0001402057-25-000193
SEC filingRevenue grew 4% to $5.74B, gross margin stable at 21.9%, but operating margin compressed to 7.7% due to higher expenses.
In Q3 2025, CDW reported net sales of $5.74 billion, up 4.0% year-over-year, driven by increased demand for netcomm products, notebooks/mobile devices, desktops, software, and services, partially offset by declines in data storage and servers. Gross profit rose 4.6% to $1.26 billion, with gross margin expanding 10 basis points to 21.9%, benefiting from higher-margin services and netted-down revenue. Operating income decreased 8.0% to $443.3 million, compressing operating margin 100 bps to 7.7%, as selling and administrative expenses surged 12.9% due to higher performance-based compensation, transformation costs, and amortization. Net income fell to $291.0 million ($2.21 per diluted share) from $316.4 million ($2.34) in the prior year.
Corporate segment revenue grew 4.4% to $2.26 billion, with operating income down 6.6% on higher compensation costs. Small Business led growth at +14.2% to $433.8 million, but operating margin improved 40 bps on operating leverage. Public segment revenue edged up 0.6% to $2.35 billion, as a decline in education (-8.5%) was offset by gains in government (+7.8%) and healthcare (+6.9%). Operating income fell 3.5% to $231.9 million. Other (UK/Canada) revenue increased 9.1% to $698.4 million, with operating income up 32.3% on higher gross profit and margin expansion.
Management cited ongoing economic uncertainty, evolving trade policies, and geopolitical conditions as headwinds. Customers remain measured in IT spending, focusing on business optimization, cost management, and security. No specific numerical guidance was provided. The company expects continued investment in cloud, AI, and hybrid solutions, and noted improvement in cash conversion cycle to 11 days from 17, reflecting better working capital management.
As of September 30, 2025, CDW held $452.9M in cash and cash equivalents, a decrease from $503.5M at year-end 2024, as short-term investments were liquidated. Total debt stood at $5,628.8M (including current maturities), relatively flat compared to $5,842.8M at December 31, 2024. The company had $1.3B of additional borrowing capacity under its revolving credit facility, with $296M reserved for floorplan financing. Total equity increased to $2,539.7M from $2,352.7M, driven by net income and share repurchases.
CDW disclosed $262.5M in remaining performance obligations (RPO) for non-cancelable managed and professional services contracts with durations longer than 12 months, as of September 30, 2025. The RPO are expected to be recognized as revenue over the following periods: $138.8M within one year, $81.5M in years 1-2, $30.8M in years 2-3, and $11.4M thereafter. The company also has $331M in accounts payable-inventory financing, primarily under a floorplan sub-facility. Additionally, $456M in accounts receivable was sold during the nine-month period.
In the first nine months of 2025, CDW repurchased 2.9M shares of common stock for $500M, including $149.9M in Q3. Dividends paid totaled $246.9M ($1.875 per share), up 0.8% from $1.860 per share in the prior-year period. The company repaid $211.1M of long-term debt, specifically the 4.125% Senior Notes due 2025 at maturity, and had no new debt issuance. Capital expenditures were $79.2M, representing 0.5% of net sales. The company also collected $211.1M from maturing short-term investments to fund the debt repayment.
CDW operates three reportable segments: Corporate, Small Business, and Public. For Q3 2025, Corporate generated $2,255.4M in net sales (up 4.4% YoY) and operating income of $195.3M; Small Business generated $433.8M (up 14.2% YoY) and $53.7M; Public generated $2,349.8M (up 0.6%) and $231.9M. The 'Other' segment (CDW UK and Canada) contributed $698.4M in sales (up 9.1%) and $43.0M in operating income. Geographically, the US accounted for $5,023.2M (87.5%) of Q3 net sales, with the Rest of World contributing $714.2M. Hardware remained the largest product category at 71.3% of sales, followed by software (19.1%) and services (9.2%).
Operating cash flow of $771.4M was slightly below net income of $787.1M, indicating a cash conversion ratio near 98%. The primary drag was a significant working capital outflow: accounts receivable surged by $633.0M, while inventory provided a $106.8M inflow. Other assets consumed $334.9M, partly offset by increases in accounts payable ($273.8M) and other liabilities ($256.3M). Non-cash add-backs (depreciation & amortization $221.5M, equity-based compensation $71.1M, provision for credit losses $26.5M) were partially offset by deferred tax benefits ($3.2M).
Capital expenditures of $79.2M represented a 10.3% capex intensity relative to operating cash flow, down from 10.1% in the prior period. Free cash flow (operating cash flow less capex) was $692.2M, covering only 92.7% of combined share repurchases ($500.0M) and dividends ($246.9M), implying reliance on debt or cash reserves to fund the shortfall.
Investing activities generated $124.7M, driven by net short-term investment proceeds of $211.1M, partially offset by capex and $5.0M in acquisitions. Financing activities used $968.7M, including $500.0M in stock buybacks, $246.9M in dividends, and $211.1M in long-term debt repayments, partly offset by $27.0M in stock option proceeds. The net cash decrease was $54.6M, ending with $453.1M in cash and restricted cash.