CDW's Q4 2025 results beat expectations, driven by strength in SMB, government, and education. The tone in the call was cautiously optimistic, with management highlighting a strong focus on capital returns and a full-year 2026 outlook for mid-single-digit EPS growth. Alpha factors indicate a pull-forward in memory-driven hardware sales and a growth strategy increasingly weighted toward AI, software, and services. CDW reported Q4 revenue of $5.5B, up 5% YoY, ahead of expectations, but driven partially by ~$50M of pull-forward demand from memory price hikes.
CDW's Q4 2025 results beat expectations, driven by strength in SMB, government, and education. The tone in the call was cautiously optimistic, with management highlighting a strong focus on capital returns and a full-year 2026 outlook for mid-single-digit EPS growth. Alpha factors indicate a pull-forward in memory-driven hardware sales and a growth strategy increasingly weighted toward AI, software, and services. CDW reported Q4 revenue of $5.5B, up 5% YoY, ahead of expectations, but driven partially by ~$50M of pull-forward demand from memory price hikes.
AI momentum is building across every market we serve, with customers moving into production stage and adoption becoming a central driver across hardware, software, and services. CDW positions itself as a neutral orchestrator with deep technical expertise, seeing AI as a…
Guidance tone
The company is targeting 200-300 bps outperformance vs. a low-single-digit US IT market growth for 2026, with gross profit growth expected in the low single digits.
Management balances confidence in strategy and execution with caution on macro headwinds, supply chain risks, and uneven demand, emphasizing prudent guidance and operating leverage.
AI momentum is building across every market we serve, with customers moving into production stage and adoption becoming a central driver across hardware, software, and services. CDW positions itself as a neutral orchestrator with deep technical expertise, seeing AI as a pervasive force across the entire technology stack.
Small business grew 18% fueling strong quarter. Management balances confidence in strategy and execution with caution on macro headwinds, supply chain risks, and uneven demand, emphasizing prudent guidance and operating leverage.
CDW is investing in high-growth AI capabilities, expanding service toolkits, and strengthening end-to-end lifecycle capabilities through tuck-in acquisitions. They also entered a new expanded five-year senior unsecured credit facility to support liquidity.
Management balances confidence in strategy and execution with caution on macro headwinds, supply chain risks, and uneven demand, emphasizing prudent guidance and operating leverage.
“While we saw some moderate levels of pull forward in the range of $50 million in net sales driven by memory-related price increases and supply chain concerns”
“We will likely see stronger hardware growth in the first half, and we will likely then see that fade a bit in lieu of more netted down revenues, software, cloud, et cetera.”
“One of the largest enterprise deployments of next generation accelerated compute, the solution improves total cost of ownership with a potential 90-day payback, dramatically increases developer agility, and reduces long-term regulatory and…”
Memory-related price increases and supply chain concerns drove a $50M pull-forward of net sales into Q4 2025, with a similar or slightly larger pull-forward expected in Q1 2026. — Indicates a near-term demand spike due to memory price hikes by suppliers like Micron, potentially creating a demand vacuum in later quarters and impacting OEM inventory and pricing strategies.
… prepared remarks with details on our fourth quarter performance, quickly recap 2025 as a whole, move to capital allocation priorities, and then finish with our outlook for 2026. Fourth quarter gross profit of $1.3 billion was up 8.6% year over year. This was above our expectations for a low to mid-single-digit year-over-year increase as our teams captured growth in client devices alongside increased demand for software and services. While we saw some moderate levels of pull forward in the range of $50 million in net sales driven by memory-related price increases and supply chain concerns, the overall impact of fourth quarter growth was minor. Fourth quarter gross margin of 22.8%, was up 50 basis points over the prior year's fourth quarter. Cruise margin was also up 90 basis points compared to the third quarter, driven by the impact of a higher mix of netted down revenues, improved product margins, and a slight mix out of client devices sequentially, despite the category's continued solid growth. The diversity of our end markets also served us well in this quarter. Government increased on the strength of state and local, while federal modestly outperformed our expectations and did …
CDW expects first half gross profit to be lighter, weighed down by memory-driven hardware mix, with margins improving in the second half as mix shifts to higher-margin netted-down software, cloud, and services revenue. — Suggests that the profit mix for CDW is increasingly tied to the growth of cloud and software-as-a-service platforms, reinforcing the durable revenue stream for major cloud providers.
Okay, thanks. Good morning. I just wanted to start on the outlook. As I think about 2026, the drivers, presumably PC mix will come down. You've got obviously these memory price increase happening, so, you know, potential for inflation hitting. But when I think about the drivers here, it's low single-digit market growth, 200 to 300 basis point outperformance of that. and low single-digit gross profit dollar growth. So it seems like the implication here is, you know, not much improvement in gross margin despite PC mix coming down in inflation, you know, potentially coming through the model. Last time we saw this, you know, increase in component costs, it was a benefit to gross margin. I just…
Yeah, good morning, Adam. It's Al, so I'll take that. I do think that we are expecting that we will see gross margin expansion. You know, we'll call it kind of modest pickup, but there is opportunity for that to accelerate. If I give you a little bit more detail, kind of what that could look like in the way of the shape of the year, given the landscape we're dealing with in the memory environment, We will likely see stronger hardware growth in the first half, and we will likely then see that fade a bit in lieu of more netted down revenues, software, cloud, et cetera. As well, we would hope that we will see progression through the year on services. So just shape of the gross margin, first half probably a bit lighter, second half pick up on the factors that I just mentioned. So that's what it looks like. I do think that if that plays out, we would see that drop down into our operating margin. Obviously, you got a lot of moving parts right now, Adam, on these different fronts, but that's the way we'd see it looking as we sit here now.
A major enterprise deployment of next-generation accelerated compute with a 90-day payback highlights the shift to on-premise AI data center infrastructure for cost and governance reasons. — Real-world evidence that enterprise AI workload economics increasingly favor on-premise accelerated compute over public cloud, driving demand for AI-optimized chips from NVIDIA and AMD.
“One of the largest enterprise deployments of next generation accelerated compute, the solution improves total cost of ownership with a potential 90-day payback, dramatically increases developer agility, and reduces long-term regulatory and”
… to life. First, a large enterprise. A large enterprise wants to scale advanced AI capabilities within its hybrid data center environment to meet rising performance demands. manage data sensitivity, and control the cost of public cloud AI workloads. After a competitive RFP process, we earned the deal with a solution that leveraged our deep partnerships and our full stack, full lifecycle approach. One of the largest enterprise deployments of next generation accelerated compute, the solution improves total cost of ownership with a potential 90-day payback, dramatically increases developer agility, and reduces long-term regulatory and data governance risks. This is the model emerging across our enterprise customers, complex recurring margin accretive engagements where our integrated capabilities matter. While we help large enterprises implement full-scale AI stack build-outs, we also deliver solutions for smaller customers that embed AI directly into their workflows as a workforce multiplier. A great example of this in action is the approach we use to help a fast-growing, multi-location automobile service business whose lean IT team was struggling to support an expanding …