Breaking Down CDW Corporation (CDW) Financial Health: Key Insights for Investors

You're looking at CDW Corporation (CDW) right now and seeing a mixed signal: a stock that dropped 8.5% after its Q3 2025 earnings, even though it delivered an adjusted earnings per share (EPS) of $2.71, beating consensus estimates. The market is focused on the rising cost structure, specifically the 12.9% surge in selling and administrative expenses, and the softness in the Public sector, where the Education segment saw an 8.5% revenue decline. Still, the underlying business is solid, with full-year 2025 consensus revenue projected at roughly $22.24 billion and EPS expected to hit $9.37, representing a modest year-over-year rise. You need to know if the strong growth in the Small Business segment, up 14.2%, can offset the cost and demand headwinds, or if this is a classic value trap; we'll break down the financial statements and show you defintely where to focus your analysis.

Revenue Analysis

You need to know if CDW Corporation (CDW) is still growing and where the money is actually coming from. The short answer is yes, they are growing again, reversing the prior year's decline, but the mix is shifting. For the trailing twelve months (TTM) ending September 30, 2025, CDW Corporation's total revenue hit approximately $22.10 billion, a solid 6.09% increase year-over-year, which is a key rebound from the 2024 fiscal year's slight decline.

Here's the quick math on where that revenue is generated. CDW Corporation's primary revenue streams are segmented by customer type: Corporate, Public, and Small Business, plus the international 'Other' segment. The Public sector is historically their largest, but the Corporate segment is a very close second, and both are critical to the top line.

The third quarter of 2025 (Q3 2025) net sales totaled $5.737 billion, up 4.0% from the same quarter in the prior year. This growth was not uniform, which is where you need to focus your attention.

• Corporate segment: Net sales of $2,255 million, up 4.4% year-over-year.
• Public segment: Net sales of $2,350 million, up only 0.6% year-over-year.
• Small Business segment: Net sales of $434 million, showing the strongest growth at 14.2% year-over-year.
• Other (UK and Canada): Net sales of $698 million, up 9.1% year-over-year.

The Small Business segment is defintely a bright spot, showing double-digit growth, but the Public segment's near-flat performance is the main drag on overall growth. You can see the company's strategic focus on its core values and mission here: Mission Statement, Vision, & Core Values of CDW Corporation (CDW).

What this segment performance hides is the internal shift within the Public sector. While the segment as a whole grew modestly, it was driven by strong increases in sales to Government (7.8%) and Healthcare (6.9%) customers. That growth was almost completely offset by an 8.5% decrease in sales to Education customers, which is a significant change in that sub-segment's contribution. On a product level, the revenue mix is favoring client devices-notebooks, mobile devices, and desktops-due to refresh cycles and the upcoming Windows 10 expiration. Plus, the services segment continues to see robust demand, helping to keep gross profit margin stable.

Here is a quick look at the Q3 2025 segment contributions to the total $5.737 billion net sales:

The Public and Corporate segments remain the twin pillars, accounting for over 80% of revenue, but the Small Business and International segments are growing faster, which is a healthy sign of diversification. You should watch the Education segment closely; that 8.5% drop suggests a pause in spending that could signal future risk if it continues.

Profitability Metrics

You need to know if CDW Corporation (CDW) is translating its strong sales growth into real bottom-line power. The quick answer is that their gross margin is a clear competitive advantage, but a surge in operating costs is currently compressing their operating and net profit.

For the third quarter of 2025, CDW reported Net Sales of over $5.73 billion, an increase of 4.0% year-over-year. However, the real story is in the margins. Here's the quick math on their GAAP profitability for the nine months ended September 30, 2025:

• Gross Profit Margin: 21.4%
• Operating Income Margin: 7.2%
• Net Profit Margin: 4.65%

Margin Trends and Operational Efficiency

CDW operates in a tough, low-margin IT distribution and solutions space, so their Gross Profit Margin of 21.9% in Q3 2025 is a critical strength. To be fair, this is significantly above the 12.0% average typically seen for Value-Added Resellers (VARs) and distributors in this sector. This margin stability is defintely driven by their strategic shift toward higher-value offerings, specifically services and netted down revenue (where they act as an agent, not principal).

Still, the pressure is showing further down the income statement. While Gross Profit grew by 4.6% in Q3 2025, Operating Income actually decreased by 8.0% to $443.3 million. This decline is a direct result of operational costs: Selling and Administrative expenses jumped by a substantial 12.9% in the quarter. That's the cost of growth and investment, but it's a trend we need to watch closely. The company's management is focused on profitable growth, and they expect full-year 2025 non-GAAP net income per diluted share to grow low single digits year-over-year.

Peer Comparison and Profitability Ratios

When you stack CDW's performance against the broader industry, their model shines at the top line but faces pressure on the bottom. Their Q3 2025 Net Profit Margin of 5.07% is slightly better than the 4.7% average for Industrial Distribution peers. This suggests a well-managed expense base relative to their gross profit, despite the recent increase in SG&A.

The table below shows the key GAAP metrics for the most recent quarter, illustrating where the cost pressure is hitting the hardest.

The 100 basis point drop in the Operating Income Margin (from 8.7% to 7.7%) is the clearest signal of the cost inflation they are battling. For investors, the action here is to monitor Q4 2025 and 2026 guidance for any sign that the growth in higher-margin services can outpace the growth in operating expenses. You can learn more about their long-term strategy here: Mission Statement, Vision, & Core Values of CDW Corporation (CDW).

Debt vs. Equity Structure

CDW Corporation (CDW) utilizes a capital structure that leans significantly on debt, which is common for a scale player in the IT solutions space, but it keeps its leverage within a defined management target. The direct takeaway for you is that while the company's debt-to-equity (D/E) ratio is high by general standards, it sits comfortably below the average for its direct IT peer group and is actively managed through strategic refinancing.

As of the third quarter of 2025, CDW Corporation's total debt stood at approximately $6.0 billion, with the vast majority being long-term obligations. Specifically, the long-term debt was reported at about $5.62 billion. This means short-term debt is relatively small, roughly $380 million, which is a healthy sign, as it suggests limited near-term liquidity pressure. They're not scrambling to cover immediate liabilities.

The company's debt-to-equity ratio for the period ending September 30, 2025, was approximately 2.347 (or 234.7%). This figure is a critical measure of financial leverage, telling you that for every dollar of equity, CDW Corporation has about $2.35 in debt. While a ratio above 2.5 is often flagged as a warning sign for many industries, the context here is key. A comparable IT peer, Gartner, had a D/E ratio of 4.95 as of September 2025, putting CDW Corporation's leverage in a much more favorable light relative to the industry.

CDW Corporation's management has set a public target for its Net Leverage Ratio-a more refined debt metric-to be between 2.0 and 3.0 times, consistent with maintaining an investment-grade capital structure. This shows their commitment to a disciplined use of debt. They are defintely trend-aware realists.

Here's the quick math on their Q3 2025 debt breakdown:

The company is proactive in managing its debt maturity schedule. In August 2024, CDW Corporation issued $1.2 billion in new senior notes, with maturities stretching out to 2030 and 2034. This move was coupled with a cash tender offer to purchase their outstanding 4.125% Senior Notes due in May 2025. This is a classic, smart refinancing play: issuing new, longer-term debt to pay off near-term obligations, thereby pushing out the maturity wall and securing capital in a volatile rate environment. This is how they balance debt financing with equity funding; they prefer debt for large, long-term capital needs like acquisitions, but they also return cash to shareholders through dividends and share repurchases, with a $750 million increase to the share repurchase program authorized in February 2025. To dive deeper into who is buying and why, you should check out Exploring CDW Corporation (CDW) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You need to know if CDW Corporation (CDW) can cover its near-term obligations, and the answer is a clear yes. Their liquidity position is solid, driven by strong operational cash flow, even as they actively manage their capital structure with debt and shareholder returns. The key takeaway is that the company maintains a healthy buffer, which is exactly what you want to see in a high-volume IT solutions provider.

The company's current and quick ratios, the two primary gauges of short-term financial health, are comfortably above 1.0. A current ratio of 1.0 means current assets exactly cover current liabilities; anything higher is a safety cushion. For CDW Corporation, the current ratio is approximately 1.39 as of November 2025, with the quick ratio at about 1.24. This indicates they have $1.39 in current assets for every dollar of current liabilities, and even after removing inventory (the quick ratio), they still have $1.24 to cover those obligations. That's defintely a strong liquidity profile.

Working capital trends show a business model that, while asset-light in some ways, has a substantial amount tied up in accounts receivable relative to quarterly revenue, which is typical for a high-volume distributor. Their liquidity remains solid, generally sitting within a current ratio range of 1.3 to 1.5 in recent periods. This consistency is a strength, suggesting predictable cash conversion cycles.

• Current Ratio: 1.39x (Strong short-term coverage).
• Quick Ratio: 1.24x (Excellent coverage without relying on inventory).
• Net Leverage: 2.5x (Within their 2.0x-3.0x target range).

Looking at the cash flow statement for the first half of 2025 (six months ended June 30, 2025) gives us a clearer picture of where the money is moving. Operating cash flow is the engine, and it's robust, but the financing side reflects their active capital management strategy.

The $443.1 million in net cash provided by operating activities is the real core strength. It funds the business and allows them to execute their capital allocation plan, which includes managing their debt and returning value to shareholders. The large negative financing cash flow of $649.2 million is not a concern; it's a deliberate action, reflecting their commitment to returning 50% to 75% of Adjusted Free Cash Flow (FCF) through dividends and share repurchases. They are also on track to meaningfully surpass this target in 2025. This is a company using its operational strength to actively manage its balance sheet. You can dive deeper into the ownership structure in Exploring CDW Corporation (CDW) Investor Profile: Who's Buying and Why?

The only real liquidity risk is the high reliance on accounts receivable, but the quick ratio's strength shows they can absorb a delay in customer payments without a crisis. The company's focus on maintaining its Net Leverage Ratio at 2.5x, which is within its target range, shows a commitment to an investment-grade capital structure, which mitigates long-term solvency concerns. Finance: monitor Accounts Receivable Days Sales Outstanding (DSO) quarterly for any significant spikes.

Valuation Analysis

You want to know if CDW Corporation (CDW) is a buy, a hold, or a sell right now. The short answer is that the market currently sees it as significantly undervalued, but you need to look past the low price-to-earnings (P/E) ratio to understand the full picture. The stock is trading near its 52-week low, which is a key opportunity for a trend-aware realist.

The core valuation metrics for CDW Corporation as of late 2025 paint a mixed, but defintely compelling, picture. We look at three key ratios to triangulate value: P/E, P/B, and Enterprise Value-to-EBITDA (EV/EBITDA). Here's the quick math:

• The trailing P/E ratio is 17.73, which is reasonable for a mature technology solutions provider.
• The forward P/E ratio, based on 2025 earnings estimates, drops to just 13.73, suggesting analysts expect earnings growth to outpace the current stock price.
• The Price-to-Book (P/B) ratio is high at 7.20, indicating the market values the company's earnings power and intangible assets (like its deep customer relationships and vendor network) far more than its tangible assets.
• The EV/EBITDA ratio is 12.22, which is a solid measure for a company carrying debt, placing it in a moderate valuation range.

The consensus among analysts is that CDW Corporation is trading at a discount. The average analyst price target for 2025 is around $236.17, which implies a massive upside from the latest closing price of $139.81 as of November 2025. This suggests the stock is currently trading about 19.4% below its estimated fair value. But still, some analysts advise caution due to concerns about operating performance, so you have to weigh the risk.

Stock Trajectory and Dividend Health

The stock price trend over the last 12 months shows significant volatility, which is where the opportunity lies. CDW Corporation's 52-week high was $222.92, and the stock is now hovering near its 52-week low of $137.31. This drop from the high, which was nearly 60% higher than the current price, reflects market anxiety over the shift to public cloud services and general IT spending slowdowns, despite the company's strong Q1 2025 results.

The dividend profile, however, remains healthy and sustainable. CDW Corporation pays an annual dividend of approximately $2.52 per share, resulting in a yield of about 1.74%. More importantly, the dividend payout ratio is a conservative 31.39% of earnings. This low ratio means they have plenty of room to reinvest in the business or continue growing the dividend, even if earnings temporarily flatten. That's a sign of financial stability you want to see. For a deeper dive into the company's long-term strategy, check out the Mission Statement, Vision, & Core Values of CDW Corporation (CDW).

The clear action here is to recognize the gap: the market is pricing in near-term risk, but analysts see significant value and a path to $236.17. Your move is to assess if the current price adequately discounts the risks of public cloud erosion versus the opportunities in hybrid IT and public sector modernization.

Risk Factors

You're looking for the clear downside in CDW Corporation (CDW), and honestly, the risks are less about a single catastrophic failure and more about navigating a persistent, volatile macro-environment. The company's core challenge in the 2025 fiscal year is balancing revenue growth against rising costs and sector-specific spending hesitancy. They've done well to manage the top line, but the pressure points are clear.

The biggest external risk is the ongoing macroeconomic uncertainty-things like possible recessionary conditions and inflation-which makes customers delay large IT projects. Plus, the political landscape is a factor: management specifically cited the government shutdown as a significant risk, which could impact their Federal, Healthcare, and Education segments. This is a distribution business, so when the government pauses, so does a chunk of their revenue pipeline.

On the internal and financial front, two numbers jump out from the Q3 2025 results that you can't ignore:

• Selling and Administrative Expenses (SG&A): This surged to $812 million in Q3 2025, an increase of 12.9% year-over-year. That's a significant jump that compresses margins.
• High Leverage: The company's debt-to-equity ratio sits at an elevated 2.55, or 2.28 depending on the reporting period. This high leverage, coupled with variable rate debt, exposes them to interest rate risk.

Simply put, their cost of doing business is rising faster than their non-GAAP operating income, which was $531 million in Q3 2025, a slight decrease of 0.6% from the prior year.

Strategically, the market is uneven. While the Small Business segment is strong, generating $434 million in Q3 2025 net sales (a 14.2% increase), the Public segment is barely growing (0.6% increase to $2.350 billion), and the Education segment specifically saw an 8.5% revenue decline in Q3 2025. That uneven demand makes forecasting tough. You need to know which client base is driving the bus. For a deeper dive into who is buying and why, you might find this helpful: Exploring CDW Corporation (CDW) Investor Profile: Who's Buying and Why?

CDW Corporation (CDW) isn't just sitting on these risks; they are actively managing them. Their primary mitigation strategy is a sharp focus on expense management, aiming to align their SG&A spending to gross profit as market conditions evolve. More importantly, they are strategically shifting the mix away from lower-margin hardware by pushing higher-margin services. Their professional and managed services saw strong growth at 14%, which is key to offsetting the margin pressure from hardware sales. They also maintain a strong liquidity position, with $1.2 billion available for borrowing under their Revolving Loan Facility as of June 30, 2025. They are defintely leaning into their strengths to weather the storm.

Here's the quick math on the segment risk:

The reliance on a few strong segments is a risk in itself. If the Small Business momentum falters, the overall growth premium-which management targets at 200 to 300 basis points above the low single-digit IT market growth-will be hard to hit. Your action item is to watch the Q4 2025 report for any sign that SG&A growth is slowing down; if it keeps climbing, the full-year analyst EPS expectation of $9.37 will be at risk.

Growth Opportunities

You're looking for a clear map of where CDW Corporation (CDW) goes from here, and the path is defintely paved with digital transformation, specifically in Artificial Intelligence (AI) and cloud services. The company's strategy is simple: outgrow the US IT market by focusing on high-margin, complex solutions, not just selling boxes.

The core of their growth plan is a targeted outperformance goal. CDW aims to exceed the overall US IT market growth by 200 to 300 basis points in 2025. Here's the quick math: if the US IT market grows in the low single digits, CDW is shooting for a mid-single-digit jump in revenue. This focus helped drive the company's trailing twelve months (TTM) revenue to $22.10 billion as of Q3 2025, a 6.09% year-over-year increase. That's solid growth in a challenging environment.

The near-term growth drivers are clear and actionable:

• AI-Enabled Innovation: Integrating AI into their offerings and helping customers secure and manage their AI infrastructure.
• Cloud Expansion: The December 2024 acquisition of Mission Cloud Services, an Amazon Web Services (AWS) Premier Tier Partner, significantly bolstered their cloud and security capabilities.
• Device Refresh Cycle: Anticipated client device refresh needs, driven by the Windows 10 expiration, are expected to create a significant bump in demand.

What this estimate hides is the margin pressure from hardware sales, but the shift toward services is the long-term solution. For the full fiscal year 2025, analysts expect Earnings Per Share (EPS) to rise to about $9.37 per share, representing a 1.4% year-over-year increase. This low-single-digit EPS growth is projected alongside low-single-digit gross profit growth, but the stability of their gross margin, which held steady at 21.6% in Q1 2025, shows they are managing the mix shift well.

CDW's competitive advantage is its vendor-agnostic approach (Value-Added Reseller or VAR), partnering with over 1,000 vendors to offer more than 100,000 products. This breadth means they benefit from overall tech industry growth without being tied to the fate of any single product or technology trend. Plus, their over 10,900 customer-facing coworkers, including engineers and specialists, ensure a high-touch service model that competitors struggle to replicate. They are truly a one-stop shop for IT solutions.

Strategic partnerships are also key. For example, the July 2025 partnership with Asato Corporation to integrate AI-powered IT asset intelligence shows they are moving quickly to embed next-generation tools into their service portfolio. This is how you stay relevant in IT. You can dive deeper into their shareholder base and market perception here: Exploring CDW Corporation (CDW) Investor Profile: Who's Buying and Why?

The company is seeing strong momentum in specific verticals, which helps offset slower segments like Education (which saw an 8.5% revenue decline in Q3 2025). Here is a snapshot of their Q1 2025 customer segment performance:

The strong growth in Healthcare, driven by cloud and services, highlights the success of their targeted expansion efforts. The growth in the Corporate and Small Business segments in Q2 2025, at 17.6% and 12.6% respectively, confirms that customer demand for data storage, mobile devices, and software remains robust. This market segmentation strategy gives them multiple levers for growth, which is exactly what you want to see.