Connection (CNXN) Q3 2026 Earnings Call: Record Sales and AI Infrastructure Demand
Source Tradingkey
Key Takeaways
- Connection reported record Q3 2026 net sales of $874.3 million, up 23.3% year over year, while gross billings rose 19.4% to $1.3 billion.
- Gross profit reached a record $161.9 million, up 16.7%, but gross margin declined 110 basis points to 18.5% due to customer and product mix, large project rollouts, and a lower contribution from software revenue recognized on a net basis.
- Operating income increased 35.4% to $41 million, and operating margin improved 40 basis points to 4.7%. Diluted EPS rose 27.8% to $1.24.
- Enterprise Solutions net sales grew 27.4% to a record $407.5 million and ended the quarter with a record backlog, supported by technology modernization and demand for AI-ready infrastructure.
- Management expects Q4 sales to decline approximately 3% to 4% sequentially, consistent with the historical Q3-to-Q4 pattern, with SG&A expected to move similarly.
- For 2027, management expects AI-related investment to remain supportive, although endpoint demand may decline slightly from 2026 as most of the device upgrade cycle is now complete.
Key Financial Data
| Metric | Q3 2026 | Year-over-year change | Commentary |
|---|---|---|---|
| Net sales | $874.3 million | +23.3% | Record result; growth across all product categories |
| Gross billings | $1.3 billion | +19.4% | Up from $1.1 billion |
| Gross profit | $161.9 million | +16.7% | Record result |
| Gross margin | 18.5% | -110 bps | Lower netted-down software contribution and customer mix |
| SG&A | $120.9 million | +11.5% | Higher variable compensation, marketing costs and platform investments |
| SG&A as a percentage of sales | 13.8% | -150 bps | Reflected operating scale and efficiency |
| Operating income | $41 million | +35.4% | Operating margin increased to 4.7% from 4.3% |
| Net income | $31.5 million | +27.2% | Effective tax rate was 27.6% |
| Diluted EPS | $1.24 | +27.8% | Increased by $0.27 |
| Trailing 12-month adjusted EBITDA | $155.2 million | +26% | Record level, versus $122.7 million a year earlier |
| Cash, cash equivalents and short-term investments | $343.3 million | — | Quarter-end liquidity |
Disclaimer: For information purposes only. Past performance is not indicative of future results.
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