TD SYNNEX projects $23B–$24B Q4 billings as AI and cloud demand accelerate

Earnings Call Insights: TD SYNNEX Corporation (SNX) Q3 2025

MANAGEMENT VIEW

* Patrick Zammit, CEO, highlighted, "our third quarter non-GAAP gross billings and diluted earnings per share established new records for our company" and cited "consolidated gross billings were $22.7 billion, growing 12%, 10% in constant currency. And non-GAAP diluted earnings per share of $3.58 exceeded the high end of our guidance, representing a 25% increase year-over-year." Zammit pointed to strong performance from Hyve, noting "gross billings increasing in the mid-30s year-over-year and ODM/CM gross billings increasing 57% year-over-year, fueled by continued strength in hyperscaler investments in cloud infrastructure." He also cited a 26% increase in software gross billings and "healthy momentum across each of our regions with exceptionally dynamic performance in Latin America and Asia Pacific and Japan." Zammit announced the launch of TD SYNNEX Partner First in North America to unify partner experience and confirmed expansion of the Destination AI enablement program, focusing on "Agentic AI, security for AI and AI factory."
* Marshall Witt, CFO, stated, "we achieved 12% gross billings growth and 25% non-GAAP diluted EPS growth in the third quarter, which exceeded the high end of our guidance range." Witt also noted, "net revenue was $15.7 billion, up 7% year-over-year and above the high end of our guidance range. Gross profit increased 18% year-over-year to $1.1 billion." He explained, "Free cash flow was $214 million, driven by strong earnings growth and a slight improvement in our cash conversion cycle." Witt confirmed a dividend of $0.44 per share payable October 31, 2025, and total year-to-date return to stockholders of $534 million.

OUTLOOK

* Marshall Witt announced Q4 guidance: "For the fourth quarter, we expect gross billings in the range of $23 billion to $24 billion, representing an increase of approximately 11% at the midpoint." He added, "Net revenue in the range of $16.5 billion to $17.3 billion," and "non-GAAP net income in the range of $281 million to $322 million. Non-GAAP diluted earnings per share in the range of $3.45 to $3.95 per diluted share." Witt anticipates a non-GAAP effective tax rate of approximately 23% and interest expense of $91 million.
* Zammit stated, "we are confident...for next quarter" regarding Hyve customer demand, and expects similar strength in Q4, with supply chain service demand also supporting momentum.

FINANCIAL RESULTS

* Witt reported, "Endpoint Solutions portfolio increased gross billings 10% year-over-year, driven by continued demand for PCs... Advanced Solutions portfolio increased gross billings by 13% year-over-year and 8% year-over-year when excluding the impact of Hyve." He detailed, "Gross margin as a percentage of gross billings was 5%, which increased 23 basis points year-over-year and improved sequentially." Non-GAAP SG&A expense was $655 million or 3% of gross billings, with a cost to gross profit percentage of 58% in Q3, improved from 60% in the first half of the year. Non-GAAP operating income was $475 million, and operating margin as a percentage of gross billings was 2.09%.
* The company ended the quarter with $874 million in cash and cash equivalents and debt of $4.2 billion. Gross leverage ratio was 2.3x and net leverage ratio 1.8x. Gross cash days were approximately 16 days, a 1-day improvement sequentially.

Q&A

* Maya, Morgan Stanley, asked about Hyve dynamics for Q4 and next year. Zammit responded, "the quarter did -- I mean, went extremely well as did distribution, by the way. So what explains the overperformance? First, I mean, we saw growth, significant growth across all the programs and all the customers." He added confidence for Q4. Witt added, "we continue to make investments in skill sets, engineering capabilities, capacity, manufacturing, et cetera, to ensure that we stay ahead of capacity requirements."
* David Paige Papadogonas, RBC, asked about PC pull forward and free cash flow targets. Zammit indicated, "we think it's very limited...we continue to see very good momentum on PCs across the world." Witt stated, "our expectation is that the free cash flow will be approximately $800 million for the year," adjusting from the $1.1 billion previously targeted, citing increased working capital needs.
* Keith Housum, Northcoast Research, asked about sustainability and pull forward from Q4 into Q3. Zammit indicated the demand drivers would "continue into Q4."
* Michael Ng, Goldman Sachs, asked about Hyve's new customer onboarding and growth sources. Witt replied, "we continue to make good progress in what we'll call programs... Our pipeline remains quite healthy and strong." Zammit added, "the growth is coming from networking and compute and more traditional compute."

SENTIMENT ANALYSIS

* Analysts focused on sustainability, free cash flow, and Hyve growth, with a slightly positive to neutral tone, seeking clarification on pull-forward dynamics and future guidance.
* Management maintained a confident tone throughout, especially on Hyve and PC segments, using phrases like "we are confident" and "we believe that, I mean, those dynamics will remain in Q4." Witt was direct in addressing the adjusted free cash flow guidance, reflecting transparency.
* Compared to the previous quarter, management's tone was more assertive regarding growth momentum, while analysts remained cautiously optimistic but pressed for sustainability details.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted from caution around growth rates and pull-forward effects in Q2 to greater confidence in Q3, with higher gross billings and EPS targets for Q4.
* Strategic focus evolved from executing digital and service initiatives in Q2 to launching new platforms such as Partner First and expanding AI enablement in Q3.
* Analyst focus moved from macro risks and demand volatility to the sustainability of high growth and cash flow conversion.
* Key metrics like gross billings, EPS, and gross margin all saw year-over-year and sequential improvements, with free cash flow guidance revised lower reflecting higher working capital needs.
* Management conveyed increasing confidence in core growth drivers, particularly Hyve and AI-related demand, in contrast to more cautious language and macro uncertainty in Q2.

RISKS AND CONCERNS

* Management acknowledged that "Hyve is a lumpy business" and results can vary by quarter, but expressed confidence in current customer demand and continued investments in capacity and skills.
* Zammit highlighted that federal sector remains a small but strategic part of the portfolio, facing "anticipated softness...as our customers navigate a dynamic environment."
* Witt cited increased working capital requirements as impacting free cash flow, particularly due to Hyve's longer cash conversion cycle.
* Analysts questioned the sustainability of growth, potential for pull-forward, and adjusted cash flow guidance, with management providing clarity and rationale for changes.

FINAL TAKEAWAY

TD SYNNEX delivered record gross billings and EPS in Q3 2025, driven by robust demand in cloud, AI, and PC markets, as well as standout performance from Hyve and software segments. Management projects continued momentum into Q4 with gross billings guidance of $23 billion to $24 billion and reinforced confidence in ongoing growth drivers, even as free cash flow expectations were revised lower due to elevated working capital needs. New digital initiatives and AI-focused programs are expected to further strengthen the company’s competitive position and support long-term growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/snx/earnings/transcripts]

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