TD SYNNEX Corporation (NYSE: SNX) Q2 2025 Earnings | 6/24/2025

TD SYNNEX Corporation Q2 2025 Earnings Call Summary

TD SYNNEX Corporation reported a strong second quarter performance for fiscal year 2025, exceeding guidance for gross billings and non-GAAP diluted EPS, driven by strength in IT distribution and hyperscaler markets. The company's strategic execution, particularly in digital capabilities and services, contributed to growth ahead of market trends.

Q2 2025 Financial Highlights:

• Gross Billings: $21.6 billion, up 12% year-over-year (11% in constant currency), exceeding the high end of guidance.

  • Excluding HIVE, gross billings grew 11%.

• Net Revenue: $14.9 billion, up 7% year-over-year, also above the high end of guidance.

• Non-GAAP Diluted EPS: $2.99, exceeding the upper end of guidance.

• Gross Profit: Increased 7% year-over-year to $1 billion.

• Gross Margin (as % of gross billings): 5%, consistent sequentially.

• Non-GAAP Operating Income: Increased 7% to $414 million.

• Cash Flow: Generated approximately $543 million in free cash flow.

• Capital Allocation: Returned $186 million to stockholders ($149 million in share repurchases, $37 million in dividends).

• Balance Sheet: Ended with $767 million in cash and cash equivalents, and $4.1 billion in debt. Net leverage ratio of 1.9 times.

Operational Performance and Market Trends:

• Technology Segments:

  • Endpoint Solutions (ES): Gross billings grew 13% year-over-year, primarily due to the ongoing PC refresh cycle.

  • Advanced Solutions (AS): Gross billings grew 12% year-over-year (10% excluding HIVE), driven by demand for data center infrastructure and growth in cloud, security, and AI.

  • Software: Continues to be a "bright spot" with 20% billings growth, fueled by cloud, cybersecurity, and infrastructure software.

  • Networking: Returned to growth after multiple weak quarters.

• Customer Segments: Broad-based double-digit demand across SMB, MSPs, and public sector.

• Regional Performance: Strong growth across all regions, particularly in Europe, APJ (especially India and Japan), and North America.

• HIVE Performance:

  • Grew gross billings in the high teens, driven by server and network rack build programs.

  • Profit margins declined sequentially due to unrealized FX losses and program mix, though a portion of FX losses is expected to be recovered.

  • Demand shortfall from a specific customer in Q1 has seen demand return in Q2, though slightly below expectations. Working capital at HIVE also improved as anticipated.

Strategic Imperatives & Industry Recognition:

• The company is executing on its five strategic imperatives (unifying reach, targeting new customers, distribution market expansion, diversifying offerings, accelerating services), evidenced by over 40 channel honors received in the quarter.

• Recognized as HPE's Global Distribution Partner of the Year and received numerous other accolades from NVIDIA, CrowdStrike, Dell, Lenovo, NetApp, and Fortinet.

• Highlighted a successful partnership with a new U.S. customer, leveraging digital capabilities (APIs and custom workflows) for integrated and automated operations, leading to exponential sales growth and accretive margins.

• Deeply engaged in services initiatives with a leading advanced solutions OEM, including building data center and AI infrastructure solutions, showcasing their ability to move up the value chain and support supply chain acceleration.

Q3 2025 Financial Outlook (Best view based on current knowledge):

• Non-GAAP Gross Billings: $21 billion to $22 billion (approximately 6% growth at the midpoint).

• Net Revenue: $14.7 billion to $15.5 billion.

• Non-GAAP Net Income: $227 million to $268 million.

• Non-GAAP Diluted EPS: $2.75 to $3.25.

• Share Repurchases: Approximately $175 million.

Management Commentary & Outlook:

• The Q2 results benefited modestly from some demand pull-forward in PCs (estimated $100-$200 million in sales, roughly $10 million in gross profit), but PC demand is expected to remain strong in the coming quarter due to refresh cycles.

• Management acknowledges a volatile macroeconomic environment (including global trade developments and the Middle East situation), which leads to a "cautiously optimistic" and "prudent" outlook for Q3. The Q3 guidance reflects a tougher comparison base from last year's recovery in distribution and strong HIVE performance.

• The PC refresh cycle is considered to be in the middle innings, with continued positive contributions expected.

• The overall goal remains generating profitable growth and free cash flow while being a valued partner. The company remains confident in achieving its $1.1 billion free cash flow target for the full year, driven by working capital improvement, especially within HIVE.