10-Q · April 29, 2026
Connection (CNXN) reported a strong Q1 2026 with net sales of $721.9 million, surpassing consensus estimates of $696.1 million. Diluted EPS came in at $0.68, exceeding expectations of $0.62, while gross margin improved…
Earnings analysis · 10-Q
CNXN earnings analysis
Filed July 29, 2026 · Our reading of the company's report
The latest report
Connection delivered a strong Q2, with revenue up 12.4% year over year to $854.0 million, gross margin up 30 basis points to 18.4%, operating margin up 90 basis points to 5.0%, and diluted EPS of $1.31. Enterprise and…
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Connection delivered a strong Q2, with revenue up 12.4% year over year to $854.0 million, gross margin up 30 basis points to 18.4%, operating margin up 90 basis points to 5.0%, and diluted EPS of $1.31. Enterprise and Business Solutions drove growth, while Public Sector was flat in the quarter but remained weak on a first-half basis due to lower federal sales. The key offset is cash conversion: six-month operating cash flow was negative $49.5 million as receivables and inventory increased, although liquidity remained $340.7 million across cash and short-term investments. No quantitative forward revenue or EPS guidance was included in the 10-Q.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $1.31
What stood out
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Revenue accelerated to $854.0 million
Q2 net sales rose $94.3 million, or 12.4% year over year, to $854.0 million. Revenue also increased $132.0 million from $722.0 million in Q1 2026.
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Margin leverage drove profit growth
Gross margin expanded 30 basis points year over year to 18.4%, while operating margin expanded 90 basis points to 5.0%. Operating income increased $12.1 million to $43.0 million.
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EPS increased to $1.31
Diluted EPS was $1.31, up from $0.68 in Q1 2026 and $0.97 in Q2 2025. Net income increased $8.4 million year over year to $33.2 million.
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Commercial segments delivered double-digit growth
Business Solutions revenue grew $50.7 million, or 17.3%, to $343.9 million, and Enterprise Solutions revenue grew $43.6 million, or 13.4%, to $369.6 million.
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Public Sector margin improved on flat sales
Public Sector gross profit increased $1.9 million to $23.2 million despite flat revenue of $140.5 million, with segment gross margin rising 130 basis points to 16.5%.
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Cash and investments totaled $340.7 million
Liquidity remained substantial, with $123.7 million of cash and cash equivalents plus $217.0 million of short-term investments at June 30, 2026.
What to watch
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Working-capital outflow worsened operating cash flow
Six-month operating cash flow was negative $49.5 million, versus negative $26.2 million a year earlier, as accounts receivable consumed $80.6 million and inventory consumed $61.5 million of cash.
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Cash conversion cycle lengthened by 5 days
The cash conversion cycle rose to 49 days at June 30, 2026 from 44 days a year earlier. Management attributed inventory cash use partly to purchases for customer rollouts and securing supply.
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Business mix compressed segment margin
Business Solutions gross margin declined 50 basis points year over year to 23.0%, driven by a shift toward lower-margin notebooks/mobility, even as segment revenue rose $50.7 million.
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Federal demand pressured first-half Public Sector
First-half Public Sector revenue fell $44.8 million, or 15.7%, to $240.4 million; federal sales declined $48.9 million, or 57.4%, because several large prior-year orders did not repeat.
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Supply and tariff costs remain a margin risk
Management cites an ongoing DRAM and NAND shortage and tariff exposure; higher inventory costs could pressure margins. Inventory-related operating cash use increased by $23.1 million year over year to $61.5 million in the first half.
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No formal risk-factor update in the 10-Q
Item 1A did not present new or amended risk factors, instead referring investors to the 2025 Form 10-K. The filing nevertheless identifies macroeconomic trends, inflation, and interest rates as factors that could substantially affect operating cash flow.
Management's outlook
The 10-Q provides no quantitative revenue or EPS outlook. Management expects cash on hand, short-term investments, and operating cash generation to fund requirements for at least the next 12 months.
Earlier filings 4
10-K · February 24, 2026
Connection positions itself as a full‑service IT solutions provider focused on hardware, software and growing services (cloud, cybersecurity, AI) via its CNXN Helix effort (launched in 2023) and GlobalServe in‑country…
10-Q · April 30, 2025
PC Connection reported Q1 net sales of $701,046,000 (up from $632,025,000 a year ago) and diluted EPS of $0.51 (vs $0.50 a year ago). Gross profit was $127,311,000 (≈18.2% of sales) and operating income was $14,522,000,…
10-K · February 24, 2025
PC Connection reported a modest decline in revenue and EPS for the fiscal year ending December 31, 2024, with annual revenues of $2.86 billion and EPS of $3.51. This reflects a challenging market characterized by…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.