By Brazil Stock Guide – WEG (WEGE3) reported net income of R$1.46 billion in Q1 2026, down 5.7% from a year earlier, in a quarter that tested one of Brazil’s most admired industrial stories. Net operating revenue fell 6.1% to R$9.47 billion, pressured mainly by weaker deliveries of centralized solar generation projects in Brazil and by the appreciation of the real against the dollar.
The quarter showed how tough the comparison base had become. In Q1 2025, WEG had recorded the highest quarterly revenue in the history of its solar generation business. Without new projects of similar scale, domestic revenue fell 19.5% to R$3.57 billion. Foreign markets, by contrast, grew 4.5% in reais to R$5.9 billion and advanced 16.1% in dollars to $1.12 billion.
Brazil Drags
Brazil was the clear weak spot. Beyond the absence of large solar deliveries, WEG cited a less attractive environment for new short-term industrial investments. In the Power Generation, Transmission and Distribution division, domestic revenue fell 36.4% year over year to R$1.52 billion.
The picture, however, was not uniformly negative. WEG said investment in Brazil’s electrical infrastructure remains strong and that its order backlog continues to look healthy in long-cycle businesses, especially transformers, substations and synchronous condensers. In other words, the quarter showed less revenue delivered, not necessarily a structural deterioration in demand.
Foreign Demand Holds
Foreign markets did much of the heavy lifting. Revenue outside Brazil already accounted for 62.3% of total revenue in Q1 2026, compared with 56% a year earlier. North America represented just over half of external revenue in dollars, with growth of 15.6% year over year. Europe rose 16.3%, Africa grew 33.3%, and South and Central America advanced 19.9%.
International performance was supported by equipment for oil and gas, ventilation and cooling systems for data centers, transformers, and transmission and distribution businesses in the United States. The stronger real, however, diluted part of those gains when translated into Brazilian currency. The average dollar exchange rate moved from R$5.85 in Q1 2025 to R$5.26 in Q1 2026.
Margins Prove Resilient
Even with lower revenue, WEG kept profitability at high levels. EBITDA reached R$2.10 billion, down 3.2% year over year, but the EBITDA margin rose 0.6 percentage point to 22.2%. Net margin stood at 15.4%, slightly above the 15.3% recorded a year earlier.
The relative improvement in EBITDA margin reflected a better product mix and adjustments in other operating expenses, including the reversal of a profit-sharing provision from the previous fiscal year. Gross margin was weaker, falling to 31.6%, as higher raw-material costs — especially copper — higher U.S. import tariffs, short-term currency volatility and lower fixed-cost dilution weighed on the quarter.
Returns Stay High
For long-term investors, the key number remains ROIC. Return on invested capital reached 33.1% in Q1 2026, almost unchanged from 33.2% a year earlier and above the 32.5% reported in Q4 2025. For a global industrial company still expanding capacity, keeping returns at this level remains WEG’s clearest quality signal.
Cash generation also improved. Operating activities generated R$1.26 billion in the quarter, supported by strong margins and better working-capital indicators. Capex totaled R$622.2 million, almost evenly split between Brazil and international operations, with investments in transmission and distribution, industrial motors, transformer plants in Mexico, Colombia and the United States, and capacity expansion in China.
Balance Sheet Helps
WEG ended March with net cash of R$3.32 billion, up from R$2.65 billion in December 2025 and R$2.45 billion in March 2025. Cash and financial investments totaled R$7.4 billion, compared with gross financial debt of R$4.09 billion. That position gives the company room to keep investing without placing excessive pressure on its balance sheet.
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