved landfill accretion expense out of operating expenses and into depreciation, depletion, amortization and accretion effective January 2026, so Q1 and Q2 of this year sit on the same basis and compare directly.

Every profitability line improved sequentially and every pricing line decelerated. That combination is what a cost quarter looks like, and it is the mirror image of the April print, where the price lines ran ahead of plan and the profitability came from tax.

Revenue

Revenue of $6,684 million grew 4.0%, which the release attributes to core price of 5.7%, collection and disposal yield of 3.6%, higher recycling and renewable energy volumes and higher energy surcharges. All four claims are true. The problem is the weighting. Of the $254 million of incremental revenue, $102 million came from the surcharge line and $33 million from acquisitions, leaving $123 million from everything the business actually did. Core internal revenue growth excluding the surcharge was 1.9%, down from 2.4% in the first quarter.

Collection and disposal volume fell 1.8%, and 1.4 points of that is the wildfire comp: excluding prior-year cleanup work, segment volume declined 0.4% and landfill volume grew 1.7%. That is a genuine mitigation and it is the right adjustment to make. It also does not close the gap to a full-year assumption of plus 0.2% to plus 0.6%, which is why the assumption is gone.

The second-half arithmetic improved but did not become easy. The reduced guide of $26,275 million to $26,475 million implies $13,364 million to $13,564 million in the second half against $12,756 million a year ago, or growth of 4.8% to 6.3%. That is still an acceleration from the 4.0% just delivered and the 3.7% delivered across the first half. The wildfire comp anniversaries at the end of Q2 and is worth roughly 1.2 points of total-company revenue growth on our arithmetic, which supplies most of the acceleration the low end requires. The surcharge tailwind, by management's own account, carries through Q3 and then normalizes. The remainder has to come from Healthcare Solutions and from the two renewable natural gas plants that are built but not connected.

Margins

Adjusted operating EBITDA margin of 30.9% expanded 40 basis points, and reported margin expanded 90. The CFO's bridge reconciles exactly and is the most useful disclosure of the quarter.

Set this against April. The operating segments contributed 180 basis points in both quarters, an unusually stable result. What changed is the offsets. In Q1 the corporate line alone consumed 110 basis points and there were no external headwinds. In Q2 the corporate line consumed only 40 while wildfire and fuel consumed 100 between them. Strip the two external items, neither of which management controls and neither of which recurs in the same form, and underlying margin expansion doubled from 70 basis points to 140.

Within the core franchise the same picture holds. Collection and disposal adjusted margin was flat at 38.6%, which reads as unimpressive until the release's own footnote is applied: the segment absorbed a 70 basis point headwind from prior-year wildfire contributions, so ex-comp the margin expanded roughly 70 basis points on a base already near 39%.

EPS

Adjusted EPS of $2.02 grew 5.2% against adjusted operating income growth of 6.2%. The gap runs the opposite way to April's, where EPS grew 8.4% against operating income growth of 5.6% because the tax line did the work. This quarter the adjusted effective tax rate rose to 23.3% from 21.8%, a 150 basis point headwind, and the only offset was a 47 basis point reduction in the diluted share count as the buyback finally reached the denominator.

Reported diluted EPS of $1.95 grew 8.3%, faster than adjusted, because the adjustments themselves shrank: Stericycle acquisition and integration costs fell to $24 million from $37 million and other unusual items to $13 million from $27 million. The convergence of reported and adjusted earnings is itself a signal that the integration is winding down. Adjusted EPS carried a $0.07 add-back this quarter against $0.12 a year ago.

The tax line now runs the other way for the rest of the year. The first half produced an adjusted effective rate of 21.1% on $1,957 million of adjusted pre-tax income. Landing the year near the roughly 23% management guided to in April requires a second-half rate around 24.5%, above the 23.3% just booked and well above the first half.

Segment Performance

The sequential view is where the divergence shows. Against Q1 2026, Collection and Disposal revenue rose 7.8% and its EBITDA 8.1%, Recycling revenue rose 9.5% and its EBITDA 27.8%, Healthcare Solutions revenue rose 3.9% and its EBITDA 14.2%. Renewable Energy went the other way on both, revenue down 1.3% to $157 million from $159 million and EBITDA down 1.4% to $71 million from $72 million. Four of five segments accelerated into the seasonally strong quarter. The one that did not is the one whose revenue guidance was cut.

Collection and Disposal

The core franchise produced $5,479 million of net revenue, up 3.7%, and $2,115 million of adjusted operating EBITDA, up 3.9%, at a flat 38.6% margin. Adjusted EBITDA grew $79 million and reported EBITDA grew $104 million, the difference being a $25 million prior-year charge in the base. Ex the 70 basis point wildfire headwind the segment expanded margin, which is the honest way to read a flat print.

The pricing mix decelerated but stayed in range. Yield of 3.6% sits at the top of the 3.2% to 3.6% full-year assumption, down from 3.9% in Q1, and core price of 5.7% sits in the upper half of the 5.4% to 5.8% assumption, down from 6.3%. The price-to-cost spread beat management's own milepost.

"I think the cost price spread is 1 of them we talked about sort of 250 basis points being a milepost, if you will. And the reality is, at least in this quarter, we outperformed that." — John Morris, President

The line-of-business detail is more informative than the total. Residential volume improved 210 basis points sequentially to negative 2.9% from negative 5.0%, exactly the moderation management promised in April, and residential yield of 6.1% remains the highest in the company. Commercial volume improved to negative 1.2% from negative 1.6% but on a worse explanation, which is covered below. Industrial volume held at plus 0.2%. Municipal solid waste, the line that carried April's structural argument, decelerated on both legs: yield fell to 5.2% from 6.9% and volume fell to plus 0.2% from plus 2.7%.

Internalization of waste rose to 73.0% from 71.9% and landfill depletable tons fell to 33.5 million from 34.7 million, the same pair of opposing moves the April report flagged. Special waste volumes grew 4.5% excluding prior-year wildfire work.

Assessment: The cost side of this segment is performing better than at any point we have observed, and the price side is still comfortably inside plan. The concern is that the specific evidence April rested on, scarcity pricing in municipal solid waste with volume growth attached, halved in a single quarter and drew one passing comment on the call.

Recycling Processing and Sales

Revenue rose 5.8% to $403 million and adjusted operating EBITDA rose 31.4% to $92 million, expanding margin 440 basis points to 22.8%. The commodity was a mild headwind rather than the collapse of the first quarter: the blended single-stream price averaged about $75 per ton against about $84 a year ago, down roughly 11%, and against the $70 per ton the company assumed for the year. Volume through the plants rose 12%.

The capital program is essentially finished, which is the point. Thirty-eight of thirty-nine planned facilities are built, with the last scheduled for 2027, and the company completed a new Denver facility in the quarter adding about 60,000 tons of annual processing capacity.

"For example, our recycling automation projects are driving a sustained 30% improvement in labor cost per ton compared to legacy facilities. And in the second quarter, we processed 12% more recyclables year-over-year." — James Fish, Chief Executive Officer

One item surfaced only in Q&A. Management said the full-year commodity outlook might come in slightly above the $70 assumption on firmer old corrugated container and plastics pricing, but that the benefit would likely be offset by operating issues stemming from a fire at one of the company's Arizona facilities. No size, no timeline and no insurance commentary were offered.

Assessment: This is now two consecutive quarters in which recycling grew earnings against a falling commodity, and the second was achieved with the capital program complete rather than mid-build. The category change the April report argued for is holding. The Arizona fire is the first operating setback in the program and it is being netted against a positive rather than disclosed on its own, which is not how a material item should surface.

Renewable Energy

Revenue rose 36.5% to $157 million and adjusted operating EBITDA rose 34.0% to $71 million, but margin contracted 90 basis points to 45.2% and both lines fell sequentially against Q1. This is the only segment in the company that went backwards quarter over quarter, and it did so while adding capacity.

The company completed three renewable natural gas facilities in the quarter, two in South Carolina and one in Florida, adding roughly 3.5 million MMBtu of expected annual run-rate production, and produced an additional 1.6 million MMBtu year over year. That is exactly the three plants promised for Q2 in April. Realized pricing did the damage: natural gas at $2.23 per MMBtu against $2.81, renewable fuel standard credits at $2.33 against $2.53, with electricity at about $69 per megawatt hour against about $67. Against Q1's realized gas price of $5.59 per MMBtu, holding EBITDA roughly flat sequentially on a 60% lower gas realization is a genuine achievement that the segment gets no credit for in the headline.

The binding constraint is not the plants and not the commodity. It is the pipe.

"Those 2 plants are built. So they're standing ready, but we're not able to push gas into the pipeline yet. And that's related to a couple of third parties the gas lines are being kind of prepared for the gas to come in, but it's not something that we have a ton of control over." — James Fish, Chief Executive Officer

The contracting position tightened further, from 80% of 2026 volume locked at the April call to 90% now, with roughly one third of 2027 renewable fuel standard credits presold against a firming D3 price. Management characterized the 25 million MMBtu production run-rate as reflecting plants past a six-month shakedown rather than a conservative floor.

Assessment: April flagged utility interconnect delay as a new and unquantified friction. One quarter later it has cost the company a piece of its revenue guidance and it is the reason this segment shrank sequentially. Nothing about the asset base or the offtake has deteriorated, which makes this a timing problem rather than a returns problem, but it is now a timing problem with a number attached and no committed date beyond a hope for year end.

Healthcare Solutions

Revenue of $638 million fell 1.2% year over year and rose 3.9% sequentially, the largest sequential increase since the segment came into the portfolio in its current form. Adjusted operating EBITDA rose 10.0% to $121 million and margin expanded 200 basis points to 19.0%, matching the 200 basis points delivered in Q1. Segment SG&A fell 15% and improved 290 basis points as a percentage of revenue, and now sits near 18% against 24% to 25% at acquisition, with a stated target of 15% to 16% by year end.

"I think we can finally say the business is integrated, and that was -- maybe took a bit longer than we initially thought when we bought it." — James Fish, Chief Executive Officer

The forward evidence is more concrete than it was. Cross-selling reached $32 million of annualized operating EBITDA against $27 million in Q1 and a $50 million target now expected by the first quarter of 2027, ahead of the original schedule. Days sales outstanding fell a further five days. Core price in the segment was 4.5% in the quarter, with management guiding it above 5.5% on exit and the CEO putting the exit number at 5.7%. The $40 million of known first-half hospital losses is sunsetting, and the customer credit balance that peaked in Q4 2025 fell again and turns into a year-over-year tailwind in Q3 and Q4.

Assessment: This was the best quarter the segment has had and the first with any top-line momentum. It is still a business whose revenue declined year over year three years after the acquisition, and the price-versus-volume split remains undisclosed for a second consecutive quarter. The promised revenue inflection now has one quarter left before it is either delivered or a fourth promise.

Corporate and Other

Adjusted operating EBITDA of negative $332 million widened $22 million against negative $310 million a year ago, and improved $22 million against negative $354 million in Q1. That sequential improvement is the single largest unexplained variance in the quarter, because in April management stated explicitly that the Q1 corporate level was indicative and would run roughly flat for the remainder of the year.

"And I think on corporate and other, we saw improved performance sequentially from Q1 to Q2. It's largely driven by timing of certain expenses, which can create some of that variability quarter in, quarter out." — David Reed, Executive Vice President and Chief Financial Officer

Assessment: The improvement is welcome and it materially relieved the pressure this line put on consolidated margin, from 110 basis points of drag in Q1 to 40. What is missing is any reconciliation to the guidance given three months ago. If Q1 was the run rate, Q2 should not have improved $22 million; if it was not the run rate, the April statement was wrong and no revised full-year corporate figure has replaced it.

Key KPIs

Key Topics & Management Commentary

Overall Management Tone: Management led with the guidance reduction rather than waiting to be asked, which is the opposite of April's posture, and was most specific exactly where the evidence is strongest, on cost and margin. Confidence thinned on the top line, where the explanation for the missing volume recovery reduced to an absence of red flags in the economy and a lost national account described as a one-off. The one place the answers drifted was the second-half margin question, put twice by different people, and answered both times with an absolute level rather than the year-over-year expansion being challenged.

1. The revenue guide came down and the volume assumption disappeared

Full-year revenue guidance falls to $26,275 million to $26,475 million from $26,425 million to $26,625 million, a $150 million reduction with the range width unchanged. This is a cut, not a narrowing. The collection and disposal volume assumption moves from plus 0.2% to plus 0.6% to approximately negative 0.8%, or negative 0.5% excluding wildfire effects, and the CFO gave a bridge that reconciles to the dollar: $250 million of lower collection and disposal volume, offset by $175 million of higher energy surcharge revenue for a net $75 million, plus a further $75 million from lower recycling brokerage activity and delayed renewable natural gas pipeline connections.

"I think we're kind of saying it's flattish in the back half. Collection, disposal should be flattish in the back half of the year. And so it takes us for the whole year to about negative 0.8%, I believe. Our original guidance was positive 0.4%." — James Fish, Chief Executive Officer

The scale is worth stating plainly. A 120 basis point reduction to the annual volume assumption, three months after that assumption was reaffirmed in full, is the largest single change to WM's 2026 plan since the plan was set.

Assessment: April's report identified the volume line as the least supported number in the guide and noted that management declined to underwrite it. That judgment was correct and the number is now gone. What matters from here is that the earnings and cash guides survived the cut intact, which tells you the volume WM lost was low-margin, and that the pricing engine is still running inside plan.

2. The margin raise is the revenue cut restated

Adjusted operating EBITDA margin guidance rises 20 basis points to 31.0% to 31.2%. Adjusted operating EBITDA guidance is unchanged at $8,150 million to $8,250 million. Those two facts together mean the raise contains no incremental dollar of profit. Holding the $8,200 million midpoint while moving the revenue midpoint from $26,525 million to $26,375 million lifts the ratio from 30.91% to 31.09%, or 17.6 basis points, which is close to the entire 20 basis point raise on its own.

"At the same time, we are increasing our 2026 margin expectations by 20 basis points to between 31% and 31.2%, demonstrating our ability to flex cost, drive productivity and continue growing earnings in a dynamic operating environment." — David Reed, Executive Vice President and Chief Financial Officer

The cost flex is real and is documented elsewhere in this report. It is simply not what the margin raise measures. Holding EBITDA flat while revenue falls is the achievement; the margin percentage is the arithmetic consequence, not independent evidence of it.

Assessment: Take the EBITDA reaffirmation as the meaningful commitment and treat the margin raise as presentation. An investor who models to the margin guide rather than the EBITDA guide will double-count the same event, and the sell-side headlines that paired a margin raise with a revenue cut as offsetting developments made exactly that error.

3. The cost line delivered the strongest quarter of the cycle

Operating expenses held at 59.2% of revenue for a sixth consecutive quarter below 60%, absorbing a combined 120 basis point headwind from the wildfire comp and higher fuel. Within collection, the operating cost increase was held below 1.7% against labor inflation of roughly 4%, which management confirmed was in line with the 4% to 4.5% planned. Adjusted SG&A fell to 9.9% of revenue, below 10% for the first time since the Stericycle acquisition pushed it toward 11%.

"Despite ongoing inflationary pressures, including labor cost increases of approximately 4%, we limited the increase in collection operating costs to less than 1.7% compared to the second quarter of 2025." — John Morris, President

Assessment: A 230 basis point wedge between labor inflation and collection cost growth is the clearest quantification of the technology program WM has yet given, and it is more persuasive than any of the platform narrative around it. This is the pillar of the thesis that improved most this quarter.

4. Technology finally has a number attached to it

WM has spent several years describing an onboard computing, artificial intelligence and automation program without sizing its contribution. This quarter it did.

"One example is our SmartTruck, which now generates more than $300 million of annual run rate EBITDA through service upgrades, optimized routing and lower operating costs. Importantly, we are still in the early innings of capturing the full value of these capabilities." — John Morris, President

Set against a guided $8.2 billion of adjusted EBITDA, $300 million is 3.7% of the company. Management also pointed to a 30% improvement in recycling labor cost per ton at automated facilities against legacy plants, and to roughly 1,200 hard-to-fill roles the automation program was committed to eliminating, a target it says has been exceeded.

Assessment: The April report noted that WM's technology spending appears as a cost headwind in Corporate and a cost benefit in the segments, making the net return invisible. This disclosure narrows that gap without closing it, because the $300 million is a gross run-rate benefit and the offsetting spend still sits unquantified in the corporate line. It is progress on a disclosure that needed it.

5. Recycling widened its lead on the commodity

The segment expanded margin 440 basis points to 22.8% while its blended commodity price fell about 11%, and grew EBITDA 31.4% on 5.8% revenue growth. Combined with Renewable Energy, the two sustainability businesses grew adjusted operating EBITDA 32.5% and contributed roughly 30 basis points of uplift to total company margin.

The distinction from April matters. In Q1 the segment grew earnings against a 27% commodity decline while the capital program was still in flight. In Q2 it grew earnings with 38 of 39 facilities complete, meaning the incremental return is now coming from throughput and cost per ton rather than from new capacity. Volume through the plants rose 12%.

"And you're seeing it translate into our EBITDA performance despite the fact that commodity prices were down year-over-year. So the trajectory is really strong on the recycling business and will be so that we can support our customers." — Tara Hemmer, Chief Operating Officer

Assessment: Two consecutive quarters of earnings growth against falling commodity prices, the second with the capital largely spent, is enough evidence to treat the recycling segment as a processing-fee business rather than a commodity business. That reframing was April's strongest bull argument and it survived a second test.

6. Renewable energy built the plants and could not connect them

Three renewable natural gas facilities were completed in the quarter, matching the April commitment exactly, and the company produced an additional 1.6 million MMBtu year over year. Two completed plants cannot deliver gas because third-party utility interconnections are not ready, and that delay is a named component of the $75 million sustainability piece of the revenue guidance cut.

"What we're seeing right now, the couple of facilities where we're having issues getting into the pipeline that will have an impact on volumes for 2026. So our volumes will be a bit lighter than we had anticipated at the beginning of the year." — Tara Hemmer, Chief Operating Officer

Against that, the contracting position improved from 80% of 2026 volume locked in April to 90% now, and roughly one third of 2027 renewable fuel standard credits are presold into a firming D3 market that has touched fifty-two week highs. Management was explicit that the rising credit price barely affects 2026 and should be a positive in 2027.

Assessment: The build risk on this program has been retired and replaced by a connection risk that management does not control and cannot date beyond a hope for year end. The 2027 economics look better than they did in April because of the credit price and the contracting; the 2026 contribution looks worse. That trade is acceptable, but it moves the segment's payoff further out at exactly the moment sustainability capital spending was raised $50 million.

7. Healthcare Solutions crossed from repair to contribution

Margin expanded 200 basis points to 19.0%, SG&A fell 15% in dollars and 290 basis points as a share of revenue, cross-selling reached $32 million of annualized EBITDA against a $50 million target now expected a quarter early, and revenue grew 3.9% sequentially. The chief executive declared the integration complete, which is a materially stronger statement than anything offered in April.

"We did talk about customer credits last quarter, and we said they would peak in Q4. They did. They came down in Q1 and came down again in Q2. And then that really turns into a tailwind, a pretty significant tailwind for us in the back half of the year, which we had indicated last quarter." — James Fish, Chief Executive Officer

Management also noted that the benefits of the platform will increasingly show up outside the segment, in back office, real estate and cross-sold solid waste volume, which makes the segment's own reported revenue an increasingly incomplete measure of whether the acquisition is working.

Assessment: Every leading indicator improved and the revenue line finally moved in the right direction sequentially. The caution is that management has now added a reason why the segment's own revenue will understate the benefit, in the same quarter that the segment's revenue was still negative year over year. That is a reasonable observation and also a convenient one.

8. Municipal solid waste cooled on both legs and drew one sentence

In April, municipal solid waste yield of 6.9% alongside volume growth of 2.7% was the single data point that separated WM's pricing story from generic inflation pass-through, and this publication called it the clearest expression of the network's structural advantage. This quarter yield fell to 5.2% and volume to plus 0.2%. Landfill volume overall grew 1.7% excluding the wildfire comp, so the disposal network is not shrinking. But the specific combination that carried the scarcity argument compressed by 170 basis points on price and 250 on volume in one quarter.

"I think when you look at overall landfill volumes, you saw that we still have positive landfill volumes across MSW in the quarter, moderated a little bit from Q1 to Q2, but still positive." — John Morris, President

Assessment: "Moderated a little bit" is doing a great deal of work in that sentence. A single quarter does not break a multi-year airspace argument, and 5.2% yield remains strong pricing by any normal standard. But this is the number that made the structural case, no analyst asked about it, and it is the first thing we will check in October.

9. Commercial volume is now attributed to price competition, not weather

Commercial volume of negative 1.2% improved 40 basis points sequentially, but the explanation deteriorated. April attributed the collection volume shortfall largely to severe winter weather and deliberate residential shedding. This quarter management said the winter volume simply never came back, could not identify an economic cause, and located the weakness specifically in commercial national accounts lost on price.

"The volume negativity was, for the most part, was in the commercial line of business. And that commercial line of business was driven more than anything else by some lost national accounts. Typically, when we lose national accounts, it ends up being as a result of kind of price." — James Fish, Chief Executive Officer

Pressed on whether this signals broader competitive intensity spilling from residential into commercial, management called it a one-off, noted that national accounts competition is limited to a couple of national players and some brokers, and pointed to several years of growth in that book.

Assessment: April's report named commercial volume as the number to watch in Q2 precisely because it was neither weather nor shedding. The answer has arrived and it is price competition on national accounts. That is a better answer than economic weakness and a worse one than weather, because it is the only volume category where a competitor can take share by underpricing a company whose entire thesis is pricing discipline.

10. Free cash flow ran far ahead of a guide that did not move

Second-quarter free cash flow of $1,104 million grew 35.0%, and first-half free cash flow of $2,024 million grew 56.5%, converting adjusted EBITDA at 51.6%. The first half alone has delivered 53% of the full-year guide midpoint. The guide did not change.

Holding it requires second-half free cash flow of $1,726 million to $1,826 million, below the first half in absolute dollars. Management's stated reason is caution on working capital, and specifically accounts payable, after a first half in which the change in operating assets and liabilities consumed $82 million against $274 million a year ago.

"Working capital, you highlighted that. It has been really strong the first half of this year, including things like accounts payable. So we're keeping an eye on that. There could be some upside there, but we're obviously -- we're tracking kind of what our historical trends with AP, and that's one element that's keeping us within our guidance range." — David Reed, Executive Vice President and Chief Financial Officer

Assessment: Management named the caveat, sized nothing, and left the guide. The $192 million favourable working capital swing in the first half is real and is also the kind of item that reverses. We think the balance of probability favours a raise at Q3 rather than a shortfall, and we carry above the top of the range.

11. Capital allocation stepped up on acquisitions while leverage did not fall

WM repurchased $659 million of stock and paid $379 million of dividends in the quarter, returning $1,038 million against $1,104 million of free cash flow. First-half repurchases of $1,003 million represent 50% of the roughly $2 billion program described in April as 55% to 60% weighted to the second half, so the buyback is running ahead of its own cadence. Neither the total nor the weighting was restated.

Acquisitions moved further. The company closed $235 million of total consideration in the quarter, acquiring $123 million of gross annualized revenue, against a full-year tuck-in range of $100 million to $200 million set in January and described in April as likely to be met at the high end or above. The CFO promised in April to refresh that number this quarter. He did not.

"Given our quick work returning leverage to within our targeted range following the acquisition of Stericycle, we expect to increase core acquisitions in the future." — James Fish, Chief Executive Officer

Leverage finished at 2.96x against 2.94x at the end of Q1, at the top of the 2.5x to 3.0x target range, with management expecting it lower in the second half.

Assessment: A record cash flow half that ends with leverage marginally higher is a statement about intent rather than capacity. The company is spending its harvest, on buyback, dividend and now on a step-up in tuck-in acquisitions, rather than banking it. That is a defensible use of capital at a 4.0% free cash flow yield. It also removes the delevering narrative that supported April's framing of the year.

Guidance & Outlook

This is the first change to the 2026 plan since it was set in January. Revenue and maintenance capital came down, margin and sustainability capital went up, and the earnings and cash flow anchors were held.

Implied second-half ramp: Revenue must reach $13,364 million to $13,564 million against the $12,756 million the same period produced in 2025, or growth of 4.8% to 6.3%, up from the 4.0% just delivered. Adjusted EBITDA must reach $4,230 million to $4,330 million against $3,920 million booked in the first half, which implies a second-half margin of 31.4% to 32.2% on the revenue midpoint, some 50 to 130 basis points above the 30.9% just printed. Free cash flow must land between $1,726 million and $1,826 million, below the $2,024 million already produced.

Street at: Consensus sits at $8.15 of adjusted EPS for 2026 and $9.18 for 2027. The first half delivered $3.83 of adjusted EPS, or 47% of the 2026 number, against first-half 2025 adjusted EPS of $3.59, so the year-to-date growth rate of 6.7% has to lift to reach the 8.7% the consensus implies. The 2027 figure has come down twelve cents since April and now implies 12.6% growth, which still embeds the sustainability portfolio stepping up, the Healthcare Solutions revenue inflection arriving, and the full-year effect of the buyback.

Guidance style: Conservative and, on this evidence, honest about the direction of a miss. WM sets its range in January, said in April it would revisit after the second quarter, and did exactly that, cutting the line that was wrong rather than hiding it inside a wider range. The width of every range was preserved. The one departure from that discipline is the margin raise, which restates the revenue cut as an improvement.

Grading the April Commitments

April's call carried ten forward commitments. Six months of guidance now has one quarter of evidence against it.

Four beaten or on track, three missed, three delivered with a qualification. The pattern is broadly consistent: most of what WM controls directly landed at or above plan, and the two lines it does not control, third-party tonnage and third-party pipelines, are where the plan broke.

Analyst Q&A Highlights

The size and shape of the volume reduction

A modeling question about the quarterly split of second-half volume produced the most consequential number of the call, and it was given without hedging. Management put the full-year figure at approximately negative 0.8% against an original assumption of positive 0.4%, and attributed most of the gap to the winter volume that never came back.

Q: "And my second question is I was hoping to get some help with the modeling. How should we think about C&D volume growth or volume decline in 3Q versus 4Q?"
— Tami Zakaria, JPMorgan

A: "I think we're kind of saying it's flattish in the back half. Collection, disposal should be flattish in the back half of the year. And so it takes us for the whole year to about negative 0.8%, I believe. Our original guidance was positive 0.4%. So a bit of a falloff, most of which, as I explained, was related to not recovering the volume loss from that strong winter."
— James Fish, Chief Executive Officer

Assessment: The candour is genuine and the number is the largest revision to the 2026 plan so far. It also concedes what April would not: the winter volume was not deferred, it was lost. A flat second half against the reduced base is the assumption the rest of the guide now rests on, and it is materially easier than the one it replaces.

What is actually inside the revenue reduction

Two separate lines of questioning worked through the components of the guidance change, and the second forced a clarification that made the bridge reconcile. The exchange is worth reading closely because it separates the piece that costs earnings from the piece that does not.

Q: "Okay. No, I think you said $250 million lower revenues, right, and then $175 million of the surcharges, so that's $75 million and then -- sorry."
— Faiza Alwy, Deutsche Bank

A: "Sorry, a net-net $75 million impact on that piece on the Collection and Disposal side. And then on the sustainability businesses, we called for about $75 million of a reduction related to the volumes, both on the recycling brokerage, which Jim alluded to, which doesn't have necessarily that much of an EBITDA impact. And then we also talked about the lower RNG volume associated with some of the plant delays and the pipeline interconnects."
— David Reed, Executive Vice President and Chief Financial Officer

Assessment: The bridge reconciles exactly to the $150 million reduction, which is more than most guidance cuts offer. The useful detail is that roughly half the cut sits in brokerage and renewable natural gas volume that carries little or no margin, which is why $150 million of revenue could be removed without touching the EBITDA guide. The $250 million of collection and disposal volume is the part that hurts, and it was covered by $175 million of zero-margin surcharge revenue.

Whether the commercial loss signals broader price competition

The sharpest challenge of the call came last, and it went directly at the thesis. Having conceded that national accounts were lost on price, management was asked whether the competitive intensity that has characterized residential for years is now reaching the commercial book. The answer was a denial with a supporting structural argument rather than data.

Q: "It seems like this is the first time you all have really commented on weakness in the segment related to price. I don't want to blow things out of proportion, but is this a one-off? Or do you think this is early signs of maybe greater competition in the commercial segment."
— Connor Cerniglia, Bernstein

A: "I think it's probably more of a one-off. I mean, we always have a lot of competition in the small and medium business segment. There's a whole host of competitors for that business within commercial. National accounts is really what I was referring to where we lost some business. And I don't see any additional competitors there."
— James Fish, Chief Executive Officer

Assessment: The structural point is fair, because the national accounts field is genuinely narrow and the losses were concentrated in the back half of last year rather than this quarter. What the answer does not do is engage with the mechanism. If WM is losing national accounts on price, the price-to-cost spread that is currently running above its 250 basis point milepost is the thing being competed against, and a company cannot indefinitely widen spread and hold share in the same book.

Why second-half margin expansion is guided below the second quarter's

A recurring line of questioning noted that the second half faces easier wildfire comparisons, a fading fuel headwind and firmer commodity prices, yet the full-year guide implies less year-over-year margin expansion than the second quarter produced. Management answered both times with the absolute level rather than the year-over-year rate that was being challenged.

Q: "So I think the full year margin guidance implies 30 basis points of margin expansion in the back half. In 2Q, you did 40 basis points of margin expansion, and you'll have an absence of the wildfire comparison in the back half, which should be a tailwind relative to 2Q expansion. And it sounds like the impact from the fuel impact is easing as well in the assumption. So just trying to -- what's driving like the lesser margin expansion in the back half than the 2Q level?"
— Adam Bubes, Goldman Sachs

A: "I mentioned the 30.9% that we posted in Q2. We're calling for Q3, Q4 to be higher than that level. It won't be a smooth straight line in terms of Q3, Q4, but we are showing net-net expansion for the second half of the year."
— David Reed, Executive Vice President and Chief Financial Officer

Assessment: The question was about the rate of expansion and the answer was about the level, twice. The chief executive supplied the missing piece separately, noting that the back half of 2025 was the company's strongest margin period and therefore the harder comparison. That is a satisfactory answer and it should have been the first one. Our arithmetic says the guide requires 31.4% to 32.2% in the second half, so the level commitment is well above 30.9% and the conservatism is in the year-over-year framing rather than in the absolute.

Free cash flow conservatism and the working capital caveat

With the first half already past half the annual guide, the obvious question was whether the range is conservative or whether something reverses. The answer named the item and declined to size it.

Q: "So maybe you could just help us kind of with the cadence you're expecting? Are there any items, working capital or otherwise that would make conversion step down in the second half? Or is there may be some conservatism there?"
— Trevor Romeo, William Blair

A: "Our guide does call for free cash flow being up 29% year-over-year. This will be our third year in a row between 20% and 30% increases. And as we exit this year, we will have doubled the free cash flow in the last 3 years."
— David Reed, Executive Vice President and Chief Financial Officer

Assessment: A three-year doubling is a real achievement and it is also not an answer to the cadence question. The substantive part came afterwards, when management identified accounts payable as the line being watched and said there could be upside. Reading the two halves together, the guide is being held because a favourable payables position might unwind, not because the earnings or capital assumptions have changed. That is conservatism, and we model above the range.

The corporate cost line against April's run-rate statement

A question framed around whether the margin improvement was core solid waste or mix arrived at the corporate expense line, which in April was described as fixed at its first-quarter level for the balance of the year. The answer recharacterized it as timing without referencing the earlier guidance.

Q: "And then in particular, as you look at the full year, any change to corporate expense expectations? Or is this really a story about better leverage in C&D?"
— Noah Kaye, Oppenheimer

A: "And I think on corporate and other, we saw improved performance sequentially from Q1 to Q2. It's largely driven by timing of certain expenses, which can create some of that variability quarter in, quarter out. But I think what's important, if you step back is from a full year perspective, while we see variability in various segment contributions, we remain confident in our full year outlook of overall operating EBITDA."
— David Reed, Executive Vice President and Chief Financial Officer

Assessment: April's answer to a nearly identical question was that the first quarter was indicative and the level would hold all year. Three months later the line improved $22 million and the explanation is quarterly timing variability. Both statements cannot be right. The direction of the surprise is favourable, which is why nobody pressed, but a corporate cost line that consumed 110 basis points of margin one quarter and 40 the next is not a line any outside model can forecast, and management has stopped offering a full-year figure for it.

Healthcare Solutions after the integration milestone

The opening question of the call went to Healthcare Solutions, noting the top line was lighter than expected, and produced the longest answer of the morning. It covered receivables, credits, cross-selling, national account wins and cost synergies, and it did not contain a volume figure.

Q: "I was hoping you could talk about maybe the Healthcare business. Just what are you seeing in terms of sort of volume or price there? And how should we think about growth going forward? I think it was just a little bit lighter than what we were expecting."
— Toni Kaplan, Morgan Stanley

A: "But we can say it's integrated now that we're seeing things like DSO dropping DSOs down 5 days, which was a nice improvement and continuing to drop."
— James Fish, Chief Executive Officer

Assessment: The declaration that the business is integrated is the most consequential sentence spoken about this segment since the acquisition, and the operational evidence behind it is now substantial. The omission is the same one as April: a segment whose narrative is price now and volume later has not disclosed the split between the two in either quarter. It was asked directly here, in the first question of the call, and the answer went everywhere except the volume number.

What They're NOT Saying

1. Nothing about why municipal solid waste decelerated on both price and volume. Yield fell from 6.9% to 5.2% and volume from plus 2.7% to plus 0.2%, the specific pairing that carried the landfill-scarcity argument three months ago. The only reference on the call was "moderated a little bit from Q1 to Q2, but still positive." No analyst followed up.
2. No reconciliation to April's statement that Q1 corporate cost was the full-year run rate. The line improved $22 million sequentially and is now described as quarterly timing variability. No revised full-year corporate figure has been supplied to replace the withdrawn one.
3. A $50 million shift out of maintenance capital and into sustainability growth capital went unmentioned. Total capital is unchanged at $2,650 million to $2,750 million, but the maintenance line fell $50 million and the sustainability line rose $50 million. With $136 million already spent in the first half, the revised plan implies $114 million of sustainability capital in the second half against $64 million under the prior plan. Neither the release prose nor any answer on the call refers to it, and it is a near-doubling of second-half spending on the programme whose revenue contribution was just cut.
4. No refreshed acquisition guidance, despite an explicit April promise to provide one this quarter. The company closed $235 million of consideration in the second quarter alone against a full-year range of $100 million to $200 million, and signalled a further step-up, without replacing the range.
5. No update to the buyback figure or its cadence. The first half completed $1,003 million of a roughly $2 billion programme that was supposed to be 55% to 60% weighted to the second half. Either the total rises or the second-half pace slows, and neither was addressed.
6. No size for the accounts payable exposure holding the free cash flow guide flat. Management named working capital and accounts payable as the reason for caution after a half that delivered 53% of the annual number, but gave no magnitude, no timing and no explanation for why second-half free cash flow should fall below the first half.
7. The Arizona recycling facility fire surfaced only as an offset. It appeared in a single Q&A clause, as the reason a better commodity outlook would not flow through, with no disclosure of the cost, the outage duration, the lost capacity or any insurance recovery.
8. Still no price-versus-volume split for Healthcare Solutions. Asked in the first question of the call. Core price was given at 4.5% with an exit rate above 5.5%; the volume number was not given, for the second consecutive quarter.

Market Reaction

• Pre-print setup: WM closed at $239.41 on July 28, the session before the after-close release. The stock entered the print up 9.0% year to date against 8.5% for the S&P 500, up 6.2% over the trailing 30 days and up 5.1% over the trailing twelve months. The 52-week closing range was $196.77 to $246.51, putting the pre-print level within 2.9% of the high. Positioning was the opposite of April's, when the stock entered roughly 21 points behind the index on a trailing-twelve-month basis.
• Reaction session: The release crossed after the July 28 close and the call was held at 10:00 a.m. ET on July 29, so the full July 29 session absorbed both. The stock opened at $236.69, down 1.1%, traded a range of $235.75 to $242.88, and closed at $236.60, down 1.2% or $2.81. The intraday high sat 1.4% above the pre-print close and the close came within $0.85 of the session low.
• Volume: 2.8 million shares against a 30-day average of 2.1 million, or 1.3 times normal. Elevated and unremarkable.
• Peer and index reaction: The S&P 500 fell 1.5%. Republic Services rose 1.05%, Waste Connections rose 2.12% and GFL Environmental rose 2.78%. WM was the only large-capitalization solid waste name down on the day.

The intraday shape is an exact inversion of April's and it is the most informative thing about the session. Three months ago the stock opened lower on a revenue miss and closed near the day's high, a market that read the release as a disappointment and the call as a reassurance. This time it opened lower, traded up through the pre-print close at some point in the session, and gave the entire move back to finish near the low. Whatever the market found to like, it did not hold it into the close.

The relative move carries more information than the absolute one. Losing 1.2% on a day the index lost 1.5% is a modest outperformance of the market and a 2.2 to 4.0 point underperformance of every listed peer. Republic Services, Waste Connections and GFL all rose. A sector that trades on pricing durability and recession resistance went up while the largest name in it went down, on the day that name cut its revenue guidance and abandoned its volume assumption. That is company-specific repricing of the growth line, not a sector event and not a macro one.

Set against the setup, the reaction reads as proportionate rather than harsh. WM went into the print near a 52-week high and 50 basis points ahead of the index for the year, which is a very different bar from the one it cleared in April. A quarter that delivered its best cost performance of the cycle and simultaneously withdrew its volume assumption gets no benefit of the doubt at that level, and did not receive one.

Street Perspective

Debate: Does a margin raise offset a volume guide cut?

Bull view: The constructive case circulating after the print is that the earnings algorithm is intact and that is all that matters. WM absorbed a $150 million revenue reduction, a 60 basis point wildfire comp and a 40 basis point fuel drag without touching its EBITDA or free cash flow guidance, and raised the margin outlook on top. Investors are buying an earnings compounder, not tonnage.

Bear view: The skeptical case is that margin expansion built on shrinking volume has an expiry date. Price-to-cost spread running above a 250 basis point milepost is precisely what invites the national account competition management has now acknowledged, and a fixed-cost network spread over fewer stops eventually compresses. The margin raise, on this reading, is arithmetic dressed as achievement.

Our take: The bear is right about the margin raise and wrong about this quarter. Holding the EBITDA midpoint while cutting revenue $150 million produces 17.6 of the 20 basis points on its own, so the raise contains essentially no incremental profit. But the 140 basis points of underlying expansion, achieved through two external headwinds and against 4% labor inflation, is the real result and it is not arithmetic. Both things are true, and the market appears to have priced the second while the sell-side headlines celebrated the first.

Debate: Is the free cash flow guide conservative, or is the first half borrowing from the second?

Bull view: The bull argument is that the capital cycle turn is structural and the guide is stale. First-half free cash flow of $2,024 million is 53% of the annual midpoint and grew 56.5%, capital spending fell more than 18%, and conversion is running near 52% against roughly 46% implied for the year. A raise at the third quarter is close to inevitable.

Bear view: The bear response is that management named the reason itself. The first-half working capital position, and accounts payable specifically, has been unusually favourable, and payables build reverses. The guide implies second-half free cash flow below the first half, and management is closer to the payables detail than the Street is.

Our take: The favourable swing is $192 million on the six months, which is real and which is also not the full $300 million cushion between the guide midpoint and the run rate. The capital reduction is structural and will not reverse. We carry above the top of the range and treat a third-quarter raise as more likely than not, while accepting that the shape of the second half will be lumpier than the first.

Debate: Has Healthcare Solutions become an asset?

Bull view: The bull case is that the segment has turned. Margin expanded 200 basis points for a second consecutive quarter to 19.0%, SG&A fell 15% and is heading to 15% to 16% of segment revenue from 24% to 25% at acquisition, cross-selling is running a quarter ahead of its $50 million target, revenue grew sequentially again, and the chief executive declared the integration complete.

Bear view: The bear case is that revenue is still negative year over year three years after the deal, the price-versus-volume split has now been withheld for two consecutive quarters, and the segment's cost structure is the direct reason the consolidated long-term SG&A anchor was moved to roughly 10% of revenue from below it. Management has also begun explaining that the benefits will increasingly appear outside the segment, which makes the acquisition harder to score rather than easier.

Our take: This was the segment's best quarter and the first with genuine top-line momentum, and the leading indicators are no longer assertions. It is not yet a re-rating event, because the second-half revenue inflection is now on its third consecutive promise. It becomes one at the third quarter if revenue prints positive year over year, and it becomes a problem if it does not.

Model Update Needed

Our April marks are revised below for the guidance change and one quarter of evidence.

Valuation impact: At the $236.60 reaction close, WM trades at 29.0x the 2026 consensus of $8.15 and 25.8x the 2027 consensus of $9.18. Market capitalization of roughly $95.2 billion plus $22.8 billion of net debt puts enterprise value near $118.0 billion, or 14.4x the midpoint of guided 2026 adjusted operating EBITDA. Free cash flow yield on the guide midpoint is 4.0% and the indicated dividend of $3.78 yields 1.6%.

Every one of those multiples is worse than it was in April, when the same calculation produced 28.2x, 24.8x, 14.1x and 4.1% at a $230.31 close. The stock rose 2.7% and both consensus years came down, the 2027 figure by twelve cents. A company that has just reduced its revenue outlook and withdrawn its volume assumption is being paid a higher multiple than it was before it did so.

We hold the 26x multiple on 2027 earnings that anchored our April fair value, because nothing in this quarter argues for paying more for a slower top line. On the current $9.18 consensus that gives approximately $239, about 1% above the reaction close, or roughly 2.6% total return with the dividend over twelve months. That is a market-like outcome with a thinner cushion than the 4% we carried three months ago. The Street's mean target of $256.46 implies 8.4% upside and requires either 28x on the 2027 number or the 2027 number arriving early.

Thesis Scorecard Post-Earnings

Overall: The operating thesis strengthened and the revenue thesis weakened. Three of four bull pillars are confirmed and the fourth improved a tag, the corporate cost bear point was genuinely relieved, and the volume bear point materialized in the form of a withdrawn guidance range. Net, WM is executing better than it was in April on everything inside its control, and the market has responded by paying a higher multiple for a lower revenue number.

Action: Hold. The gap between our fair value and the price has closed from roughly 4% to roughly 1% since April, which is the whole of the change in this call. We would move to Underperform on a third quarter of multiple expansion against falling estimates, particularly if municipal solid waste yield decelerates again. We would move to Outperform on a de-rating toward 24x the 2027 number, roughly $220, or on the combination of positive Healthcare Solutions revenue growth and collection and disposal volume troughing, which would put the two open bear points to rest in the same quarter.