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1. Company Snapshot

1.a. Company Description

PC Connection, Inc., together with its subsidiaries, provides various information technology (IT) solutions.The company operates through three segments: Business Solutions, Enterprise Solutions, and Public Sector Solutions.It offers IT products, including computer systems, data center solutions, software and peripheral equipment, networking communications, and other products and accessories, as well as provides services related to design, configuration, and implementation of IT solutions.


The company markets its products and services through its websites comprising connection.com, connection.com/enterprise, connection.com/publicsector, and macconnection.com.It serves small to medium-sized businesses (SMBs) that include small office/home office customers; government and educational institutions; and medium-to-large corporate accounts through outbound telemarketing and field sales, and marketing programs targeted to specific customer populations, as well as through digital, web, and print media advertising.The company was founded in 1982 and is headquartered in Merrimack, New Hampshire.

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1.b. Last Insights on CNXN

Negative drivers behind PC Connection's recent performance include a decline in gross margin, partly due to increased competition and pricing pressure in the IT solutions market. The company's Q2 2025 earnings call transcript revealed a decrease in gross margin percentage, which may be attributed to the company's efforts to maintain market share. Additionally, the company's IT Superhero Awards program, while a positive initiative, may not have had a significant impact on its financial performance. Furthermore, the recent earnings release showed a slight decrease in earnings per share compared to the same period last year, indicating a slowdown in growth.

1.c. Company Highlights

2. Disappointing EPS, Strong Gross Margin Expansion

The company's third quarter 2025 results were mixed, with a record gross profit of $138.6 million and a 90-basis-point expansion in gross margin to 19.6%, but earnings per share (EPS) came in at $0.97, below estimates of $1.01. The Business Solutions segment performed well, with gross profit up 7.8% and gross margin reaching a record 26.5%. The company's financial highlights also included a 2.9% increase in SG&A expenses and a 4.3% operating income margin.

Publication Date: Nov -04

📋 Highlights
  • Record Gross Profit: Q3 2025 gross profit reached $138.6 million, with a 90-basis-point margin expansion to 19.6%.
  • Business Solutions Growth: Segment gross profit rose 7.8%, achieving a record 26.5% margin.
  • Public Sector Margin Improvement: Despite timing/funding challenges, gross margin jumped 230 bps to 17.2%.
  • Cash Position: Ended quarter with $399.2 million in cash, cash equivalents, and short-term investments.
  • 2026 Outlook: Mid-single-digit sales growth expected, with data center, cloud, and cyber segments driving expansion.

Segment Performance

The Public Sector Solutions segment experienced a decline due to timing and funding issues, but gross margin increased 230 basis points to 17.2%. According to Tim McGrath, "the company is seeing strong engagement from customers who are modernizing their infrastructure and investing in AI-driven technologies." The company's backlog is building due to customer-driven delays, and it is seeing good momentum in its Enterprise and Business Solutions segments.

Outlook and Valuation

The company is forecasting sales in the mid-single digits for the next quarter and is positioned to outperform the U.S. IT market by 200 basis points for the remainder of the year. With a current P/E Ratio of 18.07 and an EV/EBITDA of 11.95, the market appears to be pricing in a moderate growth trajectory. The company's strong cash position, with $399.2 million in cash, cash equivalents, and short-term investments, provides flexibility for potential acquisitions.

Growth Prospects

The company expects continued growth in data center, cloud, and cyber segments, with AI PC potentially leveling off. For 2026, the company is forecasting mid-single digit growth, with the potential to exceed that as things normalize. Analysts estimate next year's revenue growth at 4.5%, which is in line with the company's guidance.

3. NewsRoom

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American Century Companies Inc. Sells 32,175 Shares of PC Connection, Inc. $CNXN

Dec -03

Source: defenseworld.net

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PC Connection, Inc. $CNXN Shares Sold by Geode Capital Management LLC

Nov -29

Source: defenseworld.net

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3,065 Shares in PC Connection, Inc. $CNXN Bought by Commonwealth of Pennsylvania Public School Empls Retrmt SYS

Nov -29

Source: defenseworld.net

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PC Connection (NASDAQ:CNXN) Sets New 52-Week Low – What’s Next?

Nov -23

Source: defenseworld.net

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Connection Named a Forbes America's Dream Employer 2026

Nov -20

Source: businesswire.com

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PC Connection, Inc. (CNXN) Q3 2025 Earnings Call Transcript

Oct -29

Source: seekingalpha.com

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Connection Announces Winners of the 5th Annual IT Superhero Awards

Oct -21

Source: businesswire.com

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PC Connection, Inc. (CNXN) Q2 2025 Earnings Call Transcript

Jul -31

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.33%)

6. Segments

Enterprise Solutions

Expected Growth: 3%

PC Connection's Enterprise Solutions segment growth is driven by increasing demand for IT infrastructure, cybersecurity, and cloud services from large and mid-sized businesses. Additionally, the company's strategic partnerships with leading technology vendors, such as Cisco, HP, and Microsoft, contribute to its growth. Furthermore, the company's expertise in providing customized solutions and services to meet the unique needs of its clients also fuels its growth.

Business Solutions

Expected Growth: 1.5%

PC Connection's 1.5% growth in Business Solutions is driven by increasing demand for IT infrastructure, cybersecurity, and cloud services from small to medium-sized businesses. Additionally, the company's strategic partnerships with leading technology vendors, such as Microsoft and Cisco, have expanded its product offerings and enhanced its competitive position.

Public Sector Solutions

Expected Growth: 2.5%

Public Sector Solutions from PC Connection, Inc. growth driven by increasing government IT spending, digital transformation initiatives, and cybersecurity concerns. Strong demand for cloud-based services, data analytics, and IT infrastructure modernization also contribute to the 2.5% growth rate.

7. Detailed Products

IT Products

PC Connection, Inc. offers a wide range of IT products including desktops, laptops, tablets, smartphones, servers, storage systems, and networking equipment from top manufacturers.

Software Solutions

The company provides a variety of software solutions including operating systems, productivity software, security software, and virtualization software from leading vendors.

Cloud Services

PC Connection, Inc. offers cloud services such as infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS) from top cloud providers.

IT Services

The company provides a range of IT services including consulting, implementation, and managed services to help businesses design, deploy, and manage their IT infrastructure.

Cybersecurity Solutions

PC Connection, Inc. offers a range of cybersecurity solutions including threat detection, incident response, and penetration testing to help businesses protect themselves from cyber threats.

Data Center Solutions

The company provides data center solutions including data center infrastructure, virtualization, and consolidation to help businesses optimize their data center operations.

8. PC Connection, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

PC Connection, Inc. faces moderate threat from substitutes, as customers have limited alternatives for IT products and services. However, the company's focus on providing customized solutions and strong relationships with suppliers helps mitigate this threat.

Bargaining Power Of Customers

PC Connection, Inc. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's customized solutions and strong relationships with suppliers make it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

PC Connection, Inc. has a moderate level of dependence on its suppliers, particularly for IT products. However, the company's strong relationships with suppliers and its ability to negotiate prices help mitigate this threat.

Threat Of New Entrants

The IT industry has high barriers to entry, including significant capital requirements and the need for specialized expertise. This makes it difficult for new entrants to compete with established players like PC Connection, Inc.

Intensity Of Rivalry

The IT industry is highly competitive, with many established players competing for market share. PC Connection, Inc. faces intense competition from rivals, which can lead to pricing pressure and reduced margins.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 0.58%
Debt Cost 3.95%
Equity Weight 99.42%
Equity Cost 7.35%
WACC 7.33%
Leverage 0.58%

11. Quality Control: PC Connection, Inc. passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
LSI Industries

A-Score: 5.7/10

Value: 3.9

Growth: 6.3

Quality: 6.0

Yield: 3.0

Momentum: 9.5

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Avnet

A-Score: 5.6/10

Value: 6.9

Growth: 5.2

Quality: 3.2

Yield: 6.0

Momentum: 4.0

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
Climb Global Solutions

A-Score: 5.4/10

Value: 3.9

Growth: 8.2

Quality: 6.1

Yield: 2.0

Momentum: 8.0

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
PC Connection

A-Score: 5.1/10

Value: 5.5

Growth: 5.8

Quality: 5.9

Yield: 2.0

Momentum: 2.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
ScanSource

A-Score: 4.6/10

Value: 7.3

Growth: 4.6

Quality: 5.6

Yield: 0.0

Momentum: 4.0

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
Snap One

A-Score: 3.9/10

Value: 6.9

Growth: 6.7

Quality: 2.9

Yield: 0.0

Momentum: 5.0

Volatility: 1.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

58.26$

Current Price

58.26$

Potential

-0.00%

Expected Cash-Flows