Q2 2026 TD SYNNEX Corp Earnings Call

June 25, 2026

Speaker #1: Good morning. My name is Tracy, and I will be your conference operator today. I'd like to welcome everyone to the TD SYNNEX second-quarter fiscal 2026 earnings call.

Operator: Good morning. My name is Tracy, and I will be your conference operator today. I'd like to welcome everyone to the TD SYNNEX Q2 fiscal 2026 earnings call. Today's call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. At this time, for opening remarks, I would like to pass the call over to Nate Fradell, Head of Investor Relations at TD SYNNEX. Nate, you may begin.

Speaker #1: Today's call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Speaker #1: At this time, for opening remarks, I would like to pass the call over to Nate Fridell, Head of Investor Relations at TD SYNNEX. Nate, you may begin.

Speaker #2: Good morning, everyone, and welcome to TD SYNNEX's fiscal 2026 second-quarter earnings call. Joining me on today's call are Chief Executive Officer Patrick Zammit and Chief Financial Officer David Jordan.

Liz Nguyen: Good morning, everyone, and welcome to TD SYNNEX's fiscal 2026 Q2 earnings call. Joining me on today's call are Chief Executive Officer, Patrick Zammit, and Chief Financial Officer, David Jordan. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, including statements about our strategy, demand, plans and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our financial expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release, in the Form 8-K we filed today, in the Risk Factors section of our Form 10-K, and our other reports and filings with the SEC. We do not intend to update any forward-looking statements.

Nate Friedel: Good morning, everyone, and welcome to TD SYNNEX's fiscal 2026 Q2 earnings call. Joining me on today's call are Chief Executive Officer, Patrick Zammit, and Chief Financial Officer, David Jordan. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, including statements about our strategy, demand, plans and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our financial expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release, in the Form 8-K we filed today, in the Risk Factors section of our Form 10-K, and our other reports and filings with the SEC. We do not intend to update any forward-looking statements.

Speaker #2: Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the Federal Securities Laws. Including predictions, estimates, projections, or other statements about future events, including statements about our strategy, demand, plans in positioning, growth, cash flow, capital allocation, and stockholder return.

Speaker #2: As well as our financial expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release, in the Form 8-K we filed today, in the Risk Factors section of our Form 10-K, and in our other reports and filings with the SEC.

Speaker #2: We do not intend to update any forward-looking statements. Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K, available on our investor relations website at ir.tdsynnex.com.

Liz Nguyen: Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our investor relations website, ir.tdsynnex.com. This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission. I will now turn the call over to Patrick.

Nate Friedel: Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our investor relations website, ir.tdsynnex.com. This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission. I will now turn the call over to Patrick.

Speaker #2: This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission. I will now turn the call over to Patrick.

Speaker #3: Thank you, Nate. And good morning, everyone. We delivered a record quota with broad-based strength across distribution and Hive, building on the momentum we have carried out of recent quarters.

Patrick Zammit: Thank you, Nate, and good morning, everyone. We delivered a record quarter with broad-based strength across distribution and Hyve, building on the momentum we have carried out of recent quarters. Our results reflect consistent execution against our strategy and deepening relationships within the macro environment that is becoming increasingly complex. Rising component costs, supply constraints, geopolitical uncertainty, and a once-in-a-generation AI build-out are challenging businesses to move faster and with more precision. That complexity is exactly where TD SYNNEX adds the most value, and you can see it in the demand across our business. AI is becoming a growing portion of our mix and is driving demand across both businesses, from hyperscale infrastructure build-outs to enterprise data center modernization, to AI-capable devices in our endpoint mix. We are capturing that growth across technologies, regions, and customers. With that context, I start with our distribution performance.

Speaker #3: Our results reflect consistent execution against our strategy and deepening relationships within a macro environment that is becoming increasingly complex. Rising component costs, supply constraints, geopolitical uncertainty, and the once-in-a-generation AI buildout are challenging businesses to move faster and with more precision.

Speaker #3: That complexity is exactly where TD SYNNEX adds the most value. And you can see it in the demand across our business. AI is becoming a growing portion of our mix.

Speaker #3: And it's driving demand across both businesses. From hyperscale infrastructure buildouts to enterprise data center modernization, to AI-capable devices in our endpoint mix. And we are capturing that growth across technologies, regions, and customers.

Speaker #3: With that context, I start with our distribution performance. Distribution had an excellent quota. Non-GAAP gross billings of 23.4 billion dollars up 22% year over year.

Patrick Zammit: Distribution had an excellent quarter. Non-GAAP gross billings of $23.4 billion, up 22% year over year. Strength was broad-based across every region and the portfolio, with international growth and operating margin expansion as a real bright spot. We believe the combination of our global reach, end-to-end portfolio, and specialized go-to-market is very difficult to replicate. This differentiated value proposition, coupled with strong execution against our strategy, has driven new customer wins, new expanded vendor partnerships, and a large share of wallet with our most strategic relationships, all of which have proven to be incremental growth drivers. Three pillars of our strategy are driving our growth. First, we meet our customers however they want to engage in a true omnichannel motion. Digital when they want self-serve speed, human when they want expertise and enablement, and we move seamlessly between the two in real time.

Speaker #3: Strength was broad-based across every region and the portfolio. With international growth and operating margin expansion, as a real bright spot. We believe the combination of our global reach, end-to-end portfolio, and specialized go-to-market is very difficult to replicate.

Speaker #3: This differentiated value proposition, coupled with strong execution against our strategy, has driven new customer wins and new expanded vendor partnerships and a large share of wallet with our most strategic relationships.

Speaker #3: All of which have proven to be incremental growth drivers. Three pillars of our strategy are driving our growth. First, we meet our customers or whether they want to engage in a true omnichannel motion.

Speaker #3: Digital when they want self-serve speed; human when they want expertise and enablement. We move seamlessly between the two in real time. Our digital capabilities are enabled by Partner First, which we've built for depth and speed at scale to deliver a connected experience for our partners.

Patrick Zammit: Our digital capabilities are enabled by PartnerFirst, which we've built for depth and speed at scale to deliver a connected experience for our partners. As one of the world's largest distributors, we have the data and intelligence to support our partners in identifying demand opportunities. We're applying machine learning, generative, and agentic AI to the data we gather across our ecosystem to personalize each partner's experience, their navigation, their dashboards, and customized recommendations and opportunities we surface. This reduces friction and drives higher conversion, stronger attachment, and faster cycle times. Second, we segment our commercial teams in groups of specialists. We break our customer base into strategic tiers, and in some cases, we reallocate resources monthly based on what each tier needs. We use the same discipline on the technology and vendor side. The impact shows up in the data.

Speaker #3: As one of the world's largest distributors, we have the data and intelligence to support our partners in identifying demand opportunities. We're applying machine learning, generative and agentic AI to the data we gather across our ecosystem to personalize each partner's experience.

Speaker #3: We have navigation, dashboards, and customized recommendations and opportunities we surface. This reduces friction and drives higher conversion and stronger attachment and faster cycle times.

Speaker #3: Second, we segment our commercial teams in groups of specialists. We break our customer base into strategic tiers and in some cases we reallocate resources monthly based on what each tier needs.

Speaker #3: We use the same discipline on the technology and vendor side. The impact shows up in the data. SMB customers are growing well above market and some of our most strategic accounts have surfaced billions of dollars of untapped opportunity.

Patrick Zammit: SMB customers are growing well above market, and some of our most strategic accounts have surfaced billions of dollars of untapped opportunities. Third, we invest in enablement. We accelerate our customers' time to market by equipping them with advanced training, certifications, and technical expertise tailored to each customer's technologies and segments. We provide labs to test the solutions. We believe that our partnership sharpens their capabilities and drives faster adoption of solutions. When we can help customers become more successful, they stay with us and grow with us. Europe is a clear proof point. Our EMEA team competes head-to-head against pure-play specialists, runs digital and high-touch motions in parallel, and is weighted towards high growth technologies and segments. The share gains there are structural, and it's the same model we've extended across our entire distribution business globally.

Speaker #3: Third, we invest in enablement. We accelerate our customers' time to market by equipping them with advanced training, certifications, and technical expertise tailored to each customer's technologies and segment.

Speaker #3: We provide labs to test the solutions. We believe that our partnership sharpens their capabilities and drives faster adoption of solutions. When we can help customers become more successful, they stay with us and grow with us.

Speaker #3: Europe is a clear proof point. Our EMEA team competes head-to-head against pure-play specialists, runs digital and high-touch motions in parallel, and is weighted towards high-growth technologies and segments.

Speaker #3: The share gains there are structural. And it's the same model we've extended across our entire distribution business globally. These are the reasons why earlier this quarter HPE selected TD SYNNEX as one of just two global distribution partners across its full networking, cloud, and AI portfolio.

Patrick Zammit: These are the reasons why earlier this quarter, HP selected TD SYNNEX as one of just two global distribution partners across its full networking, cloud, and AI portfolio, including the assets from the Juniper acquisition. It unifies our reach and meaningfully expands our relationship with one of the most strategic vendors in the industry. These are the kinds of outcomes our model produces. Hyve also had an excellent quarter. Non-GAAP gross billings of $5.5 billion, up 117% year-over-year, driven by new programs with existing customers. We have built a suite of services to support hyperscalers' digital infrastructure deployments, which is key to our success. Coupled with strong execution against core pillars of our strategy, we've earned expanded program opportunities with some of our most strategic relationships, which has driven the triple-digit growth we have experienced year to date.

Speaker #3: Including the assets from the Juniper acquisition, it unifies our reach and meaningfully expands our relationship with one of the most strategic vendors in the industry.

Speaker #3: These are the kinds of outcomes our model produces. Hive also had an excellent quota. Non-GAAP gross billings of $5.5 billion, up 117% year over year, driven by new programs with existing customers.

Speaker #3: We have built a suite of services to support hyperscalers' digital infrastructure deployments, which is key to our success. Coupled with strong execution against the core pillars of our strategy, we've earned expanded program opportunities with some of our most strategic relationships, which has driven the triple-digit growth we have experienced year-to-date.

Speaker #3: Hive's North Star is simple: to be the partner of choice that hyperscalers trust to design, build, and deploy their data center infrastructure globally.

Patrick Zammit: Hyve's North Star is simple: to be the partner of choice that hyperscalers trust to design, build, and deploy their data center infrastructure globally. That starts with design and co-design, from board manufacturing to full rack integration and other key components, helping customers accelerate time to deployment. Beyond the build, we offer supply chain services that are designed to support our customers across the full data center life cycle. Ahead of demand, we aim to secure key components to give our customers supply assurance in a complex environment. Throughout the life cycle, we manage the spare parts and final components to help ensure our customers have what they need when they need it. As we mentioned last quarter, we have secured at least one program with each of the top five US-based hyperscalers.

Speaker #3: That starts with design and co-design. From board manufacturing to full rack integration, and other key components. Helping customers accelerate time to deployment. Beyond the build, we offer supply chain services that are designed to support our customers across the full data center lifecycle.

Speaker #3: Ahead of demand, we aim to secure key components to give our customers supply assurance in a complex environment. Throughout the lifecycle, we manage the spare parts and final components to help ensure our customers have what they need, when they need it.

Speaker #3: As we mentioned last quarter, we have secured at least one program with each of the top five US-based hyperscalers. We have begun the early stages of the ramp with our third, and the programs with the additional two hyperscalers are on track.

Patrick Zammit: We have begun the early stages of the ramp with our third, and the programs with the additional two hyperscalers are on track with ramp expected in late fiscal year 2026 or early fiscal year 2027. We also issued an equity warrant to Amazon, a longstanding customer of ours, structured to grow in value as our programs together expand. Across these partnerships, we are being selected as a manufacturing and supply chain partner for multiple aspects of our customers' digital infrastructure build-outs. To support the future growth and needs of our customers, we're in the process of expanding our manufacturing facilities by more than 1 million square feet in several locations throughout the US, with current plans to add more.

Speaker #3: We've ramped, expected in late fiscal year '26 or early fiscal year '27. We also issued an equity warrant to Amazon, a longstanding customer of ours, structured to grow in value as our programs together expand.

Speaker #3: Across these partnerships, we are being selected as a manufacturing and supply chain partner for multiple aspects of our customers' digital infrastructure build-outs. To support the future growth and needs of our customers, we're in the process of expanding our manufacturing facilities by more than 1 million square feet in several locations throughout the U.S.

Speaker #3: We currently have plans to add more. Hive is quickly becoming the go-to partner for U.S. hyperscalers seeking a consolidated approach to the design and build of their digital infrastructure, paired with full lifecycle supply chain services.

Patrick Zammit: Hyve is quickly becoming the go-to partner for US hyperscalers seeking a consolidated approach to the design and build of their digital infrastructure that is paired with full lifecycle supply chain services. This full set of capabilities is key to winning new programs and onboarding new customers, ultimately enabling Hyve to grow at a premium to market. In closing, there are three key things I'm focused on as we move through the year. First, partnering with vendors and our customers through the current demand environment. The macro backdrop creates complexity and challenges that we aim to solve, but the underlying demand signals currently remain solid. We believe the shift to AI-capable devices is just beginning. Enterprises are prioritizing the modernization of their data centers, and AI is driving incremental investment across the stack. We are watching unit elasticity carefully, but the net revenue impact from higher ASPs has been positive.

Speaker #3: This full set of capabilities is key to winning new programs and onboarding new customers, ultimately enabling Hive to grow at a premium to the market.

Speaker #3: In closing, there are three key things I'm focused on as we move through the year. First, partnering with vendors and our customers through the current demand environment.

Speaker #3: The macro backdrop creates complexity and challenges that we aim to solve, but the underlying demand signals currently remain solid. We believe the shift to AI-capable devices is just beginning.

Speaker #3: Enterprises are prioritizing the modernization of their data centers, and AI is driving incremental investment across the stack. We are watching unit elasticity carefully, but the net revenue impact from higher ASPs has been positive.

Speaker #3: Second, our execution at Hive. We are bringing new capacity online, investing in engineering capabilities ahead of the ramp, and standing up new programs alongside expansion at existing customers.

Patrick Zammit: Second, our execution at Hyve. We are bringing new capacity online, investing in engineering capabilities ahead of the ramp, and standing up new programs alongside expansion at existing customers. The bar I'm holding the team to is best-in-class service. That's what's gotten us here, and it's what wins the next program. Third, growing operating profit faster than billings. David will cover the details, but this is the metric that matters most to me. We aim to convert top-line growth into margin expansion and shareholder value. I now pass it to David to go over the financial performance and outlook.

Speaker #3: The bar I'm holding the team to is best-in-class service. That's what's gotten us here, and it's what wins the next program. Third, growing operating profit faster than billings.

Speaker #3: David will cover the details. But this is the metric that matters most to me. We aim to convert top-line growth into margin expansion and shareholder value.

Speaker #3: I'll now pass it to David to go over the financial performance and outlook.

Speaker #2: Thanks, Patrick. And good morning, everyone. This was a record quarter for TD SYNNEX. What's encouraging is that both of our businesses continue to perform extremely well extending the growth trajectory that we've been on.

David Jordan: Thanks, Patrick, and good morning, everyone. This was a record quarter for TD SYNNEX. What's encouraging is that both of our businesses continue to perform extremely well, extending the growth trajectory that we've been on. Starting with the top line, our non-GAAP gross billings for Q2 was $28.9 billion, increasing 33% year over year, or 32% year over year in constant currency and exceeding the high end of our guidance range. Non-GAAP operating income was $615 million, an increase of 49% year over year, or 48% year over year in constant currency. Non-GAAP earnings per share was $4.85, an increase of 62% year over year and above the high end of our guidance range. GAAP operating income was $519 million, an increase of 58% year over year.

Speaker #2: Starting with the top line, our non-GAAP gross billings for the second quarter was 28.9 billion dollars. Increasing 33% year over year for 32% year over year in constant currency.

Speaker #2: And exceeding the high end of our guidance range. Non-GAAP operating income was $615 million, an increase of 49% year over year, or 48% year over year in constant currency.

Speaker #2: Non-GAAP earnings per share was $4.85. An increase of 62% year over year and above the high end of our guidance range. GAAP operating income was 519 million.

Speaker #2: GAAP earnings per share increased 58% year over year to $4.15, representing an 88% year-over-year increase, and came in above the high end of our guidance range.

David Jordan: GAAP earnings per share was $4.15, an increase of 88% year over year and above the high end of our guidance range. As we grow, we're focused on creating operating leverage so that earnings consistently grows faster than the top line. Driving that conversion is central to our strategy, how we allocate resources and manage costs. Turning to quarterly performance for each business. Distribution delivered non-GAAP gross billings of $23.4 billion, increasing 22% year over year and well ahead of plan. Our end-to-end portfolio is indexed toward faster-growing technologies, which is positioning us to grow at a premium to market. Endpoint Solutions gross billings increased 13% year over year, supported by strong growth in PCs driven by higher ASPs coupled with mid-single-digit growth in units. Advanced Solutions gross billings increased 31% year over year, driven by continued strength in infrastructure and security.

Speaker #2: As we grow, we're focused on creating operating leverage so that earnings consistently grow faster than the top line. Driving that conversion is central to our strategy, how we allocate resources, and how we manage costs.

Speaker #2: Turning to quarterly performance for each business. Distribution delivered non-GAAP gross billings of 23.4 billion dollars. Increasing 22% year over year and well ahead of plan.

Speaker #2: Our end-to-end portfolio is indexed toward faster growing technologies which is positioning us to grow at a premium to market. Endpoint Solutions gross billings increased 13% year over year supported by strong growth in PCs, driven by higher ASPs coupled with mid-single-digit growth in units.

Speaker #2: Advanced Solutions gross billings increased 31% year over year, driven by continued strength in infrastructure and security. Distribution non-GAAP operating income was $434 million.

David Jordan: Distribution non-GAAP operating income was $434 million, increasing 36% year over year, and non-GAAP operating margin as a percentage of gross billings was 1.9%, an improvement of 19 basis points year over year. We estimate the distribution gross margin benefited by approximately five to 10 basis points during the quarter, driven by incremental profit from strategic inventory purchasing. Turning to Hyve. Hyve generated non-GAAP gross billings of $5.5 billion, increasing 117% year over year and ahead of expectations, with both manufacturing and supply chain services contributing. Manufacturing represented approximately two-thirds of Hyve in the quarter, and gross billings growth increased more than the total business, primarily driven by increased volumes with our existing customer base. Supply chain services represented approximately one-third of Hyve in the quarter, and growth was driven by component demand supporting our customers' infrastructure deployments.

Speaker #2: Increasing 36% year over year and non-GAAP operating margin as a percentage of gross billings was 1.9%. An improvement of 19 basis points year over year.

Speaker #2: We estimate the distribution gross margins benefited by approximately 5 to 10 basis points during the quarter, driven by incremental profit from strategic inventory purchasing.

Speaker #2: Turning to Hive. Hive generated non-GAAP gross billings of 5.5 billion dollars. Increasing 117% year over year and ahead of expectations. With both manufacturing and supply chain services contributing.

Speaker #2: Manufacturing represented approximately two-thirds of Hive in the quarter. And gross billings growth increased more than the total business. Primarily driven by increased volumes with our existing customer base.

Speaker #2: Supply chain services represented approximately one-third of Hive in the quarter, and growth was driven by component demand, supporting our customers' infrastructure deployments. Margins and overall mix of supply chain services can vary quarter to quarter.

David Jordan: Margins and overall mix of supply chain services can vary quarter to quarter. Hyve non-GAAP operating income was $181 million, increasing 89% year over year, and non-GAAP operating margin as a percentage of gross billings was 3.3%, decreasing 50 basis points year over year, primarily driven by mix. We're laser-focused on continuing to make investments in both businesses that will position them to continue to grow at a premium to market over time. Shifting to cash flow and capital allocation. Free cash flow consumption for the quarter was approximately $330 million. Given the accelerated growth in Hyve, we're continuing to invest in working capital to support the growth of both new customers and new programs with existing customers. We're prioritizing making incremental investments where we can generate the healthiest returns, and this is showing up directly in our improving return on equity.

Speaker #2: Hive non-GAAP operating income was $181 million, increasing 89% year over year. Non-GAAP operating margin, as a percentage of gross billings, was 3.3%.

Speaker #2: Decreasing 50 basis points year over year, primarily driven by mix. We're laser-focused on continuing to make investments in both businesses that will position them to continue to grow at a premium to the market over time.

Speaker #2: Shifting to cash flow and capital allocation. Free cash flow consumption for the quarter was approximately $330 million. Given the accelerated growth in Hive, we're continuing to invest in working capital to support the growth of both new customers and new programs with existing customers.

Speaker #2: We're prioritizing making incremental investments where we can generate the healthiest returns, and this is showing up directly in our improving return on equity. Net working capital closed at $4.9 billion, with a gross cash conversion cycle of 17 days.

David Jordan: Net working capital closed at $4.9 billion, with a gross cash conversion cycle of 17 days, an increase of one day sequentially and flat year over year, reflecting an increased mix of Hyve. Both businesses improved their cash days year over year, we do expect additional efficiencies from Hyve as new programs mature. We ended with $1.1 billion of cash and cash equivalents and net leverage of 1.6 times, modestly below our medium-term framework, which gives us ample capacity to continue to invest in the business while returning capital to shareholders. During Q2, we returned $112 million to shareholders through repurchases and an additional $39 million through dividends. Our board of directors approved a cash dividend of $0.48 per common share, payable on 31 July 2026, to shareholders of record as of the close of business on 17 July 2026.

Speaker #2: An increase of one day sequentially and flat year over year, reflecting an increased mix of Hive. Both businesses improved their cash days year over year, but we do expect additional efficiencies from Hive as new programs mature.

Speaker #2: We ended with $1.1 billion of cash and cash equivalents and net leverage of 1.6 times, modestly below our medium-term framework, which gives us ample capacity to continue to invest in the business while returning capital to shareholders.

Speaker #2: During the second quarter, we returned $112 million to shareholders through repurchases and an additional $39 million through dividends. Our Board of Directors approved a cash dividend of $0.48 per common share, payable on July 31, 2026, to shareholders of record as of the close of business on July 17, 2026.

Speaker #2: Turning to our outlook for the third quarter of fiscal 2026, we expect non-GAAP gross billings of approximately $27.7 billion, plus or minus $500 million.

David Jordan: Turning to our outlook for Q3 of fiscal 2026, we expect non-GAAP gross billings of approximately $27.7 billion ±$500 million, up approximately 22% at the midpoint, a gross to net adjustment of approximately 33% Revenue of approximately $18.6 billion ±$400 million, non-GAAP net income of approximately $361 million ±$20 million, non-GAAP diluted earnings per share of approximately $4.50 ±$0.25, up approximately 26% at the midpoint, based on approximately 79.4 million diluted shares outstanding. Our Q3 guidance assumes no material contribution from Hyve's newly onboarded customers, which we are still expecting to ramp in late fiscal 2026 or early fiscal 2027. To close, we're extremely proud of our teams for the results they continue to deliver. We're entering H2 with forward momentum in both Distribution and Hyve.

Speaker #2: Up approximately 22% at the midpoint, with a gross-to-net adjustment of approximately 33%. Revenue of approximately $18.6 billion, plus or minus $400 million.

Speaker #2: Non-GAAP net income of approximately $361 million, plus or minus $20 million. Non-GAAP diluted earnings per share of approximately $4.50, plus or minus $0.25.

Speaker #2: Up approximately 26% at the midpoint, based on approximately 79.4 million diluted shares outstanding. Our Q3 guidance assumes no material contribution from Hive's newly onboarded customers, which we are still expecting to ramp in late fiscal 2026 or early fiscal 2027.

Speaker #2: To close, we're extremely proud of our teams for the results they continue to deliver. We're entering the second half with forward momentum in both distribution and Hyve. With our global reach, differentiated capabilities, and broadening portfolio, we believe we're positioning ourselves to grow at a premium to the market through time.

David Jordan: With our global reach, differentiated capabilities, and broadening portfolio, we believe we're positioning ourselves to grow at a premium to market through time. With that, we'll open the call for questions. Operator?

Speaker #2: With that, we'll open the call for questions. Operator?

Speaker #1: We will now begin the question and answer session. We request that you limit yourself to one question and one short follow-up to allow time for the other participants to ask their questions.

Operator: We will now begin the question and answer session. We request that you limit yourself to one question and one short follow-up to allow time for the other participants to ask their questions. If there is remaining time, you are welcome to re-queue with additional questions. To ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please pick up your handset when you're asking a question to allow for optimum sound quality. If you are muted locally, remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

Speaker #1: If there is remaining time, you are welcome to re-queue with additional questions. To ask a question, please press star one to raise your hand.

Speaker #1: To withdraw your question, press star one again. Please pick up your handset when you are asking a question to allow for optimum sound quality, and if you are muted locally, remember to unmute your device.

Speaker #1: Please stand by now while we compile the Q&A roster. Your first question comes from Rooploop Atateria with Bank of America. Your line is open.

Speaker #1: Please go ahead.

Speaker #3: Hi, thanks for taking my questions. Patrick, you've seen strong revenue growth and billings growth across all of your segments this quarter. The question I have is: Have you seen any evidence of demand destruction or any weakening of demand given component cost increases?

Ruplu Bhattacharya: Hi. Thanks for taking my questions. Patrick, you've seen strong revenue growth and billings growth across all of your segments this quarter. The question I have is, have you seen any evidence of demand destruction or any weakening of demand given component cost increases? Are customers showing any hesitancy to purchase either Endpoint Solutions and/or Advanced Solutions? Likewise, if units are going to be down year-on-year, have you seen any change in channel incentives from the vendors? I have a follow-up for David.

Speaker #3: Are customers showing any hesitancy to purchase either endpoint solutions or advanced solutions? And likewise, if units are going to be down year over year, have you seen any change in channel incentives from the vendors?

Speaker #3: And I have a follow-up for David.

Speaker #4: Okay, so hopefully, good morning. Thanks a lot for the question. Yeah, so I mean, focusing on Q2, it was a very strong quarter, both on distribution and Hive.

Patrick Zammit: Okay. Ruplu, good morning. Thanks a lot for the question. Focusing on Q2, very strong quarter both on Distribution and Hyve, we haven't seen, for the moment, any destruction of demand because of the price increases. The price increases are really starting to kick in, it's probably going to accelerate in Q3. On the other hand, we see underlying demand, which continues to be healthy across the portfolio. I'm anticipating a question on maybe what happened on PCs. Even on PCs, we saw a unit growth. For the moment, we don't see that phenomenon.

Speaker #4: And very transparently, we haven't seen, for the moment, any destruction of demand because of the price increases. The price increases are really starting to kick in.

Speaker #4: And it's probably going to accelerate in Q3. On the other hand, we see underlying demand, which continues to be healthy across the portfolio.

Speaker #4: I'm anticipating a question on maybe what happened on PCs. I mean, even on PCs, we saw a unique growth. So, for the moment, we don't see that phenomenon.

Speaker #4: I'll just add that this has been one of our assumptions for the guidance—that on most of the categories, companies need to continue to invest.

Patrick Zammit: I'd just add, that has been one of our assumptions for the guidance, that on most of the categories, companies need to continue to invest, especially in infrastructure, combined with the ASP increase, I think, yes, the demand will continue to remain healthy, at least for what we can see for Q3.

Speaker #4: Especially infrastructure, and combined with the AS being increased, I think the demand will continue to remain healthy—at least from what we can see for Q3.

Speaker #3: And any change in channel incentives from the vendors?

Ruplu Bhattacharya: Any change in channel incentives from the vendors?

Speaker #4: No. No. Not yet.

Patrick Zammit: No. Not yet.

Speaker #3: Okay. A quick follow-up for David.

Ruplu Bhattacharya: Okay. A quick follow-up for David.

Speaker #4: Yeah.

Speaker #3: Sorry. Go ahead.

Patrick Zammit: Yeah.

Ruplu Bhattacharya: Sorry, go ahead.

Speaker #4: Sorry, just to add—no, we don't see changes, or material changes, from our vendors. I’d add that our margin quality for distribution stayed very healthy in the quarter, as you can see.

Patrick Zammit: Sorry, Ruplu. Just to add, no, we don't see material changes from our vendors. I add that our margin quality for Distribution stayed very healthy in the quarter, as you can see. So no.

Speaker #4: So no.

Speaker #3: Okay, great. David, just quickly—inventory was up almost 30% sequentially. Can you talk about working capital and free cash flow, and what is driving that inventory?

Ruplu Bhattacharya: Okay, great. David, just quickly, inventory was up 30% almost sequentially. Can you talk about working capital and free cash flow and what is driving that inventory? Are you using the strength of your balance sheet to buy any components? Thanks for all the details.

Speaker #3: And are you using the strength of your balance sheet to buy any components? Thanks for all the details.

Speaker #2: Thanks, Rooploop. So, we've got a couple of pieces to cover here. When you think about cash flow and cash days—cash days were flat year over year.

David Jordan: Thanks, Ruplu. We've got a couple of pieces to cover here. When you think about cash flow and cash days, cash days were flat year over year. I think the important point to make, though, is both of our businesses improved their cash days year over year, and you've got the mix of Hyve that caused the totality to be flat. Hyve continues to experience a period of accelerated growth, and that business, given the cash conversion cycle, takes capital to run, so we continue to make those investments. When you start looking at inventory, I think ballpark, the days are up, call it 8 days or so year over year, and it is largely driven by some additional inventory that we've taken in Hyve to help fund new programs, existing programs, and help make sure that our customers have adequate supply given the broader macro.

Speaker #2: I think the important point to make, though, is both of our businesses improved their cash days year over year. And you’ve got the mix of Hive that caused the totality to be flat.

Speaker #2: Hive continues to experience a period of accelerated growth in that business, given the cash conversion cycle takes capital to run. And so, we continue to make those investments.

Speaker #2: When you start looking at inventory, I think, ballpark, the days are up—call it eight days or so year over year. And it's largely driven by some additional inventory that we've taken in Hive.

Speaker #2: To help fund new programs, existing programs, and help make sure that our customers have adequate supply, given the broader macro.

Speaker #4: Yeah.

Speaker #3: Thanks for all the details.

Ruplu Bhattacharya: Thanks for all the details.

Speaker #4: Rooploop, sorry. I just want to add one thing, which is—I mean, for the last quarter, we've been a little bit more aggressive on inventory levels because we've anticipated the price increases. I mean, that gave us several advantages.

Patrick Zammit: Ruplu, sorry. Just want to add one thing, which is, we've been, for the last quarters, a little bit more aggressive on inventory levels because we've anticipated on the price increases. That gave us several advantages. One, it helped us smooth the impact of the price increase for our customers, and that is very important. It also helped our vendors by having inventory. Again, it positions us well in the market. Demand is strong. We are probably one of the best inventory profile in the industry. Again, that has helped us grow faster than the market overall.

Speaker #4: First, it helped us manage the impact of the price increase for our customers, and that's very important. It also helped our vendors by ensuring they had inventory.

Speaker #4: And again, it positions us well in the market. Demand is strong. We probably have one of the best inventory profiles in the industry.

Speaker #4: And again, that has helped us grow faster than the market overall.

Speaker #1: Your next question comes from the line of David Vogt with UBS. Your line is open.

Operator: Your next question comes from the line of David Vogt with UBS. Your line is open.

Speaker #3: Great, guys. Thanks. Great. Thanks for taking my questions. So, Patrick, one for you and one for David. So, Patrick, can you help us unpack how the incremental manufacturing facility square footage plays out this year and next?

David Vogt: Great, guys. Thanks for taking my questions. Patrick, one for you and one for David. Patrick, can you help us unpack how the incremental manufacturing facility square footage plays out this year and next? Is it basically designed to support the incremental programs that you laid out with your current and future programs with your hyperscalers, and is there a rule of thumb to think about what that incremental capacity could mean for whether it's billings or revenue? Then I have one for David as well.

Speaker #3: And is it basically designed to support the incremental programs that you laid out with your current and future programs with your hyperscalers? And is there kind of a rule of thumb to think about what that incremental capacity could mean for, whether it's billings or revenue?

Speaker #3: And then I have one for David as well.

Speaker #4: Yes, good morning. Thanks a lot for the question. So, I mean, as we mentioned, we now have one program with all five U.S. hyperscalers. We now have three hyperscalers where we have more than one program.

Patrick Zammit: Yes. Good morning. Thanks a lot for the question. As we mentioned, we have now won programs with all five US-based hyperscalers. We have now three hyperscalers where we have more than one program. What we see is a very nice pipeline of opportunities, which are going to ramp up probably end of Q4, beginning of Q1 fiscal year 2027. Basically we have to invest. We have to invest in footprint, we are going to invest in additional equipment, in liquid cooling to be able to support the various programs we have won. We haven't yet established a correlation between investment and revenue.

Speaker #4: So what we see is a very nice pipeline of opportunities, which are going to ramp up probably end of Q4, beginning of Q1, fiscal year ’27.

Speaker #4: And basically, we have to invest. We have to invest in our footprint. We are going to invest in additional equipment and in liquid cooling to be able to support the various programs we have won.

Speaker #4: We haven't yet established a correlation between investment and revenue. What I can tell you is that we are very comfortable with that expansion of capabilities and capacity, and that we are going to meet the demands.

Patrick Zammit: What I can tell you is that we are very comfortable with that expansion of capabilities and capacity, that we are going to meet the demands we are seeing and be in a position to deliver the products with the right quality, which is the most important for us at the moment.

Speaker #4: We are seeing, and be in a position to deliver the products with the right quality, which is the most important for us at the moment.

Speaker #3: Okay, great. That's helpful. And David, I know this might be a tough question to answer, and I know there's some confidential data here.

David Vogt: Okay, great. That's helpful. David, I know this might be a tough question to answer, and I know there's some confidential kind of data here, but can you help us understand sort of the gross margin differentials within Hyve. Is it better to think about it relative to ODM/CM margins versus supply chain margins, or is there a lot of variability between programs with existing hyperscalers or between actual hyperscalers themselves? Can you help us understand how to think about the margin profile of these programs, particularly as you start to ramp, obviously, new programs later this fiscal year into fiscal 2027? Thanks.

Speaker #3: But can you help us understand sort of the gross margin differentials within Hive, whether it's by is it better to think about it relative to ODMCM margins versus supply chain margins?

Speaker #3: Or is there a lot of variability between programs with existing hyperscalers, or between actual hyperscalers themselves? Can you help us understand how to think about the margin profile of these programs?

Speaker #3: Particularly as you start to ramp, obviously, new programs later this fiscal year into fiscal '27. Thanks.

Speaker #2: That's a good question. So, when you take a huge step back, Hive has two businesses: manufacturing and assembly, and supply chain. On average, historically, the margin profiles have been relatively similar.

David Jordan: It's a good question. When you take a huge step back, Hyve has two businesses, manufacturing and assembly, and supply chain. On average, historically, the margin profiles have been relatively similar. I will tell you, as you start looking at things by program, there can be differences. I'll give you a couple of examples. If you're building AI servers, that tends to have a slightly lower margin profile. If you are building complex networking racks, that tends to have a slightly higher margin profile, so on and so forth. Same thing on the supply chain side. Depending on what we're buying, how long we're holding it, and how complex it is, it does dictate the margin profile. All in all, here's what I would anchor you to. We feel very good about the performance that Hyve's been able to generate.

Speaker #2: I will tell you, as you start looking at things by program, there can be differences. So I'll give you a couple of examples. If you're building AI servers, that tends to have a slightly lower margin profile.

Speaker #2: If you are building complex networking racks, that tends to have a slightly higher margin profile, and so on and so forth. Same thing on the supply chain side.

Speaker #2: Depending on what we're buying, how long we're holding it, and how complex it is, that does dictate the margin profile. But all in all, here's what I would anchor you to.

Speaker #2: We feel very good about the performance that Hive has been able to generate. We continue to make investments in new capabilities, new programs, and new products that will allow Hive to continue to maintain, if not improve, its margin profile over time.

David Jordan: We continue to make investments in new capabilities, new programs, new products that will allow Hyve to continue to maintain, if not improve, its margin profile through time. We're super excited with what the team's been able to produce thus far.

Speaker #2: And we're super excited with what the team's been able to produce thus far.

Speaker #4: Just would like to ask.

Patrick Zammit: I just would like to add-

Speaker #3: Great. Thanks, David.

David Vogt: Great. Thanks, David.

Speaker #4: So, two more things. The first one is, I mean, similar to distribution, gross margin quality is very important. And I can tell you that the team is very focused on that.

Patrick Zammit: Two more things. The first one is similar to distribution, gross margin quality is very important, and I can tell you that the team is very focused on that. That's point number one. Point number two is, obviously, as you ramp up a program, you have some inefficiencies which will disappear over time based on the learnings and the optimization. Again, hypergrowth as we speak, lots of programs being launched. Some impact on the GM quality because of that. Again, looking forward, it's a priority for us to optimize also the GM quality.

Speaker #4: So that's number one. Point number two is, obviously, as you ramp up a program, you have some inefficiencies, which will disappear over time based on the learnings and the optimization.

Speaker #4: So again, hypergrowth as we speak, lots of programs being launched. Some impact on the GM quality because of that. But again, looking forward, it's a priority for us to optimize also the GM quality.

Speaker #3: Great. Thanks, guys.

David Vogt: Great. Thanks, guys.

Speaker #1: Your next question comes from the line of Keith Hossam with North Coast Research. Your line is open.

Operator: Your next question comes from the line of Keith Housum with Northcoast Research. Your line is open.

Speaker #4: Good morning, John.

Speaker #3: Good morning, John. Congratulations on a great quarter. As we think about the evolving businesses out there with memory, we're hearing more and more about supply constraints coming into place here.

Keith Housum: Good morning, gentlemen. Congratulations on a great quarter. As we think about the evolving business out there with memory, we're hearing more and more about supply constraints coming into place here, are you guys seeing the supply constraints come into place right now, or is there concerns that you'll see some perhaps limiting the amount of growth you can have for the rest of the year or maybe into FY27? How are you thinking about the supply availability right now?

Speaker #3: Are you guys seeing the supply constraints come into place right now? Or is there concerns that you'll see some perhaps limiting the amount of growth you can have for the rest of the year or maybe into FY27?

Speaker #3: But how are you thinking about the supply availability right now?

Speaker #4: So Keith, good morning. Thanks for the question. So, for Q2, we haven't spent it really. But you're right—in our Q3 guidance, we took into account some risk with component availability.

Patrick Zammit: Keith, good morning. Thanks for the question. For Q2, we haven't felt it, really. You're right. In our Q3 guidance, we took into account some risk with component availability. It's memory, obviously, it's one of the category. Some CPUs could come also, some challenges on delivery of CPUs could come also. We factored it into our guidance, and we will see. Again, so far it has been good. I would just add that when you look at Hyve, it's our customers primarily who secure the supply, and they have, I would say, some good arguments with the vendors. On the distribution side, so far, our key vendors have done a very good job with their supply chain. Yes, for Q3, we've been a little bit more cautious because of that in our guidance.

Speaker #4: It's memory. Obviously, it's one of the categories. Some CPUs could come; also, some challenges on delivery of CPUs could come also. So we factored it into our guidance.

Speaker #4: And we will see. But again, so far it has been good. I would just add that when you look at Hive, it's our customers primarily who secure the supply.

Speaker #4: And I mean, they have, I would say, some good arguments with the vendors on the distribution side so far. We and our key vendors have done a very good job with their supply chain.

Speaker #4: But yes, for Q3, we've been a little bit more cautious because of that in our guidance.

Speaker #3: Okay. And if I could follow up on that, in terms of the HPE win—in terms of being one of two global distributors—have you seen that benefit completely in the quarter?

Keith Housum: Okay. If I could follow up on that. In terms of the HPE win, in terms of being one of two global distributors, have you seen that benefit completely in the quarter, or is this still going to ramp up over time?

Speaker #3: Or is this still going to ramp up over time?

Speaker #4: No, so we are going to see the ramp-up over time. So what's happening, just to put things in context, is that HPE has decided to rationalize its go-to-market.

Patrick Zammit: We are going to see the ramp up over time. What's happening, just to put things in context, HPE has decided to rationalize its go-to-market. They are going to focus on two global distributors in certain areas. The benefit takes some time. Okay, we are going to probably see the benefit, I would say, H1 of next year. We won some new countries. We're going to see the rationalization of the distribution network in some other countries. It takes a little bit of time. Just to comment from a more strategic standpoint on the HPE win, it's very interesting that the fact that we are global has been one of the reasons for the win. What we see more and more from the vendors is that being global is becoming the differentiator when they rationalize their go-to-market.

Speaker #4: They are going to focus on two global distributors in certain areas, and the benefit takes some time, okay? So we are probably going to see the benefit, I would say, in the first half of next year.

Speaker #4: We want some new countries. We're going to see the rationalization of the distribution network in some other countries, so it takes a little bit of time.

Speaker #4: But just to comment from a more strategic standpoint on the HPE win, it's very interesting that the fact that we are global has been one of the reasons for the win.

Speaker #4: What we see more and more from the vendors is that being global is becoming a differentiator when they rationalize their go-to-markets. And so we think that probably there's more to come. Other vendors are now looking at their global distribution landscape.

Patrick Zammit: We think that probably there's multiple other vendors are now looking at their global distribution landscape. Our strategy to expand in APJ, in Latin America, potentially one day in the Middle East, is clearly positioning us well to benefit from that market trend.

Speaker #4: And our strategy to expand in APJ, in Latin America, potentially one day in the Middle East, is clearly positioning us well to benefit from that market trend.

Speaker #3: Great. Thank you.

David Jordan: Great. Thank you.

Keith Housum: Great. Thank you.

Speaker #1: Your next question is from the line of Catherine Murphy with Goldman Sachs. Your line is open.

Operator: Your next question is from the line of Katherine Fogertey with Goldman Sachs. Your line is open.

Speaker #5: Thank you very much. Maybe switching gears here a little bit, the margin profile of the Endpoint Solutions segment seems like a record high from what I can see, at 5%.

Katherine Fogertey: Thank you very much. Maybe switching gears here a little bit. The margin profile of the Endpoint Solutions segment seems like a record high from what I can see at 5%. Can you talk about what drove the strength in the quarter, and if there were any one-time benefits like the strategic inventory purchases you mentioned that benefited results in the quarter? Then to just quickly ask my follow-up now, are there any expectations for continued benefits from this strategic inventory build as we look into the back half of the year and into 2027, so long as we continue to see increasing ASP environment? Thank you very much.

Katherine Murphy: Thank you very much. Maybe switching gears here a little bit. The margin profile of the Endpoint Solutions segment seems like a record high from what I can see at 5%. Can you talk about what drove the strength in the quarter, and if there were any one-time benefits like the strategic inventory purchases you mentioned that benefited results in the quarter? Then to just quickly ask my follow-up now, are there any expectations for continued benefits from this strategic inventory build as we look into the back half of the year and into 2027, so long as we continue to see increasing ASP environment? Thank you very much.

Speaker #5: Can you talk about what drove the strength in the quarter and if there were any one-time benefits like the strategic inventory purchases you mentioned that benefited results in the quarter?

Speaker #5: And then, just to quickly ask my follow-up now: Are there any expectations for continued benefits from this strategic inventory build as we look into the back half of the year?

Speaker #5: And into ’27, so long as we continue to see an increasing ASP environment? Thank you very much.

Speaker #2: Good morning, Kat. A couple of comments. First, we mentioned in the prepared remarks that, on the distribution side, we had 5 to 10 basis points of additional margin from strategically purchasing inventory.

David Jordan: Good morning, Kat. Couple of comments. One, we put in the prepared remarks that on the distribution side, we had 5 to 10 basis points of additional margin from strategically purchasing inventory. A lot of that manifests itself in the endpoint business. Here's the way I would think about it. Our goal is to secure the right amount of supply, and as Patrick said, to help our vendors smooth supply constraints, make sure there's proper availability. It is true when in a rising price world, we can benefit from that. What I would tell you is, yes, if prices continues to rise, there will be a benefit. We're also not greedy as it relates to this, right?

Speaker #2: A lot of that manifests itself in the endpoint business. Here’s the way I would think about it: our goal is to secure the right amount of supply.

Speaker #2: And as Patrick said, to help our vendors smooth supply constraints and make sure there's proper availability. It is true that in a rising price world, we can benefit from that.

Speaker #2: And so, what I would tell you is, yes, if prices continue to rise, there will be a benefit. But we're also not greedy as it relates to this, right?

Speaker #2: We want to be paid for the additional capital that we've got deployed, but we also share some of these benefits with our customers as well, so we can build better long-term partnerships.

David Jordan: We want to be paid for the additional capital that we've got deployed, we also share some of these benefits with our customers as well, so we can build better long-term partnerships. I would anticipate as we move forward, these types of benefits will be more one-time in nature and slowly dissipate, and that's why we tried to call them out in the scripts.

Speaker #2: And so, I would anticipate that as we move forward, these types of benefits will be more one-time in nature and will slowly dissipate. That's why we've tried to call them out in the scripts.

Speaker #1: Your next question comes from the line of Eric Woodring with Morgan Stanley. Your line is open.

Operator: Your next question comes from the line of Erik Woodring with Morgan Stanley. Your line is open.

Speaker #3: Awesome. Thank you. Thank you for taking my questions, guys. Congrats on the results. Patrick, I guess I'll combine my two questions because it's a three-part question.

Erik Woodring: Awesome. Thank you. Thank you for taking my questions, guys. Congrats on the results. Patrick, I guess I'll combine my two questions because it's a three-part question, sorry. They're all related, and I'd love if you could take a big step back and help us understand three things. First, again, help us understand the sustainability of hardware spending as we look through the H2 and into next year, given what you know today and the pipeline that you see. Second, what products are showing to have greater inelasticity than others as you face these record price hikes? Third, are there any products or segments as you look forward where you don't believe you can fully pass through the higher device costs and potentially see some margin pressure, if there's any customer pushback?

Speaker #3: So sorry. But they're all related. And I'd love if you could just take a big step back and help us understand three things. So first, just again, help us understand the sustainability of hardware spending.

Speaker #3: As we look through the second half and into next year, just given what you know today and the pipeline that you see, second, just what products are showing to have greater inelasticity than others as you face these record price hikes?

Speaker #3: And then third, are there any products or segments, as you look forward, where you don't believe you can fully pass through the higher device costs and potentially see some margin pressure, just if there is any customer pushback?

Speaker #3: I'll combine those and make those my two questions, even though it's a three-part or so. Thank you, guys.

Erik Woodring: I'll combine those and make those my two questions, even though it's a three-parter. Thank you, guys.

Speaker #4: Thank you, Eric. Good morning. Let me start with the last one on the margin. So again—and it's true for both businesses, Distribution and Hive—we are a cost-plus business.

Patrick Zammit: Thank you, Erik. Good morning. Let me start with the last one on the margin. Again, and it's true for both businesses, Distribution and Hyve, we are a cost-plus business. If cost increase, we pass it to the customers. We have no other choice. We have a very good track record as an industry and as TD SYNNEX. You look at what happened last year with the tariffs, you look at what has been happening the last two quarters. I mean, we had already some categories where we saw the price increases, and again, we're able to pass it. We had inventory to smooth the impact for our customers, but overall, I mean, no concerns there. In terms of product elasticity, the category I'm watching is PCs, with some caveats. Consumer PCs, I think the elasticity will be relatively high, but we focus on B2B.

Speaker #4: So, if costs increase, we pass them on to the customers. We have no other choice. We have a very good track record as an industry.

Speaker #4: And as TD SYNNEX, you look at what happened last year with the tariffs. You look at what has been happening the last two quarters.

Speaker #4: I mean, we already had some categories where we saw price increases. And again, we were able to pass that on. We had inventory to smooth the impact for our customers.

Speaker #4: But, overall, I mean, no concerns there. In terms of product elasticity, the category I'm watching is PCs, with some caveat. So, consumer PCs—I think the elasticity will be relatively high.

Speaker #4: But we focus on B2B. So I'm expecting some impact from the ASP increase on PC consumption. If you look at our Q2 results, we were able to mitigate the impact by gaining share.

Patrick Zammit: I'm expecting some impact of the HPE increase on the PC consumption. If you look at our Q2 results, we were able to mitigate the impact by gaining share, and also because we are positioned on B2B and the refresh is not over, and you still have many enterprises or companies who have to upgrade their PCs. That's probably the category where I am the most cautious. We are the most cautious in our outlook. If you look at infrastructure, if you look at networking. For the moment, we see very solid demand. Networking, very rapidly, the two last years were tough. Networking is back on the lower base. You have the refresh driven by Wi-Fi 7, and then you have the investments related to AI in that space. I think that's sustainable. If you look at data centers, so server and storage.

Speaker #4: And also, because we are positioned in B2B and the refresh is not over, we still have many enterprises or companies that have to upgrade their PCs.

Speaker #4: But that's probably the category where I am the most cautious. We are the most cautious in our outlook. If you look at infrastructure, if you look at networking, yeah, for the moment, we see very solid demand.

Speaker #4: Networking, very rapidly, the last two years were tough. So networking is back on a lower base. You have the refresh driven by Wi-Fi 7.

Speaker #4: And then you have the investments related to AI in that space, so I think that's sustainable. If you look at data centers—so, server and storage—I mean, this quarter, I mentioned last quarter that storage was starting to come back.

Patrick Zammit: I mentioned last quarter that storage was starting to come back, and I wanted a confirmation. We had a very strong storage quarter, and I think it's going to last. The AI drew first the compute upgrade, and then switches, and now I think storage is next. On compute, we see very solid demand, and it's driven by several things. Obviously, as the increase is driving the value up. Even in volume, what's happening is that you have still the refresh of the general compute servers happening. It's not over. That's an opportunity. You have an acceleration of the purchase of general compute servers because they have become critical when you speak about agentic AI. The cost of tokens is going to become a big topic.

Speaker #4: And I wanted a confirmation. We had a very strong storage quarter, and I think it's going to last. The AI, I mean, drove first the compute upgrade.

Speaker #4: And I think now storage is... and then switches. And now I think storage is next. And then, on compute, we see very, very solid demand.

Speaker #4: And it's driven by several things. Obviously, ASP increase is driving the value up. But even in volume, what's happening is that you still have the refresh of the general compute service happening.

Speaker #4: It's not over, so that's an opportunity. You have an acceleration in the purchase of general compute servers because they have become critical when you speak about agentic AI.

Speaker #4: And then the cost of tokens is going to become a big topic. And if you want to mitigate the cost of tokens, I mean, running your workloads on-premise is going to be a good solution.

Patrick Zammit: If you want to mitigate the cost of tokens, running your workloads on-premise is going to be a good solution. I think that's going to drive demand and remain a tailwind. An accelerated compute. Companies are starting, enterprises in particular, but also you have the sovereign cloud, especially in Europe and APJ and the neo cloud in North America. They are investing heavily. We are at the source of supply for them, and I see the demand remaining healthy here. In summary, except on PCs where units could be impacted by the ASP increase, I think on the other categories, I think it's sustainable. Software was also a very strong quarter for us, ASP increase is less of a topic. I think it's going to be sustainable.

Speaker #4: So I think that's going to continue. That's going to drive demand and remain a tailwind. And then, in accelerated compute, I mean, companies are starting—enterprises in particular—but also you have the sovereign cloud, especially in Europe and APJ.

Speaker #4: And the neo cloud in North America, they are investing heavily. We are a source of supply for them, and I see the demand remaining healthy here.

Speaker #4: So, in summary, except on PCs—where the units could be impacted by the ASP increase—I think on the other categories, it's sustainable.

Speaker #4: Software was also a very strong quarter for us, so ASP increase is less of a topic. I think it's going to be sustainable. Security, especially now that you have to manage the risk related to agents, is going to drive additional demand.

Patrick Zammit: Security, especially now that you have to manage the risk related to agents, is going to drive additional demand. I continue to be cautiously optimistic across most of the technologies.

Speaker #4: So I continue to be cautiously optimistic across most of the technologies.

Speaker #3: Awesome. Thank you very much, Patrick, for all that detail.

Erik Woodring: Awesome. Thank you very much, Patrick, for all that detail.

Speaker #1: Your next question comes from the line of Adam Tyndall with Raymond James. Your line is open.

Operator: Your next question comes from the line of Adam Tindle with Raymond James. Your line is open.

Speaker #5: Hi. Good morning. Patrick, I just wanted to start here by taking a step back. If I look at the quarter, incredible growth and negative cash flow.

Adam Tindle: Hi. Good morning. Patrick, I just wanted to start here taking a step back. If I look at the quarter, incredible growth and negative cash flow. I wonder if you might just talk about how to strike the right balance between pursuing growth versus generating cash. More specifically, if I look at kind of where that cash is going, it's heavy investments into Hyve in particular. I think what we're learning on a forward basis is some of that's going to be incrementally fixed investment with this capacity build-out. How do you protect against downside there, where customers are right now kind of rationalizing AI spend, token spend, like you said, the fear that you might be building fixed investment into a peak AI market. Thanks.

Speaker #5: I wonder if you might just talk about how to strike the right balance between pursuing growth versus generating cash. And, more specifically, if I look at kind of where that cash is going, it's heavy investments into Hive, in particular.

Speaker #5: And I think what we're learning on a forward basis is some of that's going to be incrementally fixed investment with this capacity build-out. How do you protect against downside there, where customers are right now kind of rationalizing AI spend, token spend, like you said—the fear that you might be building fixed investment into a peak AI market?

Speaker #5: Thanks.

Speaker #4: So, thanks, Adam, for the question. Let me distinguish between Distribution and Hive very quickly. Distribution continues to— I mean, cash days are down on both businesses.

Patrick Zammit: Thanks, Adam, for the question. Let me distinguish between distribution and Hyve very rapidly. Cash days are down on both businesses, but cash days are really low on distribution. The growth on distribution is generating free cash flow, significant free cash flow. Which is true today, we are investing in Hyve to fuel the Hyve growth. Both working capital and of course, fixed assets. One, Hyve continues to have a very nice return. Okay, if you look at our key ratios, it's not that we are financing a growth business at the expense of our key financial metrics. It's the other way around. It's accretive for our margin. It's accretive for our return on equity. From that standpoint, we feel very comfortable. In terms of building fixed costs in case the market is going to correct.

Speaker #4: But cash days are really low on distribution, so the growth on distribution is generating significant free cash flow, which is true today.

Speaker #4: We are reinvesting in Hive to fuel Hive growth—both working capital and, of course, fixed assets. So, one, Hive continues to have a very nice return, okay?

Speaker #4: So, if you look at our key ratios, it's not that we are financing a growth business at the expense of our key financial metrics.

Speaker #4: It's the other way around. It's a creative for our margin. It's a creative for our return on equity. So from that standpoint, we feel very comfortable.

Speaker #4: In terms of building fixed costs, if the market is going to correct, it's true that the working capital will adjust immediately if the market goes down.

Patrick Zammit: The working capital will adjust immediately if the market goes down. We have no concern. It's like distribution. If I can speak like that, the elasticity is high. As soon as the market goes down, we are going to see the working capital going down very rapidly, it will generate free cash flow. From a fixed asset standpoint, yes, it's the business which requires significantly more investment than distribution, relatively speaking. Again, it's not either a fixed cost which we could not absorb. If you look at this year, we're going to invest for Hyve roughly $100 million, amortized over five, six years. The cost is absolutely bearable in case that the market turns. The other costs for Hyve are mostly variable. Again, in case of downturn, I think it's going to be something similar to what we see in distribution.

Speaker #4: So, we have no concern. It's like distribution. If I can speak like that, the elasticity is high. So, I mean, as soon as the market goes down, we're going to see the working capital going down very rapidly.

Speaker #4: And so, it will generate free cash flow. But from a fixed asset standpoint, yes, it's a business that requires significantly more investments than distribution, relatively speaking.

Speaker #4: But again, it's not a fixed cost, which we could not absorb. If you look at this year, we're going to invest for Hive roughly $100 million.

Speaker #4: Amortized over five or six years, the cost is absolutely bearable in case the market turns. The other costs for Hive are mostly variable, so again, in case of a downturn, I think it's going to be something similar to what we see in distribution.

Speaker #4: You have a lot of cash flow generated because working capital goes down. And then we are very good at reacting and adjusting our cost base to the new market reality.

Patrick Zammit: You have a lot of cash flow generated because working capital goes down. We are very good at reacting and adjusting our cost base to the new market reality. I am not very concerned here. I can just finish with, this continues to be top of mind for us. We think about this all the time as we do the investments. Again, for the moment, I think we should be in a safe position.

Speaker #4: So I am not very concerned here. I can just finish with: this continues to be top of mind for us, so we think about it all the time as we make the investments.

Speaker #4: But again, for the moment, I think we should be in a safe position.

Speaker #2: The only other thing I'd add, Adam, if it helps, is: one, we ladder leases, and that obviously helps if there's a change in demand. Two, we don't speculate on demand.

David Jordan: The only other thing I'd add, Adam, if it helps, is one, we ladder leases. That obviously helps if there's a change in demand. Two, we don't speculate on demand, so we largely build and outfit facilities based on long-term programs once they're committed. I will tell you, the team is incredibly prudent at how they manage Hyve from a capacity perspective, and they've done a nice job. As Patrick said on the cash flow, as you're ramping a new program, there is more working capital inefficiencies that ultimately unlock as things mature. We are aware of the cash consumption. We are pleased with the reduction in cash days year-over-year. We do believe long-term, there are additional efficiencies that we'll look to achieve as well.

Speaker #2: So, we largely build and outfit facilities based on long-term programs once they're committed. I will tell you, the team is incredibly prudent in how they manage Hive from a capacity perspective.

Speaker #2: And they've done a nice job. As Patrick said on the cash flow, as you're ramping a new program, there are more working capital inefficiencies that ultimately unlock as things mature.

Speaker #2: And so we are aware of the cash consumption. We are pleased with the reduction in cash days year over year, but we do believe that long term, there are additional efficiencies that we'll look to achieve as well.

Speaker #5: Great. And just a quick follow-up. By the way, I know that question.

Adam Tindle: Great. Just a quick follow-up, and by the way, I know that question.

Speaker #1: Your next question comes from the line of Joe Cardoso with J.P. Morgan. Your line is open.

Operator: Your next question comes from the line of Joe Cardoso with JPMorgan. Your line is open.

Speaker #5: Hi, thank you for taking my question. This is MP on behalf of Joe Cardoso from JPMorgan. Can you please double-click on the mix of Hive business between supply chain versus contract manufacturing during the quarter?

[Analyst] (JPMorgan): Hi. Thank you for taking my question. This is MP on behalf of Joe Cardoso from JPMorgan. Can you please double-click on the mix of Hyve business between supply chain versus contract manufacturing during the quarter? Particularly, how did it track relative to your expectations heading into the quarter? Also, how do you expect it to track into the H2, and any potential gross margin impacts from that? Thank you. I have a follow.

Speaker #5: And particularly, how did it track relative to your expectations heading into the quarter? And also, how do you expect it to track into the second half, and any potential gross margin impacts from that?

Speaker #5: Thank you. And I have a follow-up.

Speaker #2: So good morning. And thanks for joining. So when you think about Hive, we put in a prepared remarks two-thirds of it, two-thirds of the business was manufacturing this quarter and about a third of it was supply chain.

David Jordan: Good morning, and thanks for joining. When you think about Hyve, we put in the prepared remarks, two-thirds of the business was manufacturing this quarter, and about a third of it was supply chain. When you think about performance versus expectations, both businesses exceeded expectations. It's a little tricky to try and figure out what's long-term guidance, split at kind of a sub-segment level, but here's what I would tell you. Our teams have done an excellent job winning new programs. We're very focused on expanding our manufacturing business and expanding our manufacturing programs. We also recognize that because we have an end-to-end offering, being able to tie it all together is hugely advantageous for both our customers and for TD SYNNEX. They should grow together through time.

Speaker #2: When you think about performance versus expectations, both businesses exceeded expectations. It's a little tricky to try and figure out what's long-term guidance when you split it kind of at a sub-segment level.

Speaker #2: But here's what I would tell you: Our teams have done an excellent job winning new programs. We're very focused on expanding our manufacturing business and expanding our manufacturing programs.

Speaker #2: But we also recognize that, because we have an end-to-end offering, being able to tie it all together is hugely advantageous for both our customers and for TD SYNNEX.

Speaker #2: And so, they should grow together through time. But our hope is that, long term, we continue to increase the manufacturing as a percentage of the total.

David Jordan: Our hope is that long-term, we continue to increase the manufacturing as a percentage of the total.

Speaker #4: Yeah. I just want to add that so I was supply chain services is a service. So in today's environment where you have this big ASP increase and shortages, I mean, our customers are more needs than in an environment which will normalize.

Patrick Zammit: Yeah, I just want to add that our supply chain services is a service. In today's environment, where you have this big increase in shortages, our customers have more needs than in environments which we normalize. Again, the team is first focused on winning programs to grow the manufacturing business. That's really the core of the activity. The service part is a little bit more volatile because of the context I just explained.

Speaker #4: So again, the team is first focused on winning programs to grow the manufacturing business. That’s really the core of the activity. The service part is a little bit more volatile.

Speaker #4: Because of the context I just explained.

Speaker #5: Thank you. And for my follow-up, I just wanted to ask about pricing. Can you please comment on how the pricing environment is right now?

[Analyst] (JPMorgan): Thank you. For my follow-up, I just wanted to ask about pricing. Can you please comment how you think the pricing environment is right now versus 90 days ago? Any particular product categories which you want to call out where the pricing pressures are more pronounced relative to others? Thank you.

Speaker #5: How should we—how are you thinking the pricing environment is right now versus 90 days ago? And are there any particular product categories you want to call out where the pricing pressures are more pronounced relative to others?

Speaker #5: Thank you.

Speaker #4: Yeah, so pricing is up, and you had this inventory in the channel, and that inventory has been shipped. So we're going to see the impact more and more.

Patrick Zammit: Yeah. Pricing is up. You had this inventory in the channel, and that inventory has been shipped. We're going to see the impact more and more. The category where the price increases are the most significant are obviously storage and servers, because they are the most impacted by the memory price increases. We see it also in PCs. By the way, we're expecting some new price increases in both categories in July. The price increases are not over.

Speaker #4: The categories where the price increases are the most significant are obviously storage and servers, because they are the most impacted by the memory price increases.

Speaker #4: But we see it also in PCs. By the way, we're expecting some new price increases in both categories in July. So, the price increases are not over.

Speaker #1: Your next question is from the line of Adam Tyndall of Raymond James. Your line is open now.

[Analyst] (JPMorgan): Thank you.

Operator: Your next question is from the line of Adam Tindle of Raymond James. Your line is open now.

Speaker #5: Okay, I was just going to continue on that thread, Patrick. I know that question I asked earlier about cash flow versus growth sounded challenging.

Adam Tindle: Okay. I was just going to continue on that thread, Patrick. I know that question that I asked earlier about cash flow versus growth sounded challenging. I actually think you're doing the right strategy because your balance sheet is clean. You don't necessarily need to be generating cash right now. On that thread, I wanted to ask the follow-up to David. The timing and magnitude to cash flow reversing, I think previously you had talked about 95% of non-GAAP net income for the combination of fiscal 2025 and 2026. I think you'd need like 2-plus billion of free cash flow over the next 2 quarters to do that. I wonder if we should sort of recalibrate our thinking. I know this is a tough question in a dynamic environment. Just any help for our models. Thanks.

Speaker #5: I actually think you're pursuing the right strategy. Because your balance sheet is clean, you don't necessarily need to be generating cash right now. But on that note, I wanted to ask a follow-up to David.

Speaker #5: The timing and magnitude of cash flow reversing—I think previously you had talked about 95% of non-GAAP net income for the combination of fiscal '25 and '26.

Speaker #5: But I think you'd need, like, $2-plus billion of free cash flow over the next two quarters to do that. And I wonder if we should sort of recalibrate our thinking.

Speaker #5: I know this is a tough question and a dynamic environment. Just any help for our models—thanks.

Speaker #2: No, it's a good question, Adam, and I think you're thinking about it the right way, which is: Hive is in a period of accelerated growth.

David Jordan: No, it's a good question, Adam. I think you're thinking about it the right way, which is Hyve is in a period of accelerated growth. What we've reflected in the Q3 outlook is continued momentum in both businesses. The 95% net income to free cash flow conversion ratio is absolutely our North Star metric on a long-term basis. In periods of accelerated growth, we will consume cash. We believe it's a good use of capital and the incremental ROIC is good. Hopefully that helps give you a little bit of color around our optimism in Hyve and some of the short-term cash impacts of making investments in that business. We think it's a great investment to make.

Speaker #2: And so, what we've reflected in the Q3 outlook is continued momentum in both businesses. The 95% net income to free cash flow conversion ratio is absolutely our North Star metric on a long-term basis.

Speaker #2: But in periods of accelerated growth, we will consume cash, but we believe it's a good use of capital. And the incremental ROIC is good.

Speaker #2: So, hopefully, that helps give you a little bit of color around our optimism in Hive and some of the short-term cash impacts of making investments in that business.

Speaker #2: But we think it's a great investment to make.

Speaker #4: But we think it's great.

Speaker #5: Yeah. Makes sense. Thank you.

Speaker #2: You're welcome.

Adam Tindle: Yep, makes sense. Thank you.

David Jordan: You're welcome.

Speaker #1: And your next question is from the line of Guy Hardwick with Barclays. Your line is open.

Operator: Your next question is from the line of Guy Hardwick with Barclays. Your line is open.

Speaker #6: Hi, good morning. This is a follow-up question on the strategic inventory. I'm just wondering, how much of the 13 days year-on-year increase is related to strategic inventory purchases?

Guy Hardwick: Hi. Good morning. A follow-up question on the strategic inventory. Just wondering how much of the 13 days year-on-year increase related to strategic inventory purchases. I assume in the Q3 guidance, you're also assuming further margin benefits from these purchases, maybe similar to what you had in the five to 10 basis points you had in just the recent quarter.

Speaker #6: And I assume in the Q3 guidance, you also assuming further margin benefit from these purchases may be similar to what you had in the 5 to 10 basis points you had in the just the recent quarter.

Speaker #2: So, this is a tough question to answer because it's very difficult to quantify. But what I would tell you is our teams are able to increase their days of supply around specific categories if they believe that we need to hold additional stock to kind of smooth out supply chains.

David Jordan: This is a tough question to answer because it's very difficult to quantify. What I would tell you is, our teams are able to increase their days of supply around specific categories if they believe that we need to hold additional stock to kind of smooth out supply chains. They don't go after this as a business. They're not trying to capitalize on price changes and speculate. In situations where, I'm just going to make it up, let's say lead times are going to extend by three or four weeks, they might hold an extra couple of weeks of stock and for certain categories and will get benefits from that if prices go up. What we do as a matter of course, is, we don't forecast a lot of these benefits. We call them out when they come.

Speaker #2: They don't go after this as a business. They're not trying to capitalize on price changes and speculate. But in situations where—I'm just going to make it up—let's say lead times are going to extend by three or four weeks, they might hold an extra couple of weeks of stock.

Speaker #2: And for certain categories, they'll get benefits from that if prices go up. So, what we do as a matter of course is we don't forecast a lot of these benefits.

Speaker #2: We call them out when they come. It tends to be fairly opportunistic in nature—not necessarily opportunistic, but I would tell you we don't forecast and plan for a lot of these things.

David Jordan: It tends to be fairly opportunistic in nature, not necessarily opportunistic, but I would tell you, we don't forecast and plan for a lot of these things, but when we do realize them, we tend to call them out in the quarter. It is part of the reason that inventory is up on a year-over-year basis. I would tell you the predominance of that increase was largely driven by the investments we've made in Hyve due to new programs and expanded programs with existing customers.

Speaker #2: But when we do realize them, we tend to call them out in the quarter. But it is part of the reason that inventory is up on a year-over-year basis.

Speaker #2: But I would tell you the predominance of that increase was largely driven by the investments we've made in Hive due to new programs and expanded programs with existing customers.

Speaker #6: It's just because the guidance for Q3 is not having any margin benefits from strategic inventory.

Guy Hardwick: Just to be clear, the guidance for Q3 does not include any margin benefits from strategic inventory.

Speaker #2: It's hard to say. We don't have the teams broken down to that level of detail. What I would tell you is, we do a kind of bottoms-up roll based on our guidance.

David Jordan: It's hard to say. We don't have the teams break it down to that level of detail. What I would tell you is we do kind of a bottoms-up roll based on our guidance. The team will factor a variety of risk and opportunities in there to quantify exactly whether it's in or out or what degree is a little difficult. To be candid with you, I would say there's probably a little, but as you've seen based on the Q2 results, it's relatively small, 5 to 10 basis points. It does tend to dwindle down through time.

Speaker #2: The teams will factor a variety of risks and opportunities in there to quantify exactly whether it's in or out, or to what degree, which is a little difficult.

Speaker #2: To be candid with you, I would say there's probably a little, but as you've seen, based on the Q2 results, it's relatively small—5 to 10 basis points.

Speaker #2: And so, it does tend to dwindle down through time.

Speaker #6: Thank you.

Speaker #1: Your next question is from the line of David Page with RBC Capital Markets. Your line is open.

Guy Hardwick: Thank you.

Operator: Your next question is from the line of David Paige with RBC Capital Markets. Your line is open.

Speaker #4: Good morning, Patrick. Good morning, Patrick, David. Thanks for taking my question. I want to start on the Amazon warrant. I was curious, what was the strategic rationale for that, and how did that warrant come to be?

David Paige: Good morning, Patrick.

David Jordan: Morning.

Patrick Zammit: Morning.

David Paige: Good morning, Patrick. David. Thanks for taking my question. I want to start on the Amazon warrant. I was curious, what was the strategic rationale for that and how that warrant came to be, and is it something that we should expect maybe with some of the other hyperscalers that you're ramping up? Thank you.

Speaker #4: And is it something that we should expect maybe with some of the other hyperscalers that you're ramping up? Thank you.

Speaker #7: Hey, good morning, David. So, the first thing—the warrant concerns Hive. Okay. And Hive has had a long-term, historically strong relationship with AWS.

Patrick Zammit: Hey, good morning, David. First thing, the warrant concerns Hyve. Okay. Hyve has had a long-term relationship, historical and strong relationship with AWS. The relationship has been very successful historically. The value proposition we delivered to Amazon has been very much valued. When they came to us to discuss the opportunity, we saw it as a big opportunity. With the warrant in place now, we think we have an agreement which is going to be mutually beneficial. Let's see how it materializes in the future. We are very pleased with that agreement.

Speaker #7: So, the relationship has been very successful historically. The value proposition we delivered to Amazon has been very much valued. And so, when they came to us to discuss the opportunity, we saw it as a big opportunity.

Speaker #7: And I mean, with the warrant in place now, we think we have an agreement which is going to be mutually beneficial. And, yeah, let's see how it materializes in the future.

Speaker #7: But we are very pleased with that agreement.

Speaker #4: Great, that's helpful. And just a quick follow-up—I think in the past you've spoken about additional compute versus accelerated compute. So, if you could, could you provide some color on the mix of traditional versus accelerated that you had in the quarter, or that you're expecting in late Q2 and early 2027?

David Paige: Great. That's helpful. Just a quick follow-up. I think in the past you've spoken about traditional compute versus accelerated compute. If you could you provide some color on the mix of traditional versus accelerated that you had in this quarter or that you're expecting in late Q4 and early 2027? Thank you.

Speaker #4: Thank you.

Speaker #7: I guess the question is for Hive specifically?

Speaker #4: Yeah.

Speaker #7: Yeah. So this quarter, we had the ramp-up of an accelerated compute program at Hive. Generally speaking, we think that when you look at our mix of programs, we believe that we are going to see more of networking, general compute, and storage going forward.

David Jordan: The question is for Hyve specifically?

Patrick Zammit: The question is for Hyve specifically?

David Paige: Yeah.

Patrick Zammit: Yeah. This quarter we had the ramp-up of an accelerated compute program at Hyve. Generally speaking, when you look at our mix of programs, we believe that we are going to see more of networking, general compute, and storage going forward. We want to continue to maintain and develop our expertise in accelerated compute. In terms of mix, we have this nice ramp-up, but when I look at the profile of the wins we are having, we will continue to see more of the other programs than the accelerated compute programs, I think going forward.

Speaker #7: But we want to continue to maintain and develop our expertise in accelerated compute. In terms of mix, we have had this nice run-up.

Speaker #7: But when I look at the profile of the wins we are having, we will continue to see more of the other programs than the accelerated compute programs.

Speaker #7: I think going forward.

Speaker #1: Your next question comes from the line of Vincent Coliccio with Barrington Research. Your line is open.

Speaker #5: Yeah. Patrick, if hardware demand moderates, would you expect software, cloud, and recurring revenue streams to offset some of that pressure?

Speaker #7: So thanks for the question. So software cloud security continue to grow at double digits. And for sure, that when you look at the underlying reason for that success, I think they're going to I'm quite positive and optimistic on both underlying trends to continue in the future.

Operator: Your next question comes from the line of Vincent Colicchio with Barrington Research, and your line is open.

Vincent Colicchio: Yeah, Patrick, if hardware demand moderates, would you expect software, cloud, and recurring revenue streams to offset some of that pressure?

Patrick Zammit: Thanks for the question. Software, cloud, security continue to grow at double digits. For sure that when you look at the underlying reason for that success, I'm quite positive and optimistic on both underlying trends to continue in the future. Now, I will tell you that when I look at hardware, and when I look at the impact of AI, or the potential impact of AI on premise, and even, I should say, on edge computing, I think hardware is becoming a very interesting category again. Could be poised for very interesting growth. AI could be really a game changer here. It's a little bit too early to call it out, but there are some indicators that could speak well.

Speaker #7: Now, I will tell you that when I look at hardware, and when I look at the impact of AI on the potential impact of AI on on-premise and even, I should say, on edge computing, I think hardware is becoming a very interesting category again.

Speaker #7: Could be poised for very interesting growth, and AI could really be a game changer here. It's a little bit too early to call it out.

Speaker #7: But there are some indicators that, I mean, could speak well. As I said, I mentioned it before. The cost of the tokens is going to have an impact, I think, on some of the behaviors, beyond the issue of latency, the issue of security, and privacy.

Speaker #7: I think the cost of the tokens could have a very positive impact on on-premise hardware, both in the data center and at the edge.

Patrick Zammit: As I said, I mentioned it before, the cost of the tokens is going to have an impact, I think, on some of the behaviors beyond the issue of latency, the issue of security and privacy. I think the cost of the tokens could have a very positive impact on premise hardware in both, in the data center, but also at the edge.

Speaker #4: Thank you.

Speaker #1: Your next question comes from the line of Alec Valero with Loop Capital. Your line is open.

Speaker #8: Hey, guys. Thank you for taking my question. My question to you is, I don't know if you mentioned this earlier, but on the 1 million square feet that you're adding, any color on when we can see this capacity start to contribute to revenue?

[Analyst]: Thank you.

Vincent Colicchio: Thank you.

Operator: Your next question comes from the line of Alek Valero with Loop Capital. Your line is open.

Speaker #7: Yeah, so thank you for the question. So again, I mean, we have a strong pipeline, strong backlog. And what we see is the ramp-up of the programs we have will start impacting our revenue in Q4 of fiscal year '26.

Alek Valero: Hey, guys. Thank you for taking all my question. My question to you is, I don't know if you mentioned this earlier, but on the 1 million square feet that you're adding, any color on when we can see this capacity start to contribute to revenue?

Patrick Zammit: Thank you for the question. We have a strong pipeline, strong backlog. We see the ramp-up of the programs we have won to start impacting our revenue in Q4 fiscal year 2026, and most probably in Q1 fiscal year 2027. The capacity we are adding will convert into additional revenue, potentially in Q4 and most probably in Q1 next year.

Speaker #7: And most probably in Q1, fiscal year '27. So the capacity we are adding will convert into additional revenue, potentially in Q4, and most probably in Q1 next year.

Speaker #8: Oh, got it. Thank you for that. Just a quick follow-up: on Hive, obviously you’ve said manufacturing is now two-thirds of that. What can we expect that mix to look like throughout the year?

Speaker #3: So, Alec, we don't—it's hard to give you an exact answer on that. Here's what I would—here's the way I would tell you to think about it.

Alek Valero: Oh, got it. Thank you for that. Just a quick follow-up. On Hyve, obviously, you said manufacturing is now two-thirds of that. What can we expect that mix to look like throughout the year?

Speaker #3: Over a long period of time, we expect manufacturing to increase as a mix of the total. But as Patrick said, in certain types of environments, our supply chain business becomes very critical to helping support our customers.

David Jordan: Alek, it is hard to give you an exact answer on that. Here is the way I would tell you to think about it. Over a long period of time, we expect manufacturing to increase as a mix of the total. As Patrick said, in certain types of environments, our supply chain business becomes very critical to helping support our customers. It will ebb and flow. It is hard to tell you exactly quarter to quarter, year to year what that might look like. Over a longer period of time, we expect to increase the percentage of Hyve associated with manufacturing.

Speaker #3: And so it will ebb and flow. It's hard to tell you exactly, quarter to quarter, year to year, what that might look like. But over a longer period of time, we expect to increase the percentage of Hive associated with manufacturing.

Speaker #8: Got it. Super helpful. Thank you, guys. Appreciate it.

Speaker #1: And we've reached the end of the Q&A session. I would now like to turn the call back over to Patrick for closing remarks.

Speaker #7: So, thank you all for joining us this morning. I want to close by thanking our coworkers across the globe, whose commitment and dedication drive everything we accomplish.

Alek Valero: Got it. Super helpful. Thank you, guys. Appreciate it.

Speaker #7: And our partners for the continued confidence they place in us. To everyone on today's call, we appreciate your ongoing interest in TD SYNNEX. Thank you.

Operator: We've reached the end of the Q&A session. I would now like to turn the call back over to Patrick for closing remarks.

Speaker #7: And wishing you a great day.

Patrick Zammit: Thank you all for joining us this morning. I want to close by thanking our coworkers across the globe, whose commitment and dedication drive everything we accomplish, and our partners for the continued confidence they place in us. To everyone on today's call, we appreciate your ongoing interest in TD SYNNEX. Thank you, and wishing you a great day.

Operator: That concludes today's conference call. You may now disconnect. Have a nice day.

Q2 2026 TD SYNNEX Corp Earnings Call

Request TrialDemo

TD SYNNEX

Earnings