PC Connection (CNXN) Q2 2025 earnings summary

Executive summary

• Q2 2025 net sales increased 3.2% year-over-year to $759.7 million, marking the fifth consecutive quarter of growth, driven by strong demand in mobility, desktop, and advanced technology solutions, including data center refreshes and Windows 11 transitions.

• Gross profit reached a record $137.8 million, up 0.9% year-over-year, but gross margin declined to 18.1% due to changes in partner subscription licensing programs and reduced software agency fees.

• Net income for Q2 was $24.8 million, down 5.2% year-over-year, mainly due to lower gross margins and reduced interest income; diluted EPS was $0.97, down from $0.99.

• For the six months ended June 30, 2025, net sales grew 6.7% to $1.46 billion, with net income at $38.3 million, down from $39.3 million.

• Board declared a quarterly dividend of $0.15 per share, payable August 29, 2025.

Financial highlights

• Operating income for Q2 2025 was $30.9 million, flat year-over-year; adjusted EBITDA for the last twelve months was $122.5 million, down 2% year-over-year.

• Diluted EPS was $0.97, down $0.02 year-over-year; adjusted diluted EPS was $0.97, down $0.03.

• SG&A expenses rose to $106.9 million, but as a percentage of net sales, decreased to 14.1%.

• Cash and short-term investments totaled $346.1 million as of June 30, 2025; cash and equivalents at $186.7 million.

• Cash flow used in operations for H1 2025 was $26.1 million, driven by inventory and accounts receivable increases.

Outlook and guidance

• Management expects to meet cash requirements for the next twelve months and beyond through cash on hand, short-term investments, and operating cash flows.

• Expect less impact from subscription licensing program changes in the second half of the year and anticipate continued PC refresh cycle, strong demand for data center modernization, edge AI, and AI-enabled endpoints.

• Optimistic about outperforming U.S. IT market growth by 200 basis points for the remainder of 2025.

• Gross margins expected to remain stable, within 10–15 basis points of Q2 levels.

• Positive cash flow generation expected for the full year as inventory normalizes.