IT solutions provider Connection (NASDAQ:CNXN) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 10.9% year on year to $701 million. Its non-GAAP profit of $0.60 per share was 44.6% above analysts’ consensus estimates.
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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: 2.1%, in line with the same quarter last year
- Free Cash Flow was -$54.1 million, down from $55.68 million in the same quarter last year
- Market Capitalization: $1.62 billion
Company Overview
Starting as a small computer products seller in 1982 and evolving into a Fortune 1000 company, Connection (NASDAQ:CNXN) is a technology solutions provider that helps businesses and government agencies design, purchase, implement, and manage their IT infrastructure and systems.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $2.87 billion in revenue over the past 12 months, Connection is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.
As you can see below, Connection struggled to increase demand as its $2.87 billion of sales for the trailing 12 months was close to its revenue five years ago. This shows demand was soft, a tough starting point for our analysis.
Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Connection’s recent performance shows its demand remained suppressed as its revenue has declined by 3.2% annually over the last two years. 
This quarter, Connection reported year-on-year revenue growth of 10.9%, and its $701 million of revenue exceeded Wall Street’s estimates by 8.5%.
Looking ahead, sell-side analysts expect revenue to grow 4.5% over the next 12 months. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.
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Operating Margin
Connection was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.4% was weak for a business services business.
Looking at the trend in its profitability, Connection’s operating margin might fluctuated slightly but has generally stayed the same over the last five years, which doesn’t help its cause.
In Q1, Connection generated an operating profit margin of 2.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Connection’s EPS grew at a weak 1% compounded annual growth rate over the last five years. This performance was better than its flat revenue, but we take it with a grain of salt because its operating margin didn’t expand and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.
In Q1, Connection reported EPS at $0.60, up from $0.50 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Connection’s full-year EPS of $3.35 to grow 4.2%.
Key Takeaways from Connection’s Q1 Results
We were impressed by how significantly Connection blew past analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good quarter with some key areas of upside. The stock remained flat at $62.30 immediately following the results.
Indeed, Connection had a rock-solid quarterly earnings result, but is this stock a good investment here? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.