CDW grew Q2 2026 net sales 10.0% to $6.57B on a 31.8% jump in servers and storage, but lower hardware margins and a $44M restructuring charge held operating income to +2.0% and diluted EPS to $2.15 (+5.1%).
Revenue
$6.6B
+10.0% YoY
Net income
$274M
+1.2% YoY
Diluted EPS
$2.15
+5.1% YoY
Operating margin
6.5%
Overview
CDW resells computers, networking gear, servers, software and IT services to businesses, government agencies, schools and hospitals in the US, UK and Canada. In the second quarter of 2026 (three months ended June 30), net sales rose 10.0% to $6.57 billion. Every segment grew. The fastest-growing product line was data storage and servers, up 31.8%. Profit grew much less than sales, though. Gross margin fell 70 basis points (0.70 percentage points) to 20.1%, because more of the sales came from hardware that earns less per dollar. On top of that, $44.2 million of workforce-reduction and office-lease charges pushed selling and administrative costs up. As a result, operating income rose only 2.0%, net income rose 1.2%, and diluted EPS rose to $2.15 from $2.05. EPS grew faster than net income because CDW has been buying back its own shares, so there are fewer shares to divide profit among.
Constant-currency sales growth was 9.9%. "Constant currency" means the figure with exchange-rate changes stripped out. It's almost identical to the reported 10.0%, so the growth came from real demand, not a weaker dollar. Both quarters had 64 selling days, so average daily sales rose from $93.4 million to $102.7 million.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$6,572.2M
$5,976.6M
+10.0%
Gross profit
$1,319.8M
$1,241.2M
+6.3%
Gross margin
20.1%
20.8%
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EPS growth of 5.1% is the figure in CDW's Q2 earnings release (8-K Exhibit 99.1, filed 2026-08-05). If you divide the rounded per-share figures above you get about 4.9%.
First half (six months to June 30): net sales $12,252.0M (+9.6%), operating income $804.6M (+2.9%), net income $509.8M (+2.8%), diluted EPS $3.97 vs $3.73. Gross margin was 20.5%, down from 21.1%.
What sold: hardware carried the quarter
CDW groups its sales into product categories. The 10-Q says customer demand "drove Net sales growth primarily in data storage and servers, notebooks/mobile devices, software, and netcomm products."
Category
Q2 2026
Q2 2025
YoY Change
Notebooks/mobile devices
$1,751.5M
$1,577.1M
+11.1%
Data storage & servers
$844.8M
$641.2M
+31.8%
Netcomm (networking)
$829.9M
$740.0M
+12.1%
Collaboration
$472.5M
$466.9M
+1.2%
Desktops
$372.3M
$363.0M
+2.6%
Other hardware
$634.0M
$653.8M
-3.0%
Total hardware
$4,905.0M
$4,442.0M
+10.4%
Software
$1,114.3M
$990.2M
+12.5%
Services
$520.7M
$515.2M
+1.1%
A few points stand out:
Servers and storage are the story. They grew 31.8% in the quarter and 31.9% in the first half, and their share of total sales rose from 10.7% to 12.9%. CDW's "Trends" section links this to demand for "memory-intensive products driven by the rapid adoption of artificial intelligence (AI) applications and related data center investments." It also warns that the same dynamic may "drive pricing pressures." Part of the dollar growth may therefore be higher component prices rather than more units. The cash-flow discussion supports that reading: it attributes the inventory build partly to "increased hardware cost." The filing doesn't separate price from volume.
Laptops grew, desktops barely moved. Notebooks/mobile devices rose 11.1% (8.1% in the first half), while desktops rose 2.6% (down 0.8% in the first half). This 10-Q does not describe a PC replacement cycle ("refresh") by name. It credits notebook growth to customer demand in the corporate and healthcare channels, and in Education and in the UK and Canada.
Services barely grew: +1.1% in the quarter and +0.7% in the first half. Services are the most advisory, higher-value part of the business, so this was the weakest large category.
Why sales growth overstates the gross-profit picture
Some software and services sales are booked "net." When CDW acts only as an agent, for example reselling a cloud subscription the vendor delivers, it records only its commission as revenue, not the full price the customer paid. That makes these sales small in revenue terms but high-margin. The filing notes the category percentages "are not representative of the category percentage of gross profits." More netted-down revenue raised gross margin this quarter. More than offsetting it was what the 10-Q calls "mix into and lower margin in certain hardware categories": a larger share of low-margin hardware such as servers, sold at thinner margins. The result was sales up 10.0% but gross profit up only 6.3%.
Segments: new structure from January 2026
From January 1, 2026, CDW realigned its sales organization. The Small Business segment no longer exists. Those customers are now spread across the channels of a new Commercial segment (Corporate, Financial Services, Healthcare). Healthcare moved from the old Public segment into Commercial. Government and Education are now separate reportable segments, and the UK and Canada are reported together as "Other." The prior-year figures below are the comparatives the 10-Q presents under this new structure.
Segment / channel
Q2 2026 sales
YoY
Gross margin (vs Q2 2025)
Operating income
YoY
Commercial
$3,965.4M
+9.2%
21.3% (21.7%)
$382.6M
+2.9%
— Corporate
$2,618.1M
+10.7%
— Financial Services
$487.1M
+1.8%
— Healthcare
$860.2M
+9.1%
Government
$848.0M
+13.6%
19.3% (22.5%)
$59.9M
+17.5%
Education
$933.1M
+0.7%
16.4% (15.3%)
$65.1M
+16.0%
Other (UK + Canada)
$825.7M
+22.9%
19.1% (21.1%)
$52.0M
+22.1%
Commercial (60% of sales) grew on servers and storage "across all customer channels," plus software and networking gear in Corporate and notebooks in Corporate and Healthcare. Its gross margin still slipped 40 bps, and higher performance-based pay held operating income growth to 2.9%.
Government had the fastest sales growth among the US segments, driven by networking, servers and storage, and software. But its gross margin fell 320 bps to 19.3%, which the 10-Q attributes to "mix into and lower margin in certain hardware categories and services." Gross profit dollars actually fell 2.7%. Operating income rose 17.5% only because of "lower compensation expense, including performance-based incentives." That's a cost-side gain that may not repeat.
Education was flat on sales (+0.7%), with notebooks and software offset by weaker demand in "various hardware categories." Its margin rose 110 bps, helped by more netted-down revenue.
UK and Canada grew 22.9%, on notebooks and servers/storage. Currency barely mattered: the company's constant-currency adjustment for the quarter is only $1.0M.
Operating margin: the one-off charge
Operating margin is the share of sales left after running the business, before interest and tax. It fell from 7.0% to 6.5%. The main reason is a $44.2M "workplace optimization" charge, versus $12.7M a year ago. CDW defines it as costs for "workforce reductions and charges related to the reduction of our real estate lease portfolio." Unallocated headquarters costs rose to $131.0M from $101.2M. Excluding that charge in both years (our calculation), operating income would have risen about 9%, from $432.9M to $472.8M, close to the pace of sales. CDW's own adjusted ("non-GAAP") operating income rose 7.0% to $556.0M, at an 8.5% margin (vs 8.7%). Non-GAAP EPS rose 11.9% to $2.91. The gap between GAAP EPS (+5.1%) and non-GAAP EPS (+11.9%) is mostly this restructuring charge, plus higher stock-based pay ($28.1M vs $23.5M). A higher tax rate (26.4% vs 25.7%) also weighed on GAAP net income.
Cash, debt and shareholder returns
Cash flow weakened. First-half operating cash flow was $219.7M, down from $443.1M. Receivables rose by $1,054.0M and inventory by $418.3M. The 10-Q attributes the inventory to "customer-driven stocking positions as a result of higher demand and increased hardware cost." The cash conversion cycle (roughly, how many days cash is tied up between paying suppliers and collecting from customers) lengthened to 21 days from 16.
More debt. Net debt (total debt minus cash) was $5,455.2M at June 30, up from $5,151.7M a year earlier. CDW drew on its revolving credit line during 2026. It also set up a new product-financing arrangement in Q2 to fund one customer's hardware procurement program.
Buybacks. CDW repurchased 2.9M shares for $343.7M in Q2, and 4.5M shares for $545M in the first half, versus $350.1M in the first half of 2025. On May 13 the board added $1 billion to the authorization, leaving about $1,138M available at June 30. Diluted share count fell to 127.4M from 132.4M. That drop is why EPS grew roughly four times as fast as net income.
Dividend. The quarterly dividend is $0.630 per share, up from $0.625. H1 dividend payments totaled $160.9M. Buybacks ran well ahead of free cash flow ($165.8M in H1), with the gap funded partly by borrowing.
Takeaway: CDW's 10% sales growth came mostly from low-margin servers, storage and laptops, partly helped by higher hardware prices, so gross profit grew only 6.3%. A $44M restructuring charge then held GAAP operating income to +2.0%. EPS growth of 5.1% (11.9% adjusted) relied on buybacks, which were funded partly with debt while working capital absorbed cash.
Outlook
The 10-Q gives no numeric sales or earnings guidance. In the earnings release (8-K Exhibit 99.1, filed 2026-08-05), CEO Christine Leahy said CDW remains "confident in our ability to exceed US IT addressable market growth by 200 to 300 basis points on a constant currency basis." The 10-Q notes that Government and Education sales are historically higher in the second and third quarters, so Q3 should still be seasonally supportive for those segments. In a separate 8-K the same day, CDW announced that CFO Albert Miralles plans to retire in 2027 after a successor is found.
Our read: demand is clearly there, but the quality of the growth is the thing to watch. If AI-driven memory and server price inflation keeps pushing up hardware sales, revenue will keep beating gross profit. Government's 320 bp margin drop can't be offset by lower incentive pay every quarter. And receivables and inventory need to come back down for cash flow to cover buybacks without adding debt. Key things to check in Q3: whether gross margin stabilizes near 20%, whether services growth picks up, and whether first-half operating cash flow recovers.