CDW's Q1 2025 Earnings Call: Unpacking Contradictions in Market Conditions, Pricing, and AI Adoption

Networking and storage market conditions, pricing landscape and tariff passing, AI adoption and customer behavior, pricing environment and gross margin resiliency, pricing environment and passing through cost increases are the key contradictions discussed in CDW's latest 2025Q1 earnings call.



Revenue and Earnings Growth:
- CDW Corporation reported net sales of $5.2 billion for Q1 2025, up 8% higher than the same quarter last year on an average daily sales basis. Non-GAAP operating income was $444 million, up 10% year-over-year.
- The growth was driven by strong expense management, effective use of capital, and demand for client devices due to refresh needs and potential tariff-related price increases.

Client Device and Services Performance:
- Client devices increased by more than 20%, contributing significantly to the top-line growth. The services top-line increased by 14%, with both gross profit and revenue in services up by double-digits.
- This was due to customer priorities focusing on operating efficiency, expense elasticity, and a need for device refreshes.

Segmental Growth and Challenges:
- Commercial top-line performance, including corporate and small business, was strong, with growth by 68% and 20% respectively. Healthcare also performed well, with 20% growth driven by client devices, cloud, and services.
- The federal government market faced challenges due to new administration priorities, but state and local growth offset some of the impact.

Operational Leverage and Cost Management:
- Non-GAAP SG&A was $678 million, up 2.8% year-over-year, reflecting higher gross profit achievement. The efficiency ratio of non-GAAP SG&A to gross profit was 60.4%, a 170 basis points decrease from the prior year.
- This was achieved through disciplined expense management and leveraging business operations for efficiency.