CDW Touts AI Factory Demand, Recurring Revenue Push at JPMorgan Conference

Key Points

• AI demand is moving from experimentation to production, with CDW saying customers now want help deploying AI “safely, economically, and at scale.” The company is seeing growing demand for full-stack solutions, including infrastructure, governance, security, and managed services.
• CDW is pushing more recurring revenue through “as-a-service” offerings such as GPU-as-a-service and Device as a Service. Management said these AI and services engagements can generate higher-margin, repeatable revenue over time.
• Cost savings and capital returns remain key themes as CDW’s “Geared for Growth” plan targets $100 million in run-rate savings by 2027 and $200 million by 2028. Executives also reiterated confidence in double-digit EPS growth and said share repurchases remain attractive, with $1.4 billion of capacity available.

CDW NASDAQ: CDW executives said customers are moving beyond artificial intelligence experimentation and are increasingly asking for help deploying AI “safely, economically, and at scale,” during a JPMorgan fireside chat featuring Chair and CEO Christine Leahy and CFO Albert Miralles.

Leahy said the shift toward AI plays into CDW’s role in helping customers manage technology complexity across infrastructure, software, cloud, security and services. She said AI deployments require more than access to a model or product, pointing to the need for servers, networking, data storage, governance, cloud security and change management to work together.

“CDW is uniquely positioned with our full stack capabilities and the ecosystem of diverse customers that we have to deliver against that,” Leahy said.

AI Demand Moving Toward Production

Leahy said customers are increasingly progressing AI spending and modernization efforts, citing strength in infrastructure and software. She pointed to “AI factories” as one area where CDW is working with enterprises, large companies and neoclouds on full-stack solutions, including design work and procurement. In some cases, those engagements lead to managed services or GPU-as-a-service offerings.

Asked about private AI factory opportunities, Leahy said customer engagements vary widely, with some projects lasting one month and others three or six months. She said CDW is seeing repeatability in certain verticals as architectures designed with partners become patterns that can be reused.

“We are absolutely at the point where the solutions that we’re bringing to market are solutions that we can replicate and deliver at a higher and higher margin,” Leahy said.

Leahy said AI engagements are increasing demand for services such as readiness assessments, design, security, governance, deployment, orchestration and managed services. She said AI gives CDW an opportunity to attach a higher level of services at higher margins, with more recurring revenue opportunities.

GPU-as-a-Service and Recurring Revenue

Leahy discussed CDW’s partnership with Boost Run, describing it as strategic because CDW is implementing Boost Run’s neocloud while also gaining access to AI compute capacity that can be offered to customers during a supply-constrained period.

She said the arrangement can help customers move workloads into production faster by providing another option alongside cloud capacity and on-premises infrastructure.

Leahy also said CDW is seeing more opportunities across its broader business to provide technology “as a service.” She cited CDW’s work for the 2028 Olympics as an example of Device as a Service, saying CDW will prepare, deliver, manage and secure devices used at the games.

In AI, Leahy said CDW can generate revenue through upfront services, resale, managed services and consumption. She said customers are looking for help optimizing where workloads should run based on cost, performance, scalability, compliance and security.

Supply Constraints and Pricing

Leahy said CDW’s scale and relationships with partners help it support customers during supply-constrained periods. She said CDW has been able to provide customers with information about price increases and inventory availability, allowing some customers to place orders ahead of increases.

Miralles said the pricing and supply environment was volatile early in the year, with OEM-by-OEM movements in pricing. He said conditions became more orderly as the company exited the first quarter and moved into the second quarter.

“We continue to work closely with both universes, populations, that is partners as well as customers, to figure out how do we supply, how do we get the supply, how do we fulfill demand,” Miralles said.

Miralles said first-quarter pull-forward demand was about $100 million. He added that the company’s backlog build from the first quarter into the second quarter was even higher than that, and that CDW expects some additional pull-forward in the second quarter.

Geared for Growth Targets Operating Leverage

Executives also discussed CDW’s “Geared for Growth” initiative, which is aimed at simplifying operations, modernizing workflows and embedding AI across the company. CDW has targeted $100 million in run-rate savings by 2027 and $200 million by 2028, with roughly half reinvested in the business.

Leahy said the program should not be viewed simply as a cost-cutting effort. She said the goal is to improve experiences and outcomes for customers, partners and employees while turning productivity into operating leverage and shareholder value.

Miralles said key areas include improving workflow and processes, such as quote-to-cash, using data and AI in the supply chain, optimizing CDW’s own technology spending and reassessing the operating model for areas that can be centralized or handled more efficiently.

Miralles said CDW is focused on returning its SG&A-to-gross-profit ratio to its “sweet spot” of 55% to 56%. He said the second quarter is an inflection point for savings, with more benefits expected in the back half of the year and into 2027.

Leahy said reinvestment will focus on areas such as sales capabilities, tools and technical industry capabilities that can produce revenue and expand margins.

Software Demand, Services Timing and Capital Returns

Leahy said CDW is seeing an uptick in software demand as companies explore multiple large language models and look for help avoiding excessive spending across models. She said customer approaches to AI vary widely depending on company size, industry and use case, with organizations using combinations of cloud, on-premises, colocation and different AI models.

Asked about slower services growth in the quarter, Leahy said the issue was tied to customer timing decisions. She said hardware had shipped and been received but had not yet been implemented, meaning related services should follow. She said there was “nothing structural from a demand perspective.”

Miralles said CDW’s recent reporting segment changes reflect its verticalization strategy and the scale of certain markets. He said the newly disclosed financial services segment includes sophisticated buyers focused on AI, inferencing, security, latency and compliance.

Looking ahead, Miralles said CDW’s investments in its go-to-market engine, services business, verticalization strategy and Geared for Growth program support confidence in returning to double-digit EPS growth. He also said CDW views its stock as “dislocated” and considers share repurchases compelling. Miralles said CDW had $1.4 billion of repurchase capacity after a recent $1 billion authorization increase and expects to use it in 2026 and 2027.

About CDW NASDAQ: CDW

CDW NASDAQ: CDW is a leading provider of information technology products and integrated solutions for business, government, education and healthcare customers. The company sources and resells hardware and software from major technology vendors and packages those products with professional services, managed services and lifecycle support. Its offerings span IT infrastructure, cloud and data center solutions, cybersecurity, networking, unified communications, endpoint devices, and software licensing and procurement services designed to simplify IT operations for customers.

CDW combines a broad product portfolio with consultative sales, implementation and technical support capabilities.

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