Connection's first quarter results exceeded Wall Street's expectations, with management highlighting a mix of factors driving performance. CEO Tim McGrath noted that "some customers accelerated purchases in an attempt to minimize the impact of tariffs, while others elected to delay purchases due to uncertainty with respect to the near-term economic environment." A notable shift toward notebooks and desktops supported growth, as device refresh initiatives gained momentum. The quarter also benefited from strong project-driven demand in key verticals like federal government, finance, and healthcare, while ongoing cost control efforts offset margin pressure from a changing product mix.
Is now the time to buy CNXN? Find out in our full research report (it’s free).
Connection (CNXN) Q1 CY2025 Highlights:
- Revenue: $701 million vs analyst estimates of $646 million (10.9% year-on-year growth, 8.5% beat)
- Adjusted EPS: $0.60 vs analyst estimates of $0.42 (44.6% beat)
- Adjusted EBITDA: $22.84 million vs analyst estimates of $17.9 million (3.3% margin, 27.6% beat)
- Operating Margin: 2.5%, in line with the same quarter last year
- Market Capitalization: $1.7 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Connection’s Q1 Earnings Call
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Adam Tindle (Raymond James) asked about patterns in customer buying—specifically which verticals accelerated versus delayed purchases. CEO Tim McGrath explained that federal, finance, and healthcare customers drove growth, while other segments showed more caution.
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Adam Tindle (Raymond James) sought clarity on expected gross profit growth given the strong backlog. McGrath projected mid- to high-single-digit revenue growth for the year and noted that most cost savings from recent initiatives will be realized starting in the next quarter.
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Adam Tindle (Raymond James) inquired about the timing of SG&A savings. CFO Tom Baker said savings will begin to show in Q2, with a goal of keeping SG&A growth below revenue growth through the year.
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Anthony Lebiedzinski (Sidoti) questioned how tariff-related buying and macroeconomic concerns affected demand trends throughout the quarter. McGrath replied that demand was light early in the quarter but strengthened in March due to pre-tariff buying and increased customer comfort with economic conditions.
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Anthony Lebiedzinski (Sidoti) asked about the company's appetite for acquisitions. McGrath stated that Connection remains ready for tuck-in acquisitions that expand solutions or introduce new markets, but current interest rates impact deal opportunities.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will be monitoring (1) the pace of customer adoption for AI-enabled devices and edge computing solutions, (2) the realization of cost savings from recent efficiency initiatives and their impact on margins, and (3) the progression of large government and enterprise IT projects from backlog to revenue. We will also track how ongoing tariff developments and economic conditions influence customer purchasing patterns.
Connection currently trades at $67.10, up from $62.04 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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