CDW Q2 2026 earnings: Hardware demand lifts revenue as margins narrow

CDW Corporation (NASDAQ: CDW) reported Q2 2026 net sales of $6.57 billion, up 10.0% year over year, while GAAP diluted EPS rose 5.1% to $2.15. Demand for infrastructure and device products supported revenue growth, but a shift toward lower-margin hardware and higher operating expenses limited GAAP operating income growth to 2.0%.

Core earnings data

For the quarter ended June 30, 2026, reported net sales growth was close to the 9.9% constant-currency increase. Gross profit and operating income grew more slowly than revenue, reflecting product mix and higher compensation and workplace optimization costs.

CDW’s non-GAAP measures exclude items including acquisition-related intangible amortization, equity-based compensation and related payroll taxes, acquisition and integration expenses, transformation initiatives, and workplace optimization costs.

Business and segment performance

Government and the UK-and-Canada “Other” segment recorded the fastest growth, while Education was nearly flat. Commercial remained CDW’s largest segment and accounted for most of the company’s quarterly sales.

Within Commercial, Corporate sales increased 10.7% and Healthcare rose 9.1%, compared with 1.8% growth in Financial Services. At the product level, CDW attributed overall sales growth primarily to data storage and servers, notebooks and mobile devices, software, and networking products.

Hardware-led growth lifted sales faster than GAAP profit

Cost of sales increased 10.9%, slightly faster than net sales, as business shifted toward certain lower-margin hardware categories. That mix reduced gross margin to 20.1%, although a higher contribution from netted-down revenue partially offset the pressure.

Selling and administrative expenses rose 8.6% to $891.2 million, primarily because of higher compensation, including performance-based incentives, and workplace optimization costs. With gross profit rising 6.3%, the expense increase restricted GAAP operating income growth to 2.0% and reduced operating margin by 50 basis points.

Below the operating line, net interest expense increased 6.0% to $60.2 million because of higher average debt on CDW’s senior unsecured revolving loan facility. The effective tax rate also rose to 26.4% from 25.7%, contributing to GAAP net income growth of only 1.2%.

Diluted weighted-average shares declined to 127.4 million from 132.4 million, helping GAAP EPS rise faster than net income. The board also approved a quarterly cash dividend of $0.630 per common share, payable September 10, 2026, to shareholders of record on August 25.

Earnings outlook

Management said it remained confident that CDW can grow 200 to 300 basis points faster than the U.S. IT addressable market on a constant-currency basis. This is a relative market-growth framework rather than an absolute revenue or EPS target.

Management linked its outlook to customers’ investments in infrastructure modernization, cloud services, and AI-enabled technologies, including organizations moving from AI exploration toward practical deployments.

Recent insider transactions

The supplied insider data shows no open-market insider purchases or sales during the preceding six months, with net shares purchased or sold at zero and total insider holdings of 567.23k shares. The latest 10 reported transactions were direct stock awards rather than purchases or sales, so they do not by themselves indicate a view on CDW’s valuation or outlook.

Risks investors should monitor

• Continued margin pressure from product mix: Growth concentrated in lower-margin hardware could keep sales growth above gross profit growth.
• Operating expense growth: Compensation and workplace optimization costs rose during the quarter and could continue to limit the conversion of revenue growth into GAAP operating profit.
• Uneven segment demand: Education increased only 0.7%, while Financial Services grew 1.8%, leaving overall momentum more dependent on stronger areas such as Government, Corporate, and Other.
• Interest and tax pressure: Higher revolving-loan debt levels increased net interest expense, while a higher effective tax rate weighed on net income.
• AI-related supply and cost constraints: CDW identified potential supplier capacity limitations and cost increases associated with demand for AI workloads, which could affect product availability or margins.

Summary

CDW’s Q2 2026 revenue growth was supported by infrastructure modernization, devices, software, and networking demand, with Government and international operations leading the segment gains. The central issue was the gap between 10.0% sales growth and 2.0% GAAP operating income growth as lower-margin hardware mix and higher expenses compressed profitability. Future results will depend on margin management, operating expense discipline, and whether CDW sustains growth above the U.S. IT addressable market.