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    CNXN
    Earnings call· Jun 2026(Q2 FY26)

    PC CONNECTION Q2 FY26 earnings call CNXN

    Jul 29, 2026 Source

    Executive summary

    PC Connection, Inc. Q2 FY26 — Record Sales and Profit Driven by AI Adoption

    PC Connection delivered record Q2 FY26 results, driven by strong demand for AI-ready infrastructure and modern workplace technologies. The company is successfully navigating supply chain dynamics and varied customer purchasing patterns across its diversified segments. Management remains confident in sustained profitable growth, underpinned by long-term technology trends and strategic investments in AI and digital transformation.

    Highlights

    5

    • Record net sales of $854 million, up 12.4% year-over-year.

    • Record gross profit of $157.5 million, up 14.3% year-over-year, with gross margin expanding 30 basis points to 18.4%.

    • Operating income increased 39.2% to a record $43 million, with operating income margin improving to 5%.

    • Diluted EPS increased 35.1% to $1.31.

    • Business Solutions segment net sales increased 17.3% to a record $343.9 million, with backlog at its highest level in three years.

    Concerns

    4

    • May revenue was "a little bit soft" compared to strong April and June.

    • Some customers delayed ordering during Q2 due to fixed IT budget cycles.

    • Supply chain constraints and other macroeconomic conditions still exist, causing some uncertainty.

    • Geopolitical tariffs and cost pressures continue to impact manufacturers.

    Guidance & targets

    3
    CategoryTargetConfidence
    FY26 US IT Market Outperformance
    outperform the US IT market by 200 basis points
    high materiality
    High
    Q3 FY26 Revenue Growth (Year-over-year)
    high single digits
    medium materiality
    Medium
    Q3 FY26 Revenue (Sequential)
    down a little bit
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Business Solutions
    Delivered an outstanding quarter with record net sales and gross profit. Gross margin was 23% compared to 23.5% in prior year, reflecting a higher mix of endpoint devices and changes in customer mix. Demand remained broad-based with double-digit growth across endpoint devices, netcom, and storage. Some customers pulled forward demand in advance of price increases.
    Gross Profit: $79.1 millionGross Billings: $496.1 millionGross Billings Growth: 16.7%Backlog: highest level in three years
    		$343.9 million17.3%—23%
    Public Sector Solutions
    Net sales consistent with prior year. Gross margins expanded 130 basis points to 15.5% reflecting a favorable customer mix. Government agencies prioritize modernization initiatives focused on cybersecurity, cloud adoption, and operational efficiency, evaluating AI for mission outcomes.
    Gross Billings: $197.1 millionGross Billings Growth: 1.7%
    		$140.5 millionconsistent with prior year—15.5%
    Enterprise Solutions
    Delivered an outstanding quarter with strong demand for endpoint devices, software, servers, and services. Gross margin expanded 30 basis points to 14.9%, benefiting from favorable product mix and strong growth in services. Experienced greatest impact from supply chain dynamics, with some customers accelerating purchases and others delaying due to fixed IT budget cycles. Customers made strategic inventory commitments.
    Gross Profit: $55.2 millionGross Profit Growth: 15.8%Gross Billings: $477 millionGross Billings Growth: 17%Backlog: record level
    		$369.6 million13.4%—14.9%

    Operational metrics

    35
    Net sales
    $854 million12.4% increase year-over-year
    Q2 FY26

    Record net sales.

    Notebooks, mobility, and desktops growth
    19.5%year-over-year
    Q2 FY26
    Software growth
    15%
    Q2 FY26
    Networking growth
    11.5%
    Q2 FY26
    Gross billings
    $1.2 billionincreased 14% compared to $1 billion in prior year quarter
    Q2 FY26

    Record gross billings.

    Gross profit
    $157.5 millionincreased 14.3%
    Q2 FY26

    Record gross profit.

    Gross margin
    18.4%expanded by 30 basis points
    Q2 FY26
    SG&A
    $114.5 millionincreased 7.1% year over year
    Q2 FY26
    SG&A as % of net sales
    13.4%down 70 basis points year over year
    Q2 FY26

    Reflects continued focus on efficiency and scale.

    Operating income
    $43 millionincreased 39.2% year-over-year
    Q2 FY26

    Record operating income, demonstrating strong operating leverage.

    Operating income margin
    5%improved from 4.1% last year
    Q2 FY26

    Record operating income margin.

    Interest income
    $2.5 millioncompared to $3.2 million last year
    Q2 FY26

    Primarily a function of lower cash balances and interest rates.

    Effective tax rate
    27.2%down from 27.3% in the prior year
    Q2 FY26
    Net income
    $33.2 millionincreased 33.8%
    Q2 FY26

    Record net income, reflecting strong underlying earnings performance.

    Diluted earnings per share
    $1.31increase of 35.1%, or $0.34 compared to the prior year
    Q2 FY26
    Adjusted EBITDA
    $144.5 millioncompared to $122.5 million a year ago, an increase of 18%
    TTM

    Resulting from improved earnings.

    Cash used from operations
    $49.5 million
    H1 FY26
    Increase in inventory
    $61.5 million
    H1 FY26

    Part of working capital investments.

    Increase in accounts receivable
    $80.6 million
    H1 FY26

    Part of working capital investments.

    Increase in accounts payable
    $39.3 million
    H1 FY26

    Partially offset increases in inventory and accounts receivable.

    Cash used in investing activities
    $6.4 million
    Q2 FY26
    Cash used in financing activities
    $13.6 million
    Q2 FY26
    Cash, cash equivalents, and short-term investments
    $340.7 million
    Q2 FY26

    Strong liquidity position.

    Quarterly dividend per share
    $0.20
    Q2 FY26

    Paid during the quarter.

    Declared dividend per share
    $0.27
    Q3 FY26

    Board of directors declared.

    Remaining stock repurchase authorization
    $81.2 million
    as of call date

    Under existing stock repurchase program.

    Retail net sales growth
    31%year-over-year
    Q2 FY26

    Retail remained one of the strongest performing verticals.

    Retail gross profit growth
    29%
    Q2 FY26
    Healthcare net sales growth
    15%year-over-year
    Q2 FY26
    Healthcare gross profit growth
    14%year over year
    Q2 FY26
    Financial services net sales growth
    23%year over year
    Q2 FY26
    Financial services gross profit growth
    17%year over year
    Q2 FY26
    Manufacturing net sales growth
    27%year over year
    Q2 FY26

    Reflecting broad base demand.

    Manufacturing gross profit growth
    8%year over year
    Q2 FY26
    Endpoint devices unit growth
    3%
    Q2 FY26

    For notebooks, mobility, and desktops.

    Industry KPIs

    7
    MetricValueDetails
    Segment revenue growthBusiness Solutions: $343.9 million; Public Sector Solutions: $140.5 million; Enterprise Solutions: $369.6 millionUSD
    Design wins product cycle ramps—
    Order visibility backlog policy—
    Recurring software services mix—
    Supply demand imbalance lead times—
    End market revenue mix organic growthRetail: 31%; Healthcare: 15%; Financial Services: 23%; Manufacturing: 27%%
    Operating margin incremental leverage5%%

    Orderbook & backlog

    3
    Business Solutions backloghighest level in three yearsQ2 FY26
    Enterprise Solutions backlogrecordQ2 FY26
    Overall backlogelevated relative to the past few yearsQ2 FY26

    Deals & partnerships

    1
    DellAward recognition

    Recognized as Dell's 2026 North America Channel Services Sales Partner of the Year.

    Risks & headwinds

    5
    Pricing and supply dynamicsQ2 FY26

    discussed last quarter

    Mitigation: teams worked closely with customers and strategic partners to manage supply constraints, optimize purchasing decisions, and maintain business continuity

    Customer purchasing patterns variabilityQ2 FY26

    some customers accelerated purchases and others took a more measured approach

    Mitigation: diversified customer base, broad partner ecosystem, and disciplined execution enabled successful navigation

    Fixed IT budget cycles leading to delayed orderingQ2 FY26

    some customers delayed ordering during the second quarter because of fixed IT budget cycles

    Mitigation: Enterprise Solutions ended the quarter with a record backlog, combined with continued demand for infrastructure modernization to support enterprise AI adoption, positions well for continued momentum

    Supply chain constraints and other macroeconomic conditionsnear term

    some uncertainty that supply chain constraints and other macroeconomic conditions still exist

    Mitigation: continue to work closely with our partners and customers to minimize those impacts; long term technology trends remain intact

    Geopolitical tariffs and cost pressuresongoing

    ongoing geopolitical tariffs and cost pressures

    Mitigation: manufacturers continue to focus on automation, operational resilience, productivity improvement, and supply chain optimization

    What to watch in Q3 FY26

    5

    Q3 FY26 Revenue Growth (Year-over-year)

    Q3 FY26
    CurrentQ2 FY26 net sales up 12.4% YoY
    Targethigh single digits

    Why it matters

    Indicates the company's ability to maintain growth momentum despite sequential revenue decline expectations.

    I think our sequentially will probably be down a little bit, I would say, in revenues next quarter compared to this quarter and probably in the, you know, year-on-year and like the high single digits in terms of growth.

    Q&A highlights

    5

    What were the monthly revenue trends within Q2, and how has July started?

    April and June were strong, while May was soft. July started strong and is continuing with solid momentum. Q3 revenue is expected to be down sequentially from Q2 but up high single digits year-over-year.

    “What we saw, Anthony, is we had a really strong April and a reasonably strong June, and May was, frankly, a little bit soft. I'm not quite sure why that happened that way, but that's kind of the way it rolled through. ... You asked about July. And July did start and is going strong with solid momentum.”

    asked by Anthony Lebiedzinski · answered by Thomas Baker

    2 min read5 chapters

    Detailed Narrative

    01

    AI Adoption and Digital Transformation

    PC Connection is observing a fundamental shift towards enterprise-wide AI adoption, moving beyond mere experimentation. The company's strategy focuses on delivering full-stack technology solutions, integrating infrastructure, cloud, software, cybersecurity, AI, and services. Through its Technical Solutions Organization (TSX) and Helix, its center for AI and applied robotics, Connection is helping customers deploy and scale AI while accelerating broader digital transformation initiatives.

    02

    Strategic Investments and Market Trends

    The company continues to invest across networking, storage, server, software, and modern workplace technologies, which are seen as foundational for future AI deployment. Key long-term technology trends driving the business include the ongoing PC refresh cycle through 2026, data center modernization for complex data-intensive workloads, and the expansion of technical services to manage complex technology environments. These trends are contributing to healthy pipeline growth and significant opportunities.

    03

    Supply Chain Navigation and Customer Dynamics

    During the quarter, PC Connection successfully navigated ongoing pricing and supply dynamics by working closely with customers and partners. While some customers accelerated purchases in anticipation of price increases or to secure supply, others delayed ordering due to fixed IT budget cycles. The company's diversified customer base and broad partner ecosystem enabled it to manage these varied purchasing patterns across all three sales segments.

    04

    Vertical Market Performance

    The company experienced strong growth across its key vertical markets. Retail net sales grew 31% year-over-year, driven by investments in networking, storage, security, and AI-ready endpoints. Healthcare net sales increased 15% as organizations modernized technology environments. Financial services saw a 23% increase in net sales, prioritizing cybersecurity and infrastructure. Manufacturing net sales rose 27%, reflecting broad demand for endpoint devices and data center technologies enabling enterprise AI.

    05

    Operational Efficiency and Capital Allocation

    PC Connection demonstrated strong operating leverage, with SG&A as a percentage of net sales decreasing 70 basis points year-over-year to 13.4%. This reflects a continued focus on efficiency balanced with targeted investments for future growth. The company maintains a disciplined approach to capital allocation, returning capital to shareholders through dividends and share repurchases, while ending the quarter with a strong liquidity position of $340.7 million in cash and investments.

    AI-generated summary of the company’s earnings call. Not investment advice.