IT solutions provider CDW (NASDAQGS:CDW) reported revenue ahead of Wall Street’s expectations in Q2 CY2026, with sales up 10% year on year to $6.57 billion. Its non-GAAP profit of $2.91 per share was 4% above analysts’ consensus estimates.

Is now the time to buy CDW? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

CDW delivered revenue and non-GAAP earnings per share above Wall Street expectations in Q2, supported by robust demand for AI infrastructure and modernization projects across its Commercial, Government, and International segments. However, the market reacted negatively following the results, with management pointing to a pronounced shift in customer spending towards large-scale hardware and cloud investments that exerted pressure on gross margins. CEO Christine Leahy noted, “Customers are still purchasing technology and reallocating budgets to prioritize mission-critical outcomes,” while CFO Albert Miralles described the technology environment as “more normalized” but still highly dynamic.

Looking forward, CDW’s updated outlook reflects confidence in the durability of underlying IT demand, particularly as AI adoption broadens across customer segments. Management emphasized that services and recurring revenue opportunities should accelerate as customers transition from infrastructure procurement to implementation and lifecycle management. Leahy stated, “We are seeing use cases scale more quickly than in the past, especially in health care, financial services, and government,” while Miralles cautioned that gross margins will remain sensitive to product mix and the timing of services engagements throughout the remainder of the year.

Key Insights from Management’s Remarks

Management attributed Q2’s performance to strong AI-driven infrastructure demand, a diversified customer base, and disciplined expense management, but highlighted that product mix and timing of services influenced margins.

• AI infrastructure momentum: CDW saw double-digit growth in server, storage, and networking hardware, driven by customer investments in AI readiness and modernization. Enterprise clients led adoption, with mid-market and public sector customers beginning to follow as proven AI use cases scale across industries.

• Services timing and mix: The company experienced slower growth in services revenue, which management attributed to a temporary shift in customer priorities towards hardware and cloud investments. CFO Albert Miralles explained that services demand typically follows infrastructure deployment, leading to expectations for a future pickup in lifecycle and managed services.

• International acceleration: Net sales in Canada and the U.K. delivered approximately 23% growth, led by a record quarter in Canada and continued strong momentum in the UK. Management pointed to successful localization of cloud and security offerings, as well as healthy demand for modernization projects across public and private sector clients internationally.

• Expense efficiency initiatives: Operating leverage improved as non-GAAP SG&A declined relative to gross profit, reflecting early benefits from the “Geared for Growth” cost efficiency program. Miralles said the company expects these efforts to drive further improvement in expense ratios in the second half of the year.

• CFO transition planned: CFO Albert Miralles announced his planned retirement in 2027, with a search for his successor underway. Management emphasized continuity and the ongoing focus on capital allocation priorities, including disciplined buybacks and a targeted dividend payout ratio.

Management’s remarks further emphasized CDW’s ability to navigate a dynamic technology environment shaped by AI complexity, pricing volatility, and ongoing memory challenges. The company delivered net sales of $6.6 billion, up 10%; gross profit of $1.3 billion, up 6%; non-GAAP operating income of $556 million, up 7%; and non-GAAP earnings per diluted share of $2.91, up 12%. These results set new all-time quarterly records for net sales, gross profit, and non-GAAP EPS. Leahy credited the breadth of CDW’s “full stack” capabilities and a diversified customer portfolio, noting that Commercial segment net sales increased 9%, healthcare grew 9%, and government net sales rose approximately 14%. International operations, which include the U.K. and Canada, were highlighted as strong contributors, with both markets delivering mid-teens or better local market growth and robust demand across hardware, software, and cloud. Margins were affected by larger hardware deals, particularly with enterprise customers, and a lower relative contribution from services year-over-year. Miralles reiterated the company’s focus on disciplined expense management, noting that non-GAAP SG&A declined both year-over-year and quarter-over-quarter as a percentage of gross profit. He also highlighted progress with the Geared for Growth initiative, which is expected to drive further improvements in operating leverage. Looking ahead, both Leahy and Miralles stressed that CDW’s scale, broad capabilities, and deep industry expertise will help the company remain resilient as technology spending priorities shift and as customers increasingly seek partners who can orchestrate complex AI deployments.

Drivers of Future Performance

CDW’s forward guidance is shaped by continued AI-driven infrastructure demand, the anticipated ramp in services revenue, and a cautious approach to gross margin expectations given evolving product and customer mix.

• Broadening AI adoption: Management expects AI infrastructure projects to expand beyond large enterprises into health care, education, and mid-market customers. As these organizations move from pilots to scaled deployments, CDW sees opportunity to grow its full-stack services and recurring revenue streams.

• Services growth lag: The company anticipates a delayed but material uptick in lifecycle and professional services as customers shift from procurement to implementation phases. Management believes that this transition will help offset margin pressures associated with hardware-heavy sales cycles.

• Margin sensitivity and headwinds: While operating leverage is expected to improve through ongoing expense discipline, gross margins remain susceptible to product mix—particularly if hardware continues to outpace higher-margin services. Miralles also highlighted working capital normalization and supply chain steadiness as key watchpoints for free cash flow recovery.

The company’s updated full-year outlook calls for gross profit to grow mid-single digits for the full year 2026, with non-GAAP net income per diluted share growth expected at the high end of the high single-digit range year-over-year. CDW’s management remains prudent as they monitor evolving demand patterns and maintain flexibility to adapt to shifting technology cycles.

Catalysts in Upcoming Quarters

Looking ahead, key catalysts to monitor include (1) the pace at which AI-driven infrastructure investments translate into higher-margin services revenue, (2) the normalization of working capital and improvement in free cash flow conversion, and (3) the ability of international markets to sustain above-average growth. Execution on the “Geared for Growth” efficiency program and the impact of product and customer mix on gross margins will also be key areas of focus.

CDW currently trades at $140.20, down from $154 just before the earnings. Is there an opportunity in the stock? See for yourself in our full research report (it’s free).

Stocks That Trumped Tariffs

ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.

Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.