CDW reported a strong Q1 2026, with sales up 9%, driven by a surge in infrastructure hardware demand as customers raced to secure supply ahead of memory price increases and potential shortages. Despite the strong performance, management raised its full-year gross profit outlook modestly, citing continued uncertainty in the second half, but expressed confidence in achieving operating leverage from its 'Geared for Growth' initiative. Q1 net sales grew 9% YoY, driven by strong demand for infrastructure hardware (networking, servers, storage up >20%).
CDW reported a strong Q1 2026, with sales up 9%, driven by a surge in infrastructure hardware demand as customers raced to secure supply ahead of memory price increases and potential shortages. Despite the strong performance, management raised its full-year gross profit outlook modestly, citing continued uncertainty in the second half, but expressed confidence in achieving operating leverage from its 'Geared for Growth' initiative. Q1 net sales grew 9% YoY, driven by strong demand for infrastructure hardware (networking, servers, storage up >20%).
Management emphasized AI adoption is shifting from exploration to production, driving demand for infrastructure hardware and services, and they are positioning as an 'AI first' full-stack partner. They highlighted a large AI factory deal and a new GPU-as-a-service partnership…
Management emphasized AI adoption is shifting from exploration to production, driving demand for infrastructure hardware and services, and they are positioning as an 'AI first' full-stack partner. They highlighted a large AI factory deal and a new GPU-as-a-service partnership…
Customers prioritized hardware purchases, leading to a mix shift away from higher-margin services and 'netted down' revenues.
The company saw significant backlog build-up in Q1 that will benefit Q2 results, but remains cautious on H2 demand.
Management emphasized AI adoption is shifting from exploration to production, driving demand for infrastructure hardware and services, and they are positioning as an 'AI first' full-stack partner. They highlighted a large AI factory deal and a new GPU-as-a-service partnership to address supply constraints, seeing AI as margin accretive due to higher services attach.
Financial services vertical driving AI inferencing demand. Management expressed confidence in strong execution and forward-looking investments, while maintaining a prudent outlook on the back half of the year.
Management expressed confidence in strong execution and forward-looking investments, while maintaining a prudent outlook on the back half of the year.
“the decline was primarily driven by the impact of a lower mix of netted down revenues as customers focus more of their spend on acquiring solutions hardware in this volatile pricing environment”
“our inventory went up several hundred million, and we still delivered our free cash flow within the range of expectations relative to non-GAAP net income”
“the AI deals per se have a couple of components that make them make margin accretive. Higher value services attach and continuing recurring revenues and overall that's a larger size deal typically in a higher margin deal”
Customer demand is heavily prioritizing hardware purchases, driven by memory price hikes and supply fears, causing a mix shift away from higher-margin software/services. This is altering gross margin dynamics and creating a build-up of backlog. — The channel is being used as a buffer to secure inventory and lock in prices, potentially amplifying short-term demand and masking underlying end-market softness that could hit component and PC makers later in the year.
… and supply chain environment to capture demand in infrastructure hardware and client devices, alongside increased demand for software licenses. Importantly, our growth reflects strong execution and broad-based customer demand across our segments. First quarter gross margin of 21% was down 60 basis points over the prior year's first quarter but remains resilient given the demand environment and mix of the business. The decline was primarily driven by the impact of a lower mix of netted down revenues as customers focus more of their spend on acquiring solutions hardware in this volatile pricing environment. We do expect netted down revenues alongside professional and managed services to be higher priorities for customers in the second half of the year and to continue to outpace the overall business growth in the longer term. Taken together, these dynamics were timing and mix-driven, and we expect to remain principally within the margin framework we've shared for the full year. The diversity of our end market served us well this quarter as all of our segments increased sales year over year. Our commercial segments started the year strong, up almost 10%, driven by increased demand …
AI-related deals are driving larger deal sizes and a higher attach rate of professional services, making them margin-accretive compared to traditional infrastructure sales.