PC Connection Reports Strong Q1 2026 Results as AI Demand Supports Enterprise and Business Growth
PC Connection Reports Strong Q1 2026 Results as AI Demand Supports Enterprise and Business Growth
PC Connection, Inc. (NASDAQ: CNXN), also known as Connection, reported a stronger first quarter for 2026, supported by rising demand from enterprise and business customers, improved profitability, and growing interest in artificial intelligence-related technology projects.
The company said net sales for the quarter ended March 31, 2026 reached $721.9 million, up 3.0% from the same period last year. Gross billings rose 4.3% to about $1.0 billion, while gross profit increased 4.3% to $132.7 million. Gross margin improved to 18.4%, up 20 basis points year over year. Net income climbed 27.8% to $17.2 million, or $0.68 per diluted share. Adjusted diluted EPS was $0.77.
AI Projects Move From Testing to Real Business Use
Management highlighted that demand was especially solid in the Enterprise Solutions and Business Solutions segments. President and CEO Timothy McGrath said customers are moving from AI experimentation into AI production, which helped support stronger purchasing activity during the quarter. This suggests that more organizations are now turning early AI trials into practical technology investments across infrastructure, devices, software, and services.
Enterprise Solutions Leads Growth
The strongest segment was Enterprise Solutions, where net sales increased 16.3% year over year to $346.5 million. Gross billings rose 10.3% to $439.6 million, and gross profit jumped 18.7% to $50.2 million. Gross margin also improved to 14.5%, showing that larger corporate customers continued investing in technology upgrades and advanced IT solutions.
Business Solutions Also Shows Solid Momentum
The Business Solutions segment posted net sales of $275.6 million, up 6.6% from the prior year. Gross billings increased 9.3% to $446.0 million. Gross profit rose to $67.5 million, though gross margin slipped to 24.5%. The results show that small and medium-sized business customers remained active buyers of IT products and services despite a still-careful spending environment.
Public Sector Remains a Weak Spot
Not every part of the business grew. The Public Sector Solutions segment saw net sales fall 31.0% to $99.8 million. Gross billings declined 21.2% to $135.7 million, and gross profit dropped 23.4% to $15.0 million. However, gross margin improved to 15.0%, up 140 basis points from the prior year. This points to weaker sales volume, but better profitability on the business the company did win.
Product Mix Shows Stable Device Demand
Notebook, mobility, and desktop sales remained the biggest part of Connectionâs revenue mix, accounting for 49% of net sales. Software represented 11% of net sales and increased 6% year over year. Networking sales rose 8%, while servers and storage sales declined 10%. These figures suggest customers are still buying core workplace technology while selectively investing in software, networking, and infrastructure.
Cost Control Supports Profit Growth
Connection also benefited from tight expense management. Selling, general, and administrative expenses decreased slightly to $109.5 million from $109.9 million a year earlier. As a share of net sales, SG&A improved to 15.2%, compared with 15.7% in the same quarter of 2025. The company also recorded $3.1 million in severance expenses tied to cost reduction initiatives.
Cash Position Remains Strong
The company ended the quarter with $411.4 million in cash, cash equivalents, and short-term investments, up from $406.7 million at the end of 2025. During the quarter, Connection repurchased 41,987 shares for about $2.4 million. The board also declared a quarterly dividend of $0.20 per share, payable on May 29, 2026, to shareholders of record as of May 12, 2026.
Outlook: AI, Cloud, Security, and IT Modernization in Focus
Connectionâs latest results show a company benefiting from several important technology trends. Businesses are modernizing infrastructure, adopting AI tools, improving cybersecurity, and refreshing workplace devices. While public sector demand remains uneven, the companyâs stronger enterprise and business performance helped offset that weakness.
The main takeaway is that Connection entered 2026 with improving profitability, a healthy balance sheet, and clear exposure to rising AI-driven IT spending. Investors will likely watch whether the company can keep this momentum going, especially if AI production projects continue to move from early planning into larger deployments.
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