Ingram Micro's Q3 2025 Earnings Call: Contradictions in Inventory Management, Cyber Incident Impact, and Macroeconomic Pressures

Date of Call: October 30, 2025

Financials Results

• Revenue: $12.60 billion, up 7.2% year-over-year (6.0% FX-neutral)
• EPS: $0.72 non-GAAP diluted EPS, flat year-over-year; ransomware impact ~$0.02-$0.03 per share; non-GAAP net income up 6% to $169M from $159M
• Gross Margin: Q3 gross profit $870M vs $845M prior year; gross margin down 29 bps YOY, up 34 bps sequentially; would have been above 7% excluding low-margin GPU shipments
• Operating Margin: Operating expenses $646M or 5.13% of net sales vs 5.33% prior year (improved OpEx leverage)

Guidance:

• Net sales for Q4 2025 expected $14.00B to $14.35B (midpoint >6% YOY growth)
• Q4 gross profit expected $935M to $990M (gross margin roughly 6.8% at midpoint)
• Non-GAAP diluted EPS expected $0.85 to $0.95 (assumes ~235.9M shares and 33% non-GAAP tax rate)
• Company expects continued year-over-year net sales growth and continued scaling of Xvantage

Business Commentary:

• Strong Financial Performance:
• Ingram Micro reported revenue of $12.6 billion for Q3, up 7.2% year-over-year, exceeding guidance.

• Growth was driven by increases in client and endpoint solutions, strong demand for notebooks, and the successful deployment of AI solutions like IDA.

• AI and Digital Platform Momentum:

• The Xvantage digital platform saw rapid international adoption, with IDA-driven revenue from non-U.S. operations growing by more than 100% in Q3.

• This was due to the platform's ability to drive revenue, improve quote-to-order conversion rates, and enhance customer engagement through AI innovations.

• Geographical and Product Growth:

• Regions like Latin America and Asia Pacific demonstrated FX-neutral growth in the low teens year-over-year.

• Growth was fueled by solid performance in client and endpoint solutions, servers and storage, and cloud in specific regions.

• SMB Growth and Strategic Focus:

• The SMB customer category achieved a third straight quarter of sequential growth, despite a previous trend of weaker performance.
• This was attributed to Ingram Micro's strategic focus on optimizing operations for SMB customers, leading to improved cost structures and increased sales.

Sentiment Analysis:

Overall Tone: Positive

• "The third quarter was strong with revenues of $12.6 billion, up 7.2% year-over-year and above the high end of our guidance."; "results that either exceeded or hit the top end of each of our guidance ranges"; management: "we enter the fourth quarter with confidence."

Q&A:

• Question from Ruplu Bhattacharya (BofA Securities): Given dynamics this quarter and for December, how should we think about margins going forward (gross & operating)? How does SMB vs large enterprise mix impact margins?
  Response: Guidance implies Q4 gross margins in the high-6% range (~6.8% midpoint); SMB strength is margin-accretive while large GPU/advanced solutions mix can be dilutive; geography (Asia mix) also lowers margin but reduces cost-to-serve.

• Question from Ruplu Bhattacharya (BofA Securities): On inventory, free cash flow and cash conversion cycle: inventory sequentially down a bit — pace of inventory reduction and should Q4 be a negative FCF quarter as you prepare for H1?
  Response: Inventories declined as expected after Q2 build for large projects; management won't give cash guidance but expects a solid cash flow quarter in Q4 (similar favorable dynamics to last year).

• Question from Maya Neuman (Morgan Stanley): On traditional hardware — PCs and servers — where are we in the cycle across these product markets?
  Response: PC refresh is in the later innings but demand remains; server performance was strong and some refresh legs remain.

• Question from Maya Neuman (Morgan Stanley): With current memory market, are customers pulling forward spend to hedge component cost inflation?
  Response: No meaningful pull-forward activity observed; demand/pricing conversations remain traditional to date.

• Question from David Paige Papadogonas (RBC Capital Markets): Where is Xvantage benefiting most — SMB or enterprise — and what's the source of the tailwind?
  Response: Xvantage drives benefits across both: SMB sees transformational 'whole-business' automation and demand generation; enterprise uses it for pricing/availability and sales enablement — overall driving cost-to-serve reduction and pipeline conversion.

• Question from David Paige Papadogonas (RBC Capital Markets): Could AI-powered PCs extend the refresh into 2026?
  Response: Potentially—about 25% of current PC shipments are AI PCs, so AI could lengthen/smooth the refresh, but it's early and visibility should improve in early 2026.

• Question from Logan Katzman (Raymond James): Are you hearing about a potential budget flush exiting 2025?
  Response: No abnormal budget flush; Q4 seasonal budgeting cycle explains typical pop and management views it as normal, with SMB strength the main variable.

• Question from Alek Valero (Loop Capital): Biggest catalysts over the next 4–6 quarters?
  Response: Key catalysts are partner services expansion, AI monetization/adoption, security as an overlay, and scaling AI proof-of-concepts into production with hyperscaler relationships.

• Question from Alek Valero (Loop Capital): Any feedback from the field on macro?
  Response: Feedback is encouraging—SMB is recovering across categories (cloud, networking, cyber, desktop) and macro signals like moderating inflation and tariff clarity support SMB optimism.

Contradiction Point 1

Inventory Management and Cash Flow

It involves the company's approach to inventory management and cash flow, which are crucial for operational efficiency and financial health.

What are the expected margin trends? How does the SMB vs. large enterprise mix impact margins? - Ruplu Bhattacharya (BofA Securities)

2025Q3: We exited Q2 with some inventory buildup, mainly due to large projects. This was reduced in Q3 as expected. We did not invest as much as usual into working capital in Q3. - Michael Zilis(CFO)

How does cash flow relate to the strong performance in Client and Endpoint? - Adam Tyler Tindle (Raymond James)

2025Q2: The cash flow also reflects the strategic buys for tariffs and large deals. We're managing working capital on a days basis, with expectations for a more neutral cash flow situation in Q4. - Michael Zilis(CFO)

Contradiction Point 2

Impact of Cyber Incident

It pertains to the company's response to a significant cyber incident and its impact on operations and financials, which are critical for investor confidence.

Where are the benefits of Xvantage most felt: in SMB or enterprise? - David Paige Papadogonas (RBC Capital Markets)

2025Q3: The cyber incident and tempered Client and Endpoint growth impact guidance. - Michael Zilis(CFO)

What are your expectations for endpoint and advanced products in Q3, and what percentage of China’s mobility demand is driven by government subsidies? - Michael Ng (Goldman Sachs)

2025Q2: Our guide reflects potential impacts from the cyber incident. - Michael Zilis(CFO)

Contradiction Point 3

PC Refresh Cycle and Demand Trends

It involves differing views on the stage and demand trends of the PC refresh cycle, which directly impacts revenue projections and market positioning.

Where are we in the cycle for PCs and servers? - Maya Neuman(Morgan Stanley)

2025Q3: We're in the second half of the PC refresh cycle, with good demand but not as strong as the first half. - Paul Bay(CEO)

What's driving large enterprise outperformance? Is the buying before tariffs complex or just a pull forward? Where are we in the PC cycle and are there signs of a refresh? - Michael Ng(Goldman Sachs)

2024Q4: We're in the early days of the PC refresh cycle. The PC cycle is driven by Windows 11. - Paul Bay(CEO)

Contradiction Point 4

SMB Market Performance and Expectations

It involves differing perspectives on the performance and expected trajectory of the SMB market, which affects strategic planning and investor expectations.

What are the margin trends going forward? How does the SMB versus large enterprise mix impact margins? - Ruplu Bhattacharya(BofA Securities)

2025Q3: We see margins in the high 6s, around 6.8% at the midpoint. We expect continued strength in SMB, encouraging growth in geography and region. - Michael Zilis(CFO)

How is the SMB market performing, and what are your expectations for it going forward? - Surinder Singh(Jefferies)

2024Q4: SMB was down double digits in Q4, but early signs suggest improving momentum. Expected recovery by the back half of the year, driven by advanced solutions and networking recovery. - Paul Bay(CEO)

Contradiction Point 5

Impact of Macroeconomic Headwinds and Tariffs

It involves differing views on how macroeconomic conditions and tariffs are impacting business performance, which affects revenue projections and strategic responses.

Have you received feedback from partners on the macro environment? - Alek Valero(Loop Capital)

2025Q3: It's been more encouraging. We're seeing SMB growth across categories, indicating a healthier economy. The easing of inflation and tariffs is positively affecting SMB spending. - Paul Bay(CEO)

How do you assess demand shifts from tariffs and Ingram Micro's approach to tariff-related cost impacts? - Samik Chatterjee(JPMorgan Chase)

2024Q4: We're seeing impacts from inflationary pressures and tariffs. We expect that to continue through Q2, which will keep us at lower levels than the rest of the year. - Michael Zilis(CFO)