What Is CDW and Why Does It Resell IT?
CDW is a middleman for technology: it buys hardware, software and cloud products from thousands of vendors and resells them, with advice and installation, to businesses, governments, schools and hospitals. It earns a thin gross margin, 20.1% in the second quarter of 2026, on a very large volume: $6.57 billion of sales in the quarter, up 10%.
- Corporate customers are the largest group and grew 10.7%.
- The weak spots are a gross margin that fell 0.7 points on mix, and cash conversion of 42% in the first half against a target of 80% to 90%.
This is analysis, not a recommendation.
What does CDW actually sell?
CDW is a reseller and solutions provider. A company that needs laptops, servers, storage, networking, software licences or cloud services can buy them from CDW instead of dealing with each vendor, and CDW adds services such as design, deployment and security. Its profit is the gap between what it pays vendors and what customers pay, plus service fees. Part of its sales are recorded net, as an agent: that line was $474 million in the quarter, up 16%.
| Customer channel (Q2 2026) | Net sales | Growth |
|---|---|---|
| Corporate | $2.62 billion | +10.7% |
| Education | $0.93 billion | +0.7% |
| Healthcare | $0.86 billion | +9.1% |
| Government | $0.85 billion | +13.6% |
| Other (UK and Canada) | $0.83 billion | +22.9% |
| Financial services | $0.49 billion | +1.8% |
| Total | $6.57 billion | +10.0% |
CDW's Q2 2026 net sales by channel, from its August 5, 2026 results release.
How profitable is the reselling model?
| Measure | Q2 2026 | Change |
|---|---|---|
| Net sales | $6.572 billion | Up 10.0% |
| Gross profit | $1.320 billion | Up 6.3%, a margin of 20.1% against 20.8% |
| Non-GAAP operating income | $556 million | Up 7.0%, an 8.5% margin |
| Non-GAAP EPS | $2.91 | Up 11.9% |
| Net debt | $5.46 billion | About 2.5 times EBITDA, against a 2.0 to 3.0 target |
| Dividend | $0.63 a quarter | About $2.52 a year |
The margin fell because of mix: more sales of lower-margin hardware, especially servers and storage for AI work, and larger enterprise orders. Growth that comes with a lower margin helps sales more than profit, which is why gross profit grew 6.3% against 10.0% for sales.
What is the AI link?
Management says customers are moving beyond AI exploration to building it, which lifted sales of servers, storage and networking by double digits, with services expected to follow as projects move into deployment. Services grew only about 1% in the quarter. The company expects to beat US IT market growth by 2 to 3 points and full-year gross profit to grow at a mid-single-digit rate.
What are the risks?
- Margins: second-half gross margin is expected below last year's, and the first-half drop was 0.7 points.
- Cash: first-half free cash flow was $166 million against $394 million a year earlier, and adjusted free cash flow was 42% of non-GAAP net income, against a target of 80% to 90%. Inventory rose to $982 million from $563 million at year-end.
- Leverage: net debt is about 2.5 times EBITDA, and about $1 billion of debt matures within a year.
- Dependence: it relies on key vendors and distributors, and public-sector customers can be affected by budget fights and government shutdowns.
Investing.com reported that the shares fell 16% on the day of the results, which this site could not confirm from the company's own materials.
How does CDW look on this site's checks?
From the weekly data of October 23, 2026, on the CDW stock page:
| Measure | CDW | What it tells you |
|---|---|---|
| Price | $165.11 | At its 52-week high of $165.56 |
| Market value | $20.6 billion | Total value of all shares |
| Trailing / forward P/E | 19.1 / 12.6 | Price per dollar of earnings, last year and expected |
| Price to sales / price to book | 0.9 / 8.4 | A reseller's sales multiple is low because margins are thin |
| Revenue growth / net margin | +7.4% / 4.6% | Trailing twelve months |
| Dividend yield | 1.58% | Payout ratio 30% of earnings |
| Debt to equity | 2.38 | Total debt against shareholders' equity |
| 1-year change / RSI | +5.6% / 70.8 | RSI below 30 is oversold, above 70 is overbought |
| Value filters passed | 3 of 8 | This site's eight mechanical value filters |
| Margin of safety (DCF) | -12.0% | A neutral model that fades growth from 8% to 2.5% |
The price has recovered to its 52-week high, with a reverse DCF that needs free cash flow per share to grow about 11% a year, so it already assumes steady growth. The See's Candies test asks how much capital a business needs, a useful question for a reseller that must fund inventory and receivables.
What should you read next?
Two more explainers on companies in the same screen: what does Cencora do for drug prices, and why did Centene stock fall so hard.
Sources
- CDW Q2 2026 results release (SEC, August 5, 2026): sales, margins, channels, debt
- GuruFocus via Yahoo Finance: CDW Q2 2026 earnings call highlights (August 5, 2026): AI demand, outlook
- Investing.com: CDW Q2 2026 slides (August 5, 2026): cash flow and margin
- CDW on this site: price and ratios, October 23, 2026
The product split and some outlook items come from call coverage, and the coverage conflicts in places on third-quarter guidance. This is educational content, not investment advice.
CDW FAQ
What does CDW do?
It resells technology, including computers, servers, software and cloud services, with design, installation and security services, to businesses, governments, schools and hospitals.
How does CDW make money?
From the gap between what it pays vendors and what customers pay, about 20% of sales as gross profit, plus service fees.
Is CDW growing?
Yes. Net sales rose 10.0% to $6.57 billion in the second quarter of 2026 and non-GAAP EPS rose 11.9%, though gross profit grew only 6.3%.
Why did CDW's margin fall?
More sales of lower-margin hardware and larger enterprise deals, partly offset by more agent-style revenue.
Does CDW pay a dividend?
Yes, $0.63 a quarter, about $2.52 a year, or roughly 1.6% at the October price.