CDW Accelerates Sales Growth as Hardware Mix Squeezes Margins
Second-quarter net sales climbed 10.0% to $6.572 billion as infrastructure demand strengthened.
Technology-solutions provider CDW Corporation (CDW) accelerated its sales growth in the second quarter, though a shift toward lower-margin hardware constrained profit gains.
The quarter extended a four-period improvement in revenue growth, supported by renewed demand for data storage and servers. Those infrastructure categories had returned as growth drivers in the first quarter after weakening in the second half of 2025.
Net sales rose 10.0% from a year earlier, accelerating from 9.2% in the first quarter, while sequential sales increased 15.7%. GAAP net income edged up 1.2% to $274.4 million, and diluted earnings rose 5.1% to $2.10 a share as a lower share count lifted per-share growth. Adjusted earnings increased 11.9% to $2.71 a share, compared with 6.3% growth in the prior quarter.
Government sales grew 13.6%, up from 4.6% growth in the first quarter, while the UK and Canada operations accelerated to 22.9%. Commercial sales rose 9.2%, with stronger corporate and healthcare demand offset by a sharp slowdown in financial services. Education growth eased to 0.7%.
Gross profit increased 6.3% to $1.320 billion, trailing sales growth and narrowing gross margin to 20.1% from 20.8%. CDW attributed the pressure to a greater mix of certain hardware categories and lower margins within them, partly offset by more netted-down revenue. GAAP operating income rose 2.0% to $428.6 million as selling and administrative expenses increased 8.6%, reducing operating margin to 6.5%.
The company incurred $44.2 million of workplace-optimization charges tied to workforce reductions and a smaller real-estate lease portfolio, up from $12.7 million a year earlier. First-half free cash flow fell to $165.8 million from $393.7 million, while adjusted free cash flow declined to $278.4 million from $458.9 million.
CDW continues to target constant-currency growth that exceeds the US IT addressable market by 200 to 300 basis points, maintaining the objective carried through the previous three quarters. The widening gap between sales and gross-profit growth left execution against that target increasingly dependent on the profitability of its infrastructure mix.