Core Insights - CDW's fourth-quarter performance exceeded expectations, driven by strong growth in software, cloud, and professional managed services, leading to the highest gross margin of the year at 22.8% [3][5][7] Financial Performance - For Q4, CDW reported net sales of $5.5 billion, a 5% increase year over year, with gross profit ranging from $1.25 billion to $1.3 billion, reflecting a 9% increase [4][7] - Non-GAAP diluted EPS for the quarter was $2.57, up 4%, while non-GAAP operating income was approximately $502 million to $503 million, up roughly 1% [4][7] Market Dynamics - The company anticipates a low-single-digit growth in the U.S. IT market for 2026, targeting 200 to 300 basis points of outperformance [5][18] - CDW's revenue mix is shifting towards higher-margin categories such as cloud and SaaS, with netted down revenues representing 36.1% of gross profit in Q4, up from 35.8% year over year [13] Segment Performance - Double-digit growth was observed in software, cloud, and professional managed services, with cloud contributing approximately half of the gross profit growth for the quarter [3][9] - Small business sales grew by 18%, driven by cloud consumption and modernization of client devices, while corporate sales declined by 1% due to slowing hardware solutions [8][11] Operational Efficiency - Non-GAAP SG&A expenses increased by 14.6% year over year to $752 million, primarily due to higher commissions and performance-based expenses [14] - Adjusted free cash flow for Q4 was $418 million, with a full-year total of $1.09 billion, representing 82% of non-GAAP net income [15] Capital Allocation - CDW returned nearly $1 billion to shareholders in 2025 through dividends and share repurchases, exceeding its initial target of 50% to 75% of adjusted free cash flow [17] - The company plans to continue returning 50% to 75% of adjusted free cash flow to shareholders in 2026 while remaining active in M&A [17]