Key Highlights

● Net sales were $6,572.2 million, up 10.0% from $5,976.6 million.

● Government sales rose 13.6% and Corporate sales rose 10.7%.

● Gross margin was 20.1%, compared with 20.8% a year earlier.

● Non-GAAP diluted earnings per share were $2.91, up 11.9%.

CDW Corporation (NASDAQ:CDW) reported second-quarter 2026 results on 5 August 2026. Net sales were $6,572.2 million, up 10.0% from $5,976.6 million a year earlier, with the Government segment up 13.6% and Corporate up 10.7%. Profit grew more slowly than sales because the mix shifted towards lower-margin hardware, a pattern the company described in its release.

Business and Sector

CDW is a multi-brand provider of information technology products and services to business, government, education and healthcare customers in the United States, United Kingdom and Canada. It resells hardware and software from vendors and adds services such as cloud, security and managed support. Its reporting segments are Commercial, which includes Corporate, Financial Services and Healthcare, Government, Education, and Other, which covers the United Kingdom and Canada.

As a reseller, CDW's results track corporate and public sector technology spending. Management said it remains confident of exceeding growth in the United States IT addressable market by 200 to 300 basis points on a constant currency basis.

Latest Results

Segment sales in the quarter were $3,965.4 million for Commercial, up 9.2%, $848.0 million for Government, up 13.6%, $933.1 million for Education, up 0.7%, and $825.7 million for Other, up 22.9%. First-half net sales were $12,252.0 million, up 9.6%. Demand was led by data storage and servers, notebooks and mobile devices, software and networking products.

Gross profit rose 6.3% to $1,319.8 million, and gross margin was 20.1%, compared with 20.8%. Operating income increased 2.0% to $428.6 million. Net income rose 1.2% to $274.4 million, and diluted earnings per share were $2.15, up 5.1%. Non-GAAP diluted earnings per share were $2.91, up 11.9%, helped by a lower diluted share count of 127.4 million against 132.4 million.

Financial Performance and Industry Context

Selling and administrative expenses grew 8.6% to $891.2 million, which the company attributed to higher compensation, including performance incentives, and workplace optimisation costs. Non-GAAP operating margin was 8.5%, against 8.7%.

Cash flow was weaker over the first half. Operating cash flow was $219.7 million, against $443.1 million a year earlier, and free cash flow was $165.8 million, against $393.7 million. The cash conversion cycle lengthened to 21 days from 16 days. At 30 June 2026, total debt was $5,817.0 million, net debt was $5,455.2 million and revolver availability was $1,682.4 million.

CDW declared a quarterly cash dividend of $0.630 per share, payable on 10 September 2026 to holders of record on 25 August 2026. Interest expense rose 6.0% to $60.2 million on higher average borrowings under its revolving facility.

Risks and Uncertainties

The shift towards hardware lifts sales but dilutes gross margin, and the company's profit therefore depends on its ability to grow higher-margin services and software. Customer refresh cycles can be uneven, and demand for devices and infrastructure may moderate once projects are completed.

Working capital is a second consideration. Receivables outstanding at 93 days and a longer cash conversion cycle absorbed cash in the first half, and net debt is a meaningful part of the capital structure. Operating expenses are also rising faster than gross profit, which compresses operating margin unless growth continues.

Education sales were nearly flat and Financial Services grew only 1.8%, so growth is not uniform across customer groups. Government demand, which grew strongly, can also be affected by funding and procurement timing.

Margin mix and cash conversion

CDW's second quarter shows broad sales growth from storage, server and client device demand, with cash flow and gross margin as the areas to examine. Readers may watch the next quarter's gross margin trend and operating margin, progress in cash conversion, whether sales continue to outpace the United States IT market and the evolution of expenses relative to gross profit.