CDW Stock Jumps 9% as AI Infrastructure Demand Drives Q3 Beat, 18% Revenue Growth

CDW Corp. (NASDAQ:CDW) shares are trading higher Wednesday after the company reported better-than-expected third-quarter results.

Adjusted EPS came in at $3.26, beating the analyst estimate of $2.98.

Revenue rose 18% year over year to $6.754 billion, above the $6.219 billion consensus.

AI infrastructure and data center modernization drove customer demand, particularly for servers, storage and cloud solutions. Management said customers are moving toward production AI deployments, creating opportunities across networking, security, data governance and services.

Gross profit increased 10.3% year over year to $1.4 billion. Gross margin was 20.5%, down 140 basis points year over year but up 40 basis points sequentially, reflecting a higher mix of hardware-heavy infrastructure projects.

Adjusted operating income rose 16.8% year over year to $620 million, with a 9.2% margin.

Business Performance

Commercial sales rose 21%, International sales increased 26%, Government grew 10% and Education advanced 8% in the quarter.

The U.K. and Canadian businesses each recorded growth above 20%, supported by modernization, AI and infrastructure investments.

Hardware sales increased 21%, with data storage and server sales more than doubling. Networking and communications sales grew 9%, while client device sales rose 19%.

Software sales increased 14%, driven by network management, virtualization and operating systems.

Professional and managed services returned to growth, rising 2%, with further opportunities expected from infrastructure, security and AI project deployments.

Cash Flow & Liquidity

Adjusted free cash flow reached $506 million in the quarter.

CDW returned $187 million through buybacks and dividends during the quarter. Year-to-date shareholder returns totaled approximately $892 million, including repurchases of 5.3 million shares at an average price of $123 each.

Approximately $1 billion remains available under its share repurchase authorization.

The company also raised its quarterly dividend 8% to $0.68 per share, marking its 13th consecutive annual increase.

CDW ended the third quarter with $5.6 billion in net debt.

Key Updates

CDW completed its $525 million acquisition of Lovelytics on Sept. 25, adding approximately 600 employees and expanding its data, cloud and AI capabilities. The deal strengthens its offerings in analytics, generative AI, machine learning, data strategy and modernization.

The company also developed an approximately $2 million AI-powered monitoring solution for a major international airport. The solution combines computer vision, LiDAR and machine learning to help prevent disruptions and improve maintenance efficiency.

Outlook

For full-year 2026, CDW expects U.S. IT market growth in the high single digits and aims to outperform the market by 300–400 basis points.

Gross profit is projected to grow at a mid- to high-single-digit rate, while adjusted EPS is expected to increase at a low-double-digit rate.

For the fourth quarter, the company expects gross profit and adjusted EPS to increase at mid-single-digit and low-double-digit rates, respectively.

CDW Stock Price Activity: CDW shares are trading higher by 8.85% at $163.02 at the time of publication on Wednesday, according to Benzinga Pro data.

Photo: T. Schneider / Shutterstock