Key Highlights

  • Net sales reached a record USD 874.3 million, up 23.3% from USD 709.1 million a year earlier.
  • Diluted EPS rose 27.8% to USD 1.24, and net income increased 27.2% to USD 31.5 million.
  • Gross profit grew 16.7% to USD 161.9 million, while gross margin declined 110 basis points to 18.5%.
  • Enterprise Solutions net sales rose 27.4% to a record USD 407.5 million, and the segment closed with record backlog.

PC Connection, Inc. (NASDAQ:CNXN) reported third-quarter 2026 net sales of USD 874.3 million, up 23.3% from USD 709.1 million and above a consensus estimate of USD 773.74 million. Diluted earnings per share were USD 1.24, an increase of USD 0.27 from the prior-year quarter and above a consensus estimate of USD 1.04. Net income was USD 31.5 million.

Gross billings climbed 19.4% to USD 1.3 billion. Sales grew in every product category: notebooks, mobility and desktops were up 26.6%, software 23.2%, server and storage 45.1%, and networking 43.3%. CEO Timothy McGrath described record net sales, gross billings and gross profit, and linked demand to enterprise AI infrastructure and device refresh activity.

Segment Results and Margin Pressure

Enterprise Solutions net sales were USD 407.5 million, up 27.4%, with gross profit of USD 60.2 million and a gross margin of 14.8%. Business Solutions sales rose 27.8% to USD 328.2 million, though its gross margin fell to 23.8% from 26.5% on customer mix and less software recognized on a net basis. Public Sector Solutions grew 4.6% to USD 138.6 million with a gross margin of 16.9%. The CEO said state and local education led that segment while the federal business continues to rebuild.

Consolidated gross margin of 18.5% reflected large project rollouts and a lower share of netted-down revenue. The chief financial officer said about half of the decline stemmed from software accounting and the rest from mix tilted to endpoint devices sold to large customers. Selling, general and administrative expense was USD 120.9 million, or 13.8% of net sales, down 150 basis points, and operating income rose 35.4% to USD 41.0 million, a 4.7% margin.

Cash Flow, Capital Returns and Outlook Commentary

Operating activities used USD 39.8 million of cash over nine months, as accounts receivable rose USD 144.8 million and inventory rose USD 83.0 million, partly offset by a USD 74.5 million increase in payables. Cash, cash equivalents and short-term investments totaled USD 343.3 million. Trailing twelve-month adjusted EBITDA reached a record USD 155.2 million, up 26%.

The company paid a quarterly dividend of USD 0.20 per share and declared another USD 0.20 payable November 27, 2026 to holders of record on November 10. USD 81.2 million remains under the repurchase program. The company did not issue formal numeric guidance. Management said history shows Q3 to Q4 sequential net sales declines of 3% to 4%, a pattern it believes could recur, and that endpoint demand may be slightly lower in 2027 than in 2026 while server, networking, security and software demand stays solid.

Metrics to Track

Four items stand out. The first is sequential sales: the 3% to 4% historical decline from Q3 to Q4 would be measured against USD 874.3 million. The second is Enterprise Solutions backlog, which closed the quarter at a record. The third is gross margin, at 18.5% after a 110 basis point drop, with notebook revenue up over 30% on roughly 5% fewer units. The fourth is working capital, where receivables and inventory growth drove the USD 39.8 million operating cash outflow, set against USD 343.3 million of liquidity and a newly appointed president and chief operating officer.