0001402057-26-000025
SEC filingQ1 2026 revenue grew 9.2% YoY driven by improved customer spending, but gross margin contracted 60 bps to 21.0%.
For Q1 2026, CDW reported net sales of $5.68 billion, a 9.2% increase year-over-year, driven by improved customer spending across all segments despite persistent economic and geopolitical uncertainties. On a constant currency basis, sales grew 8.4%. The top-line growth was broad-based, with particular strength in data storage and servers, netcomm products, software, and notebooks/mobile devices.
Gross profit rose 6.0% to $1.19 billion, but gross margin contracted 60 basis points to 21.0%, primarily due to a lower contribution from netted-down revenue. Selling and administrative expenses increased 7.0%, outpacing gross profit growth, leading to a 4.0% increase in operating income to $376 million. Operating margin declined 40 bps to 6.6%. Net income grew 4.7% to $235.4 million, and diluted EPS rose to $1.82 from $1.69.
Non-GAAP operating income increased 1.8% to $451.9 million, with non-GAAP operating margin of 8.0% versus 8.5% last year. Non-GAAP net income per diluted share increased to $2.28 from $2.15.
All reportable segments posted net sales growth. Commercial (62.8% of total) grew 9.6% to $3.57 billion, but operating margin fell 120 bps to 9.9% due to higher compensation expense. Government sales rose 4.6% to $633 million, yet gross margin plunged 260 bps to 19.7%, dragging operating margin down to 4.0%. Education sales increased 2.5% to $675 million, with gross margin expanding 70 bps to 16.7% driven by higher-margin software; operating margin surged 200 bps to 5.8%. Other (UK & Canada) delivered strong 17.9% revenue growth to $803 million, with stable gross margin of 19.3% and operating margin of 5.8%. Headquarters unallocated expense remained roughly flat at $90 million.
CDW did not provide quantitative guidance for upcoming periods. Management noted that prevailing economic conditions remain challenging due to uncertainty around global trade policies, geopolitical tensions, and customers' measured IT spending. The company is focusing on solutions in security, software, AI, and hybrid/cloud to align with customer priorities. The cash conversion cycle increased to 16 days from 15 days due to higher inventory stocking positions to meet demand. A quarterly dividend of $0.630 per share was declared. Overall, the MD&A reflects a cautious but steady demand environment, with margin pressures from mix shift and cost inflation.
Cash and cash equivalents stood at $578.6M as of March 31, 2026, down from $618.7M at year-end 2025. Total debt (carrying value, including current maturities) was $5,664.7M, with $1,005.9M classified as current. The revolving credit facility remained undrawn, with $1.9B of additional borrowing capacity (net of $363M reserved for floorplan financing). Shareholders' equity decreased by $50.7M to $2,555.4M, driven by share repurchases and dividends partially offset by net income.
Remaining performance obligations for non-cancelable managed and professional services contracts (principal, >12 months) totaled $240.3M as of March 31, 2026, with $142.7M expected within one year, $65.5M in years 1-2, $25.7M in years 2-3, and $6.4M thereafter. Inventory financing agreements of $355.6M are outstanding, primarily under a floorplan sub-facility of the revolving credit facility. The company has no other material purchase commitments disclosed.
During Q1 2026, the company repurchased 1.6M shares for $201.0M, consistent with the $200.1M spent in Q1 2025. No new share repurchase authorization was announced. Dividends of $81.1M ($0.630 per share) were paid, a 0.8% increase from $0.625 in Q1 2025. Capital expenditures totaled $26.4M (0.46% of sales). Net debt increased by $12.8M, primarily from accrued interest and amortization, with no new debt issuances or repayments.
Effective January 1, 2026, the company realigned into three reportable segments: Commercial ($3,569.4M net sales, $354.7M operating income), Government ($632.9M, $25.2M), and Education ($675.0M, $39.4M). Other (CDW UK & Canada) contributed $802.5M net sales and $46.5M operating income. Commercial grew 9.7% YoY; Government up 4.6%; Education up 2.5%; Other up 17.9%. Geographically, US net sales were $4,860.9M (85.6% of total), rest of world $818.9M (14.4%). Hardware comprised 72.5% of sales, software 18.6%, services 8.5%.
Operating cash flow of $274.8M exceeded net income of $235.4M, yielding a CFO/Net Income ratio of 1.17x, indicating decent cash conversion. However, the quality was tempered by significant working capital outflows: accounts receivable consumed $170.1M, inventory $257.6M, and other assets $104.0M, partially offset by a $341.3M increase in accounts payable. These swings reflect typical seasonal patterns but highlight the cash intensity of growth.
Capital expenditures of $26.4M were nearly flat year-over-year, representing a modest capex intensity of 9.6% of CFO. Free cash flow (CFO minus capex) was $248.4M, insufficient to cover combined share repurchases ($201.0M) and dividends ($81.1M) of $282.1M, resulting in a $33.7M shortfall. The company relied on net borrowings under its revolving credit facility (gross proceeds and repayments of $651.5M each) and a $3.0M increase in accounts payable-inventory financing to bridge the gap.
Notable anomalies include a $9.7M negative effect of exchange rate changes on cash, and a $4.3M deferred tax benefit. Overall, cash generation was adequate but working capital demands and aggressive capital returns pressured liquidity, leading to a $39.0M net decrease in cash.