TD SYNNEX (SNX) just delivered a quarter that makes most other earnings reports look like a gentle tap on the brakes. The IT distribution giant reported fiscal second-quarter results Thursday that blew past Wall Street's expectations on both the top and bottom lines, and it's not because customers are suddenly feeling generous—it's because they can't get enough of AI infrastructure.
Revenue jumped 31% year over year to $19.58 billion, well above the $16.80 billion analysts were looking for. On a constant-currency basis, revenue rose 29.1% and landed above the high end of the company's own guidance. This wasn't a squeaker of a beat; it was a full-on demolition.
Earnings and Margins: The Numbers Behind the Beat
GAAP diluted earnings per share came in at $4.15, up from $2.21 a year ago. But the headline number is non-GAAP diluted EPS, which climbed 62.2% to $4.85—topping the analyst estimate of $4.14 by a comfortable margin. Net income rose 80.7% to $334 million, while non-GAAP net income increased 55.8% to $390 million.
Gross profit rose 28% to $1.34 billion, though gross margin slipped a bit to 6.84% from 7.00% a year earlier. Operating income jumped 58.3% to $519 million, and non-GAAP operating income rose 48.5% to $615 million. Non-GAAP gross billings climbed 33.4% to $28.9 billion, also exceeding the company's outlook.
The Hyve Effect: AI Infrastructure Is the Star
TD SYNNEX operates two main segments: its distribution business, which sells IT hardware, software, and systems, and Hyve, which provides traditional and accelerated compute, cloud, and connected infrastructure solutions. During the earnings call, management said distribution gross billings increased 22% to $23.4 billion. Endpoint Solutions grew 13%, supported by higher average PC selling prices and mid-single-digit unit growth. Advanced Solutions rose 31% on strength in infrastructure and security.
But the real fireworks came from Hyve. Gross billings more than doubled, rising 117% to $5.5 billion. Manufacturing represented about two-thirds of the segment's business. CEO Patrick Zammit said Hyve has secured at least one program with each of the top five U.S.-based hyperscale cloud providers. The company is adding more than 1 million square feet of U.S. manufacturing capacity to support program launches expected in late fiscal 2026 or early fiscal 2027.
Management said it has not seen demand weaken because of higher prices but continues to monitor PC demand elasticity. It also cited memory and CPU supply constraints as potential third-quarter risks and said Hyve's rapid growth will continue to consume cash in the near term.
Zammit put it plainly: the company has "not seen any destruction of demand because of the price increases," adding that businesses continue to invest in infrastructure and AI initiatives. TD SYNNEX also said it has not seen material changes in vendor incentives, while demand across its product portfolio, including PCs, servers, and networking, remained healthy heading into the fiscal third quarter.
Cash Flow and Shareholder Returns: The Cost of Growth
All that growth comes with a price tag. Operating cash flow for the first six months was negative $1.16 billion, and free cash flow was negative $1.26 billion. Cash and cash equivalents fell to $1.09 billion from $2.44 billion at the end of fiscal 2025. Current borrowings totaled $1.13 billion, while long-term debt stood at $3.59 billion.
Despite the cash burn, the company returned $151 million to shareholders through dividends and share repurchases. TD SYNNEX also raised its quarterly dividend 9% year over year to 48 cents per share.
Outlook: More Growth Ahead
For the fiscal third quarter, TD SYNNEX expects revenue of $18.2 billion to $19.0 billion, above the analyst consensus estimate of $16.83 billion. The company forecasts non-GAAP gross billings of $27.2 billion to $28.2 billion, GAAP diluted EPS of $3.40 to $3.90 (above the $3.04 estimate), and non-GAAP diluted EPS of $4.25 to $4.75, exceeding the consensus estimate of $4.03.
Of course, it's not all smooth sailing. TD SYNNEX said geopolitical uncertainty, weaker IT spending, inflation, currency fluctuations, tariffs, supply constraints, and changes in supplier programs remain key risks to its outlook. But for now, the AI boom is keeping the party going.
SNX Price Action: TD Synnex shares were down 0.70% at $281.23 at the time of publication on Thursday. The stock is approaching its 52-week high of $296.47.
