CDW Corp Q1 FY2026 earnings call

• Three performance drivers: balanced portfolio of customer end markets, breadth of full-stack offering, relentless execution of growth strategy. • Commercial, Government, Education, and Other segments had respective growth. • AI-driven enhancements across sales, operations, and solutions. • Geared for Growth initiative to modernize operating model. • Example of a large financial services company engagement for private AI factory.

Consolidated net sales increased 9% year-over-year. Gross profit grew 6%, non-GAAP operating income increased 2%, non-GAAP net income per diluted share grew 6%, and adjusted free cash flow totaled 251 million. Commercial segment up 10%, Government increased 5% (State and local double-digit, federal low single-digit decline), Education increased 3% (K-12 strength offsetting higher ed), Other segment (UK and Canada) had 18% growth in U.S. dollars. Hardware increased 10% (led by infrastructure), Software increased 11%, Services top line flat.

• Full-year 2026 view: low single-digit growth for addressable IT market, target market outperformance of 200 to 300 basis points. • Gross profit expected to grow in low to mid single digits for full year, second half contribution slightly above first half. • Non-GAAP net income per diluted share expected to grow at high end of mid-single-digit year-over-year. • Anticipate gross profit to grow at high single-digit rate sequentially in Q2, non-P&L SG&A modestly higher in Q2, non-GAP net income per diluted share up high single digits year over year.

Q: At a portfolio level, how are you assessing whether AI-driven deals differ on a gross margin basis in terms of the services attached rate?

A: AI deals have higher value services attach and recurring revenues, larger size deal typically in higher margin.

Q: Why do netted down revenues and services in particular should increase in the second half of the year?

A: Customers will balance back to broader array of product categories.

Q: How much of hardware revenue growth is elevated demand, pricing, and portfolio driving?

A: All elements played out as expected, customer activity persisted.

Q: What drove 40% plus sequential increase in inventory?

A: Urgency to get product, first in line to get inventory.

Q: Thoughts on OEM partners potentially squeezing channel partners?

A: Relationships with partners turn out well, partners lean on CDW more.

Q: What drove strength in financial services and its durability?

A: FSI on leading edge of technology, go-to-market refinement.

Q: On Geared for Growth, how about preventing future disruption and hiring rationale?

A: Geared for Growth is next phase, new CTO adds deep technical etc.

Q: Clarification on $100 to $200 million run rate savings from Geared for Growth?

A: Gross annual run rate impact, some reinvestment with ROI.

Q: Squaring strong water growth, backlog, and uncertainty in back half?

A: Outlook update steeped in Q2, need to see continued order activity.

Q: Composition of backlog and margin dynamics?

A: Consistent with Q1 mix, heavy on solutions hardware.

Q: Margin-related question and end market demand destruction?

A: Q1 seasonality lower, back half expected to normalize.

Q: Product shortages and constraints in second half?

A: Becoming more orderly, not significant concern now.

Q: Driver of benefits from Geared for Growth?

A: AI-driven tools, embedding AI across processes, productivity and cost savings.