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Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

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The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

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This year’s Fortune 500 marks the 68th running of the list.

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F500-2021-161-CDW

The information technology services company is based in Vernon Hills, Ill., and employs 10,000 people across 28 locations. With the pandemic forcing companies to transition to remote work in 2020, thus driving demand for the company's WFH tech solutions, CDW reported a 13.3% year-over-year climb in profits for 2020.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-178-CDW

CDW provides technology products and services—from hardware to security systems to cloud computing—for businesses, schools, and the government. Founded in 1984, the company emerged from a $3 <i data-stringify-type="italic">Chicago Tribune</i> classified advertisement to sell a used computer in 1982. CDW was publicly traded from 1993 until 2007 (when it went private in a $7.3 billion deal by Madison Dearborn Partners and Providence Equity Partners) and it made its <i data-stringify-type="italic">Fortune</i> 500 debut in 2001 at No. 435. Today the Illinois company is public once again, thanks to a 2013 IPO on the Nasdaq, and counts more than 10,000 employees and 250,000 customers.

Fortune's proprietary methodology allows us to zero in on the 50 global firms that are best poised to deliver—and continue delivering—above average gains.

The Future 50

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

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This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Based in Vernon Hills, Ill., CDW provides information technology solutions to customers in business, government, health care, and education in the U.S., the U.K., and Canada. The company sells both discrete hardware and software products and services as well as integrated IT solutions, including on-premises and cloud computing services. The company also offers managed IT solutions and software design and development services. Founded as CDW Computer Centers in 1984, it changed its name to CDW in 2003.

Q2 2026

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Q4 2025

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Q1 2025

Q4 2024

CDW (CDW): Company Profile, Stock Price, News, Rankings

legacy

Ladies and gentlemen, the CDW First Quarter twenty twenty five Earnings Call will begin shortly with your host, Steve O'Brien. We appreciate your patience as we prepare your session today. During the call, we encourage participants to raise any questions they may have. As a reminder, to raise a question will be star followed by one. We will begin shortly.

Good morning all and thank you for joining us for the CEW First Quarter twenty twenty five Earnings Call. My name is Carly, and I'll be coordinating the call today. I'd now like to hand over to our host, Steve O'Brien of Investor Relations. The floor is yours.

Thank you, Carly. Good morning, everyone. Joining me today to review our first quarter twenty twenty five results are Chris Leahy, our Chair and CEO and Al Morales, our Chief Financial Officer. Our earnings release was distributed this morning and is available on our website, investor.cdw.com, along with supplemental slides that you can use to follow along during the call. I'd like to remind you that certain comments made in this presentation are considered forward looking statements under the Private Securities Litigation Reform Act of 1995.

Those statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. Additional information concerning these risks and uncertainties is contained in the earnings release and Form eight ks we furnished to the SEC today and in the company's other filings with the SEC. CDW assumes no obligation to update the information presented during this webcast. Our presentation also includes certain non GAAP financial measures, including non GAAP operating income, non GAAP operating income margin, non GAAP net income and non GAAP earnings per share. All non GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules.

You'll find reconciliation charts in the slides for today's webcast and in our earnings release and Form eight ks. Please note, all references to growth rates or dollar amounts changes in our remarks today are versus the comparable period in 2024 with net sales growth rates described on an average daily basis unless otherwise indicated. Replay of this webcast will be posted to our website later today. I want to remind you all that this conference call is the property of CDW and may not be recorded or rebroadcast without specific written permission from the company. With that, let me turn the call over to Chris.

Thank you, Steve. Good morning, everyone. I'll begin today's call with a brief overview of our first quarter performance and provide thoughts on our view for the balance of the year. Al will provide additional details on our results, capital allocation priorities and further perspective on our outlook. We'll move quickly through our prepared remarks to ensure we have plenty of time for questions.

The team had an excellent start to the year with strong execution during a period of rapidly changing market dynamics. Once again, the benefit of our strategic progress was evident with our industry leading margins. Strong expense management and effective use of capital drove leverage down the P and L. For the quarter, net sales were $5,200,000,000 8 percent higher than last year on an average daily sales basis. Gross profit was $1,100,000,000 7 percent higher than last year on an average daily basis.

Non GAAP operating income was $444,000,000 up 10%, and non GAAP net income per share was $2.15, up 12%. Broadly speaking, customers remain focused on mission critical projects and must dos, and their priorities were consistent with 2024, Laser focus on operating efficiency and expense elasticity with one addition, client device prioritization, which reflected three factors, need for refresh, the upcoming Windows 10 expiration, and the desire to get ahead of tariff related price increases. Underlying demand was solid. Commercial market growth was consistent with the favorable trajectory we saw late in the fourth quarter. Tariff uncertainty slowed down major infrastructure investments, but also drove demand for client devices and greater focus on expense elasticity, consumption based solutions and services.

Federal government market growth was subdued throughout the quarter as agencies digested the impact of new policy priorities, while education growth accelerated towards the end of the quarter driven by Chromebook demand ahead of potential price increases. First quarter results underscore the power of our full stack, full life cycle solutions. The team's ability to provide solutions that address customers' priorities for cost optimization drove excellent performance across services, software, and cloud. Let's take a closer look at how customer priorities and market dynamics impacted end market and portfolio performance in the quarter. As always, there were three main drivers of our results, our balanced portfolio of customer end markets, the breadth of our product solutions and services portfolio, and relentless execution of our three part growth strategy.

First, our balanced portfolio of diverse customer end markets. We have five U. S. Channels, corporate, small business, healthcare, government, and education. Each channel is a billion dollar plus business annually.

Additionally, our UK and Canadian operations together delivered sales of $2,500,000,000 last year. Our scale allows us segment our business into customer end markets with dedicated sellers and technical resources who deeply understand and address the unique priorities of each market. The benefit of our diverse end markets was evident in the first quarter with all customer end markets posting average daily sales growth. Commercial top line performance, which includes corporate and small business, was strong and balanced. Corporate and small business increased by 68%, respectively.

Our ability to address both customer priorities for client devices and customer priorities for cost optimization with as a service and ratable solutions drove solid profitability, and our commercial gross margin was steady year over year. Public top line increased by 11%. Healthcare was a standout performer with net sales up 20% driven by client devices, cloud, and services. Education increased top line by 11% with balanced performance across both k 12 and higher education. K 12 growth was driven driven by Chromebook reflecting both customer refresh needs and buying ahead of anticipated tariff price increases, while higher ed growth was driven by security, data center, and services.

Government net sales increased slightly as the impact of pauses in federal agency decision making due to new administration priorities was offset by state and local growth. Other, which represents our UK and Canadian operations, posted a 10% increase led by The UK. The second driver of performance was our broad and deep portfolio of solutions and services, a key point of differentiation for us in the marketplace. This quarter, we had balanced performance across hardware, software, and services with each increasing by high single digits or better. Hardware increased top line by 7%, Excellent growth in client devices, increased more than 20%, was partially offset by declines in both NetComm and storage.

Software top line increased by 10%. Top line growth was primarily driven by the ongoing shift in spend from traditional networking to software defined networking architectures. Software gross profit increased faster than net sales. Security performance was strong consistent with the fourth quarter with both top line and gross profit growing by low double digits. Priorities met by as a service and ratable solutions to optimize spend drove excellent performance in cloud with spend, top line and gross profit all up meaningful double digits.

Customers continue to lean into CDW services to build and execute their strategies, manage expenses, and accomplish mission critical objectives, which drove the services top line increase of 14. CEW managed and professional services top line and gross profit both increased by double digits. The third driver of performance is our ongoing investment in our customer driven strategy, a strategy designed to maximize our relevance and differentiation in the marketplace and continuously fortify our leading position as vendor partner of choice and trusted adviser to our customers. To meet the accelerated pace of change over the last five years, we have concentrated our strategic investments on key high growth, high relevance areas like cloud adoption and optimization, cybersecurity, IT workflow optimization, and AI expertise. Given the vital role services play in today's interconnected solutions, recent investments have been focused on embedding services throughout our entire portfolio, including Mission Cloud Services, which closed last November.

And just as our previous investments have done, Mission, a leader in AI and a premier AWS partner, furthers our ability to deliver mission critical outcomes for customers, an ability that is more important than ever in today's dynamic environment where customers continue to move forward with mission critical projects. Movement we are seeing across our portfolio and especially in security where the need to deliver seamless access for employees while ensuring data protection is crucial, a need that our full suite of security solutions underpinned by products, services, and deep expertise addresses. A great example of this in action is the solution CEW developed for an American designer and manufacturer of heavy duty commercial trucks. An industry leader for more than 100, the company had multiple HR systems with employees logging in daily across offices in The United States and around the world. Managing trust and identity required manual intervention and made it difficult to get a global view of the data.

Working closely with the company's CISO, our team engineered, designed, and implemented a solution that migrated data from on premises identity governance to cloud hosted centralized control. Utilizing artificial intelligence to streamline processes, the solution delivered a zero trust environment for nearly 25,000 users. Not only did the solution deliver significant measurable outcomes through enhanced user access, compliance, operational efficiencies, the scalable automated platform also set the company up for future growth. For CDW, the solution represents a multimillion dollar, multiyear software transaction and professional services fees that exceeded $1,000,000 for our team's engineering and implementation work. This is a great example of the power of our strategic investments helping customers achieve mission critical outcomes.

And that leads me to a topic that's on everyone's mind, our outlook for the remainder of the year. We are maintaining our 2025 outlook, which calls for US IT market growth to be in the low single digits on a customer spend basis with a CDW growth premium of two to 300 basis points. While market parameters changed since we first shared our outlook with you in February, our current view is underpinned by what we are seeing and hearing in the market, our first quarter performance and a continued level of prudence. While the start of the second quarter with the start of the second quarter, the overall rhythm of the business has been solid and spend in the commercial market remains healthy. Despite the pull forward of client devices at the end of the first quarter, both written and shipped orders have been consistent with overall first quarter performance.

Customers indicate that while they are watchful of the environment, they do not intend to alter their course for now. Maintaining our full year outlook balances are better than expected first quarter results and current customer sentiment with two countervailing factors. First, it recognizes that our federal and education customers will need more time to adjust to recent government efficiency initiatives that will impact their IT planning, prioritization, and in some cases, their budgets. Second, it incorporates a level of general economic uncertainty and caution that could mute growth. Our outlook does not factor in potential wildcards such as recessionary conditions.

Of course, the environment remains fluid. And as always, we'll continue to monitor the market and update our view as necessary throughout the year. There is no doubt that we are operating in uncertain times, but we have experienced uncertainty in the past. During prior periods of uncertainty, most recently, the pandemic and post pandemic supply chain crisis, and before that, the financial crisis of two thousand and eight and 02/2009, our partners and customers turned to us. They recognized the vital role we play in their success and knew that leveraging our strengths would lead to better outcomes for them.

Once again, customers and partners are turning to us to help them navigate the challenges of today's dynamic landscape so they can effectively address cloud workload growth, increased security threat, an aging client device base, and significant data challenging, including how to manage data to leverage AI for insights and productivity aspirations. As they always do, our team has rolled up its sleeves. They are working with their customers to scenario plan, determine how to optimize spend, and identify sources of funds. They are also working with customers to test multiple brands for future projects, providing product optionality depending on different tariff scenarios. And to prepare for a potential economic slowdown, the team continues to help customers evaluate the economics of various architectures and procurement models.

As our customers navigate this dynamic period, we are ready and confident in the power of our strategy and strength of our business model to weather uncertainty and serve our customers. Regardless of market conditions, we will do what we have done successfully in the past and focus on what we can control. We will manage the business to ensure we remain a vital valued partner to both customers and vendors and ensure we are well prepared to capitalize on our strength and accelerate out of the curve. With that, let me turn it over to Al.

Thank you, Chris, and good morning, everyone. I will start my prepared remarks with details on our first quarter performance, move to capital allocation priorities, and then finish with our 2025 outlook. First quarter gross profit of $1,100,000,000 was up 5.5% year over year on a reported basis and 7.2% year over year on an average daily sales basis. This was above our original expectations of low single digit growth as our teams captured increased demand for client devices, cloud, security and services in a dynamic environment. We also saw a pull forward of demand for client devices that was most acute in the education channel, but also had a minor influence on other channels.

In total, we estimate that we benefit by approximately $100,000,000 in net sales or two percentage points of growth in the quarter. In line with our expectation, gross margin of 21.6% was relatively consistent with 2024 levels, down 20 basis points year over year. Gross margins held firm even with strong client device performance, which comprised 33% of net sales, up from 29% of net sales in the first quarter of twenty twenty four. The higher contribution from client device sales was partially offset by higher contribution from netted down revenues. Netted down revenues contributed a record 36.5% of our gross profit compared to 35.1% in the prior year first quarter and 35.8% in the fourth quarter of twenty twenty four.

Our netted down category solutions listed as transferred at a point in time for CDW's agent in our earnings release and filings represents an important and durable trend within our business, alongside our professional and managed services listed as transferred over time or CDW's principal. We continue to expect net down revenue streams to outgrow the rest of the portfolio driven by consistently strong cloud infrastructure and SaaS growth. EBITDA revenues increased 12% year over year in the first quarter on an average daily sales basis. Moving on to a quick review of our end markets for the quarter. On an average daily sales basis, all of our channels grew on a year over year basis.

Corporate and small business produced top line growth for the second consecutive quarter. In the public space, education had a strong above seasonal quarter as schools both refreshed aging devices and tried to get ahead of potential tariff related price increases. While the government channel remained challenging, the team achieved our expectations and helped customers navigate a complex environment. Healthcare was a standout performer again this quarter as the team delivered mission critical outcomes enabled by our strategic investments. International grew driven by strength in The UK from PC refresh activity and full stack wins with public sector customers, while Canada faced macroeconomic impacts that muted spending.

We still expect volatility in international end markets. Customers in these regions face ongoing economic and political uncertainty. Overall, I want to credit our teams for delivering above our expectations in a rapidly changing market. Our performance shows we continue to meet our customers where they need us most. Turning to expenses for the first quarter.

Non GAAP SG and A totaled $678,000,000 up 2.8% year over year. This increase was due to higher gross profit achievement. The efficiency ratio of non GAAP SG and A to gross profit was 60.4%, down 170 basis points from the 62.1% in Q1 twenty twenty four, reflecting typical leverage and our disciplined approach to expenses. Coworker count at the end of the quarter was approximately 15,100 and customer facing coworker count was 10,850, both relatively unchanged quarter over quarter and year over year. Our goal is to balance growth, expansion of capabilities, and exceptional customer experience with greater efficiency and cost leverage from our broader operations.

Non GAAP operating income was approximately $444,000,000 up 10% versus the prior year driven by expense leverage on our gross profit growth. Non GAAP operating income margin of 8.5% was up from 8.3% in the prior year first quarter. Our non GAAP net income was $287,000,000 in the quarter, up 9.9% on a year over year basis impacted by slightly higher interest expense following our debt refinancing last year and lower interest income primarily due to lower cash balances. With first quarter weighted average diluted shares of $133,500,000 non GAAP net income per diluted share was $2.15 up 11.9% versus the prior year first quarter. Moving to the balance sheet.

At period end, net debt was roughly $5,200,000,000 up roughly $40,000,000 from the fourth quarter of twenty twenty four. Liquidity remains strong with cash plus revolver availability of approximately $1,700,000,000 The three average cash conversion cycle was fifteen days, down one day from the prior year first quarter, down three days from year end 2024 and below the low end of our target range of high teens to low 20s. This cash conversion reflects our effective management of working capital, including disciplined management of our inventory levels even as client device sales accelerated. As we've mentioned in the past, timing and market dynamics will influence working capital in any given quarter or year. We continue to believe our target cash conversion range remains the best guidepost for modeling working capital longer term.

Adjusted free cash flow was $249,000,000 in the quarter, consistent with our expectations and reflecting 87% of non GAAP net income within our stated rule of thumb of 80% to 90% of non GAAP net income. For the quarter, we utilized cash consistent with our 2025 capital allocation objectives, including returning approximately $200,000,000 in share repurchases and $83,000,000 in the form of dividends. As a reminder, we're targeting 50%, seventy five % of adjusted free cash flow to shareholders in 2025. We are clearly ahead of pace through Q1. That brings me to our capital allocation priorities.

Our first capital priority is to increase the dividend in line with non GAAP net income growth. We have increased the dividend for eleven consecutive years through 2024. We continue to prudently manage our dividend with respect to the growth environment to target a roughly 25% payout ratio of non GAAP net income going forward. Our second priority is to ensure we have the right capital structure in place. We ended the first quarter at 2.5 times net leverage within our targeted range of two to three times.

We will continue to proactively manage liquidity while maintaining flexibility as evidenced by our 2024 debt refinancing and redemption actions. Finally, our third and fourth capital allocation priorities of M and A and share repurchases remain important drivers of shareholder value. We continually evaluate M and A opportunities that could accelerate our three part strategy for growth as shown by our recent acquisition of Mission Cloud Services. Likewise, we remain committed to a target to return 50% to 75% of adjusted free cash flow to shareholders via the dividend and share repurchases. Now turning to our outlook.

While the strength we saw in the first quarter emanated from solid underlying demand, we also saw some customers trying to get ahead of potential tariff related price increases, contributing roughly two points of our year over year net sales growth. We have contemplated this pull forward into our seasonal view, understanding it does not change the full year 2025 overall. We came into 2025 with an appropriately prudent outlook. And despite the strong start to the year, we believe this environment calls for continued prudence. We are laser focused on controlling what we can control and supporting our customers as only we know how to do in this dynamic environment.

Our outlook assumes frictional impacts in the government and education channels and a level of general economic uncertainty and caution, but it does not factor in recessionary conditions. As always, as the landscape changes, we will provide you updates each quarter. With these factors in mind, we are holding to our full year 2025 view of low single digit growth for the IT market. We continue to target market outperformance of 200 to 300 basis points on a customer spend basis. Based on the anticipated mix of products and solutions, we continue to expect low single digit gross profit growth for the full year 2025 and gross margins to remain relatively stable and within the range of twenty twenty four levels.

We expect first half gross profit to be slightly lower than the second half, but higher than the historical split of 48% versus 52%. Finally, we expect our full year non GAAP earnings per diluted share to grow low single digits year over year as we focus on profitable growth, exceptional customer outcomes and an effective execution of our capital allocation priorities. Please remember we hold ourselves accountable for delivering our financial outlook on a full year constant currency basis. On that note, we expect currency to be roughly neutral to reported growth rates for the year. Moving to modeling thoughts for the second quarter.

We anticipate mid to high single digit gross profit growth sequentially, leading to low single digit year over year growth. This factors in the pull forward in client device demand, ahead of tariffs and sub seasonal spending in the government and education channels. We continue to expect gross margin to be similar to overall 2024 levels. Moving down the P and L, we expect second quarter operating expenses to increase quarter over quarter seasonally aligned to gross profit, but for non GAAP SG and A as a percentage of gross profit levels to be lower than in the first quarter. Finally, we expect second quarter non GAAP earnings per diluted share to grow at a mid teens rate sequentially to a level that is nearly flat with the second quarter of twenty twenty four.

That concludes the financial summary. As always, we'll provide updated views on the macro environment and our business on our future earnings calls. And with that, I will ask the operator to open it up for questions. We would ask each of you to limit your questions to one with a brief follow-up. Thank you.

We'd now like to open the lines for Q and A. Our first question comes from David Voigt of UBS. David, your line is now open.

Great. Thanks guys. Good morning. Maybe both for Krish and Al. I don't want go into the tariffs because you talked a lot about tariffs, but I want to talk about some of the product categories.

I thought you had relatively easy compares against Netcomm and storage last year. Obviously, just want to kind of get your thoughts on what's going on in those markets. Are they seeing a pause in spending by customers ahead of tariffs, uncertainty? Just kind of what are the dynamics going on in those particular end markets that seemed a little bit weaker than I would have thought given some of the checks that we had done? Thank you.

Yeah. Dave, good morning. And I can start with that. I would say you're absolutely right on the compares for networking. We still see some customers that are digesting, number one.

Number two, I'd say that if you look at our networking results, it reflects a continuing shift to software defined architectures and a bit of a pause in the interest the larger infrastructure deals that we've been, that we mentioned in terms of, the cautiousness right now. We don't see it as a harbinger or a problematic. It's just a timing issue in the first quarter. But it's you know, we are continuing to have what I would say are design discussions, extensively, which to us is a leading indicator of what's to come. So not concerned about the categories.

In fact, feeling that the services work that we're doing is is foreshadowing what will be coming in the future quarters.

Thank you very much. Our next question comes from Eric Woodring with Morgan Stanley. Eric, your line is now open.

Hi. Good morning. This is Maya on for Eric. One question from me. You know, what are you seeing kind of across the pricing landscape?

And given some of the competition comments you've made in recent calls, is there any risk that, you know, you would not be able to pass through any tariff related cost to end customers? Just any color you can share there would be helpful.

Yeah. Let me I I would start with the resiliency of our gross margin that you saw this quarter notwithstanding, tick up in client devices. So regardless of the, I'll call it competitive environment that we are in, we are still continuing to be able to drive profitability. And, you know, as we see tariffs implemented down the line, we might continue to we might see a tick up in competitiveness, but we feel fair fairly confident that we'll be able to, you know, pass along price increases. You might have customers, for example, buying fewer units of something, etcetera, but they're gonna spend their budget.

And as you know, as the cost of goods sold goes up and the price goes up, the gross margin itself might reduce a little bit mathematically. But otherwise, we feel very confident as we have in prior circumstances like this that we'll be able to maintain our profitability. And maybe I Maya, I would just add to that. We would observe that in

the quarter despite quite a bit of variability, a pretty orderly market. Certainly, variability across the different OEMs and product categories as well as end markets. But really not the level of variability or, you know, concern there that you might expect, in this type of environment. And just a reminder, we're a cost plus provider. So what we did see in that kind of orderly environment, is pretty much where customers were, taking actions that, we were passing through, the impact and maintained our margin to Chris' point.

Thank you very much. Our next question comes from Osia Merchant of Citigroup. Assia, your line is now open.

Great. Thank you very much for taking the question and good results here. Just healthcare has been up strong. I think you referred to that being strong again. Just if you can parse out what's going on in this health care, is it specific to CDW and how you guys are thinking about, you know, it ahead in terms of your channel performance looking ahead to the rest of '25?

Yeah. Sure. I think look. I think health care, there is there are the results reflect several things that are specific to CUW, in particular, our strategic strategic progress over the last several years. We have invested behind both our sales organization, our technologists within health care, and our industry experts in health care.

We've invested in things like the transformation centers where our customers can come together and test out technologies with CW experts and their peers. We have focused our go to market on size and type of, customer in the health care space, and you're seeing really good results based on the tremendous execution of that strategy. Quarterly results this you know, for q one, we did see a nice uptick in client devices. So that reflects top line growth significantly. And the other thing is, we've mentioned this before, but health care organizations were a little behind in the adoption of cloud and, cloud optimization.

And so we've seen an acceleration over the last couple of years for CDW customers in our ability to help them actually accelerate workloads to the cloud, make decisions around that. And then finally, just say security has been a been a big driver, for our health care results.

Our next question comes from Amit Daryanani of Evercore ISI. Amit, your line is now open.

Thanks a lot. Good morning, everyone. I guess maybe to start with Chris, I realize it's a tough evolving macro environment. But as you look at the SMB and corporate verticals specifically, are you seeing any change in the orders of buying behavior in Q2 versus what you saw in March? And did this pull in potentially sustain into the month of April given the liberation day technically was in

Yes. Good morning, Amit. Yes, I would say we have been pleasantly surprised by the solid underlying demand and the rhythm of the business as we moved into the second quarter. It's been a healthy rhythm, which means activity across our commercial sector, and that's been a very positive sign. You know, customers certainly are incrementally more cautious.

But as I mentioned in my earlier, comment, we are also deeply involved with customers in planning phases and design phases, and we take that as a positive sign, for as we move throughout the year. And then client devices in the in the commercial space has been very strong, for the reasons we've we've discussed before. I mean, refreshes we're probably, you know, we're probably now into the refresh in the early innings, kind of the mid cycle, I guess, I'd say. So we got refresh picking up, that's been a positive as well. So I just say, look.

We're cautiously optimistic. Our customers are incrementally more cautious. They are disciplined, but yet they're determined. And given the breadth and depth of our portfolio and our capabilities to help customers toggle to the most optimized solution, we are feeling, I would just say, you know, cautiously optimistic.

Got it. And then if I could just follow-up with Al. Al, can you when I think of your calendar 2025 guide and EPS were in low single digits, can you just talk about how are you embedding buybacks in that model? Because if I just assume you do your free cash flow conversion and your buybacks in that kind of 50% free cash flow range, you should be able to achieve your EPS guide on a flat revenue. So just talk about what are you embedding in your guide from a buyback perspective?

Yes. Good morning, Amit. We are continuing to bake in an expectation on it that we would be within that 50 to 75%, range in terms of return to shareholders. Now that being said, we, in q one, took advantage of valuation opportunities, and we did buy back 200,000,000, in dollars in in shares. And so, therefore, we certainly are ahead of pace, and I would say kinda the front loading, does indeed, Amit, benefit us kinda when you think from an averaging perspective.

But we're not presuming per se that that pace will continue. So I'd say we're still within the range, of our, 50 to 75%, albeit with q one, it's likely towards the top of that range.

Thank you very much. Our next question comes from Samik Chatterjee of JPMorgan. Samik, your line is now open.

Yes. Thank you, and thanks for taking the questions. Chris, I wanted to go back to your response to the question from Ahmed, where you said order activity and customer spending is still robust as you enter 2Q, but there are customers that are sounding a bit more cautious. I mean how much of that are you interpreting as customers want to spend the budget while they have it before they lose some of those IT budgets in the back half of the year versus sort of there being underlying demand for the equipment and there being underlying demand that drives them to continue to invest in their infrastructure? And maybe, like, any insights you're getting from your project driven activity versus transactional business in terms of whether customers are doing sort of choosing one versus the other?

Sure. It was a little hard to hear the question, but I think I caught it. And it was on our on commercial spend and kinda dissecting how much of the, April activity is related to transactional and spending budgets versus, driving, you know, projects forward. Look. Let me start by saying we're we're sharing an outlook in our perspective based on what we've seen so far.

Like everybody else, we can't predict the future. But I would say, I would I would, call what we're seeing as solid and balanced. And when I say balanced, that is across both transactional and activities that suggest that large mission critical projects will move forward at some point. You know, the timing throughout the year are hard to say, but we're feeling a positivity and a determination amongst our customers. Our outlook does, however, reflect a more muted environment as we go out go throughout the year because of the pull forward that we've experienced.

So we've we've baked that into our outlook, the incremental cautiousness, but I and I call it solid balanced. I'm it feels pretty good.

Okay. Okay. And a quick follow-up for Al here. Al, the first half versus second half split, were you expecting more revenue than the first half versus historical trends? And with the pull forward in client devices, how should we think about gross margin percentage rates greater to some of the sort of cadence we've seen in the last couple of years?

Is there more of a sequential increase as we go through the year on account of the client devices pull forward? Thank you.

Yes. Sure, Samik. No, I would not expect that there's going to be much in the way of variation on gross margin, both, say Q2 as well as, full year, we would expect gross margins to be reasonably similar to 2024 levels. Now, what we have seen obviously in the first quarter was a pretty significant mix shift into client devices and frankly away from solutions. When you take those elements for the quarter, it explained almost all of the variation versus prior year and prior quarter as well.

I will also note, Samik, that our original outlook contemplated some level of like for like compression in gross margins. And while we didn't see a ton of that in q one, we are continuing to make space that you could see some of that. All in, when you add up all of those factors, Samik, I think you get back to something like twenty twenty four levels.

Okay. Got it. Great. Thank you. Thanks for taking the questions.

Thank you very much. Our next question comes from Harry Reid of Redburn. Harry, your line is now open.

Hi, good morning. Just wanted to ask on your hiring plans for the rest of the year. Do you expect to have a sequentially flat coworker base as you've seen in Q1? And then what are you currently seeing in terms of wage inflation in the market? And do you expect, if you see continued growth in gross profit, to see operating leverage like we've seen in the first quarter of this year?

Yeah. I'll start and then Al can jump in, and good morning. In terms of our plans for the year, we are managing expenses very prudently. And at the same time, we are continuing to invest in strategic hires. So I would just call it a balanced approach to our our coworker investments during the course of the year.

And when I say investments in strategic areas, you can think of areas like technology, particular sales, rules, particular industry rules, particular technology and digital rules. So we'll continue to invest behind that. In terms terms of wage inflation, we aren't really seeing anything of any note, across wage inflation at this point in time. And I didn't catch the third part of the question, Al, did you? Okay.

Oh, yeah. Just if you expect to see continued operating that can can you hear me?

Harry, so obviously yes. Can you hear us?

Obviously, what you what you saw in q one was pretty significant operating leverage. And that was partially a function, obviously, from our strong growth, but a little bit impacted as well by the pull forward. So I think what you can expect on the operating leverage front is in this environment of low single digit growth kind of remainder of the year, we wouldn't have quite the operating leverage we had in q one because there's a bit of a kind of asymmetry there between what we saw on growth in q one and then what kind of plays out for the rest of the year. So that being said, you know, like Chris said, we are cautiously optimistic that the solid underlying growth we've seen could play out and certainly that would lead to stronger operating leverage for the full year. So and then maybe Harry, I would just add to that on Chris' comments on the headcount.

She talked about continuing to invest in the business. That's super, super important. But really our playbook here has been, while we feel good about the potential inflection point and solid underlying demand, we want to be cautious in terms of our spending and our hiring overall to the extent that we if we did see a pullback, we would not want to be in a place where we have to more urgently pull back on expenses. So what you're seeing is kind of a careful thoughtful plotting of our expenses and our hiring to ensure that kind of we're balanced in this dynamic environment.

Okay. That makes sense. Thanks. And maybe just a very short follow-up. Is that incorporating why the guidance on EPS growth is the same as gross profit growth at this stage?

You've got it, Harry. That's spot on. It's just essentially with our really strong growth from Q1, you have a bit of kind of a deceleration and a bit of an asymmetry in your operating leverage.

CDW (CDW) Q1 2025 Earnings Call Transcript

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