CDW tops Q3 profit and sales estimates as revenue rises 17.7%

CDW (CDW) said on Nov. 4 that third-quarter net sales rose 17.7% from a year earlier to $6.75 billion, topping the $6.28 billion consensus estimate.

Non-GAAP earnings per diluted share rose 20.4% to $3.26, above the $3.01 consensus estimate. The company's press release gave the figures below.

Here's how the company did:

• Net sales: $6.75 billion vs. $5.74 billion a year earlier
• Non-GAAP EPS: $3.26 vs. $2.71 a year earlier, against $3.01 expected
• Gross profit: $1.39 billion vs. $1.26 billion a year earlier
• Net income: $309.8 million vs. $291.0 million a year earlier

Gross profit margin fell to 20.5% from 21.9% a year earlier. The company said the decline was driven by mix and lower margins in certain product categories.

Segment results

Commercial segment net sales rose 20.8% to $3.98 billion. Sales to Financial Services customers rose 73.2%, sales to Corporate customers rose 16.8% and sales to Healthcare customers rose 9.3%.

Government segment net sales rose 9.9% to $913 million. Education net sales rose 7.5% to $982 million.

Net sales for CDW's UK and Canadian operations, combined as “Other,” rose 26.0% to $880 million.

The company said customer demand drove sales growth mainly in data storage and servers, notebooks and mobile devices, and software.

Costs and charges

Selling and administrative expenses rose 10.3% to $896 million. The company attributed the increase mainly to higher performance-based incentives, workplace optimization costs and acquisition costs.

Non-GAAP operating income rose 16.8% to $620 million. Operating income rose 10.4% to $490 million.

Interest expense, net rose 19.8% to $66 million, which the company said reflected higher average borrowings under its senior unsecured revolving loan facility.

“Strong customer demand and disciplined execution drove double-digit growth in gross profit,” said Chief Financial Officer Albert J. Miralles. He added that operating leverage and capital management contributed to more than 20% growth in non-GAAP net income per diluted share.

Cash, debt and capital returns

Net cash provided by operating activities was $618.5 million, compared with $771.4 million a year earlier. Adjusted free cash flow was $784.6 million, up from $668.0 million.

Total debt was $7.12 billion at Sept. 30, up from $5.63 billion at Dec. 31, 2025. Days of sales outstanding were 100, compared with 92 a year earlier.

The board declared a quarterly cash dividend of 68 cents per share, approximately 8% above last year's dividend. It is payable Dec. 10 to stockholders of record as of Nov. 25. The company said the dividend is aligned with a target of 25% of trailing-twelve-month non-GAAP net income.

As of Sept. 30, the company had about $1.03 billion remaining under its share repurchase program.