PC Connection, Inc.

Q2 net sales were $854 million, up 12.4% year over year. Gross billings rose 14% to $1.2 billion, gross profit increased 14.3% to a record $157.5 million, and gross margin expanded 30 basis points to 18.4%. Operating income increased 39.2% to a record $43 million, operating margin improved to a record 5%, net income rose 33.8% to a record $33.2 million, and diluted EPS was $1.31, up 35.1% or $0.34 year over year. For segments, Business Solutions sales were $343.9 million (+17.3%), Public Sector Solutions sales were $140.5 million (flat), and Enterprise Solutions sales were $369.6 million (+13.4%). Management said Q3 revenue will likely be down slightly sequentially versus Q2 and, on a year-over-year basis, likely in the high single digits; they also said demand remains solid through Q3 and July started strong.

Tim McGrath framed the quarter as evidence of a broader shift from AI experimentation to enterprise-wide AI adoption, with customers seeking integrated solutions across infrastructure, cloud, software, cybersecurity, AI, and services. He emphasized Connection’s TSX organization and Helix center as part of its ability to help customers deploy AI and modernize environments with confidence. His tone was upbeat but measured: he repeatedly noted strong pipeline, elevated backlog, and durable long-term trends, while acknowledging short-term variability from procurement timing, supply constraints, and macro conditions.

Tom Baker highlighted operating leverage and disciplined expense control: SG&A rose 7.1% to $114.5 million, but declined to 13.4% of sales, helping operating income reach a record $43 million. He cited lower interest income of $2.5 million versus $3.2 million last year, an effective tax rate of 27.2%, and adjusted EBITDA of $144.5 million on a trailing 12-month basis versus $122.5 million a year ago. On capital allocation, he noted a quarterly dividend of $0.20 per share paid in the quarter, a newly declared $0.27 per share dividend payable August 28, $81.2 million remaining under the repurchase program, and $340.7 million in cash, cash equivalents, and short-term investments. He also said first-half operating cash flow was negative $49.5 million due to working capital investments, including $61.5 million higher inventory and $80.6 million higher receivables, partly offset by $39.3 million higher payables.

Analysts focused on monthly trends, pricing versus unit dynamics, backlog, and how pull-ins and supply-chain issues affect near-term results. Management said April was very strong, May was softer, and June was strong again, with July starting well; they also said Q3 should be slightly down sequentially because Q2 benefited from Microsoft year-end timing and some customer pull-ins. On pull-ins, Baker estimated they were not 10% of the business and likely in the mid-single digits or a bit lower overall, while noting some backlog will ship in Q3 and some will roll into Q4. On working capital, he said receivables are elevated because about 40% of revenue came in June, and inventory should come down by year-end, possibly toward the $150 million range sequentially.