CDW · Q4 2025 Earnings

Cautious

CDW Corporation

Reported February 4, 2026

30-second summary

Non-GAAP EPS of $2.57 cleared the Q3 guide of "down slightly YoY and down sequentially" by a wide margin on the back of $5.51B revenue (+6.3% YoY) and a 22.8% gross margin, and management used the print to nudge the FY2026 EPS frame up to mid single digits from FY2025's low single digits. But the tone hasn't followed the numbers: 2025 is being explicitly reset as a "normal baseline" for expense leverage, gross profit growth was guided narrower at "low single digits" (vs. FY2025's "low to mid"), and management openly flagged memory-driven Q1 pull-forward and a still-lingering shutdown impact. The earnings re-acceleration is real; the conviction behind it is not.

Headline numbers

EPS

Q4 FY2025

$2.57

Revenue

Q4 FY2025

$5.51B

+6.3% YoY

Gross margin

Q4 FY2025

22.8%

Operating margin

Q4 FY2025

7.8%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$5.51B	+6.3%	$5.74B	-3.9%
EPS	$2.57	—	$2.71	-5.2%
Gross margin	22.8%	—	21.9%	+90bps
Operating margin	7.8%	—	7.7%	+10bps

Guidance

FY2026 earnings growth accelerated to mid single digits YoY (vs. FY2025's low single digits); gross profit growth guided narrower at low single digits, with margins expected to improve slightly; outperformance target maintained at 200-300 bps.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Gross Profit Growth	Q4 FY2025	low to mid single digit year-over-year	FY2025 gross profit grew low single digits YoY (21.7% gross margin × $22.424B FY revenue implies ~$4.86B gross profit vs ~$4.56B FY2024, ~6.5% growth)	in-line with guide	Beat
Non-GAAP Net Income Per Diluted Share	Q4 FY2025	down slightly year over year and down sequentially	$2.57	exceeded qualitative guide (expected YoY decline)	Beat

New guidance

Metric	Period	Guide	YoY
Gross Profit Growth	FY2026	low single digits	—
Gross Margin	FY2026	slightly higher than 2025 levels	—
Non-GAAP EPS	FY2026	mid single digits year-over-year growth	—
IT Addressable Market Growth	FY2026	low single digits	—
Non-GAAP EPS	Q1 FY2026	up mid single digits year over year	—
Gross Profit Growth	Q1 FY2026	mid single digit year-over-year growth; mid single digit sequential decline	—

Reaffirmed unchanged this quarter: Non-GAAP EPS ($10.02 (actual))

Segment performance

Q4 FY2025

Segment	Q4 FY2025	YoY
Corporate	$2.37B	+1.0%
Small Business	$0.457B	+20.3%
Public - Government	$0.651B	+6.0%
Public - Education	$0.639B	+14.7%
Public - Healthcare	$0.726B	+6.3%

Platform metrics

Q4 FY2025

Segment	Q4 FY2025
Average Daily Sales Growth	4.6%
Customer Count	250,000+
Vendor Partner Count	1,000+
Days Sales Outstanding	95 days
Days Supply in Inventory	11 days
Cash Conversion Cycle	16 days
Constant Currency Revenue Growth	6.0%

Profitability

Q4 FY2025

Segment	Q4 FY2025
Non-GAAP Operating Margin	9.1%

Other KPIs

Q4 FY2025

Segment	Q4 FY2025	YoY
Other (UK & Canada)	$0.669B	+10.2%

Management tone

Narrative arc: Q2 "Refuse to upgrade despite beat" → Q3 "Prudence hardens, Q4 EPS guided down" → Q4 "Beat the down-guide, raise FY26 EPS, but reset the baseline"

The "prudence" stance evolved from generic caution to a structural baseline reset. Q2 framed prudence as protection against unmodeled macro tails; Q3 attached it to the government shutdown specifically; this quarter Al delivered the cleanest version yet: "we continue to structurally align our business for stronger future expense leverage. And we expect to make progress towards this in 2026 and deem 2025 to be a normal baseline for comparative purposes." Calling 2025 a "normal baseline" is doing real work — it implicitly tells analysts not to expect the FY2025 SG&A absorption to repeat as a tailwind. The mid-single-digit FY2026 EPS guide requires fresh operating leverage from a less favorable starting line.

Government/public sector framing has shifted from event-driven to lingering structural. Q3's framing was "given the recent government shutdown, our continued prudence is warranted." This quarter Al said "we continue to see unique dynamics in the public sector, including lingering impacts of last year's government shutdown" — the shutdown is now backward-looking, but its drag is forward-looking. Combined with the unchanged 200-300bps outperformance target despite better FY2025 execution, the read is that management does not see policy normalization in 2026.

AI was deliberately reframed away from a discrete revenue line. Three quarters ago AI was framed as a future opportunity tied to consulting and managed services; last quarter as an accelerating mix shift. This quarter Chris drew an explicit line: "AI is not a discrete contributor, it is a pervasive one, which results embedded in our hardware, software, and services performance." This is expectation management — it caps any near-term "AI revenue" thesis and refuses to give analysts a number to model. The trade-off: it also positions CDW as architecturally embedded rather than a beneficiary of a single product cycle.

Memory pricing emerged as a new specific risk vector. Last quarter's risks were policy and shutdown; this quarter Al disclosed "moderate levels of pull forward in the range of $50 million in net sales driven by memory-related price increases" in Q4 and explicitly guided Q1 to absorb more of the same. That's a quantified one-time benefit being flagged before analysts have to back it out — useful disclosure, but it tells you the Q1 mid-single-digit EPS guide already has a pull-forward tailwind embedded.

Corporate caution is now openly acknowledged as a multi-quarter condition, not a one-quarter blip. Q2 corporate was +17.6% and management refused to extrapolate. Q3 fell to +4.4%, framed as enterprise project deferrals. This quarter +1.0%, framed as "continued caution towards major capital investments" — the framing has moved from temporary deferral to ongoing posture. Management did not characterize it as deteriorating, but the trajectory speaks for itself.

Recurring themes management leaned on this quarter:

AI as pervasive (embedded across hardware, software, services) not discrete revenue lineCustomer caution persists despite recovery narrative; 'laser-focused on operating efficiency and cost leverage'Netted-down revenues (36.1% of gross profit) as durable trend shielding from hardware volatilityPublic sector structural headwinds ('lingering impacts') requiring go-to-market restructuringGovernment shutdown and tariffs as ongoing 'wild cards' with material downside riskFull-stack, full-lifecycle model as differentiation in dynamic, interconnected ecosystems

Risks management surfaced:

Public spending dynamics and lingering government shutdown impactsTariffs as ongoing exogenous factor with potential material changeGeopolitical risks affecting customer buying behavior and sentimentMemory pricing volatility and supply chain disruption (pull-forward demand risk)Cautious customer capital expenditure behavior limiting hardware and solutions sales

Q&A highlights

David Bott · UBS

How should we think about memory price pull-forwards affecting demand across the year, particularly for memory-sensitive categories like PCs and servers? Also, regarding SG&A as a percentage of gross profit in 2026, shouldn't it decline more given investments made in 2025-2026?

Management expects similar or slightly more pull-forward in Q1 versus December. PCs remain strong but will see decelerating growth and choppier performance due to memory dynamics. SG&A ratio decline will follow as operating leverage progresses through the year, contingent on amplified growth and expense optimization. Full visibility to back half of year is limited.

Expected pull-forward in Q1 similar to or slightly more than DecemberPC growth expected to decelerate but remain strongSG&A to remain baseline in 2025, working toward operating leverage in 2026Operating leverage expected to accelerate and progress through 2026

Adam Tindall · Raymond James

Given PC mix coming down and memory inflation, how does CDW expect gross margin expansion when past inflation cycles benefited gross margins? What is different this time? Also, on AI versus cloud, what strategic partnerships or inflection points might materialize?

Management expects modest gross margin expansion with stronger hardware growth in H1 and services/cloud/software growth in H2. Gross margin lighter in H1, picking up in H2 on favorable mix. AI differs from cloud as it's embedded across entire stack. CDW already has partnerships with major AI players and sees inflection point now with customers moving to production, with CDW playing orchestration/integration role.

Expect modest gross margin expansion in 2026Stronger hardware growth in H1, fade in H2Services progression expected through yearAI embedded across entire stack, not just consumption model

Eric Woodring · Morgan Stanley

Historically CDW outperformed market by 400-500 bps in strong hardware years, but last 3 years only 200-300 bps despite robust 2025 hardware spending. Is this structural competition or mix shift? Also, explain the divergence between corporate (flat) and SMB (double-digit) growth.

Outperformance at high end of 200-300 bps, with mix shift toward netted-down revenue reducing top-line differential. No competitive concerns; CDW remains #1 trusted advisor. Corporate vs SMB difference reflects spending cycles and AI adoption timelines—corporates in testing/cost optimization phase, SMBs nimble and cloud-forward. Large companies now entering production spending phase.

Outperformance in high end of 200-300 basis points rangeMix shift into netted-down revenue compressing top-line differentialCorporate cohort transitioning from optimization to production spendingSMB showing double-digit growth due to cloud-forward, faster AI adoption

Amit Daryanani · Avoco ISI

Where are customers allocating incremental budget dollars by category in 2026? What about networking/netcom priorities? Also, explain the OpEx dynamics—why has OpEx growth been ahead of revenue by hundreds of basis points, and what drives leverage in 2026?

Clients devices show continued strength with AI PCs momentum; cloud/SaaS/security remain evergreen and will have higher weight in netted-down revenues. Networking positive for 2025 continuation; server/storage choppy with modest growth. OpEx outpaced revenue due to: (1) incentive comp variability, (2) higher-than-expected gross profit triggering variable model response, and (3) strategic investments. 2026 leverage driven by comparable comp baseline, continued investments, but laser focus on fixed cost optimization.

Client devices remain strong with AI PC pickupCloud/SaaS/security will have higher weight in full-year netted-down revenuesNetworking solid in 2025 with drivers to continueServer/storage expected modest growth

Ruku Bhattacharya · Bank of America

Non-netted-down gross margins are trending well (up 70 bps sequentially). How does CDW navigate supplier price increases and maintain/grow core business margins? Also, what AI-related services work are you seeing from SMB/mid-market customers?

Non-netted-down margin improvement driven by: (1) services growth strength, (2) client mix sequential shift, (3) resilient product margins. CDW is cost-plus provider passing through gross margin during price increases, with concept holding up in current environment. Services growth strong with AI engagement across customer segments. SMB/mid-market lack resources for in-house AI capabilities, so CDW engaged in design, architecture, migration, deployment, operations, data governance, and managed services.

Non-netted-down margins up 70 bps sequentially and year-on-yearServices growth strong driverProduct margins resilient for multiple quartersCDW operates as cost-plus provider, passing through increases

Answers to last quarter's watch list

Q4 EPS landing zone — $2.57 came in materially above the "down slightly YoY and down sequentially" guide; vs. Q4 2024's $2.49, this is +3.2% YoY growth, not a decline. FY non-GAAP EPS of $10.02 cleared the low-single-digit FY commitment comfortably.

Resolved positively

Corporate segment stabilization — Decelerated again from +4.4% to +1.0%, just above the 3% threshold flagged as a structural-vs-cyclical line. Management explicitly framed the flatness as expected and tied to "continued caution towards major capital investments." This is not breakdown, but it's not stabilization either — it's a second consecutive deceleration.

Resolved negatively

Government shutdown duration impact — Government decelerated modestly from +7.8% to +6.0% YoY, holding up better than the conservative Q4 guide implied. Management characterized the shutdown impact as "lingering" rather than active, which suggests the conservatism in the Q4 guide proved warranted but not severe.

Resolved positively

Services share of gross profit — Management did not restate the 36% netted-down/9% services share metrics this quarter on the print disclosure. Gross margin expanded to 22.8% (+50bps YoY), consistent with continued mix shift, but the specific share metric wasn't repeated.

Continue monitoring

2026 framework on the Q4 call — Stepped up to mid single-digit EPS growth from FY2025's low single-digit — a tier higher, suggesting some policy/visibility overhang has eased. However, gross profit growth was guided narrower at low single digits and the outperformance target was held flat, so the upgrade is earnings-leverage-driven, not demand-driven.

Resolved positively

Healthcare Medicare exposure — Healthcare grew +6.3% in Q4, decelerating slightly from Q3's +6.9% but holding above mid-single-digit. Management did not flag Medicare hesitancy as a materializing risk this quarter, suggesting the previously-disclosed exposure is not yet biting.

Continue monitoring

What to watch into next quarter

Q1 EPS landing vs. the mid-single-digit guide — Q1 2025 non-GAAP EPS was the relevant baseline; the guide embeds memory pull-forward tailwind. Watch whether actual Q1 EPS lands at or above mid-single-digit YoY, and how much management attributes to pull-forward (which would be borrowed from later quarters).

Corporate segment third-derivative — After +17.6% → +4.4% → +1.0%, watch whether Q1 stabilizes back to low-single-digit or breaks negative. A negative Q1 Corporate print would invalidate management's "expected/in line" framing and force a 2026 reset.

Gross margin trajectory toward "slightly higher than 21.7%" — The FY2026 gross margin guide implies expansion despite stronger H1 hardware mix (which is dilutive). Watch Q1 gross margin — anything below 22.0% raises questions about whether the H2-loaded services accretion is enough to deliver the FY commitment.

Memory pull-forward sizing — Q4 captured ~$50M of pull-forward; management guided Q1 to similar or slightly more. Watch whether management quantifies it again on the Q1 print and whether Q2 shows the implied air pocket from borrowed demand.

Outperformance target — held or raised — FY2026 outperformance held at 200-300bps despite FY2025 execution above that range. Watch whether mid-2026 commentary acknowledges sustained over-delivery or whether the 200-300bps becomes a more visible ceiling.

Operating leverage realization — The mid-single-digit FY2026 EPS guide requires SG&A leverage with only low-single-digit gross profit growth. Watch Q1 SG&A as % of gross profit vs. the FY2025 baseline; if it doesn't show clear improvement, the FY EPS guide is at risk by mid-year.

Sources

CDW Corporation Q4 2025 Earnings Release, https://www.sec.gov/Archives/edgar/data/1402057/000140205726000001/cdw-20251231earningsrelease.htm
CDW Corporation Q4 2025 earnings call commentary (transcript references throughout)

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