CDW — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for the three months ended September 30, 2026, were $6,754.5 million, a 17.7% increase from $5,737.4 million in the prior year period; for the nine months ended September 30, 2026, net sales were $19,006.5 million, a 12.4% increase from $16,913.1 million.
• Gross profit for the quarter was $1,385.3 million (10.3% increase), with a gross profit margin of 20.5% compared to 21.9% in the prior year; for the nine months, gross profit was $3,895.1 million (7.6% increase) with a margin of 20.5% versus 21.4%.
• Operating income for the quarter was $489.5 million (10.4% increase), with an operating income margin of 7.2% versus 7.7% in the prior year; for the nine months, operating income was $1,294.1 million (5.6% increase) with a margin of 6.8% versus 7.2%.
• Non-GAAP operating income for the quarter was $619.8 million (16.8% increase) with a margin of 9.2% (unchanged from prior year); for the nine months, non-GAAP operating income was $1,627.7 million (8.9% increase) with a margin of 8.6% versus 8.8%.
• Net income for the quarter was $309.8 million (6.5% increase), while non-GAAP net income was $410.2 million (14.8% increase); for the nine months, net income was $819.6 million (4.1% increase) and non-GAAP net income was $1,075.9 million (9.0% increase).
• Net income per diluted share for the quarter was $2.46 (11.6% increase), while non-GAAP net income per diluted share was $3.26 (20.4% increase); for the nine months, net income per diluted share was $6.43 (8.2% increase) and non-GAAP net income per diluted share was $8.44 (13.3% increase).
• Interest expense, net for the quarter was $66 million (19.8% increase), primarily due to higher average borrowings under the senior unsecured revolving loan facility and lower interest income.
• Net cash provided by operating activities for the nine months ended September 30, 2026, was $618.5 million compared to $771.4 million in the prior year period.
• Free cash flow for the nine months ended September 30, 2026, was $537.8 million compared to $692.2 million in the prior year period.
• Adjusted free cash flow for the nine months ended September 30, 2026, was $784.6 million compared to $668.0 million in the prior year period.
• Total debt as of September 30, 2026, was $7,124.3 million, up from $5,629.8 million as of December 31, 2025.
• Revolver availability as of September 30, 2026, was $1,869.5 million.
• Days of sales outstanding increased to 100 days as of September 30, 2026, from 95 days as of December 31, 2025.
• Days of supply in inventory increased to 18 days as of September 30, 2026, from 11 days as of December 31, 2025.
• The cash conversion cycle was 20 days as of September 30, 2026, compared to 16 days as of December 31, 2025.

Guidance and Future Outlook:

• Management expressed confidence in its ability to outpace US IT addressable market growth by 200 to 300 basis points on a constant currency basis.
• The company aims to drive sustainable long-term value for customers and shareholders through strategic investments and addressing customer needs across the full technology stack and lifecycle.

Business Segments and Product Lines:

• Commercial segment net sales were $3,979 million, a 20.8% increase, driven by growth in Financial Services (73.2%), Corporate (16.8%), and Healthcare (9.3%) customers.
• Government segment net sales were $913 million, a 9.9% increase.
• Education segment net sales were $982 million, a 7.5% increase.
• Net sales for UK and Canadian operations ("Other") were $880 million, a 26.0% increase.
• Net sales growth was primarily driven by data storage and servers, notebooks/mobile devices, and software.
• The decrease in gross profit margin was primarily driven by product mix into and lower margins in certain product categories.

Market and Competitive Landscape:

• The company operates in an environment defined by rapid technology change and increasing complexity.
• Strong momentum in enterprise AI adoption is noted as a driver of results.
• The company faces substantial competition that could reduce market share.

Risks and Challenges:

• Risks include dependence on vendor partners and wholesale distributors, potential breaches of data security, and potential service failures.
• Challenges include fluctuations in foreign currency, global economic and political conditions, and potential disruptions in product supply related to AI workload demand.
• The company faces risks related to the costs and risks of strategic investments, acquisitions, and the successful integration of newly acquired businesses.
• Potential adverse occurrences at primary facilities or third-party data centers, including climate change impacts, are noted risks.
• Decreases, delays, or changes in technology spending, including impacts of government shutdowns and procurement policies, are identified risks.

Management Commentary and Tone:

• Christine A. Leahy, Chair and CEO, described the results as "robust," powered by broad-based strength across customer end-markets and strong momentum in enterprise AI adoption.
• Albert J. Miralles, CFO, stated that strong customer demand and disciplined execution drove double-digit growth in gross profit and more than 20 percent growth in non-GAAP net income per diluted share.
• Management emphasized balancing investments supporting customers and long-term growth with disciplined expense management and capital allocation.
• Leahy concluded that CDW's role as a trusted advisor is increasingly important in addressing customer needs across the full technology stack.

Other Key Points:

• The Board of Directors approved a quarterly cash dividend of $0.680 per common share to be paid on December 10, 2026, to stockholders of record as of November 25, 2026.
• Weighted-average diluted shares outstanding decreased to 126 million in the third quarter of 2026 from 132 million in the prior year period.
• The effective income tax rate was 26.9% in the third quarter of 2026, compared to 25.3% in the prior year, due to lower tax credits and higher non-deductible expenses.
• Selling and administrative expenses were $896 million in the third quarter, a 10.3% increase, primarily due to higher performance-based incentives, workplace optimization costs, and acquisition costs.
• Net sales on a constant currency basis increased 17.8% in the third quarter of 2026 compared to the third quarter of 2025.
• There were 64 selling days in both the three months ended September 30, 2026, and 2025.