TD SYNNEX Earnings Call Highlights Record Growth, Cash

TD SYNNEX Corporation ((SNX)) has held its Q4 earnings call. Read on for the main highlights of the call.

TD SYNNEX Delivers Record Quarter Amid Manageable Headwinds

TD SYNNEX’s latest earnings call struck an upbeat tone, with management underscoring record billings, earnings per share and free cash flow, powered by broad-based demand and exceptional growth in its HIVE business. While executives were candid about emerging headwinds—such as a rising gross-to-net drag, flat gross margin percentage, a higher tax rate, and some uncertainty around component-driven pricing—the overarching narrative was one of strong execution, disciplined capital allocation and confidence that robust cash generation can comfortably absorb near-term challenges.

Record Billings and Earnings Underscore Operating Leverage

The quarter showcased clear operating leverage as TD SYNNEX posted non-GAAP gross billings of $24.3 billion, up 15% year over year (13% in constant currency), and non-GAAP diluted EPS of $3.83, up a strong 24% and marking a company record. The gap between top-line growth and faster EPS expansion highlights improving efficiency, with the business converting higher volumes into disproportionately higher earnings despite a more complex product mix and a flat gross margin percentage.

HIVE Emerges as a Powerful Growth Engine

HIVE, TD SYNNEX’s high-performance infrastructure and advanced solutions business, was a standout performer. HIVE gross billings surged more than 50% year over year in the quarter, with ODM and similar programs growing 39%. Operating income from HIVE also grew meaningfully and is becoming a larger contributor to the company’s overall profit mix. This performance underscores HIVE’s role as a strategic growth pillar, even as management acknowledges it can be lumpy and requires continued investment in leadership, engineering and capacity.

Core Distribution Franchise Shows Healthy Momentum

The company’s core distribution business, excluding HIVE, delivered solid gains, reinforcing that TD SYNNEX’s growth is not solely dependent on its newer ventures. Gross billings in the ex-HIVE segment rose 10% year over year, while both gross profit and operating income advanced at double-digit rates. That combination suggests healthy demand from partners and strong execution on traditional lines of business, even as the portfolio shifts toward more software, cloud and advanced solutions.

Net Revenue, Profit and Margin All Move in the Right Direction

On a reported basis, net revenue climbed 10% year over year to $17.4 billion, while gross profit increased 15% to $1.2 billion. Non-GAAP operating income rose 18% to $497 million, and operating margin edged up by 5 basis points to 2.04%. Although margin expansion was modest, the company still converted revenue growth into faster operating income gains, reflecting disciplined cost management and a richer mix of higher-value offerings, even as headline gross margin percentage remained flat.

Robust Free Cash Flow Fuels Shareholder Returns

TD SYNNEX delivered $1.4 billion of free cash flow for the fiscal year, matching the $1.4 billion generated in the fourth quarter alone, marking a third consecutive year above the $1 billion threshold. The company returned $209 million to shareholders in Q4 through $173 million of buybacks and $36 million in dividends, and $742 million for the full year. Over the past three years, cumulative capital returns exceed $2.2 billion, representing about 61% of free cash flow, signaling a clear commitment to shareholder-friendly capital allocation.

Broad-Based Regional Strength and Product Tailwinds

Growth was geographically diversified, with Europe coming in stronger than expected and Asia Pacific & Japan delivering robust expansion, helped by cloud, PC refresh cycles and AI-related development. On the product side, endpoint solutions gross billings rose 12% year over year, and PCs recorded double-digit growth for the fourth consecutive quarter. These trends indicate that underlying IT demand remains resilient across regions and categories, with AI and modern workplace upgrades contributing to momentum.

Strategic Digital and AI Investments Gain Traction

Management highlighted ongoing investments in an omnichannel digital platform and a new AI assistant designed to provide 24/7 self-service support, which are already driving operational time savings. These tools aim to make it easier for partners to transact, configure and support complex solutions at scale. Market recognition has followed: TD SYNNEX received awards such as UK iCloud Marketplace of the Year from an industry publication and Cisco Distributor of the Year across multiple geographies, and it secured a global security RFP, reinforcing the company’s positioning as a leading solutions aggregator.

Costs, Working Capital and Leverage Remain Tight

Cost discipline and balance sheet management were key themes. Non-GAAP SG&A expenses were $698 million, just 3% of gross billings, and the cost-to-gross-profit ratio improved by roughly 100 basis points to 58%. Net working capital decreased by about $300 million year over year, while gross cash days improved by two days, underscoring better inventory and receivables management. The company ended the period with $2.4 billion in cash and $4.6 billion in debt, translating to gross leverage of 2.4x and net leverage of 1.1x—levels that afford financial flexibility for both investment and capital returns.

Gross-to-Net Drag Intensifies on Software and HIVE Mix

One notable headwind is the rising gross-to-net impact. In the fourth quarter, there was roughly a 29% reduction from gross billings to net revenue, and guidance for the upcoming quarter implies an even steeper gross-to-net adjustment of about 33%. This reflects a growing mix of software and certain HIVE programs that are accounted for on a net basis, which depresses reported net revenue even as underlying billings and profits grow. For investors, it means gross billings and earnings metrics may be more indicative of true activity than headline revenue.

Flat Gross Margin Percentage Limits Upside

Despite higher gross profit dollars, gross margin as a percentage of gross billings held steady at around 5% year over year. The flat margin suggests that competitive dynamics, product mix, and the shift toward netted software and HIVE programs are capping percentage margin expansion, even as the business grows. While absolute profits are increasing, investors looking for margin uplift will need to watch whether mix improvements and efficiency gains can eventually translate into a higher margin profile.

Higher Tax Rate Weighs on Net Income

TD SYNNEX’s non-GAAP effective tax rate rose to about 24% in the quarter, up from 21% a year earlier. The higher tax burden dampens the translation of strong pre-tax performance into net income and EPS. While not unique among global companies facing evolving tax regimes, this shift is an incremental headwind that partially offsets the operational improvements elsewhere in the P&L.

Cash Flow Timing Set to Normalize After Exceptional Q4

Management cautioned that fourth-quarter cash flow was boosted by a handful of large receipts, estimated in the range of a few hundred million, that will not repeat. As those timing benefits unwind and typical seasonality returns, the company expects a cash outflow in the first quarter. This normalization does not change the underlying free cash flow narrative but is important for investors tracking quarter-to-quarter liquidity and leverage metrics.

HIVE’s Growth Comes With Volatility and Investment Needs

While HIVE’s growth and profit contribution are clear positives, management noted that the business includes opportunistic, project-based supply-chain programs that can produce lumpy results. The company is continuing to invest in HIVE leadership, engineering and capacity to support long-term demand, particularly in high-performance computing and AI-related infrastructure. These investments may pressure near-term margins but are positioned as necessary to sustain HIVE’s strong trajectory and defend TD SYNNEX’s competitive edge in complex, high-value solutions.

Component Price Inflation Adds an Element of Uncertainty

Rising prices for memory and other components, including DRAM and NAND, have pushed up average selling prices across PCs, servers and storage, offering a near-term tailwind to billings and revenues. However, these price increases also introduce uncertainty around demand elasticity, as higher prices could eventually weigh on volumes if customers delay or scale back purchases. Management noted that, so far, they have not seen significant demand destruction, but they remain vigilant in monitoring potential impacts on future orders and mix.

Guidance Points to Continued Growth and Strong Cash Conversion

For the first quarter of fiscal 2026, TD SYNNEX guided to non-GAAP gross billings of $22.7–$23.7 billion, implying roughly 12% growth at the midpoint, assuming a euro–dollar rate of 1.16. Net revenue is expected in the $15.1–$15.9 billion range, reflecting an ongoing gross-to-net adjustment of about 33%. Non-GAAP net income is projected between $243 million and $283 million, with non-GAAP diluted EPS of $3.00–$3.50 based on approximately 80.1 million diluted shares. While the company anticipates a cash outflow in Q1 due to seasonality and the reversal of Q4 timing benefits, management targets cumulative free cash flow conversion of roughly 95% of non-GAAP net income over fiscal 2025 and 2026. The board also approved a quarterly cash dividend of $0.48 per share, and the company retains $1.2 billion in remaining share repurchase authorization, underscoring its intent to continue returning capital to shareholders.

TD SYNNEX’s earnings call painted the picture of a company executing well on multiple fronts: record billings and EPS, sustained free cash flow strength, and clear momentum in both its core distribution and high-growth HIVE segments. At the same time, management was transparent about rising gross-to-net headwinds, flat gross margins, a higher tax rate and potential volatility from component price trends and HIVE’s project-based nature. For investors, the takeaway is a business with solid growth, disciplined balance sheet management and generous capital returns, offset by accounting and mix nuances that may mask underlying strength in headline revenue metrics but do little to dent the longer-term bullish narrative.