CDW Corporation (CDW) Earnings & Analysis

Latest quarter

CDW reported Q2 FY2026 revenue of $6.6 billion, up 9.97% from Q2 FY2025, and said revenue exceeded the consensus of $6.3 billion by 5.07%. The company reported adjusted EPS, as the consensus counts it, of $2.91, compared with the consensus of $2.80 and 3.93% above that benchmark. CDW also reported diluted EPS of $2.15, up 4.88% from $2.05 a year earlier.

The filing said net sales increased across all operating segments, with customer demand centered on data storage and servers, notebooks and mobile devices, software, and netcomm products. CDW reported gross margin of 20.1%, down −0.7 percentage points from Q2 FY2025, which the filing attributed primarily to mix into and lower margins in certain hardware categories. The company reported operating margin of 6.52%, versus 7.03% a year earlier. CDW reported free cash flow of −$82.6 million, compared with $133.4 million in Q2 FY2025; its filing said operating cash flow for the first six months declined primarily because of accounts receivable and inventory.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chris Leahy said demand remained healthy despite cautious and deliberate customer spending, with AI readiness and modernization supporting infrastructure investment. She said commercial sales rose 9%, government sales increased approximately 14%, education sales increased approximately 1%, and international sales increased approximately 23% during the quarter. Leahy said hardware revenue rose 10%, with server, storage and netcomm categories posting double-digit growth, while software, cloud and security produced top-line and gross-profit growth.

Leahy said services increased 1% because customers focused on hardware and cloud investments and because deployment timing affected demand. She said CDW expects lifecycle and professional-services activity to increase as customers move from procurement into implementation and management. In response to an analyst question about services, Leahy said services are involved in readiness, deployment, integration, optimization and ongoing operations for AI deployments, while she did not quantify AI-related revenue.

Morales said gross margin declined because of mix into infrastructure products, larger orders, more enterprise customers and a lower relative contribution from services. Asked about competitive pricing, he said CDW passed through price increases and attributed the margin movement to mix rather than like-for-like pricing pressure. Morales also said netted-down revenue grew 16.1% and represented 35.9% of gross profit.

On supply and pricing conditions, Morales said customer urgency continued but the market had become more orderly after three quarters of adjustment. He said the backlog still reflected product-delivery delays, although delivery-date consistency had improved, and said the company did not see a meaningful effect on quarterly results from pull-forward demand.

Morales said CDW had made working-capital investments to support customer product needs, including about a $400 million increase in inventory since the beginning of the year. He said the company expects to reduce that inventory position as conditions normalize and continues to target normalized cash-flow conversion over the balance of the year. Morales said Geared for Growth benefits were progressing at or beyond the company’s expectations and were expected to contribute during the second half.

Guidance

CDW raised its full-year 2026 gross-profit outlook to mid-single-digit growth from its previous low- to mid-single-digit growth range. The company now expects full-year non-GAAP diluted EPS growth at the high end of the high-single-digit range, compared with its previous expectation for growth at the high end of the mid-single-digit range. CDW now expects the U.S. IT addressable market to grow in the mid-single digits on a customer-spend basis, compared with its previous low-single-digit expectation, with 200 to 300 basis points of CDW outperformance. Morales said full-year gross margin is expected to be modestly below full-year 2025, compared with the company’s previous expectation for approximately in-line gross margin.