CDW — CDW Corporation

The market is positive, not euphoric. CDW beat consensus in Q2 2026 with 10% revenue growth and 12% non-GAAP EPS growth, management raised full-year guidance, and analyst ratings are Buy-leaning with 13 buys/strong buys, 5 holds, and zero sells. The sharp post-earnings move and price above all key moving averages show institutional buyers treating AI/infrastructure demand as a genuine tailwind.

Revenue has inflected upward: YoY growth was roughly 4% in Q3 2025, 6% in Q4 2025, then 9.3% in Q1 2026 and 10.0% in Q2 2026, when net sales hit $6.57B. That is a real reacceleration, not a one-quarter blip. The profit picture is more mixed: GAAP operating margin compressed from 7.0% in Q2 2025 to 6.5% in Q2 2026, and GAAP net income grew only ~1% YoY in Q2 2026 because the mix shift toward larger, lower-margin hardware/infrastructure deals pressured gross margin by ~70bps. Free cash flow is solid but lumpy: Q2 2026 FCF of $166M was up ~24% YoY, and H1 2026 FCF of $414M was up ~5% YoY. Net takeaway: revenue momentum is real, but margin dilution is the offsetting trend.

At the 2026-08-27 price of $148.97, CDW is cheap versus its own history. Trailing P/E is 17.8x versus a 5-year average of 23.3x, and price/sales of 0.81x is well below the 5-year average of 1.14x. Using the consensus forward EPS figure of $10.93, the forward P/E is roughly 13.6x. The trailing PEG of 6.0x overstates expensiveness because it is built on a subdued trailing growth rate; on forward estimates, the growth-adjusted valuation is much more reasonable. This is a fair-to-cheap valuation, not a stretched one.

At $148.97, CDW is priced at about 13.6x consensus forward EPS of $10.93. That is below the 17.8x trailing multiple and far below the 23.3x five-year average, meaning the market is not yet pricing in sustained double-digit revenue growth. If CDW delivers on its raised guidance and Q3/Q4 keep showing reacceleration, estimates can hold or rise and the multiple could re-rate toward 16-18x, implying meaningful upside into the $175-$195 zone. If gross-margin compression continues and EPS growth stays low-single-digit, the current price is roughly fair and needs no multiple expansion.

As of 2026-08-27, RSI(14) was 60.28, so momentum is positive but not overbought. Price was 6.38% above the 20-day SMA, 8.58% above the 50-day SMA, and 13.22% above the 200-day SMA. The trend turned clearly up after the recovery from the $97 low, but the post-earnings pop leaves the stock short-term extended. A pullback toward the 20-day or 50-day SMA would offer a better entry than chasing after a +5.3% single-day move.

• Enterprise AI infrastructure and datacenter modernization are pulling IT hardware/services demand forward, directly benefiting CDW's resale and services model.
• Interest rates and corporate financing costs remain the swing factor for enterprise capex and for CDW's own 2.44x debt/equity balance sheet.
• Memory and component price volatility, plus mix shift toward large low-margin infrastructure deals, pressure gross margins.
• Government IT budgets are supportive — Government segment grew ~14% — while Education is flat-to-weak.
• Cloud, software, and security services mix is the long-term margin opportunity, but it is currently being offset by big-ticket hardware volume.

• Q3 2026 earnings scheduled for November 3, 2026 — watch pipeline visibility, deal conversion, and gross-margin commentary.
• Continued enterprise AI modernization and management's expectation to outperform U.S. IT market growth by 200-300bps.
• CFO transition search and any update on capital-return continuity; CDW already returned over $545M via buybacks and dividends in H1 2026.
• Potential forward P/E re-rating if EPS estimates keep moving up with strong execution.

• Gross margin compression from hardware mix shift and memory price pressure could keep GAAP EPS growth lagging revenue growth.
• High leverage — debt/equity of 2.44x and long-term debt of $4.81B — leaves limited cushion if cash flow dips or rates stay elevated.
• An enterprise IT spending slowdown or budget pause would hit a cyclical, hardware-heavy reseller hard.
• Education segment stagnating and uneven public-sector order timing could act as a drag on growth.

CDW is a well-run, cash-generative IT solutions business with reaccelerating revenue, a record Q2, and a valuation that is historically cheap. But GAAP margins are compressing, the balance sheet is levered, and the deterministic score lands at Fair Fundamentals, so as of 2026-08-27 this is a neutral — not a high-conviction buy — at $148.97. It becomes more interesting on a pullback toward the 50-day average or if forward EPS estimates start moving up again.

Calculated as consensus forward EPS of $10.93 times a justified P/E of 15.5x — a deliberate discount to CDW's 5-year average P/E of 23.3x to reflect its 21.4% gross margin, 7.1% GAAP operating margin, and 2.44x debt/equity, while still embedding upside to today's 13.6x forward multiple for the reaccelerating revenue and raised guidance.