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01/10 04:26
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary highlights strong financial performance, with record high revenue and earnings growth, exceeding guidance. The Q&A section confirms sustained demand and growth in key areas, such as Hyve and PCs, with positive expectations for Q4. Shareholder returns through dividends and buybacks further support a positive outlook. Despite some uncertainty in management's responses, overall sentiment is positive, indicating a likely stock price increase of 2% to 8%.
Consolidated Gross Billings $22.7 billion, growing 12% (10% in constant currency) year-over-year. Growth attributed to strong execution, differentiated go-to-market strategy, and a global end-to-end portfolio of products and services.
Non-GAAP Diluted Earnings Per Share $3.58, representing a 25% increase year-over-year. Growth driven by strong execution and exceeding the high end of guidance.
Gross Billings (excluding Hyve) Increased 9% year-over-year. Growth in gross profit and operating income by double digits.
Hyve Gross Billings Increased in the mid-30s year-over-year. ODM/CM gross billings increased 57% year-over-year, driven by hyperscaler investments in cloud infrastructure.
Software Gross Billings Increased 26% year-over-year, fueled by cybersecurity and infrastructure software.
PCs Gross Billings Increased double digits for three consecutive quarters, driven by a higher mix of AI PCs and the Windows 11 refresh cycle.
Gross Billings in Latin America and Asia Pacific and Japan Increased strong double digits year-over-year, driven by broad-based adoption of IT products and services.
U.S. Public Sector Gross Billings Increased low single digits year-over-year. Strength in state and local offset by softness in federal due to budget revaluation and changes to federal funding programs.
Net Revenue $15.7 billion, up 7% year-over-year. Growth driven by an increase in Hyve transactions and a higher mix of software within distribution.
Gross Profit $1.1 billion, increased 18% year-over-year. Gross margin as a percentage of gross billings was 5%, up 23 basis points year-over-year.
Non-GAAP Operating Income $475 million, increased 21% year-over-year. Operating margin as a percentage of gross billings was 2.09%, up 15 basis points year-over-year.
Non-GAAP Net Income $296 million, with a 25% increase in non-GAAP diluted EPS year-over-year.
Free Cash Flow $214 million, driven by strong earnings growth and slight improvement in cash conversion cycle.
Shareholder Returns $210 million returned to stockholders, including $174 million in share repurchases and $36 million in dividend payments.
AI PCs and Windows 11: Continued strong demand for PCs driven by a higher mix of AI PCs and the Windows 11 refresh cycle.
Hyve: Gross billings increased in the mid-30s year-over-year, with ODM/CM gross billings up 57%, driven by hyperscaler investments in cloud infrastructure.
Software: Gross billings increased by 26%, fueled by cybersecurity and infrastructure software.
AI Enablement Program: Launch of Destination AI program with three focus areas: Agentic AI, security for AI, and AI factory to support partners in adopting and scaling AI solutions.
Regional Growth: Strong double-digit growth in Latin America and Asia Pacific and Japan, driven by broad-based adoption of IT products and services.
SMB and MSPs: Broad-based strength in SMB and MSPs, growing substantially above the company average in most geographies.
U.S. Public Sector: Gross billings increased low single digits, with strength in state and local offset by softness in federal due to budget revaluation and funding changes.
Partner First Portal: Launch of a unified portal in North America to optimize partner experience, combining commerce, services, education, and community in a single digital environment.
Operational Efficiency: Improved cost-to-gross profit ratio to 58%, down from 60% in the first half of the year, reflecting better cost management.
Cybersecurity Vendor Expansion: Onboarded a cybersecurity vendor in North America, growing the business from zero to hundreds of millions of dollars within 18-24 months.
Data Center Infrastructure: Investments in new capabilities for data center infrastructure, including GPU and AI integrated racks, with substantial growth beyond the top customer.
Federal Sector Softness: Anticipated softness in the federal sector due to revaluation of budgets and expected changes to federal funding programs, which could impact growth in this segment.
Gross to Net Revenue Adjustment: Higher-than-expected reduction from gross billings to net revenue, driven by an increase in Hyve transactions and a higher mix of software within distribution, which could affect profitability.
Interest Expense: Increased interest expense and finance charges, up $11 million year-over-year, which could pressure net income.
Regulatory and Budgetary Dynamics: Dynamic environment in the U.S. public sector, particularly federal, with potential regulatory and budgetary challenges impacting growth.
Customer Concentration Risk: Dependence on top customers, though diversification efforts are underway, any adverse changes in these relationships could impact revenue.
Economic Uncertainty: Potential risks from broader economic uncertainties that could affect demand for IT products and services.
Gross Billings: For Q4, expected gross billings are in the range of $23 billion to $24 billion, representing an increase of approximately 11% at the midpoint.
Net Revenue: Anticipated net revenue for Q4 is in the range of $16.5 billion to $17.3 billion, translating to a gross to net adjustment of 28%.
Non-GAAP Net Income: Expected non-GAAP net income for Q4 is in the range of $281 million to $322 million.
Non-GAAP Diluted Earnings Per Share: Projected non-GAAP diluted EPS for Q4 is between $3.45 and $3.95, based on approximately 80.7 million weighted average shares outstanding.
Non-GAAP Effective Tax Rate: The anticipated non-GAAP effective tax rate for Q4 is approximately 23%.
Interest Expense: Expected interest expense for Q4 is $91 million.
PC Demand: PC demand is expected to remain strong, driven by the ongoing Windows 11 refresh cycle and a higher mix of AI PCs. The company believes it is in the mid- to late innings of the refresh cycle.
Hyve Growth: Hyve's capabilities and U.S. manufacturing footprint position it to support increased demand, with robust growth expected in Q4, particularly in server and networking rack builds.
AI and Data Center Investments: The company is investing in AI technologies and data center infrastructure, with programs like Destination AI and enhanced capabilities for GPU and AI-integrated racks. Substantial growth is anticipated beyond the top customer, with the second-largest customer expected to show similar strength in Q4.
Global Rollout of Partner First: The Partner First unified portal, which optimizes partner experience using AI, automation, and advanced analytics, will be rolled out globally in the coming quarters.
Dividend Payments: $36 million in dividend payments were made in the quarter, bringing the total return to stockholders for the year to $534 million.
Cash Dividend: The Board of Directors approved a cash dividend of $0.44 per common share, payable on October 31, 2025, to stockholders of record as of October 17, 2025.
Share Repurchases: $174 million was spent on share repurchases in the quarter, contributing to a total return to stockholders of $534 million for the year.
The earnings call summary highlights strong financial performance, significant market share gains in APJ and Europe, and robust growth in Hyve and AI investments. Despite concerns about component costs, no demand destruction was observed, and optimistic guidance was provided. The Q&A session revealed sustainable growth strategies and positive market sentiment, with Hyve's strong margin profile and strategic technology growth as key factors. Overall, the positive elements outweigh the concerns, suggesting a positive stock price movement.
The earnings call summary highlights strong financial performance, with record high revenue and earnings growth, exceeding guidance. The Q&A section confirms sustained demand and growth in key areas, such as Hyve and PCs, with positive expectations for Q4. Shareholder returns through dividends and buybacks further support a positive outlook. Despite some uncertainty in management's responses, overall sentiment is positive, indicating a likely stock price increase of 2% to 8%.
The earnings call summary indicates strong growth in strategic technologies and partner expansion, with a positive outlook for Q2 net revenue and non-GAAP net income. Shareholder returns are robust, with significant share repurchases and dividends. The Q&A section reveals cautious optimism due to macro uncertainties but highlights strong demand and growth in key areas. Despite some uncertainties, the overall sentiment is positive, with expectations of continued growth and financial health improvements. The commitment to a $1.1 billion free cash flow target and strong performance in APJ further support a positive outlook.
The earnings call revealed mixed results. While there was growth in gross billings and net revenue, issues like component delays and a decline in profit margins were concerning. The Q&A highlighted management's vague responses about Hyve's demand challenges, adding uncertainty. However, the dividend increase and share repurchases provide some positive sentiment. Overall, the combination of positive and negative factors suggests a neutral stock price movement in the short term.
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