Connection, Inc. (CNXN): A Strategic Lever in Tech Distribution's Evolution

Charles HayesTuesday, Jun 24, 2025 10:12 am ET
29min read

In an era where enterprise tech adoption and cloud migration are reshaping global commerce, Connection, Inc. (NASDAQ: CNXN) has positioned itself as a critical partner to industry giants like Lenovo. The company's recent win of the Lenovo 360 Nationals Partner of the Year U.S. 2025 award—the first time Lenovo has recognized a single partner for excelling across all three divisions of its International Sales Organization—underscores its execution capabilities and strategic alignment. This milestone, paired with 33% year-over-year growth in Intelligent Devices and 44% growth in Solutions & Services, suggests CNXN is primed to capitalize on secular trends in IT infrastructure and recurring revenue models like Device-as-a-Service (DaaS).

The Lenovo Partnership: A Catalyst for Cross-Divisional Growth

Connection's award-winning performance stems from its deep integration with Lenovo's strategic priorities. By achieving 33% growth in Intelligent Devices—which includes PCs, tablets, and smart IoT devices—CNXN has become a key driver of Lenovo's channel sales. Meanwhile, the 44% surge in Solutions & Services reflects its success in closing one of the largest DaaS deals in Lenovo's history. This recurring revenue stream, which provides clients with flexible IT infrastructure access, is a high-margin, sticky business model that aligns with enterprises' shift to subscription-based technology.

Ryan McCurdy, Lenovo's Senior Vice President, highlighted Connection's “strategic alignment, training, and customer engagement” as critical to its success. This partnership isn't merely transactional; it's a collaborative effort to deliver tailored solutions, from custom-configured systems built in Connection's ISO 9001-certified lab in Wilmington, Ohio, to global support via subsidiaries like GlobalServe.

Leveraging Tech Distribution's Evolution

The tech distribution sector is undergoing a structural shift. Enterprises are moving away from one-off hardware purchases toward holistic solutions that blend infrastructure, software, and services. Connection's multi-divisional structure—spanning Connection Business Solutions, Enterprise Solutions, and Public Sector Solutions—allows it to address diverse client needs across industries like healthcare, education, and government. This specialization reduces dependency on any single market while amplifying its ability to upsell complementary services.

The DaaS boom is central to CNXN's growth thesis. As businesses seek agility and cost predictability, DaaS subscriptions eliminate upfront capital expenditure while ensuring access to the latest technology. Connection's ability to close such deals at scale suggests it can convert short-term sales into long-term revenue streams, improving margins over time.

Margin Expansion: The Underrated Opportunity

CNXN's focus on technical certifications (over 2,500 globally) and its vertically integrated lab capabilities create operational leverage. By controlling the configuration and delivery process, the company minimizes reliance on third-party logistics, potentially reducing costs and boosting gross margins. Historically, tech distributors with strong vertical integration have seen margin expansion as scale advantages compound.

Risks and Considerations

While CNXN's strategic partnerships and DaaS momentum are compelling, risks remain. Overreliance on a single vendor (Lenovo represents a material portion of its business) could expose it to supply chain disruptions or shifting vendor priorities. Additionally, the macroeconomic environment—particularly in enterprise IT spending—could dampen demand. Investors should monitor CNXN's customer diversification efforts and its ability to expand beyond its core markets.

Investment Takeaway: A Leveraged Play on Tech's Future

Connection, Inc. offers a unique exposure to two powerful trends: the enterprise tech spend boom and the shift to recurring revenue models. With its cross-divisional growth, strategic vendor alignment, and operational control, CNXN is well-positioned to grow faster than its peers.

Buy or Hold?
At current valuations, CNXN trades at a premium to its historical averages, reflecting investor optimism. However, the 33-44% growth rates in its key divisions suggest the stock could justify further upside if margin expansion materializes. Investors with a 3-5 year horizon and a tolerance for sector volatility may find CNXN an attractive leveraged bet on the tech distribution sector's evolution.

In short, Connection, Inc. isn't just a supplier—it's a strategic partner to the future of enterprise IT. And that's a role with real earning power.