Why Is CDW (CDW) Down 11.7% Since Last Earnings Report?

A month has gone by since the last earnings report for CDW (CDW). Shares have lost about 11.7% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is CDW due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent catalysts for CDW Corporation before we dive into how investors and analysts have reacted as of late.

CDW's Q4 Earnings Beat Estimates

CDW reported fourth-quarter 2025 non-GAAP earnings per share (EPS) of $2.57, beating the Zacks Consensus Estimate of $2.44. Also, the bottom line increased 3.8% year over year.

CDW reported fourth-quarter net sales of $5.51 billion, a 6.3% year-over-year increase. The improvement reflects gradually strengthening customer spending, particularly in software, notebooks and mobile devices, and services, despite broader macroeconomic and geopolitical unrest. The standout was the Small Business segment, which significantly outpaced overall company growth, suggesting healthy demand and improving budget visibility among smaller customers. Quarterly revenues surpassed the consensus mark of $5.3 billion.

For 2025, net sales rose 6.8% year over year to $22.4 billion.

Management added that strong gross profit growth, disciplined working capital management and robust cash generation enabled the company to return approximately $982 million to shareholders in 2025 through dividends and share repurchases, while preserving flexibility for M&A.

Moreover, CDW reaffirmed its long-term growth ambition, targeting 200–300 basis points of growth above the U.S. IT addressable market in 2026, driven by demand across hardware, software, services and AI-related guidance.

Segmental Details

Net sales of CDW’s Corporate segment amounted to $2.37 billion, down 0.6% on a year-over-year basis, reflecting ongoing caution among large enterprise customers.

The Small Business segment’s net sales of $457 million rose 18.4% year over year, highlighting improving investment activity among SMB customers.

The Public segment’s revenues totaled $2.02 billion, up 7% from the year-ago quarter. The upside was fueled by higher net sales across key customer groups, with the Education sector leading at 12.9% growth, followed by Healthcare at 4.6% and Government customers at 4.3%.

Net sales in Other (Canadian and U.K. operations) rose 8.4% to $669 million, reflecting steady international momentum.

Margin Details

Gross profit rose 8.6% year over year to $1.25 billion, outpacing revenue growth and signaling favorable mix trends. Gross margin expanded to 22.8% from 22.3% a year ago, primarily due to a higher contribution of netted-down revenue, often associated with software and services.

Selling and administrative expenses increased 10.3% to $824 million, driven mainly by higher performance-based compensation and coworker-related costs. As a result, operating income grew at a slower pace than gross profit.

The non-GAAP operating income inched up 0.6% year over year to $502 million. The non-GAAP operating margin was down to 9.1% from 9.6%.

Balance Sheet and Cash Flow

As of Dec. 31, 2025, CDW had $618.7 million in cash and cash equivalents, up from $452.9 million as of Sept. 30, 2025.

The company had a long-term debt of $5.63 billion compared with $5.62 billion as of Sept. 30, 2025.

For the year ended Dec. 31, 2025, CDW generated $1.2 billion of cash flow from operating activities compared with $1.28 million in the year-ago period. Free cash flow was $1.1 billion.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a upward trend in estimates review.

VGM Scores

At this time, CDW has a average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CDW has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

CDW is part of the Zacks Computers - IT Services industry. Over the past month, ServiceNow (NOW), a stock from the same industry, has gained 17.3%. The company reported its results for the quarter ended December 2025 more than a month ago.

ServiceNow reported revenues of $3.57 billion in the last reported quarter, representing a year-over-year change of +20.7%. EPS of $0.92 for the same period compares with $0.73 a year ago.

For the current quarter, ServiceNow is expected to post earnings of $0.95 per share, indicating a change of +17.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.6% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for ServiceNow. Also, the stock has a VGM Score of C.

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This article originally published on Zacks Investment Research (zacks.com).

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