CDW’s third quarter results met Wall Street’s revenue expectations but drew a significant negative market reaction, with shares selling off after the report. Management attributed the quarter’s performance to solid execution across its diversified end markets, particularly highlighting strong growth in small business and international operations. CEO Christine Leahy noted that customer spending was concentrated on essential needs such as security and device upgrades, while discretionary projects continued to be scrutinized. The company’s services segment saw robust demand, but overall margin compression reflected higher performance-based expenses and a continued shift in revenue mix.
Is now the time to buy CDW? Find out in our full research report (it’s free for active Edge members).
CDW (CDW) Q3 CY2025 Highlights:
- Revenue: $5.74 billion vs analyst estimates of $5.75 billion (4% year-on-year growth, in line)
- Adjusted EPS: $2.71 vs analyst estimates of $2.62 (3.4% beat)
- Adjusted EBITDA: $570 million vs analyst estimates of $559.1 million (9.9% margin, 1.9% beat)
- Operating Margin: 7.7%, down from 8.7% in the same quarter last year
- Market Capitalization: $18.66 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From CDW’s Q3 Earnings Call
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Amit Daryanani (Evercore ISI) asked about the federal government shutdown’s impact and the likelihood of sales catch-up post-shutdown. CEO Christine Leahy explained that shutdown-related delays typically result in shifted—not lost—sales, but emphasized the company’s conservative approach to Q4 assumptions.
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Keith Housum (Northcoast Research) inquired about the sustainability of client device demand after the Windows 10 end-of-life cycle. Leahy replied that demand remains healthy for now, with AI-enabled PCs providing an additional tailwind, but acknowledged the upgrade cycle is in later innings.
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Erik Woodring (Morgan Stanley) pressed for clarity on the “complex” IT spending environment and its effect on gross profit growth. Leahy cited volatility and unpredictability in funding, policy, and technology adoption as key challenges, while CFO Albert Miralles added that operating leverage depends on sustained gross profit momentum.
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Samik Chatterjee (JPMorgan) explored the drivers behind services growth and the potential for M&A in that segment. Miralles highlighted strong demand for managed and professional services, especially around data, AI, and security, and indicated ongoing interest in services-focused acquisitions.
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Adam Tindle (Raymond James) requested more detail on Q4 gross profit expectations and the balancing of public sector weakness with strengths elsewhere. Miralles explained that small business and UK operations are expected to offset some of the public sector headwinds, supporting seasonal trends.
Catalysts in Upcoming Quarters
In the upcoming quarters, our analysts will closely monitor (1) the trajectory of federal and education IT spending as government funding and shutdown dynamics evolve, (2) the sustainability of growth in services and managed solutions, and (3) progress on margin stabilization efforts, particularly in relation to variable compensation and SG&A efficiency. Developments in AI and cloud adoption across customer segments may also play a critical role in shaping results.
CDW currently trades at $143.31, down from $154.81 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).
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