CNXN earnings analysis
What we found in CNXN's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
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.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- 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.
- 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.
- 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.
- 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.
- 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%.
- 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.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $1.31
- Gross margin
- 18.4%
- Operating margin
- 5.0%
- Segment
- Enterprise Solutions revenue: $369.6 million, up $43.6 million or 13.4% year over year
- Segment
- Business Solutions revenue: $343.9 million, up $50.7 million or 17.3% year over year
- Segment
- Public Sector Solutions revenue: $140.5 million, unchanged year over year
What they said about what is next.
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.
The filing reads better than the one before it.
What came before.
- 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…
- 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. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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