TD SYNNEX Corporation (SNX) Earnings

Management highlights

### Core Strategic Pillars Driving Growth - Omnichannel engagement: Combine digital self-service for speed with human-led expertise for complex needs, enabled by the Partner First platform. Leverage ecosystem data and AI/ML to personalize partner experiences, reduce friction, and improve conversion and cycle times. - Specialized segmented commercial teams: Tier customers by strategic importance, reallocate resources dynamically based on needs, and apply the same segmentation to technology and vendor partnerships. This framework has driven above-market SMB growth and unlocked billions in untapped opportunity at strategic accounts. - Partner enablement: Provide tailored advanced training, certifications, technical expertise, and testing labs to accelerate customer time-to-market, driving retention and wallet share growth. ### Distribution Segment Operational Highlights - Broad-based strength across all regions, with particularly strong international growth and margin expansion. The EMEA region is a key proof point of the company's model, delivering structural share gains against specialized competitors. - Secured a strategic win as one of only two global distribution partners for HPE's full networking, cloud, and AI portfolio (including assets from HPE's Juniper acquisition), unifying reach and expanding a key strategic vendor relationship. ### HIVE Segment Operational Highlights - HIVE provides end-to-end design, manufacturing, full rack integration, and lifecycle supply chain services for hyperscaler data center infrastructure. - The company has secured at least one program with each of the top 5 U.S.-based hyperscalers. Ramping for 3 hyperscalers is underway, with 2 additional programs on track to ramp in late FY26 or early FY27. - Issued an equity warrant to long-standing customer Amazon, structured to grow in value as the companies' joint programs expand. - Is expanding U.S. manufacturing facilities by more than 1 million square feet to support future customer growth, with capacity expected to contribute revenue starting in Q4 FY26, ramping in Q1 FY27. ### Capital Allocation Highlights - Returned $112 million to shareholders via share repurchases and $39 million via dividends in Q2. The board approved a $0.48 per share dividend payable July 31, 2026. - Ended the quarter with $1.1 billion in cash and a net leverage ratio of 1.6x, below the company's medium-term framework, providing capacity for continued investment and shareholder returns.

Guidance

- For Q3 fiscal 2026, management expects non-GAAP gross billings of approximately $27.7 billion (plus/minus $500 million), representing ~22% year-over-year growth at the midpoint. - Expected Q3 non-GAAP EPS is approximately $4.50 (plus/minus $0.25), representing ~26% year-over-year growth at the midpoint, on 79.4 million diluted shares outstanding. - Expected Q3 revenue is approximately $18.6 billion (plus/minus $400 million), after a 33% gross-to-net adjustment. Non-GAAP net income is expected to be approximately $361 million (plus/minus $20 million). - Q3 guidance assumes no material contribution from newly onboarded HIVE customers, which are still expected to ramp in late FY26 or early FY27. - Guidance incorporates projected risks from component supply constraints, particularly for memory and CPUs.

Segment performance

TD SYNNEX reported total non-GAAP gross billings of $28.9 billion for Q2 fiscal 2026, a 33% year-over-year increase. **Distribution Segment (81% of total gross billings):** Non-GAAP gross billings hit $23.4 billion, up 22% year-over-year. Within Distribution: - Endpoint Solutions: Gross billings increased 13% year-over-year, with mid-single-digit unit growth and strong growth in PCs driven by higher ASPs - Advanced Solutions: Gross billings increased 31% year-over-year, led by strength in infrastructure and security Segment non-GAAP operating income was $434 million, up 36% year-over-year, with a non-GAAP operating margin of 1.9% (up 19 basis points year-over-year). **HIVE Segment (19% of total gross billings):** Non-GAAP gross billings reached $5.5 billion, up 117% year-over-year. Within HIVE: - Manufacturing: Represented ~two-thirds of segment gross billings, with faster growth than the overall segment driven by higher volumes with existing customers - Supply Chain Services: Represented ~one-third of segment gross billings, with growth driven by component demand for customer infrastructure deployments Segment non-GAAP operating income was $181 million, up 89% year-over-year, with a non-GAAP operating margin of 3.3% (down 50 basis points year-over-year primarily due to mix shifts). Company-wide non-GAAP operating income totaled $615 million (up 49% YoY), non-GAAP EPS was $4.85 (up 62% YoY). GAAP operating income was $519 million (up 58% YoY), GAAP EPS was $4.15 (up 88% YoY).

Risks & headwinds

- Macro environment headwinds include rising component costs, ongoing component supply constraints, geopolitical uncertainty, and potential demand elasticity from product price increases. - PC (particularly consumer PC) demand may see higher elasticity from price increases, which could impact unit volumes. - Early-stage program ramps in HIVE carry temporary inefficiencies that can pressure near-term margins, even as these inefficiencies are expected to decline over time with optimization. - Accelerated HIVE growth requires incremental working capital investment, leading to near-term free cash consumption that is expected to improve as new programs mature. - Price increases are not complete, with additional increases expected for PCs, storage, and servers in July, creating uncertainty around demand reaction.

Analyst Q&A

• Q: Have you seen demand weakening or demand destruction from rising component costs, and have vendors changed channel incentives?

  A: Management has not seen broad demand weakening in Q2. Price increases are just starting to take effect and will accelerate in Q3, but underlying demand remains healthy across all portfolio segments, including PCs. No material changes to channel incentives from vendors have occurred to date, and distribution margin quality remains healthy.

• Q: How do you balance growth investment in HIVE against cash flow generation, and when will cash flow conversion return to long-term targets?

  A: Distribution growth generates significant free cash flow currently. All incremental cash investment is going toward HIVE, which delivers strong returns that improve overall company return on equity. HIVE working capital adjusts rapidly if demand slows, and most HIVE operating costs are variable, so the balance sheet can withstand a downturn. The 95% long-term non-GAAP net income to free cash flow conversion target remains the company's North Star, but short-term cash consumption is expected during accelerated HIVE growth.

• Q: What is the sustainability of hardware spending through the second half and next year, which products have higher/lower demand elasticity to price hikes, and can all cost increases be passed through?

  A: TD SYNNEX operates as a cost-plus business, so all cost increases are passed through to customers, with a strong track record of doing so during past market shocks. Consumer PCs have the highest expected demand elasticity, but the company is focused on B2B PCs where refresh demand remains strong and share gains are offsetting unit pressure. Demand for infrastructure, networking, storage, servers, security, and software remains solid and sustainable, driven by AI investments, on-premise workload trends, and refresh cycles.

• Q: What was the strategic rationale for issuing an equity warrant to Amazon, and should we expect similar arrangements with other hyperscalers?

  A: The warrant relates to the companies' long-standing HIVE partnership with AWS. The agreement was mutually beneficial, as Amazon has long valued the value proposition TD SYNNEX provides, and it supports the expansion of joint programs going forward. Management did not confirm whether similar arrangements will be used with other hyperscalers.