CDW Corp. (CDW (CDW)) shares took a beating Wednesday after the IT solutions provider served up a mixed bag of first-quarter results. The company beat revenue expectations handily, but an earnings miss and margin pressure sent the stock to a 52-week low.

Mixed Q1 Results Pressure CDW Shares

CDW reported adjusted earnings of $2.28 per share, just a penny shy of the $2.29 analysts were looking for. That might not sound like much, but in the world of earnings, a miss is a miss. Revenue, however, was a different story: net sales jumped 9.2% year over year to $5.68 billion, topping the consensus estimate of $5.48 billion. On a constant-currency basis, sales rose 8.4%.

The company said demand stayed strong across data storage, servers, networking products, software, and notebooks and mobile devices. Customer spending trends improved across all business segments compared with the first quarter of 2025, even with economic and geopolitical uncertainty still hanging around.

Margins Face Pressure Amid AI Investments

Gross profit rose 6% year over year to $1.19 billion, but gross margin narrowed to 21% from 21.6%. The culprit? A shift in sales mix toward hardware, which tends to be lower-margin. CFO Al Miralles acknowledged that margins took a hit from that mix shift.

Selling and administrative expenses climbed 7% to $814 million, driven by higher compensation costs, performance-based incentives, employee-related expenses, and investments tied to artificial intelligence initiatives. Adjusted operating income inched up 1.8% to $452 million, but the adjusted operating margin slipped to 8% from 8.5% a year earlier.

Chair and CEO Christine A. Leahy highlighted ongoing supply and pricing challenges, saying, “Customers also navigated memory supply and pricing constraints, which reshaped budget priorities in this quarter.”

Segment Performance Shows Broad-Based Demand

Despite the margin squeeze, demand was broad-based. Commercial segment revenue rose 9.6% to $3.57 billion, supported by growth in financial services, corporate, and healthcare customers. Government segment sales increased 4.6% to $633 million, while education revenue rose 2.5% to $675 million. The “Other” segment, which includes operations in the U.K. and Canada, posted net sales of $803 million, up 17.9% from a year earlier.

The board also approved a quarterly cash dividend of 63 cents per share, payable June 10 to shareholders of record as of May 25, 2026.

CEO Highlights AI Deployment Opportunity

Leahy said customers are increasingly moving from AI experimentation into production environments and are relying on partners with integration, governance, and lifecycle expertise to scale deployments. She added that CDW expects to outperform U.S. IT market growth by 200 to 300 basis points on a constant-currency basis.

But she also warned about broader uncertainty, saying, “It does not factor in potential wild cards, such as recessionary conditions or meaningful changes in known ongoing exogenous factors, which include elevated geopolitical risks and more extreme dislocations in pricing and supply.”

Earnings Call Insights

On the earnings call, management sounded very optimistic about CDW’s positioning in AI infrastructure, enterprise orchestration, and full-stack IT solutions. Executives repeatedly emphasized strong customer demand, durable AI trends, healthy backlog levels, and confidence in long-term growth opportunities. The company also projected confidence in its AI-driven “Geared for Growth” initiative and future efficiency gains.

However, the tone became notably more measured when discussing the second half of 2026. Management repeatedly referenced uncertainty around pricing volatility, supply chain disruptions, macroeconomic risks, geopolitical concerns, and the possibility of demand normalization after customers accelerated purchases earlier in the year. Executives avoided sounding overly bullish and consistently stressed “prudence,” “discipline,” and limited visibility into the back half.

CDW Stock Slides After Earnings Release

CDW shares were down 19.98% at $109.47 at the time of publication on Wednesday, hitting a new 52-week low. The market clearly focused on the earnings miss and margin pressure, even as revenue impressed. Investors will be watching to see if the cautious tone on the second half proves prescient or overly conservative.