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CDW Corp (CDW) Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales rose 3.3% year-over-year to $5.186B, while gross margin fell 70 bps to 22.3% and GAAP EPS declined 9.8% to $1.97; non-GAAP EPS was $2.48, down 3.7% .
  • Sequentially vs Q3, Q4 showed higher gross margin (22.3% vs 21.8%) but lower operating income ($408.6M vs $481.6M) and lower non-GAAP EPS ($2.48 vs $2.63) as client devices and pricing mix compressed product margins .
  • Public segment strength (Healthcare +27.5% YoY; Public +4.4%) offset declines in Government (-7.1%) and Education (-3.7%); Corporate (+2.6%) and Small Business (+2.7%) posted modest YoY growth .
  • 2025 outlook: CDW targets exceeding US IT growth by 200–300 bps with low single-digit gross profit and non-GAAP EPS growth; Q1 is guided to low single-digit EPS growth YoY and gross profit similar to 2024 levels; Board increased buyback authorization by $750M and set quarterly dividend at $0.625 .

What Went Well and What Went Wrong

What Went Well

  • Public segment resilience led by Healthcare: “Healthcare was a standout… up 30%,” reflecting investments in cloud, security, and managed services; cloud profit up mid-teens and services top-line +10% with double-digit profit growth .
  • Gross margin durability: Q4 gross margin reached the highest quarterly level of 2024 (22.3%), supported by netted-down revenue (cloud/SaaS) comprising 35.8% of gross profit .
  • Capital allocation: Returned $832M to shareholders in 2024 (dividends $332M; buybacks $500M); added $750M repurchase authorization and maintained dividend growth (annual dividend ~25% payout target) .

What Went Wrong

  • Margin rate and mix headwinds: Year-over-year gross margin fell to 22.3% due to higher mix of notebooks/desktop and modest rate contraction across product categories; GAAP EPS fell 9.8% YoY .
  • Government and Education softness: Government -7.1% and Education -3.7% YoY driven by federal uncertainty and K-12 funding normalization post-stimulus, partially offset by Healthcare strength .
  • Pricing intensity/competition: Management cited “irrational pricing” and larger-deal lumpiness pressuring volume and margins; CDW maintained pricing discipline, walking away from uneconomic transactions .

Financial Results

Summary Financials (YoY and sequential context)

MetricQ4 2023Q3 2024Q4 2024
Net Sales ($USD Millions)$5,018.5 $5,516.6 $5,186.0
Gross Profit ($USD Millions)$1,153.8 $1,200.7 $1,155.3
Gross Profit Margin %23.0% 21.8% 22.3%
Operating Income ($USD Millions)$435.0 $481.6 $408.6
Non-GAAP Operating Income ($USD Millions)$518.7 $534.0 $499.2
Net Income ($USD Millions)$296.1 $316.4 $264.2
Diluted EPS ($USD)$2.18 $2.34 $1.97
Non-GAAP Diluted EPS ($USD)$2.57 $2.63 $2.48
Effective Tax Rate %22.2% 26.0% 24.8%
Interest Expense, net ($USD Millions)$53.3 $54.4 $56.5
Weighted Avg Diluted Shares (Millions)135.9 134.9 134.4

Segment Net Sales (Q4 detail)

SegmentQ4 2023 ($USD Millions)Q4 2024 ($USD Millions)YoY %
Corporate$2,285.6 $2,344.9 +2.6%
Small Business$370.0 $380.0 +2.7%
Government$660.7 $613.5 -7.1%
Education$579.1 $557.4 -3.7%
Healthcare$535.9 $683.1 +27.5%
Total Public$1,775.7 $1,854.0 +4.4%
Other (UK/Canada)$587.2 $607.1 +3.4%
Total Net Sales$5,018.5 $5,186.0 +3.3%

KPIs and Operating Metrics

KPIQ3 2024Q4 2024
Average Daily Sales ($USD Millions)$86.2 $83.6
Netted-Down Gross Profit Mix (%)35.7% 35.8%
Cash Conversion Cycle (days)17 18
Days Sales Outstanding (DSO)79 84
Days of Supply (Inventory)14 13
Days of Purchases Outstanding (DPO)(76) (79)
Adjusted Free Cash Flow ($USD Millions)$261 (Q3) $315 (Q4)
Net Debt ($USD Billions)~$4.9 $5.125

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
US IT market growthFY 2025No prior FY25 guidance; view to be provided next call Low single digits Initiated
CDW growth vs marketFY 2025No prior FY25 guidance Outperform by 200–300 bps (customer spend basis) Initiated
Gross profit growthFY 2025N/ALow single digits Initiated
Gross marginFY 2025N/AStable, within 2024 range Initiated
Non-GAAP EPSFY 2025N/ALow single-digit YoY growth Initiated
FX impactFY 2025N/ASlight headwind to reported growth Initiated
H1/H2 split (Gross Profit)FY 2025N/A~48% / 52% Initiated
Q1 gross profitQ1 2025N/AMid-single-digit sequential decline; low single-digit YoY growth Initiated
Q1 non-GAAP EPSQ1 2025N/ALow single-digit YoY growth Initiated
Quarterly dividendOngoing$0.625 declared Oct 30, 2024 $0.625 per share, paid Mar 11, 2025 (1% YoY increase) Maintained level; YoY up 1%
Share repurchase authorizationOngoing~$588M remaining (12/31/24) +$750M incremental authorization Raised

Earnings Call Themes & Trends

TopicQ2 2024 (Jul)Q3 2024 (Oct)Q4 2024 (Feb)Trend
AI & technology initiativesEarly innings; customers reassessing architecture; CDW investing in people/enablement Continued hardware solution reassessment; hybrid cloud conviction Mission Cloud acquisition (AWS) expands capabilities; example of AI-driven contact center solution Building capabilities and monetization pipeline
Cloud/SaaS (netted-down mix)Netted-down grew +8.7%; 33.2% of GP Netted-down 35.7% of GP; highest quarterly netted-down revenues Netted-down 35.8% of GP in Q4; cloud profit up mid-teens Structural shift benefiting margins
Hardware solutions (NetComm/servers/storage)NetComm/collaboration weak; storage strong; client refresh emerging Double-digit declines in NetComm/storage/servers; client up high single digits Hardware increased top line ~4%; client, NetComm, storage mid-single digits Signs of stabilization; cautious outlook
Public sector dynamicsFederal delays; state/local mid-single digit growth; K-12 Chromebook refresh Government -12%; education -5%; healthcare +3%; pricing pressure Public +6% ADS; Healthcare +30%; Government and Education down; federal pauses Mixed; healthcare strong; federal/education headwinds
InternationalUK worsened (election impact); Canada -4% International up 5% off depressed comps; volatility persists International grew; below typical budget flush; volatility expected Choppy; macro/political uncertainty
Competition/pricing intensityFirm product margins; mix helping core margins “Irrational pricing”; CDW maintaining discipline Competition fierce; margin impact not outsized; some compression in clients Elevated competitive intensity
Managed servicesServices +6% in Q2; double-digit growth drivers Services +13%, managed/warranty strong Managed services +20%; overall services double-digit profit growth Expanding services contribution

Management Commentary

  • CEO: “The team delivered a solid finish to a challenging year… consultative solutions strategy… is more vital than ever.”
  • CFO: “Gross margin of 22.3%… highest margin quarter of the year… decline vs 23% last year due to higher notebooks/desktop mix and modest rate contraction.”
  • CEO on Healthcare strategy: “Our deeply experienced Healthcare subject matter experts… solutions like our proprietary Patient Room Next AI and IoT-based solution…” .
  • CFO on outlook: “We expect… IT market to grow low single digits… and target market outperformance of 200 to 300 basis points… non-GAAP EPS to grow low single digits.” .
  • CEO on competition: “We are seeing deals at low margin… that is not our business model; we are not racing to the bottom.” .

Q&A Highlights

  • Public verticals: Education and federal have puts/takes; CDW cautiously factoring policy/workforce impacts; expects tech to be a long-run winner .
  • Mix and margin bridge: Slight compression in net sales from leaning into netted-down; expense pressure depresses non-GAAP OI; leverage improves at EPS level .
  • Healthcare drivers: Balanced mix including some larger transactions; strength offset declines in Government/Education .
  • Core margins outlook: Non-netted-down margins expected to hold firm in FY25 with services attach supporting hardware recovery .
  • Mission Cloud: Profitable, strategic fit; limited near-term EPS accretion due to foregone interest; significant longer-term potential .

Estimates Context

  • Wall Street consensus via S&P Global was not available during this session due to data access limits; therefore, we cannot provide versus-estimate comparisons for Q4 2024. If needed, we can refresh and add consensus EPS, revenue, and surprise metrics once access is restored.

Key Takeaways for Investors

  • Q4 2024 showed stabilization in core commercial and hardware categories with strong Healthcare-led public performance, but YoY margin rate and EPS declined given client-device mix and pricing pressure .
  • Structural mix shift toward cloud/SaaS and services remains a multi-year margin tailwind; netted-down contribution held at ~36% of gross profit in Q4 .
  • 2025 setup: low single-digit growth in gross profit and non-GAAP EPS with stable margin, outpacing market by 200–300 bps; Q1 seasonally heavier SG&A ratio but EPS guided to low single-digit YoY growth .
  • Capital return is a notable catalyst: $750M incremental buyback and steady dividend ($0.625 quarterly), supported by >$1B adjusted FCF and liquidity ($1.7B cash+revolver) .
  • Watch federal/education demand normalization and continued competitive intensity; management is holding pricing discipline, which may trade off near-term volume for profitability integrity .
  • Healthcare momentum and services attach should continue to offset areas of macro weakness; Mission Cloud expands AWS capabilities and managed services monetization .
  • Sequentially, monitor client-device margin rate and DSO uptick (84 days) as working capital normalizes post Q4; CCC remains inside target range (18 days) .

Citations: .

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