CDW Corporation

Hello, everyone. Thank you for joining us and welcome to CDW first quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Steve O'Brien with Investor Relations. Steve, please go ahead.

Thank you, Samantha. Good morning, everyone. Joining me today to review our first quarter 2026 results are Chris Leahy, our chair and chief executive officer, and Al Morales, our chief financial officer. Our earnings release was distributed this morning and is available on our website, investor.cdw.com, along with supplemental slides that you can use to follow along during the call. I'd like to remind you that certain comments made in this presentation are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Those statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. Additional information concerning these risks and uncertainties is contained in the earnings release and form 8K we furnished to the SEC today and in the company's other filings with the SEC. CDW assumes no obligation to update the information presented during this webcast. Our presentation also includes certain non-GAAP financial measures. For instance, non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income, and non-GAAP earnings per share. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts in the slides for today's webcast and in our earnings release and form 8K. Please note all references to growth rates or dollar amount changes in our remarks today versus the comparable period in 2025. Our net sales growth rates are described on an average daily basis unless otherwise indicated. As a reminder, we made changes to reflect our updated go-to-market structure, which are reflected in our earnings materials on the website. We also released an 8K filing last Friday, which provides quarterly financial performance for 2024 and 2025 aligned to our new segment structure. We'll talk through these new reported segments now and in the future. Replay of this webcast will be posted to our website later today. This conference call is property of CDW and may not be recorded or rebroadcast without specific written permission from the company. With that, let me turn the call over to Chris.

Thank you, Steve, and good morning, everyone. I'll begin today's call with an overview of our first quarter performance. strategic progress, and provide thoughts on the balance of the year. Anne will provide additional detail on our results, our capital allocation priorities, and further perspective on our outlook. The team delivered a strong start to the year in a complex and fast-moving environment. Excellent top-line performance reflected agility both in securing supply and capturing demand for AI investment and ongoing infrastructure modernization. For the quarter, consolidated net sales increased 9% year-over-year. Growth profit grew 6%, non-GAAP operating income increased 2%, non-GAAP net income per diluted share grew 6%, and our adjusted free cash flow totaled 251 million. Across all sizes and industries, customers navigated the operational challenge of moving AI from exploration into real production environments. Customers also navigated memory supply and pricing constraints, which reshaped budget priorities in this quarter. Teams responded quickly by leveraging our partner relationships, full-stack capabilities, and balance sheet strength to help customers secure product and identify alternatives, once again demonstrating their unmatched execution in yet another challenging supply market. Our ability to address the shift in near-term customer priorities and meet ongoing AI hardware infrastructure investment fueled strength across networking, storage, servers, power, and cooling, which drove heavier infrastructure hardware mix in the quarter. Consistent with typical patterns, services, warranties, and software assurance, which carry higher gross margins, were lower customer priorities in the quarter. The built-in flexibility of our model helped support the resulting gross margin impact, enabling record first quarter gross profit and solid gross profit growth. While discretionary investments in seasonal expense patterns dampens non-GAAP operating income, disciplined capital management drove record first quarter non-GAAP net income or deleted share and strong cash flows. Let's take a closer look at the quarter. There were three performance drivers, our balanced portfolio of customer end markets, the breadth of our full-stack offering, and relentless execution of our growth strategy. First, our balanced portfolio of diverse customer end markets. Today we operate across three US segments, commercial, government, and education. In our commercial segment, teams are organized around three customer channels, corporate, healthcare, and financial services. Government teams are aligned to state and local and federal customers, while education teams are focused on K-12 and higher education. Separately, our other segment represents our combined UK and Canadian international operations. To maximize our ability to address the unique needs of customers based on size, within each end market, we further align our teams by customer size, enterprise, mid-market, and small, each covered by dedicated sales professionals, industry strategists, and technical resources. Against this quarter's complex backdrop, the diversity of our customer and market exposure, again, served us well, with strong results in commercial, state and local, K-12, and international. more than offsetting market-specific challenges in federal and higher education. Commercial had an excellent start to the year, up 10%. Growth was broad-based across all sizes of customers, driven by demand for infrastructure, hardware, and software, reflecting both AI demand and the desire to manage supply constraints. Government increased 5%. State and local double-digit increase more than offset a low single-digit decline in federal, which was impacted by budget timing and procurement delays stemming from last year's shutdown. Education increased 3% with K-12 strength, primarily driven by client device purchasing in advance of price increases, offsetting extended decision-making by higher ed customers. In our UK and Canada operations, which we report together as other, The teams executed with focus and speed and together delivered 18% growth in U.S. dollars. U.K. delivered high single-digit local currency growth driven by private sector demand, while Canada was up double digits in local currency with balanced growth across end markets, reinforcing the scalability and relevance of our model beyond the U.S. The team's ability to address customer priorities was underpinned by the second driver of our performance, are comprehensive, services-led, full-stack, end-to-end offering, which includes hardware, software, and services. Hardware increased 10%. Growth was led by infrastructure, with networking, servers, and enterprise storage each up more than 20%. Underlying client device demand was strong, but reported growth was 3%, reflecting difficult year-over-year comparisons driven by tariff-related pull-ins in the prior year, particularly in K-12, as well as shipment delays this quarter that pushed orders and elevated backlog. Software increased 11% as customers continued to invest in productivity, collaboration, and security platforms. License growth was strong and focused on AI readiness and standardized core workloads. Cloud customer spend growth continued at a healthy pace, but slowed compared to prior quarters as customers prioritized hardware investment. Services top line was flat in the quarter. Solid performance in professional and managed services was offset by declines in warranties reflecting an infrastructure heavy revenue mix and normal timing between equipment purchases and installation. Notably, professional and managed services gross profit contributed nearly 15% of total gross profit growth, underscoring the strategic and financial value of higher margin services. Once again, customers across our end markets leaned on CDW to help them navigate complexity and optimize their IT investments with speed and confidence. Sustaining that level of value consistently and at scale requires excellence in both how we go to market and how we operate. And that brings us to the third driver of our performance this quarter, our growth strategy. At the core of our growth strategy is a clear shift we are seeing from customers moving beyond interest in AI to a focus on how to put it to work in real environments at scale and with measurable business impact. That shift plays directly to CDW's strengths and sits at the center of our AI forward full stack strategy. We are building CDW to be AI first and outcome obsessed. And at the center of that is our coworkers who every day turn complexity into real outcomes for our customers and partners. To achieve this, AI is an operating capability at CDW, not a bolt-on, and it is being embedded across how we operate, how we sell, and the solutions we deliver. AI-driven enhancements across how we sell and operate include coworker AI fluency, deeper data integration and platform readiness, and productivity gains from tools such as agentic RFP capabilities. During the quarter, we furthered our progress embedding AI into our go-to-market motions with our CDW assist superagents, which helps sales professionals prioritize opportunities and engage customers more effectively through insight-driven AI-supported workflows. At the enterprise level, AI is being embedded across our core systems and end-to-end workflows under our AI-powered modernization initiative, which we call Geared for Growth. Geared for Growth is translating AI-enabled productivity into operating leverage, supporting margin, discipline while providing investment capacity to sustain scalable growth. We expect the benefits from Geared for Growth's enterprise initiatives to begin flowing through in the back half of this year, building over time. Customers are focused on the same opportunity, turning AI's promise into practical, secure, and measurable outcomes. AI adoption is a compute-intensive shift that increases both services' intensity and hardware relevance. It reshapes how customers build, operate, and secure their environments, requiring them to connect data, embed AI into existing systems, balance cost and performance, and govern usage at scale, all while continually optimizing infrastructure. As complexity rises, customers need a partner who can execute reliably at scale. CDW orchestrates technology across the full stack in a way few others can. Our architectural expertise, expansive partner ecosystem, unmatched delivery scale, and services forward model enable customers to adopt AI in ways that align with their environments, risk profiles, and strategic priorities. A recent engagement where the customer turned to CDW to design, configure, and implement a private AI factory hosted within a co-location environment brings this to life. Our advisory services team worked closely with the customer, a large financial services company, to design an end-to-end solution that included accelerated compute nodes, high-speed fabric-based networking, enterprise switching, and supporting compute infrastructure. The team also configured AI orchestration, containerization, and workload management software. The comprehensive solution delivered a production-ready platform that provided greater customer control over data, cost, and governance, and generated a nearly eight-figure deal, which included a significant professional services component. The hard part of AI is not the model. It's the orchestration. AI increases complexity and value shifts from access to execution quality, depth, and comprehensive end-to-end solutions. a shift that reinforces the relevance of our model across all of our customer and markets and sizes, small, mid-market, and enterprise, and expands our opportunity set, an opportunity further strengthened by our recent go-to-market alignment of resources. Organizations that once self-served or relied on smaller or more narrow partners now face requirements that demand scale, integration, and breadth. AI is not only increasing wallet share, it's also bringing new customers to CDW. Unlocking that opportunity requires expanding access. With AI infrastructure demand expanding beyond hyperscaler and frontier model builders, the push to deploy AI at scale has driven demand for accelerating compute past available supply, making access, not ambition, a crucial restraint. To address this constraint, we have finalized a relationship with provider Boost Run to deliver our customers access to high performance AI infrastructure through a flexible GPU as a service model while remaining fully composable as on-premises and cloud environments that may be planned or in place. When paired with CDW's advisory services, change management, governance, and adoption expertise, customer AI ambition across all sizes and industries become durable, production-ready outcomes. Implementing accelerated compute is not the only way customers are operationalizing AI. AI is increasingly being embedded directly into the technology stack across end user and collaboration platforms, networking and security environments, and the data center, driving smarter orchestration, monitoring, and optimization. As customers embed AI into existing platforms, they are upgrading, not re-architecting, placing greater demand on execution. Meeting those expectations requires a partner with deep expertise and the ability to operate at speed across the full environment. That plays directly to CDW's full-stack end-to-end model. Regardless of how customers choose to consume it, AI adoption reinforces what differentiates CDW, our full-stack relevance, end-to-end engagement, and ability to execute at scale, supporting our durable, profitable growth. And that leads us to our outlook. We continue to approach the year with discipline and prudence in our maintaining our view for the US IT addressable market to grow in the low single digits in 2026 on a customer spend basis with 200 to 300 basis points of CDW outperformance. Our outlook takes into account two countervailing factors, our near-term visibility into the second quarter given strong Q1 order activity that flowed into backlog and our prudent view of uncertainty in the second half of the year. It does not factor in potential wildcards such as recessionary conditions or meaningful changes in a known ongoing exogenous factors which include elevated geopolitical risks and more extreme dislocations in pricing and supply. As always, we will provide updated perspectives on business conditions and refine our view of the market as we move through the year. As AI adoption reshapes customer requirements of the continued uncertainty, expectations for integration, governance, and execution are rising. Partners with scale, full stack relevance, and the ability to deliver outcomes consistently with confidence and speed matter. Because when complexity rises, CDW's relevance grows. With that, let me turn it over to Al for a more detailed review of our financial performance.