Waste Management Q2 2025: Stericycle Acquisition Fuels Revenue, Squeezes Margins

Waste Management, Inc. (WM), the familiar giant of North American environmental services, recently filed its quarterly report for the period ending June 30, 2025. These filings can be dense, but they offer a clear view into a company's financial health. Let's dig into the income statement to see how WM performed and what the numbers tell us about its current strategy, particularly following its landmark acquisition of Stericycle.

A Revenue Surge Driven by a New Health-Focused Arm

The most striking figure from the report is the surge in revenue. WM pulled in $6.43 billion for the second quarter, a substantial 19% increase from the $5.40 billion reported in the same quarter last year.

What's behind this growth? The primary driver is the November 2024 acquisition of Stericycle, which has been integrated as a new segment: WM Healthcare Solutions. This new division, which specializes in managing medical and pharmaceutical waste, contributed $646 million to the top line.

However, growth comes with costs. This new segment is still in its early stages of integration and posted an operating loss of $23 million for the quarter. The filing attributes this to significant depreciation, amortization of acquired assets, and other integration-related expenses.

To get a better sense of how these revenue streams and costs flow together, let's look at a visual breakdown of their income statement for the quarter.

The Cost of Expansion

While the top-line revenue is impressive, the costs associated with the Stericycle integration are visible throughout the income statement.

• Selling, General, and Administrative (SG&A) expenses jumped to $696 million from $501 million a year ago. As a percentage of revenue, SG&A increased from 9.3% to 10.8%, with the company citing higher labor costs from the acquisition and consulting fees for the integration.
• Interest expense nearly doubled, rising to $232 million from $136 million in the prior-year quarter. This is a direct result of the additional debt taken on to finance the Stericycle purchase.
• Depreciation and Amortization also saw a significant increase to $708 million, up from $543 million. A key driver was the amortization of intangible assets like customer relationships acquired from Stericycle.

These increased costs put pressure on profitability. While income from operations grew in absolute terms to $1.15 billion, operating margin—a key measure of efficiency—dipped from 18.7% to 17.9%.

The Core Business Remains a Pillar of Strength

Despite the integration headwinds, WM's traditional Collection and Disposal business remains robust. This core segment, which includes everything from residential trash pickup to landfill management, saw its income from operations grow by a healthy 7.5% to $1.46 billion.

This performance was driven by a combination of price increases (what the company calls "yield") and higher volumes, particularly from special waste clean-up activities related to wildfires in its West Tier. The ability of the core business to generate strong, consistent cash flow provides a crucial foundation for the company as it navigates the complex and costly integration of its new healthcare arm.

A Transitional Period

Waste Management's latest quarter paints a clear picture of a company in a major transitional phase. The acquisition of Stericycle has significantly expanded its revenue base and market reach into the specialized healthcare waste sector. However, this strategic expansion comes with the expected short-term pains of higher costs, increased debt, and pressure on profit margins.

The company has prudently suspended its share repurchase program to focus on paying down debt. The key for the future will be how effectively WM can realize synergies from the acquisition, turn the new healthcare segment profitable, and manage its higher debt load. For now, the strength of its core operations provides a solid bedrock for this transformation.