IT solutions provider CDW (NASDAQGS:CDW) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 6.3% year on year to $5.51 billion. Its non-GAAP profit of $2.57 per share was 5.1% above analysts’ consensus estimates.
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CDW (CDW) Q4 CY2025 Highlights:
- Revenue: $5.51 billion vs analyst estimates of $5.34 billion (6.3% year-on-year growth, 3.1% beat)
- Adjusted EPS: $2.57 vs analyst estimates of $2.44 (5.1% beat)
- Adjusted EBITDA: $544.7 million vs analyst estimates of $517.1 million (9.9% margin, 5.3% beat)
- Operating Margin: 7.8%, in line with the same quarter last year
- Market Capitalization: $17.98 billion
StockStory’s Take
CDW’s Q4 results were greeted with a positive market reaction, reflecting stronger-than-anticipated demand across key IT categories. Management attributed the quarter’s momentum to double-digit growth in cloud, software, and professional services, as well as robust expansion in small business and education segments. CEO Christine Leahy pointed to a “strong finish to a complex year,” emphasizing the role of the company’s diverse end markets and broad solution set in offsetting soft spots in federal government and corporate spending.
Looking ahead, management’s outlook for 2026 is shaped by expectations for moderate IT spending growth and rising interest in AI-driven solutions. The company aims to outperform the overall market through deeper client engagement in cloud, security, and managed services. CFO Albert Miralles emphasized that operating leverage and targeted expense optimization will be top priorities, while Leahy noted that “AI momentum is picking up in all of our end markets” and CDW is positioned to support customers as they move from experimentation to production deployments.
Key Insights from Management’s Remarks
CDW’s management credited the quarter’s performance to strong execution in high-growth service categories and successful navigation of industry headwinds.
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Cloud and Services Momentum: Cloud-related revenue and gross profit saw double-digit increases, with cloud now contributing nearly half of quarterly gross profit growth. Professional and managed services also delivered strong top-line gains, led by hybrid infrastructure and AI-powered customer experience projects.
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End-Market Diversity: Exceptional growth in small business (up 18%) and education (up 13%) offset softer trends in corporate and federal government channels. The company’s diverse exposure helped mitigate the impact of an extended federal shutdown and uneven hardware refresh cycles.
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AI Integration Across Offerings: AI capabilities are increasingly embedded throughout CDW’s hardware, software, and service lines. Management highlighted enterprise-scale deployments and accessible AI solutions for small businesses, underscoring AI as a “pervasive” performance driver rather than a discrete product.
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Product Mix and Pricing Dynamics: Hardware growth was modest, with double-digit gains in notebooks and servers countered by storage declines. The quarter saw some demand pulled forward due to memory price increases, but management described the overall impact as minor and expects continued navigation of supply and pricing volatility.
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Strategic M&A to Expand Capabilities: CDW completed a tuck-in acquisition of Lexicon Tech Solutions assets to strengthen end-to-end lifecycle offerings for education customers, reflecting ongoing investment in targeted capability expansion.
Drivers of Future Performance
Management expects continued market outperformance in 2026, driven by elevated demand for cloud, AI, and managed services, but notes persistent uncertainty from public sector funding and supply chain dynamics.
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AI and Cloud Adoption: Management believes adoption of cloud-based and AI-enabled solutions will remain a key growth driver, as more customers move from pilot projects to production. Leahy cited customer reliance on CDW’s integration expertise to orchestrate secure deployment across complex IT environments.
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Expense Leverage and Efficiency: CFO Miralles indicated that operating leverage will be a central focus in 2026, with efforts to optimize both variable and fixed costs. The company aims for SG&A ratio improvement as growth in high-margin services accelerates through the year.
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Supply Chain and Pricing Volatility: Rising memory prices and potential supply shortages are expected to influence product mix and purchasing behavior. Management is preparing for possible demand fluctuations and supply constraints, particularly in the second half of the year, and will adjust strategy as conditions evolve.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will track (1) the progression of AI and cloud adoption from pilot to production across customer segments, (2) the company’s ability to achieve operating leverage as service lines expand, and (3) the impact of memory price volatility and potential supply constraints on hardware demand. Updates on the integration of recent acquisitions and new segment reporting will also be important indicators of strategic execution.
CDW currently trades at $138.04, up from $126.16 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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