PC Connection's Q2 2025: Navigating Contradictions in Inventory, Growth, and Margins

Inventory staging and tariff impact, growth expectations and market outlook, sales progression and pipeline, inventory staging and tariff-related price increases, gross margin stability and impact of licensing fee programs are the key contradictions discussed in PC Connection's latest 2025Q2 earnings call.



Revenue Growth and Technology Refresh:
- PC Connection reported net sales of $759.7 million for Q2 2025, an increase of 3.2% over last year.
- Growth was driven by momentum in mobility and desktop categories due to Windows 11 refresh and demand for AI PCs, as well as investment in data center refresh and edge computing.

Segment Performance Variability:
- Business Solutions segment net sales were $293.2 million, up 5.4%, while Public Sector Solutions sales decreased by 11.9% year-over-year.
- The decline in the Public Sector was primarily due to a decrease in sales to state, local government, and educational institutions, offset by federal government sales increase.

Gross Margin Impact and Strategic Initiatives:
- Gross profit increased to a record $137.8 million, but gross margins were down to 18.1%, 40 basis points below last year.
- The decline in gross margin was due to changes in partner subscription licensing programs, and the company is implementing initiatives to mitigate these impacts.

Backlog and Pipeline Strength:
- The company's backlog reached its highest level in nearly 2 years by the end of Q2, indicating strong pipeline growth.
- Optimism is driven by planned rollouts, technology refresh cycles, and increasing demand for AI and solution-based discussions.