CDW (CDW 0.16%), a provider of integrated information technology (IT) solutions, released its second quarter 2025 earnings on August 6, 2025. The company reported GAAP revenue and Non-GAAP earnings per share that exceeded analyst estimates, driven by strong demand in its commercial businesses and significant gains in its healthcare channel. Revenue (GAAP) reached $5,976.6 million, outpacing the consensus of $5,512.35 million. Non-GAAP earnings per share came in at $2.60, topping the $2.49 Non-GAAP estimate. However, gross profit margin (GAAP) dipped to 20.8% due to decreased rates in certain hardware categories and lower contribution from netted down revenue, and reported net income softened year over year. The quarter showed robust topline growth but also highlighted the impact of changing sales mix and rising expenses on profitability.
Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
---|---|---|---|---|
EPS (Non-GAAP) | $2.60 | $2.49 | $2.50 | 3.9% |
Revenue (GAAP) | $5,976.6 million | $5,512.35 million | $5,423.4 million | 10.2% |
Non-GAAP Operating Income | $520.0 million | $510.3 million | 1.8% | |
Gross Profit Margin | 20.8% | 21.8% | (1.0) pp | |
Net Income (GAAP) | $271.0 million | $281.1 million | (3.5%) | |
Estimate data sourced from FactSet; management expectations based on guidance provided in the Q1 2025 earnings report. |
About CDW and What Drives Its Business
CDW’s core business is providing IT products and services to a wide range of customers, including corporations, small businesses, and public sector entities such as healthcare, government, and education. It operates as a multi-brand reseller and solutions provider, offering products like notebooks, servers, software, cloud solutions, cybersecurity, and consulting services.
The company’s success relies on its network of over 1,000 technology vendors and more than 250,000 customers. CDW’s ability to deliver integrated solutions, act as a trusted advisor, and adapt its offerings to customer needs is central to its business model. Investments in its workforce, logistics infrastructure, and strategic partnerships are key to maintaining its market position and delivering complex IT solutions that cover advisory, implementation, and managed services.
Quarterly Highlights: Segment Performance and Profit Trends
In the quarter, CDW’s revenue growth was led by its Corporate segment, which grew net sales by 17.6% year-over-year. Net sales for the Corporate segment reached $2.6 billion, reflecting strong demand for upgrades to notebooks, mobile devices, software, and data center equipment. This growth was partly driven by device refresh cycles and the transition related to Microsoft’s Windows 10 end-of-life. The Small Business segment posted GAAP net sales of $431.3 million, up 12.6% year-over-year, though growth was slightly slower than in the Corporate segment.
Public sector channels showed mixed results. Healthcare sales surged 24.1% year-over-year, reflecting CDW’s investments in its sales organization and industry expertise. Education sales dropped 10.9% year-over-year as many schools shifted orders into Q1 2025 to get ahead of tariff-related price increases, resulting in a challenging comparison and lower volumes. Government net sales (GAAP) increased 2.7% year-over-year, with management noting continued slow spending cycles and budget friction in this area.
Internationally, the UK and Canada segment generated $672 million in GAAP net sales, reflecting 11.6% year-over-year growth. However, spending in Canada remained muted, and management noted general macroeconomic volatility in international markets.
CDW’s product mix continued to evolve. Hardware such as notebooks, storage, and servers led top-line growth, while software and cloud solutions remained important as organizations shifted to integrated digital strategies. Customer demand for full-stack digital transformation -- which involves upgrading the entire IT process from hardware to ongoing service management -- supported strong contributions from cloud, cybersecurity, and artificial intelligence consulting.
On profitability, gross profit (GAAP) rose to $1.24 billion, but gross profit margin (GAAP) decreased by one percentage point as hardware’s larger share diluted overall margins. Non-GAAP operating income increased to $520 million, though operating margins narrowed as selling and administrative expenses rose 9.5%, driven by performance-based compensation and investments in technology and workplace changes.
Net income, as reported under US Generally Accepted Accounting Principles, softened to $271 million, down 3.5% from the prior year. The company continued share repurchases, resulting in a weighted average diluted shares outstanding decrease of approximately 2.4%. Free cash flow generation moderated on a year-over-year basis for the first six months of 2025, with working capital swings and timing issues affecting conversion rates. At quarter-end, CDW reported $1.7 billion in available liquidity as of June 30, 2025.
The quarterly dividend was set at $0.625 per share. The company reiterated its commitment to returning 50% to 75% of adjusted free cash flow to shareholders through both dividends and repurchases.
Looking Forward: Guidance and Key Factors
CDW management reaffirmed its outlook, targeting growth that outpaces the US IT market by 2.0 to 3.0 percentage points on a constant currency basis. The company expects market growth in the low-single-digits and sees gross margins holding close to 2024 levels. It projects low-single-digit growth for full-year Non-GAAP earnings per diluted share. Despite strong Q2 2025 results, management chose not to raise its full-year guidance. This continued caution reflects uncertainties related to government spending, education sector volatility following order shifts, and ongoing budget caution among customers.
Investors should monitor margin trends, given the ongoing shift toward lower-margin hardware and rising expense ratios. The company’s capital allocation plans, including its pace of share repurchases and ability to maintain dividend growth, will also be important in assessing shareholder return. No new or unusual guidance on one-time items or extraordinary events was given for the period.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.