CDW (NASDAQ:CDW) Chief Financial Officer Al Miralles told investors at the Morgan Stanley TMT conference that the company is focused on “controlling what we can control” as it plans for 2026, after what he described as a difficult 2023 and 2024 marked by macro pressure, elongated customer decision cycles, and uneven public-sector funding dynamics.
Miralles said the company’s priority in 2025 was achieving a “sustainable return to growth,” which he said CDW has begun to deliver, citing share gains and what he characterized as precise execution. Looking to 2026, he emphasized continued go-to-market execution, disciplined working-capital management to support cash flow, and capital allocation that can balance buybacks and potential M&A.
Customers “cautious and intentional,” with budgets prioritized
By customer segment, Miralles highlighted the following themes:
- Corporate: Cautious spending environment, with significant focus on AI and infrastructure planning to support AI workloads.
- Small business: Described as a “really healthy channel” for CDW over the past year, with expectations that strength will continue. Miralles pointed to resilience among small businesses and interest in security, cloud, and client devices.
- Healthcare: A strong growth area, though Miralles noted tougher comparisons may be a factor in 2026. He attributed performance to CDW’s investments in verticalization.
- Public sector: State and local has been strong, while federal has been “choppier” due to shutdowns and funding pauses. Education has been challenging post-COVID, though he said CDW believes education spending will eventually exceed pre-pandemic levels and expressed hope for a return to growth in 2026.
Public sector unevenness remains, with federal pipeline dynamics
On government, Miralles said demand exists across agencies, but the operating environment has introduced friction. He described CDW’s federal strategy during shutdowns as focusing on agencies that remained open, preparing to re-engage impacted agencies when funding resumed, and rebuilding pipeline after disruptions.
He also referenced CDW’s prior commentary that a fourth-quarter shutdown did not impact Q4 results but would be more likely to affect Q1, contributing to what he called a more modest federal outlook. He said the team has worked to rebuild the pipeline and position for more continuity into 2026.
Verticalization playbook expands beyond healthcare
Miralles described healthcare as a key example of CDW’s verticalization strategy paying off. He said the company has implemented “healthcare strategists” who work with large healthcare organizations at a strategic level, helping them navigate innovation amid industry cost pressures and reimbursement challenges.
He added that CDW is applying similar approaches in other verticals and said the company will now report on financial services, where it has built vertical expertise and a strategist model designed to deepen strategic relationships.
PC demand remains meaningful, but visibility drives a cautious back-half stance
Miralles said the company continues to see “meaningful demand” in PCs, pushing back on the notion that the cycle may have run its course. He cited several drivers, including Windows 11-related activity, classic refresh cycles following COVID-era deployments, and growing interest in AI PCs.
However, he said CDW’s outlook reflects strong near-term visibility—particularly into the second quarter—while visibility becomes “murkier” in the back half. He said the company tends to be prudent when visibility is limited.
He also pointed to memory pricing and supply questions as factors that could mute demand later in the year, with potential supply constraints already appearing in pockets.
AI monetization progressing from services to products, with infrastructure at an “inflection point”
Miralles framed AI as early in its adoption curve and suggested it may ultimately be more pervasive than cloud. He said CDW’s AI monetization began with professional services such as workshops and assessments, then expanded into enabling customer use of frontier AI models, including Copilot, ChatGPT, Gemini, and Anthropic.
He also said AI is increasingly embedded across the partner ecosystem’s product lines, including AI PCs, while cloud remains an avenue for AI workloads—particularly for small businesses running agentic workloads. Miralles referenced CDW’s Mission Cloud acquisition as benefiting from increased agentic AI workloads in the cloud.
He said “meaningful infrastructure spend” for AI has not yet arrived broadly, but indicated CDW is seeing increasing interest, including examples discussed on the company’s earnings call involving large corporate customers building on-prem AI capabilities. He described memory pricing dynamics as a potential catalyst to accelerate infrastructure decisions and said larger customers increasingly appear to be moving toward hybrid environments that blend on-prem and cloud for AI capacity.
Discussing the broader infrastructure market, Miralles said servers, storage, and networking have been softer and more uneven than expected, with customers delaying decisions and optimizing spending. He suggested a combination of clearer AI capacity planning and memory price concerns is driving more engagement on infrastructure refresh decisions.
Netted-down revenues expected to remain durable and supportive of margins
Miralles said CDW continues to expect “the durability of netted down revenues” to persist and likely outgrow overall sales, a view he said the company has maintained for roughly three years. He said netted-down revenues—such as cloud, SaaS, warranty, Software Assurance, and partner-delivered services—have grown from the mid-to-high 20% range of gross profit to “well into the thirties,” noting that 36% of gross profit came from netted-down revenue in the most recent quarter.
He said cloud and SaaS are the biggest drivers, with SaaS skewed toward infrastructure-related software and security rather than enterprise applications. Miralles added that CDW is a ServiceNow provider, which he characterized as supporting AI efforts and workflow optimization.
Operating leverage focus, capital returns, and buybacks highlighted
On expenses, Miralles said 2025 included difficult year-over-year comparisons in variable compensation following the tougher demand environment of 2023 and 2024, during which CDW rightsized operations. He said coworker count has been flat and described 2025 as a “tweener year” as the company moved past those comparisons.
For 2026, he pointed to CDW’s outlook calling for low single-digit gross profit growth and mid single-digit growth further down the P&L, which he said implies operating leverage. He emphasized structural savings, streamlining operations, and using AI internally, while also reinvesting to support growth.
On capital allocation, Miralles said CDW views its stock as “very attractive and currently dislocated,” and said the company returned $1.1 billion to investors in 2025 through dividends and buybacks. He said CDW plans to lean into buybacks while keeping M&A as an “always on” priority, though he noted the bar is higher when management views the company’s equity valuation as particularly attractive.
In closing, Miralles said investors should recognize CDW’s scale, supply-chain sophistication, services-led strategy, and cash-flow discipline—qualities he said helped the company perform well during COVID-era supply constraints and are expected to be important again amid current component pricing and supply dynamics.
About CDW (NASDAQ:CDW)
CDW (NASDAQ: CDW) is a leading provider of information technology products and integrated solutions for business, government, education and healthcare customers. The company sources and resells hardware and software from major technology vendors and packages those products with professional services, managed services and lifecycle support. Its offerings span IT infrastructure, cloud and data center solutions, cybersecurity, networking, unified communications, endpoint devices, and software licensing and procurement services designed to simplify IT operations for customers.
CDW combines a broad product portfolio with consultative sales, implementation and technical support capabilities.
