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Acceleration of enterprise AI infrastructure adoption pulling through complex networking, security consulting, and high-margin recurring managed services.
Second-half 2026 gross margin compressing due to infrastructure product mix and tier-1 volume deals.
CDW Corporation offers steady enterprise compounding through client endpoint refreshes and AI infrastructure adoption, though near-term gross margin dilution and a balanced risk-reward warrant a Hold rating at current levels.
CDW generated $22.42B in FY2025 revenue and $1.66B in operating income, driven by its core Corporate ($9.44B) and Public ($8.54B) segments.78
Management raised its full-year 2026 outlook on strong written bookings and elevated backlog, expecting to outperform the U.S. IT addressable market by 200 to 300 basis points. However, heavy mix shift toward enterprise infrastructure hardware will compress second-half gross margins.5
With a composite fair value of $156.65 representing 10.18% upside from $142.17, the stock is fairly valued, supporting the committee's Hold recommendation.4
Over $22B in revenue and relationships with 1,000+ vendors secure preferred OEM pricing tiers and durable customer switching costs.57
Enterprise device refresh cycles and AI inferencing deployments sustain mid-single digit revenue growth and high single-digit EPS expansion.5
Consistent free cash flow generation ($1.09B in FY2025) funds a targeted ~25% dividend payout and regular share repurchases.5
Hold: CDW's fair value of $156.65 offers 10.18% upside from $142.17 as of October 9, 2026. Investors should maintain existing allocations and monitor second-half margin trends and inventory rationalization.4
CDW Corporation (NASDAQ: CDW) is a Fortune 500 provider of information technology solutions to business, government, education, and healthcare customers in the United States, the United Kingdom, and Canada.
The company acts as a multi-vendor aggregator, offering more than 100,000 products and services from over 1,000 hardware, software, and cloud providers, spanning endpoint devices, data center infrastructure, cybersecurity, and recurring managed services.
Under simultaneous pressures of a 300 bps operating margin compression and revenue deceleration below 3.0% YoY, CDW's cash flow would contract significantly. Fixed interest service on $6.33B of total debt would consume an expanded share of operating profit, restricting share repurchases and forcing capital preservation.
CDW possesses a narrow economic moat underpinned by enterprise customer switching costs and scale-driven procurement advantages. The company aggregates more than 100,000 products from over 1,000 commercial hardware and software vendors, serving as a unified integration partner for complex multi-vendor IT estates.
While gross margins reflect distribution dynamics, CDW consistently achieves solid operating profitability ($1.66B operating income in FY2025) and high returns on equity (44.0%), demonstrating economic value creation above its 9.12% moderate cost of equity.
Moat durability is bounded because CDW operates in a cost-plus distribution framework without proprietary intellectual property pricing power. OEM direct-sales initiatives and cloud marketplace catalogs present ongoing competitive tension, preventing a wide moat designation.
The highlighted cell is Fair value when every assumption sits at its base level ($156.65). Each row and column shows what Fair value becomes when one assumption moves.
Free cash flow to the firm stays positive in the first projected year at $1.2B after modeled reinvestment of $108.1M, with terminal value at 79.9% of enterprise value. A sudden drop in free cash flow is not projected unless capital spending relative to , reinvestment, or resets materially.
Demonstrates that high-margin security, cloud, and managed services are successfully attaching to hardware deployments, driving structural operating leverage.
Enterprise customers are actively expanding data center and edge hardware infrastructure, driving strong written bookings exceeding invoicing, while industry capex-to-depreciation stands at 0.35.5
Accelerated enterprise digitalization, Windows 11 endpoint refresh cycles, and generative AI infrastructure upgrades expanding IT budgets beyond historical baseline growth.
Enterprise capex digestion following large-scale deployments, elongated corporate approval cycles, and public sector budget delays stalling hardware deliveries.
Reflects CDW's solid competitive position and steady compounding characteristics, balanced against a Hold rating, modest 10.18% upside to fair value, and near-term gross margin dilution.
Cap exposure at 3% of aggregate equity portfolio. Hedge sector concentration risk via IT distributor or semiconductor peer pairs if enterprise hardware capex digestion broadens.
Trading at 15.15x forward P/E and a 9.2% discount to fair value of $156.65, the margin of safety is insufficient to warrant an aggressive overweight position.4
Revenue growth projected at 8.11% in FY2026 before moderating to mid-single digits provides steady compounding but limited re-rating catalysts.1
Current dividend yield backed by a disciplined 25% offers reliable income but remains secondary to share repurchases.
CDW Corporation is rated Hold with a composite fair value of $156.65, offering 10.18% upside from the current share price of $142.17.4
While CDW benefits from endpoint refreshes and AI infrastructure demand, second-half gross margin dilution and working capital inventory normalization warrant a neutral stance until higher-margin services materialize.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
The records this analysis drew on, as they stood when it was run.
Hardware digestion, public procurement freezes, and OEM direct sales compress gross margins and stall revenue growth at low single digits.
Management guided second-half 2026 gross margins below 2H 2025 levels due to heavy mix of enterprise infrastructure products and tier-1 volume deals. If services attachment lags and operating expenses fail to leverage, operating margin falls from 7.38% toward 5.5%.57
Corporate and Public segments generate $9.44B and $8.54B in revenue respectively. Post-refresh enterprise digestion and budget freezes could cause revenue growth to miss the projected 8.11% in FY2026 and fall below 3.0% YoY.18
CDW trades at 15.15x forward P/E with a modeled terminal P/E of 15.0x. Slower EPS growth, lingering inventory overhang, and $6.33B total debt could derate the multiple by 20% toward peer levels (SWKS at 13.4x, FIS at 5.1x).345
Carrying $6.33B in total debt with pre-tax cost of debt at 5.87% exposes CDW to refinancing headwinds, lifting moderate Ke from 9.12% by 100 bps.24
The five developments that would weaken our investment case.
Shift into low-margin infrastructure deals without pull-through of higher-margin services.
Current:20.1% (Q2 2026)
Alert if< 20.5% (Full Year)
Enterprise capex pause or public sector procurement delays stalling shipment volumes.
Current:8.11% (FY2026 consensus)
Alert if< 3.0% YoY
Supply chain bottlenecks or order delivery delays trapping operating cash flow.
Current:$400M build in 1H 2026
Alert ifFailure to decline by Q4 2026
Delays in inventory liquidation reducing cash available for share repurchases.
Current:$1.09B in FY2025
Alert if< $900M in FY2026
Elevated debt service costs impeding capital returns and share repurchases.
Current:$6.33B total debt
CDW generates returns on invested capital well above its moderate cost of equity of 9.12% and WACC of 7.87%, enabled by low annual capital intensity ($117.1M capex on $22.42B revenue).27
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Project SBC-adjusted EPS, discount each year's earnings at cost of equity, then add a Gordon-growth terminal value.
Under the moderate discount rate, $41.86 comes from forecast-period earnings and $156 from the long-term value, totaling $197.
Project EPS through the explicit advantage period, fade growth as competition catches up, and discount the full stream at cost of equity.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Discount the explicit dividend path and its Gordon-growth terminal value at cost of equity.
Solve for the growth rate that makes the model value equal the report-date share price.
CDW delivers 8.11% top-line growth in FY2026 fading to 3.67% in FY2027, with operating margin stable between 7.4% and 7.6%.1
Accelerated enterprise AI infrastructure deployment drives robust pull-through for higher-margin security, cloud, and managed services.5
Confirms base-case guidance; CDW executes cost-plus pricing discipline while absorbing infrastructure mix dilution.
Signals prolonged enterprise capex digestion, failure of services attachment, and unmitigated hardware margin compression.
Earnings quality is solid with reported GAAP net income of $1.07B in FY2025 supported by $1.21B in operating cash flow and minimal stock-based compensation ($83.6M). Working capital swings from the $400M inventory build represent timing rather than structural deterioration.457
Consensus estimates post-Q2 earnings remained flat immediately following the release (FY2026 EPS at $10.76 on August 6) before edging up toward $10.97 in October, while FY2026 revenue consensus sits at $24.24B.1
Unwinding the $400M inventory build is critical for restoring free cash flow conversion.5
Sustaining ~25% payout ratio and buybacks enhances per-share earnings growth.5
| $20.82B |
| $23.75B |
| $21.38B |
| $21.00B |
| $22.42B |
| +1.9% |
| Gross profit | $3.57B | $4.69B | $4.65B | $4.60B | $4.87B | +8.1% |
| Operating income | $1.42B | $1.74B | $1.68B | $1.65B | $1.66B | +3.9% |
| Net income | $988.6M | $1.11B | $1.10B | $1.08B | $1.07B | +1.9% |
| EPS (diluted) | $7.04 | $8.13 | $8.10 | $7.97 | $8.08 | +3.5% |
| EBITDA | $1.64B | $2.01B | $1.68B | $1.93B | $1.95B | +4.4% |
| R&D | — | — | — | — | — | — |
| SG&A | $2.15B | $2.95B | $2.97B | $2.95B | $3.22B | +10.6% |
In FY2025, CDW generated $1.21B in operating cash flow and $1.09B in free cash flow on capital expenditures of $117.1M. Free cash flow conversion temporarily dipped in first-half 2026 due to a $400M inventory build, but unwinding this inventory will re-accelerate conversion in the second half of 2026.567
CDW prioritizes disciplined capital returns through a targeted ~25% dividend payout ratio and substantial share repurchases ($653M in FY2025), which significantly exceed stock-based compensation dilution ($83.6M), while managing $6.33B in total debt.
CDW generates durable return on capital supported by an asset-light IT solutions aggregation model with low net capital expenditure needs ($117.1M capex in FY2025).
Economic returns comfortably exceed the estimated cost of capital (WACC of 7.87% and moderate Ke of 9.12%), generating positive economic profit.
FY2026 consensus revenue of $24.24B reflects 8.11% growth over FY2025 revenue of $22.42B.
Top-line expansion confirms market share gains outperforming broader IT spending by 200-300 bps.
Second-half 2026 gross margins guided below 2H 2025 levels due to infrastructure mix, but operating leverage improves into 2027.
Operating margins remain stable in the 7.4% to 7.6% range, sustaining operating profit growth.
$400M inventory build accumulated in 1H 2026 will be rationalized by year-end.
Restores annual free cash flow conversion toward historical levels above $1.0B.
| Revenue | $6,572,200,000 |
|---|---|
| Cost of revenue | $5,252,400,000 |
| Gross profit | $1,319,800,000 |
| Operating expenses | $891,200,000 |
| Operating income | $428,600,000 |
| Non-operating items and tax | -$154,200,000 |
| Net income | $274,400,000 |
| Total assets | $16,028,200,000 |
|---|---|
| Cash | $618,700,000 |
| Current assets | $8,500,500,000 |
| Total liabilities | $13,422,100,000 |
| Current liabilities | $7,226,100,000 |
| Shareholders’ equity | $2,606,100,000 |
| Net income | $1,066,600,000 |
|---|---|
| Operating inflow | $1,445,800,000 |
| Depreciation and amortization | $295,600,000 |
| Stock-based compensation | $83,600,000 |
| Operating cash flow | $1,205,200,000 |
| Operating outflow | $240,600,000 |
| Cash available | $1,803,400,000 |
| Beginning cash | $507,700,000 |
| Investing inflow | $70,200,000 |
| Exchange-rate effect | $20,300,000 |
| Financing outflow | $1,184,500,000 |
| Share repurchases | $653,000,000 |
| Dividends paid | $328,600,000 |
| Net debt repayment | $1,000,000 |
| Other financing activities | $201,900,000 |
| Ending cash | $618,900,000 |
| Investing cash flow | $70,200,000 |
| Financing cash flow | -$1,184,500,000 |
Source: SEC EDGAR · Filed 2026-02-20 · SEC EDGAR
| Revenue by operating segment | Revenue | Share | YoY |
|---|---|---|---|
| Corporate Segment Private Sector Business | $9.4B | 42.1% | 6.8% |
| Public Segment Government Agencies Educationand Healthcare | $8.5B | 38.1% | 4.6% |
| All Other Segments | $2.7B | 12.1% | 9.7% |
| Small Business | $1.7B | 7.7% | 13.3% |
Point-in-time financial data used in the 2026-10-11 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016-12-31 | $13.7B | $1.1B | $425.1M | $604M | $540.5M | $63.5M | $254.5M | $39.2M | $367.4M | $78.7M | — | -$65.9M | -$304.6M | — | $263.7M | $263.7M | $3.2B | 6.0% | — | 5.4% | — |
| 2017-12-31 | $14.8B | $1.1B | $523.1M | $777.7M | $696.6M | $81.1M | $260.9M | $43.7M | $534M | $106.9M | — | -$81.1M | -$818.7M | $263.7M | $144.2M | $144.2M | $3.2B | 5.8% | — | 5.7% | — |
| 2018-12-31 | $16.2B | $1.3B | $643M | $905.9M | $819.8M | $86.1M | $265.6M | $40.7M | $522.3M | $139.4M | — | -$86.1M | -$754.8M | $144.2M | $205.8M | $205.8M | $3.2B | 6.1% | — | 6.1% | — |
| 2019-12-31 | $18B | $1.4B | $736.8M | $1B | $790.9M | $236.3M | $267.1M | $48.5M | $657.2M | $183.4M | — | -$331.4M | -$749.8M | $205.8M | $154M | $154M | $3.8B | 6.3% | — | 5.7% | — |
| 2020-12-31 | $18.5B | $1.6B | $788.5M | $1.3B | $1.2B | $158M | $425.6M | $42.5M | $340.6M | $219.6M | — | -$201M | $138.8M | $154M | $1.4B | $1.4B | $4.6B | 6.4% | — | 4.6% | — |
| 2021-12-31 | $20.8B | $1.6B | $988.6M | $784.6M | $684.6M | $100M | $191.2M | $72.6M | $1.5B | $234.8M | — | -$2.8B | $832.8M | $1.4B | $258.1M | $258.1M | $7.4B | 6.8% | — | 4.9% | — |
| 2022-12-31 | $23.7B | $2B | $1.1B | $1.3B | $1.2B | $127.8M | $290.6M | $91.1M | $0 | $282.6M | -$865.3M | -$164.5M | -$1.1B | $258.1M | $315.2M | $315.2M | $6.1B | 7.3% | — | 7.3% | — |
| 2023-12-31 | $21.4B | $1.7B | $1.1B | $1.6B | $1.5B | $148.2M | $270.7M | $93.7M | $500M | $321.5M | -$74.4M | -$229.6M | -$1.1B | $315.2M | $588.7M | $588.7M | $5.8B | 7.9% | — | 7.5% | — |
| 2024-12-31 | $21B | $1.9B | $1.1B | $1.3B | $1.2B | $122.6M | $275.3M | $64.7M | $500M | $332.1M | $235.4M | -$659.2M | -$686.9M | $588.7M | $507.7M | $717.7M | $6B | 7.9% | — | 7.8% | — |
| 2025-12-31 | $22.4B | $2B | $1.1B | $1.2B | $1.1B | $117.1M | $295.6M | $83.6M | $653M | $328.6M | -$1M | $70.2M | -$1.2B | $507.7M | $618.9M | $618.7M | $6.3B | 7.4% | — | 7.3% | — |
CDW Corporation (CDW) trades at 15.2x forward earnings against a peer median of 13.8x. Its EV/EBITDA of 11.7x compares with a peer median of 12.9x. The comparison uses 4 peers: International Business Machines Corporation, Fidelity National Information Services Inc., Skyworks Solutions Inc. and Broadridge Financial Solutions Inc., as of 2026-10-10 to 2026-10-11.
| Note |
|---|
| Enterprise AI Adoption and Edge Computing | positive | Inference workloads and edge computing demand full-stack infrastructure upgrades across compute, networking, and security. |
| Hybrid Cloud and Cost Optimization | positive | Customers balance cloud flexibility with on-prem cost optimization, requiring multi-vendor architectural guidance. |
| Cybersecurity Estate Complexity | positive | Rising threat vectors and AI model risks drive ongoing demand for identity, endpoint, and perimeter security integration. |
As an authorized tier-1 aggregator for over 1,000 technology vendors, CDW occupies a critical intermediate position between fragmented enterprise IT buyers and major OEMs, capturing volume across corporate ($9.44B FY2025 revenue) and public sectors ($8.54B FY2025 revenue).58
| $130.00 - $135.00 | Consider initiating or building position | |
| $142.17 | Hold existing allocation | Trading at $142.17 as of October 9, 2026 reflects fair pricing with a 10.18% upside, warranting patience for better risk-reward entry. |
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Discounted forecast-period cash flows ($42.19) plus discounted terminal value ($167) minus signed net debt per current share ($45.69) equals the $164 lens value shown above. Negative net debt is net cash, so subtracting it raises value.
Multiply the peer median PEG by this stock's forecast growth to derive an implied forward P/E, then apply it to forward EPS.
| FIS |
| Fidelity National Information Services Inc. |
| $17.6B |
| 5.1x |
| 1.4x |
| 10.8x |
| 22.3% |
| 20.7% |
| SWKS | Skyworks Solutions Inc. | $18.0B | 13.4x | 4.5x | 13.7x | 5.1% | 8.8% |
| BR | Broadridge Financial Solutions Inc. | $18.7B | 14.3x | 2.5x | 12.1x | 40.9% | 24.6% |
