Why did CDW (CDW) report faster sales growth than profit growth?

Sonal Goyal

28 October 2026 04:59 PM AEDT

Why did CDW (CDW) report faster sales growth than profit growth?

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Key Highlights

Second-quarter 2026 net sales were US$6,572.2 million, up 10.0 per cent, while GAAP Net Income rose 1.2 per cent to US$274.4 million.
Gross Margin fell to 20.1 per cent from 20.8 per cent, and first-half free Cash Flow fell to US$165.8 million from US$393.7 million.
Net Debt was US$5,455.2 million, up from US$5,011.1 million at the end of 2025, and a quarterly Dividend of US$0.630 per share was payable on 10 September 2026.

Second-quarter results

CDW Corporation (NASDAQ:CDW), the US-based technology products and services provider, reported second-quarter 2026 results on 5 August 2026. Net sales were US$6,572.2 million, up 10.0 per cent year on year, or 9.9 per cent in constant currency.

Profit grew more slowly than sales on a GAAP basis. Gross Profit rose 6.3 per cent to US$1,319.8 million, taking the gross margin to 20.1 per cent from 20.8 per cent. Operating Income increased 2.0 per cent to US$428.6 million, a 6.5 per cent margin against 7.0 per cent. Net income was US$274.4 million, up 1.2 per cent, or US$2.15 per diluted share, up 5.1 per cent.

Non-GAAP view and mix

On the company's non-GAAP measures, operating income rose 7.0 per cent to US$556.0 million, an 8.5 per cent margin against 8.7 per cent, and net income climbed 7.8 per cent to US$370.4 million. Non-GAAP Diluted Earnings per Share were US$2.91, up 11.9 per cent.

Chief financial officer Albert Miralles cited double-digit earnings per share growth driven by infrastructure Demand and expense management. Chief executive Christine Leahy said customers were investing in infrastructure modernisation, cloud and AI-enabled technologies.

Commercial customers accounted for US$3,965.4 million, or about 60 per cent of net sales, up 9.2 per cent, and Healthcare within it grew 9.1 per cent to US$860.2 million. Corporate sales were US$2,618.1 million, up 10.7 per cent, and Government rose 13.6 per cent to US$848.0 million. Other, comprising the UK and Canada, grew 22.9 per cent to US$825.7 million. Education was almost flat at US$933.1 million, up 0.7 per cent, and Financial Services rose 1.8 per cent to US$487.1 million. The release does not quantify any link between sales mix and the lower gross margin.

Cash flow and leverage

Cash generation was weaker in the first half. Operating Cash Flow for the six months to 30 June was US$219.7 million, against US$443.1 million a year earlier. Free cash flow fell to US$165.8 million from US$393.7 million, and adjusted free cash flow was US$278.4 million, compared with US$458.9 million.

The release does not say how that compares with the prior year.

Total debt stood at US$5,817.0 million and net debt at US$5,455.2 million, up from US$5,011.1 million at the end of 2025. Cash was US$361.8 million, and cash plus revolver availability was US$2,044.2 million. A quarterly dividend of US$0.630 per share was payable on 10 September 2026 to holders of record on 25 August.

What to watch

The release gave no quantitative guidance beyond the long-term aim of exceeding growth in the US IT addressable market by 200 to 300 basis points in constant currency, which is an ambition rather than a result.

When the next report arrives, the key questions are whether gross margin stabilises after the decline to 20.1 per cent, whether the growth in Government and the UK and Canada continues, and how cash flow recovers from the first-half slowdown. Net debt will also be worth following against the company's cash generation.

FAQs

Q: How did CDW's sales and profit compare in the second quarter of 2026?

A: Net sales rose 10.0 per cent to US$6,572.2 million, while GAAP net income rose 1.2 per cent to US$274.4 million. Non-GAAP diluted EPS rose 11.9 per cent to US$2.91.

Q: Why did CDW's gross margin decline?

A: Gross margin fell to 20.1 per cent from 20.8 per cent. The release does not quantify the cause.

Q: What is CDW's net debt?

A: Net debt was US$5,455.2 million, up from US$5,011.1 million at the end of 2025. Cash was US$361.8 million.

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