IT solutions provider Connection (NASDAQ: CNXN) reported revenue ahead of Wall Street’s expectations in Q1 CY2026, with sales up 3% year on year to $721.9 million. Its non-GAAP profit of $0.77 per share was 24.2% above analysts’ consensus estimates.

Is now the time to buy CNXN? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Connection began 2026 with results that exceeded Wall Street’s expectations, supported by robust demand in its Enterprise and Business Solutions segments. Management credited growth in endpoint devices, networking, and cloud security, while disciplined pricing and proactive supply chain strategies helped navigate industry-wide memory shortages. CEO Timothy McGrath noted, “Our Business Solutions and Enterprise Solutions segments delivered strong growth and consistent execution,” emphasizing the company’s ability to offset a sharp decline in Public Sector sales due to a nonrecurring federal contract. The quarter’s positive momentum reflected the resilience and diversification of Connection’s business model.

Looking forward, Connection’s management expects continued demand for AI-enabled solutions and ongoing infrastructure modernization to be primary growth drivers. McGrath highlighted that, “Customers are all adopting—many of them are adopting—AI on-premise…because the inflection point around AI is so great that they can’t outrun it.” However, the team also acknowledged persistent supply chain uncertainty and memory price inflation as potential headwinds. CFO Thomas Baker added that while some backlog will clear in the coming quarters, pricing dynamics and customer purchasing patterns remain fluid and will influence growth rates throughout the year.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to strong execution in the Enterprise and Business Solutions segments, effective supply chain navigation, and increased demand for AI-driven technology.

• Enterprise demand accelerates: The Enterprise Solutions segment saw notable growth, fueled by increased orders for endpoint devices and modernization projects. Management cited a record backlog, indicating sustained customer appetite for advanced IT solutions and infrastructure upgrades.
• AI adoption boosts product mix: A surge in customer demand for AI chip-enabled devices contributed to a favorable sales mix. McGrath reported that nearly 70% of endpoint device purchases were AI-enabled, compared to less than 40% a year ago, reflecting a shift toward higher-value products.
• Proactive supply chain management: The company responded to industry-wide memory shortages by working closely with suppliers and customers, leading to advanced purchasing and inventory builds that helped mitigate disruption and position Connection for continued growth.
• Pricing and margin discipline: Despite inflationary pressures from component shortages, gross margin expanded due to effective pricing strategies and a shift toward more profitable products and customer segments. Management noted that price increases more than offset declines in unit volumes.
• Public Sector weakness offset: While Public Sector Solutions revenue declined sharply due to a nonrecurring federal contract, underlying performance was stable. Management expects this headwind to diminish as the year progresses, allowing other segments to drive overall growth.

Drivers of Future Performance

Connection expects ongoing demand for AI-enabled devices and IT modernization to sustain growth, while persistent supply chain and pricing volatility may moderate the pace of improvement.

• AI and modernization as growth levers: Management anticipates that adoption of AI-capable endpoint devices and continued data center upgrades will drive customer investment, as organizations seek improved security and operational efficiency. The PC refresh cycle, particularly for AI-enabled hardware, is expected to extend through most of 2026.
• Supply chain and pricing risks: Ongoing memory shortages and related price increases could affect both revenue mix and unit volumes. CFO Thomas Baker noted that while price inflation has boosted top-line results so far, the duration and magnitude of these trends remain uncertain and could introduce variability in revenue timing and customer purchasing behavior.
• Expense discipline and operating leverage: The company is maintaining a focus on cost control, with recent headcount reductions and lower marketing spend supporting margin expansion. However, management cautioned that SG&A may trend slightly higher relative to gross profit in future quarters, depending on investment needs and compensation dynamics.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will closely monitor (1) how quickly Connection can convert its record backlog into revenue, (2) the pace and sustainability of AI-enabled device adoption across key customer segments, and (3) the evolution of supply chain constraints and memory price inflation. The trajectory of expense management and the ability to offset Public Sector headwinds will also be critical to watch.

Connection currently trades at $65.32, up from $63.38 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

High Quality Stocks for All Market Conditions

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum - both boxes checked at the same time.

Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks - FREE. Get Our Strong Momentum Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.