Q2 2026 CDW Corp Earnings Call Transcript
Key Points
- Record quarterly net sales of $6.6 billion, up 10% year-over-year, with gross profit and non-GAAP EPS also setting all-time highs.
- Strong demand across diversified end markets, with Commercial up 9%, Government up 14%, and International up 23% (record quarter in Canada).
- AI-related infrastructure demand driving double-digit growth in servers, storage, and netcomm, with a robust pipeline for future services growth.
- Operating leverage improving as non-GAAP SG&A as a percentage of gross profit decreased 20 basis points year-over-year, with further benefits expected from Geared for Growth in the second half.
- Raised full-year outlook for gross profit growth to mid-single digits and EPS growth to the high end of high single digits, reflecting confidence in durable demand.
- Strong capital returns with $344 million in share repurchases and $80 million in dividends in Q2, supported by a $1.1 billion remaining buyback authorization.
- Gross margin declined 70 basis points year-over-year due to mix shift toward large enterprise infrastructure deals and lower services contribution.
- Services revenue growth was only 1% in the quarter, impacted by deployment timing and customer prioritization of hardware and cloud investments.
- Free cash flow conversion was weak at 42% of non-GAAP net income for the first half, below the 80-90% target, due to working capital investments in inventory.
- Higher education segment remains constrained by a challenging funding environment, with only 1% growth in the Education segment overall.
- Net interest expense increased year-over-year due to higher average borrowings, and net leverage stands at 2.5x, within but at the higher end of the target range.
- Management remains cautious on the second half, expecting gross margins to be below prior year levels and Q3 EPS growth to be at the high end of high single digits, implying a prudent outlook.
Hello, everyone. Thank you for joining us, and welcome to the CDW second-quarter earnings call. (Operator Instructions)
I will now hand the conference over to Steve O'Brien with Investor Relations. Steve, please go ahead.
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Thank you, Joel. Good morning, everyone. Joining me today to review our second quarter 2026 results are Chris Leahy, our Chair and Chief Executive Officer; and Al Miralles, our Chief Financial Officer. Our earnings release was distributed this morning and is available on our website, investor.cdw.com, along with supplemental slides that you can use to follow along during the call. I'd like to remind you that certain comments made in this presentation are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995.
Those statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. Additional information concerning these risks and uncertainties is
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