CDW (CDW) Morgan Stanley Technology, Media & Telecom Conference 2026 summary

Business environment and outlook

• 2023 and 2024 were challenging due to macroeconomic factors, elongated decision cycles, and public sector funding delays, but a return to growth is expected in 2025 with continued momentum into 2026.

• Execution improvements and go-to-market changes have already shown positive results, with a focus on disciplined working capital use and sustainable cash flow.

• Customers across segments are cautious but engaged, prioritizing budgets rather than cutting them, with small business and healthcare showing resilience and growth.

• State and local government spending remains strong, while federal spending is more volatile due to shutdowns and funding cycles; education is expected to return to growth in 2026.

• International operations have been more resilient and consistent than anticipated, benefiting from diversification and strong execution.

Technology trends and product demand

• PC demand remains meaningful, driven by Windows 11 refresh, generic refresh cycles, and growing interest in AI PCs, though memory price increases may mute demand in the second half of the year.

• Infrastructure spending has been delayed as customers optimize cash flow and await clarity on AI needs, but rising memory prices and AI requirements are now catalyzing renewed engagement.

• AI adoption is still in early stages but is expected to be more pervasive than cloud, with increasing customer interest in both cloud and on-premise AI workloads.

• Hybrid environments are emerging as the logical choice for corporates balancing cost and capacity for AI workloads.

Strategic initiatives and financial management

• Verticalization strategies, especially in healthcare and financial services, have driven outperformance and are being replicated across other sectors.

• Netted down revenues, primarily from cloud and SaaS, have grown to 36% of gross profit and are expected to continue outpacing overall sales growth, supporting higher gross margins.

• Operating leverage is expected to improve in 2026, with a focus on structural savings, operational streamlining, and reinvestment, aided by AI-driven efficiencies.

• Capital allocation remains balanced between buybacks and M&A, with recent emphasis on buybacks due to attractive stock valuation, while maintaining readiness for strategic acquisitions.

• Strong cash flow discipline and supply chain sophistication position the company to excel in dynamic environments and capitalize on market opportunities.