Rollins grew Q2 2026 revenue 7.9% to $1.08B, but organic growth slowed to 5.7% on weak residential lead volume, operating margin fell 110 bps to 18.7%, and it cut its 2026 organic growth outlook to at least 6%.
Revenue
$1.1B
+7.9% YoY
Net income
$144M
+1.7% YoY
Diluted EPS
$0.30
+3.4% YoY
Operating margin
18.7%
Rollins Q2 2026: acquisitions kept sales growing, but slower homeowner demand squeezed margins and forced a cut to growth guidance
Rollins, the owner of Orkin and about a dozen other pest control brands, reported second-quarter 2026 revenue of $1,078.6 million, up 7.9% from $999.5 million a year earlier. Management called it the company's 99th consecutive quarter of revenue growth. Profit barely moved, though. Operating income rose only 1.5% to $201.4 million, and net income rose 1.7% to $143.9 million. The company's own summary: "Our reported results for the second quarter fell short of our expectations."
Two things explain the gap. Fewer new customers came in through the residential channels that depend on homeowners searching online or calling in. At the same time, labor, materials and fuel costs grew faster than revenue. As a result, Rollins lowered its full-year organic growth target from 7%–8% (the outlook in its Q1 filing) to "at least 6%."
All figures below are from Rollins' Form 10-Q for the quarter ended June 30, 2026, filed July 23, 2026.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Revenue
$1,078.6M
$999.5M
+7.9%
Organic revenue growth (excl. acquisitions)
5.7%
n/a
n/a
Growth from acquisitions
2.2 pts
n/a
n/a
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A basis point (bp) is one-hundredth of a percentage point, so −110 bps means the margin fell from 19.8% to 18.7%.
Organic growth vs. bought growth
Rollins grows two ways. It sells more to existing and new customers, which it calls organic growth. It also buys smaller pest control companies, which it calls inorganic or acquisition growth. Organic revenue is total revenue minus sales from any business acquired in the past 12 months. That makes it the better gauge of how healthy the underlying business is.
This quarter, $21.8 million of the $79.0 million revenue increase came from acquisitions. That was 2.2 points of the 7.9% total. The largest recent deal was Romex Pest Control, bought on April 1, 2026 for $95.7 million, which alone added $10.2 million of revenue. Organic growth was 5.7%, down from 6.6% in Q1 2026. Organic growth for the first half was 6.1%.
The slowdown was concentrated in one service line:
Service line
Q2 2026 revenue
Reported growth
Organic growth
Residential pest control
$485.8M
+6.6%
+3.6%
Commercial pest control
$347.9M
+8.6%
+7.2%
Termite & ancillary
$234.2M
+10.5%
+8.9%
Franchise & other
$10.7M
−7.4%
−7.4%
Residential is Rollins' largest line, 45% of revenue. Only 3.6% of its 6.6% growth was organic. The other 3.0 points came from acquisitions. The 10-Q explains the weakness as "slower growth in parts of our residential service offering due to a decline in lead volume." It says the problem was specifically at "brands that are more reliant on consumer-initiated demand through search, digital media and inbound calls." In contrast, channels that rely on relationships ("home builders and door-to-door sales") "delivered solid organic revenue growth." Commercial (7.2% organic) and termite (8.9% organic) both held up.
Where the margin went
Operating margin is the share of revenue left after running the business, before interest and taxes. It fell 110 bps to 18.7%. The 10-Q breaks the cause down line by line:
Gross margin fell 100 bps to 52.8%. The filing attributes 70 bps to "higher employee expenses, including higher employee medical costs and service salaries," 20 bps to materials and supplies, and 20 bps to "higher fleet expenses associated with higher fuel costs." Lower insurance and claims costs offset 10 bps. Employee costs in cost of services rose 10.2% to $328.8M, faster than revenue.
Sales, general & administrative (SG&A) costs rose 8.9% to $335.0M, reaching 31.1% of revenue versus 30.8%. The increase came from selling and marketing (+10 bps), fuel (+10 bps) and other overhead.
The earnings release states the reason plainly: "our cost structure remained positioned for a stronger growth environment entering peak season." Rollins hired and spent for a busy summer, and demand came in lighter than planned. The result: revenue grew by $79.0M, but operating income grew by only $3.0M. Put differently, only about 4 cents of each extra revenue dollar reached operating profit, compared with the roughly 20-cent margin on the business as a whole.
Below the operating line
Interest expense rose $2.0M to $9.4M because of "higher borrowings under our commercial paper program." Commercial paper is short-term corporate debt, used here partly to pay for acquisitions such as Romex. Management raised its full-year interest expense estimate to about $40M, up from about $35M in the Q1 filing.
Taxes helped. The effective tax rate fell to 24.2% from 26.0%, "primarily due to the purchase of transferable federal income tax credits." The lower rate is why net income (+1.7%) and EPS (+3.4%) grew faster than operating income. EPS also got help from a slightly lower share count: 481.4M diluted shares versus 484.7M, including $20.0M of buybacks in the quarter.
Adjusted EPS of $0.32 (+6.7%) excludes amortization of intangible assets and contingent-consideration adjustments for the Fox, Saela and Romex acquisitions. These are accounting charges tied to past deals, not cash costs of serving customers. Even on that basis, adjusted operating margin fell by the same 110 bps, to 19.5%.
Cash flow and capital use
Operating cash flow was $172.5M (−1.5%) and free cash flow was $166.1M (−1.2%). The company says timing of tax payments tied to its tax-credit strategy reduced both. During the quarter Rollins spent $116.8M on acquisitions, $6.4M on capital expenditures, $88.1M on dividends and $20.0M on share repurchases. The business needs very little equipment spending, so almost all operating cash flow is available for deals and shareholder payouts.
Takeaway: Revenue still grew 7.9%, but only 5.7% came from the existing business. The weakest part was homeowner demand from online search and inbound calls. Costs had been set for a stronger season, so less than 4% of the $79M revenue increase reached operating profit. Acquisitions and a lower tax rate are now doing more of the work in the growth numbers, and management's cut to its organic growth target confirms the slowdown is not a one-quarter blip.
Outlook
Management's updated 2026 guidance (from the 10-Q):
Organic revenue growth of at least 6%, down from 7%–8% previously
Inorganic (acquisition) revenue growth of 2%–3%, unchanged
Adjusted incremental EBITDA margin of at least 10%, meaning at least 10 cents of adjusted EBITDA on each additional revenue dollar
Free cash flow conversion above 100% of net income
Interest expense of about $40M
Management also says "lead volume improved toward the end of June and has maintained this momentum through the first few weeks of July." It says it has "implemented organizational and operational changes to improve local execution, strengthen accountability, and better align resources with current demand conditions."
Our read: Organic growth was 6.6% in Q1 and 5.7% in Q2. At 6.1% for the first half, hitting "at least 6%" for the year means the second half must roughly hold the first-half pace. July's lead-volume recovery makes that plausible, but there is little margin for error. The margin target is the bigger test. In Q2, adjusted EBITDA rose $5.1M on $79.0M of extra revenue, an incremental margin of about 6.5%, well below the 10% floor management set for the year. Reaching it requires the cost realignment to show up in Q3 and Q4, the lower-revenue off-season quarters. Commercial and termite work are growing 7%–9% organically, which is a solid base. The Q3 10-Q, expected in late October, should show whether residential organic growth recovers from 3.6% and whether gross margin stops shrinking.