DNOW (DNOW) Financials

DNOW Inc. has seen a clear deterioration in profitability over the last year, even as revenue has held up relatively well. Sales were essentially flat to slightly up on a year-over-year basis in recent quarters, but margins compressed sharply in late 2025 and early 2026. The latest quarter showed a loss, weak operating cash flow, and a higher debt load after acquisition activity and financing moves.

What stands out most: DNOW’s balance sheet is still manageable, but the company has shifted from a period of decent earnings and cash generation in 2024 to a more pressured 2025–2026 profile. Investors will likely focus on whether the recent margin reset is temporary or a sign of a tougher operating environment.

• Revenue has remained fairly resilient. Q1 2026 revenue was $1.183 billion, up from $959 million in Q4 2025 and above the $599 million posted in Q1 2025, showing the top line has not fallen off dramatically.
• Gross profit stayed positive despite the earnings swing. In Q1 2026 gross profit was $193 million, indicating the core business still generated meaningful spread above cost of revenue.
• Liquidity appears adequate. DNOW ended Q1 2026 with $116 million in cash and equivalents, along with $2.25 billion in current assets.
• Net debt is not extreme relative to the asset base. Long-term debt was $571 million versus $3.927 billion in total assets, so the company is not highly levered from a balance-sheet perspective.
• Operating cash flow was solid through much of 2024 and 2025 before the latest pullback. DNOW generated $122 million in operating cash flow in Q4 2024 and $43 million in Q3 2025.
• The company has been active with acquisitions. Acquisitions were a major cash use in several quarters, including $566 million in Q4 2025 and $46 million in Q1 2026, which may support growth but also raises execution risk.
• Share count has been drifting lower in some periods. DNOW has repurchased shares in multiple quarters, which can help EPS over time, although the benefit has been overshadowed by weaker operating performance recently.
• Goodwill and intangible assets increased after acquisitions. These assets were much larger in 2026 than a year earlier, suggesting acquisition-driven growth but also more intangible-heavy assets on the balance sheet.
• Profitability weakened sharply in late 2025 and turned negative in Q1 2026. After earning $25 million in Q1 2025 and $25 million in Q2 2025, DNOW swung to a $44 million loss in Q1 2026.
• Operating income turned negative. Q1 2026 operating loss was $50 million versus operating income of $33 million in Q3 2025 and $32 million in Q2 2025, showing a major margin squeeze.
• Cash flow from operations was negative in Q1 2026. DNOW used $95 million in operating cash flow in the quarter, compared with positive operating cash flow in prior periods.
• Working capital was a headwind. In Q1 2026, changes in operating assets and liabilities reduced cash by $118 million, a big drag on operating cash flow.
• Inventory and receivables remain large. Q1 2026 inventories were $1.193 billion and accounts receivable were $889 million, which can pressure cash if demand slows or collections lengthen.
• Debt increased in the latest quarter. DNOW issued $253 million of debt in Q1 2026 while repaying $97 million, and long-term debt stood at $571 million, up materially from earlier periods.
• Equity has been eroded by losses. Retained earnings were deeply negative at $880 million in Q1 2026, reflecting a long history of accumulated losses and distributions.

Bottom line: DNOW’s revenue base and balance sheet still provide some support, but the most recent quarter was weak enough to raise a red flag. The key question for investors is whether the Q1 2026 loss and cash burn are temporary, acquisition-related bumps or the start of a more prolonged margin reset.