Key financial results
- Net sales grew 15.5% to $2.46 billion, up $330 million from the prior year.
Our net sales were $2.46 billion, up $330 million from last year.
- Operating margin increased by 90 basis points year-over-year to 21.5%.
Operating margin was 21.5%, up 90 basis points
- Operating income increased by $90 million, marking the largest year-over-year single-quarter increase in Fastenal's history.
Operating income increased by $90 million from last year. That's the largest year-over-year increase in the single quarter in Fastenal's history.
- Return on invested capital reached 32.5%, representing a 230 basis point increase.
return on invested capital reached 32.5%, up 230 basis points.
- Gross margin was approximately 45%, down 40 basis points from last year but up 20 basis points sequentially from the second quarter.
Gross margin was approximately 45%, and down 40 basis points from last year but 20 basis points above second quarter.
- Operating cash flow was approximately $422 million, representing 105% of net income.
Operating cash flow was approximately $422 million, or 105% of net income.
- Free cash flow was approximately $350 million, or 87% of net income.
Free cash flow is approximately $350 million or 87% of net income
Business segment results
- Heavy manufacturing: Heavy manufacturing represented approximately 45% of sales and daily sales grew approximately 20%.
It represented approximately 45% of sales and daily sales grew approximately 20%.
- Other manufacturing: Other manufacturing grew approximately 13%, indicating that growth extended beyond the largest accounts and strongest verticals.
Other manufacturing grew approximately [ 13%, ] showing that the improvement extended beyond the largest accounts and strongest verticals.
- Materials: Direct materials increased approximately 19% compared to approximately 14% growth in indirect materials.
direct materials increased approximately 19% compared with approximately 14% in indirect materials.
- Data centers: Data centers contributed roughly 4 to 5 percentage points of overall growth.
Internally, we look at about 4% to 5% of our -- 4 to 5 percentage points of our growth.
- Segment profit: Management did not give distinct segment profit figures by individual business unit on the call.
Capital allocation
- Third quarter capital spending was approximately $72 million, or 2.9% of sales.
Third quarter capital spending was approximately $72 million or 2.9% of sales.
- Capital spending was directed toward hub and facility capacity, automation, FMI equipment, information technology, and transportation assets.
Spending was directed primarily toward hub and facility capacity, automation, FMI equipment, information technology and transportation assets.
- The company returned $328 million to shareholders during the quarter, consisting of $298 million in dividends and $30 million in share repurchases.
We returned $328 million to shareholders during the quarter, $298 million of which was through dividends and $30 million through share repurchases.
- Management reaffirmed full year 2026 net capital spending expectations of $310 million to $330 million.
For full year '26, we continue to expect net capital spending of $310 million to $330 million.
Industry trends and dynamics
- Industrial conditions improved further in the third quarter, with the U.S. manufacturing PMI averaging nearly 55.
Industrial conditions improved further in the third quarter. U.S. manufacturing PMI averaged nearly 55
- Pricing contributed approximately 2.4% to growth during the quarter, representing a slower pace than earlier in the year as the company laps strong pricing actions from 2025.
Pricing did contribute for the quarter, approximately 2.4% to growth. That's a slower pace than earlier in the year
- Price/cost was a 30 basis point headwind, improving approximately 10 basis points sequentially from the second quarter.
Price cost was approximately a 30 basis point headwind and improving approximately 10 basis points from the second quarter
- Favorable items including direct sourcing savings, supplier rebates, and tariff refunds added approximately 40 basis points to gross margin.
Favorable items added approximately 40 basis points to gross margin, including direct sourcing savings, supplier rebates and tariff refunds.
Competitive landscape
- Fastenal's growth continued to significantly outpace the industrial markets it serves, signaling continued market share gains.
our growth continued to significantly outpace the market. The common bread was our continued progress with larger customers
- Contract customers represent over 76% of sales, and their daily sales grew 18.8%.
Contract customers now represent over 76% of sales and their daily sales grew 18.8%.
- The number of customer sites spending $50,000 or more per month grew almost 19% from approximately 2,800 to roughly 3,300.
The number of sites spending $50,000 or more per month with us grew almost 19% from approximately 2,800 to roughly 3,300
Macroeconomic environment
- Industrial production for key end markets remained positive, showing gradual improvement since late last year.
industrial production for our key end markets remained positive. This is consistent with the gradual improvement we've seen since late last year.
- Growth opportunities were strongest in data centers and high-demand markets, while softness remained concentrated in agriculture and food.
Growth opportunities were strongest in data centers and other high-demand markets, while softness remained concentrated in a smaller number of areas.
Growth opportunities and strategies
- The digital footprint accounted to 61.4% of sales, with digital sales growing approximately 16% on a daily basis.
Our digital footprint was 61.4% of sales and digital sales grew approximately 16% on a daily basis
- The installed base of FMI devices passed 143,000 units, up 7%, with sales through FASTBin and FASTVend growing approximately 18%.
our installed base passed 143,000 units, up 7% and sales through FASTBin and FASTVend grew approximately 18%.
- The company signed approximately 7,500 weighted FMI devices in the quarter, or about 117 per day.
We signed approximately 7,500 weighted FMI devices in the quarter or about 117 per day
- Management continues to expect 27,000 to 29,000 weighted device settings for the full year 2026.
We continue to expect 27,000 to 29,000 weighted device settings for the full year.
Financial guidance and outlook
- Management did not provide formal quarterly or annual financial guidance on revenue or EPS for future periods.
Now we don't provide guidance on a quarterly or annual basis, as you well know
Technology and M&A strategy
- Fastenal completed a small acquisition focused on artificial intelligence capabilities and orchestration.
We've made that clear in the past. But at the same time, we find opportunities and we look for opportunities to improve our capabilities.
- The acquired business brings orchestration capabilities around AI and technology to help accelerate technology growth.
What they kind of brought us was some orchestration that we needed around our AI and our technology as we move forward.
Q3 2026 results
| Metric | Result | Change |
|---|---|---|
| Net sales | $2.46 billion | Up 15.5% |
| Operating margin | 21.5% | Up 90 basis points |
| Return on invested capital | 32.5% | Up 230 basis points |
| Operating cash flow | $422 million | 105% of net income |
| Free cash flow | $350 million | 87% of net income |
| Capital spending | $72 million | 2.9% of sales |
How management sounded
Balanced (+35 on our -100 to +100 scale). Management emphasized strong growth, sequential price/cost improvement, and record operating income increase while maintaining discipline. Management sounded more upbeat than on 20% of the 302 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Read the analyst Q&A summary and guidance and outlook for this call.
What to watch before the next call
- Progression of price/cost neutrality and diesel/fuel cost impacts.
- Growth trends in large customer contracts and data center demand.
- Digital device installations and installed base expansion.
Earlier calls
- Q2 2026 (Jul 14, 2026), tone Balanced: Fastenal reported Q2 2026 daily sales growth of 14.7% driven by strong key account momentum and market share gains, while maintaining operating margin despite cost headwinds.
