TD SYNNEX Corporation 2026 Q3 Earnings Call

Nate, you may begin. Good morning, everyone, and welcome to TD SYNNEX's fiscal 2026 third quarter earnings call.

Joining me on today's call are Chief Executive Officer, Patrick Zammit, and Chief Financial Officer, David Jordan. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, including statements about our strategy, demand, plans and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our financial expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release, in the Form 8-K we filed today, in the Risk Factors section of our Form 10-K, and our other reports and filings with the SEC. We do not intend to update any forward-looking statements.

Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our investor relations website, ir.tdsynnex.com. This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission. I will now turn the call over to Patrick.

Thank you, Nate, and good morning, everyone. We delivered another record quarter with Distribution and Hyve both performing above our expectations and growing above market within the quarter. Results were broad-based across geographies, technologies, customers, and programs, with notable strength in data center infrastructure. Our success securing opportunities with new and existing customers, particularly within Hyve, required working capital investment to support these ramps. As David will discuss in more detail, those investments affected near-term cash flow during the quarter but position us to support committed customer demand and future growth. Looking beyond the quarter, we continue to see encouraging developments across the technology landscape. Enterprise AI adoption is progressing toward broader production deployments. Data center modernization remains a priority as organizations prepare for next-generation infrastructure requirements, while AI is driving new security, governance, and compliance requirements across technology environments.

We believe these trends expand our opportunities across both Distribution and Hyve and reinforce our confidence in the long-term growth opportunity ahead. I will now begin with Distribution. Distribution delivered strong growth during the quarter, with non-GAAP gross billings reaching $24.8 billion, up 27% year-over-year, exceeding our expectations and growing above market across each of our regions. Our performance reflects a broader trend across the technology ecosystem. As technology environments become more complex, customers increasingly need help integrating, deploying, securing, and managing solutions across multiple vendors and technologies. Vendors are looking for partners that can not only efficiently reach customers but enable customer capabilities, activate demand, and execute consistently around the world. This is increasing the strategic importance of Distribution. One area we are particularly encouraged by is the growing number of enterprises moving from AI experimentation towards production-scale centralized AI factory deployments.

This quarter, TD SYNNEX and Mach3 Systems signed an agreement to support an NVIDIA AI factory powered by Vera Rubin NVL72 systems. This is one of the largest enterprise AI factory infrastructure deployments expected to be delivered through the channel, bringing together the design, integration, deployment, day 2 co-admin operations, financing, and supply chain capabilities needed to operationalize a sophisticated NVIDIA-based AI factory platform for a large enterprise. As enterprises evaluate next-generation platforms, we are seeing growing demand for partners that can simplify complexity and accelerate implementation through their enablement capabilities. AI factories have the potential to power transformative new products and services, but realizing that potential requires far more than access to compute. Organizations that ensure AI investments are secure, governed, cost-effective, and aligned with measurable business outcomes.

Similar to the evolution of cloud computing, we believe disciplines such as financial operations and security operations will become increasingly important as AI becomes embedded in business-critical processes. Organizations will need support selecting the right models for the right workloads, deploying them on the right infrastructure, and balancing performance, security, and governance across edge, private, hybrid, and public cloud environments. While still early in the adoption curve, deployments of this scale signal a market that is moving toward broader deployment. As AI becomes embedded across more users, workloads, and business processes, we believe the requirements to secure, govern, optimize, and support these environments will continue to expand. Customers are also seeking greater flexibility in how they engage with us and have seen benefits from our digital strategy.

Customers regularly engaging across our digital offerings have grown their spend with TD SYNNEX at nearly twice the pace of similar customers with us. Through solutions such as PartnerFirst and Digital Bridge, enhanced with AI agents embedded throughout the customer experience, we help customers identify opportunities, simplify purchasing decisions, and engage efficiently across a broad range of technologies and vendors. We view digital engagement as an extension of our broader enablement strategy. Whether customers engage through digital platforms, technical specialists, enablement programs, or a combination of all three, our objective remains the same: helping our customers build capabilities, grow their business, and better serve their end users. The same capabilities creating value for customers are also important for vendors. As technology portfolios expand and customer requirements become more specialized, vendors are seeking partners that can combine global execution with expertise across technologies, customer segments, and geographies.

This is expanding the addressable market served through Distribution. Earlier this quarter, IBM expanded its relationship with TD SYNNEX into 20 additional countries across Europe, Asia-Pacific, and Latin America. We believe this expansion reflects the strength of our go-to-market model and the confidence our vendors place in our ability to activate demand, execute consistently across end markets around the world, and accelerate growth. Collectively, over the last year, we have added multiple billion USD of incremental gross billings into the portfolios through new customer wins and an expanded vendor line card. More importantly, we believe these relationships deepen our role in the technology ecosystem and create additional opportunities for long-term profitable growth and potential earnings expansion. Turning to Hyve. Hyve delivered a strong quarter with non-GAAP gross billings of $7 billion, up 117% year-over-year, exceeding our expectations as we saw continued increased demand from existing customers and programs.

Our previously announced programs with new customers have progressed as planned, with shipments expected to begin in our fiscal fourth quarter. These programs improve visibility into future growth, including maintaining a healthy pipeline of opportunities, and support a broader customer and program mix over time. We believe increasingly sophisticated infrastructure requirements are elevating the importance of expertise in engineering, validation, manufacturing, and supply chain execution. As a result, customers are engaging Hyve earlier in the development process, creating additional opportunities to expand our relationship with our current customer base and potential new customers. One example is our work with multiple customers on the design of advanced liquid-cooled networking racks that are expected to enter into production in the first half of fiscal year 2027. At the same time, we remain focused on ensuring growth translates into attractive long-term returns.

While customer demand and revenue growth remain robust during the quarter, profitability remains an important area of focus. The business is working through a period of significant customer ramps, manufacturing expansion, and elevated investment activity, including engineering talent, technical expertise, and operating capabilities as we support multiple large growth initiatives at the same time. Several opportunities in our pipeline are being awarded at margin profiles that are neutral to accretive relative to our current operating performance. As previously awarded programs mature and newer programs ramp, we expect modest margin improvement over time, even as we continue investing to support future growth. Our manufacturing investments remain aligned with awarded customer programs, and our focus remains on deploying capital in ways that strengthen our competitive position and are expected to generate attractive returns over time.

In closing, we believe both Distribution and Hyve continue to benefit from durable technology trends and expanding customer relationships. Within Distribution, enterprise AI adoption, digitally enabled experiences paired with human expertise, and growing technology complexity are increasing the value we provide to customers and vendors. Within Hyve, sophisticated infrastructure architectures are driving deeper customer engagement and expanding opportunities across a broader set of customer and programs. While we have deployed significant capital to support customer growth initiatives, particularly within Hyve, we believe those investments strengthen our competitive position, support future growth, and increase the long-term earnings power of the company. As these programs mature, we expect free cash flow generation and conversion to improve, and we remain focused on demonstrating progress as we close fiscal year 2026 and enter fiscal 2027. With that, I will turn it over to David to discuss our financial performance and outlook in greater detail.

David? Thank you, Patrick, and good morning, everyone.