Insight Posts Record Margins Amid Revenue Decline

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $2 billion, down 1% YOY (Q4); $8.2 billion, down 5% YOY (full year 2025)
• EPS: $2.96 adjusted diluted EPS, up 11% YOY (Q4); $9.87 adjusted diluted EPS, up 2% YOY (full year 2025)
• Gross Margin: 23.4%, an increase of 220 basis points YOY (Q4); 21.4%, an expansion of 110 basis points YOY (full year 2025)
• Operating Margin: Adjusted EBITDA margin of 7.6%, expanded 80 basis points YOY (Q4); 6.6%, expanded 40 basis points YOY (full year 2025)

Guidance:

• Gross profit growth in the low single digits for 2026.
• Gross margin expected to be approximately 21% for 2026.
• Adjusted diluted EPS (excluding stock-based compensation) expected between $11 to $11.50, representing ~5% growth at the midpoint vs. 2025.
• Core services gross profit to grow in the high single digits.
• Cloud gross profit to grow in the low double digits.
• Hardware gross profit approximately flat.
• Cash flow from operations expected in the $300M-$400M range.
• Share repurchases of $75M intended to start in Q1.

Business Commentary:

Revenue and Profitability Trends:

• Insight Enterprises reported a 1% decrease in overall revenue for Q4 2025, primarily due to the migration of on-prem software to cloud.
• Despite the revenue decline, the company achieved record gross profit and gross margin of 23.4%.
• The strong performance in gross profit was driven by growth in cloud and core services, despite challenges from partner program changes.

Cloud and Core Services Growth:

• Cloud gross profit increased by 11%, with double-digit growth in SaaS and Infrastructure as a Service.
• Core services gross profit grew by 16%, driven by acquisitions and organic growth.
• Growth in these segments was supported by strategic acquisitions and a focus on advisory capabilities, particularly in the North American market.

Geographic Performance and Strategic Focus:

• EMEA region showed strong growth with a 30% increase in gross profit, influenced by demand in UAE and Saudi Arabia.
• The company's focus on expanding technical consulting capabilities and advisory services contributed to this growth.
• Strategic acquisitions like Inspire11 and Sekuro enhanced technical expertise in data, AI, and cybersecurity, supporting geographic expansion.

Financial Outlook and Guidance for 2026:

• For 2026, Insight Enterprises expects low single-digit growth in gross profit with a gross margin of approximately 21%.
• Adjusted diluted EPS is anticipated to be between $11 to $11.50, reflecting about 5% growth at the midpoint compared to 2025.
• The outlook considers subdued spending from corporate and large enterprise clients, along with potential impacts from memory pricing and supply chain dynamics.

Sentiment Analysis:

Overall Tone: Cautiously Optimistic

• Management expressed 'cautious optimism' for 2026, noting a 'challenging backdrop' in 2025 but highlighting 'record gross profit, record gross margin and record adjusted earnings from operations.' They see 'opportunity in cloud modernization, security and AI adoption' and are 'encouraged by the progress' in services, though the macro environment remains 'subdued' with 'uncertainty persists.'

Q&A:

• Question from Adam Tindle (Raymond James): Could you discuss the process for setting 2026 guidance and provide color on customer IT budgets and early indications for the year?
  Response: Guidance process emphasized greater caution due to market disruptions and more reliance on past performance; IT budgets show subdued large enterprise spending focused on AI readiness, commercial growth expected to moderate, public sector remains spiky, and year started with positive momentum.

• Question from Adam Tindle (Raymond James): Could you summarize the partner program change impact in 2025 and expectations for 2026, especially regarding EPS weighting?
  Response: Partner program changes impacted gross profit by $70M in 2025; a financial tail effect is expected in 2026, more pronounced in the second half due to Google pivot seasonality, causing cloud growth to be stronger in H1 than H2.

• Question from Lucas Morison (Canaccord Genuity): How repeatable is the AI data center engagement opportunity, and how will AI data center build-outs contribute to growth?
  Response: AI data center demand is in early stages but represents a significant tailwind; Insight is positioned with multi-cloud portability and partner prepackaged solutions to support enterprise adoption as memory and power optimization become critical.

• Question from Lucas Morison (Canaccord Genuity): How might memory cost supply chain disruptions impact customers and your business?
  Response: Memory price increases of 10-25% expected, leading to PC price elasticity and potential unit volume declines; partners can add value by helping customers navigate supply constraints, while infrastructure price hikes may cause caution but are generally passed through.

• Question from Joseph Cardoso (JPMorgan): Can you provide more detail on the first half vs. second half weighting in the full year EPS guidance and the underlying drivers?
  Response: First half EPS growth expected closer to the upper end of the range, second half closer to the lower end, driven by stronger cloud and hardware performance in H1 and steadier core services throughout the year.

• Question from Joseph Cardoso (JPMorgan): What was cloud gross profit growth ex-partner headwinds in Q4, and does the low double-digit guidance imply acceleration?
  Response: Cloud gross profit growth underlying performance was in the mid-teens in Q4; full year guidance is low double-digits with H1 growth slightly above and H2 slightly below the annual rate, with financial impacts from partner changes largely behind by year-end.

• Question from Vincent Colicchio (Barrington Research): How did market share changes play out in key focus areas in North America?
  Response: Insight believes it is on par with the market in devices and infrastructure, and slightly ahead in cloud.

• Question from Vincent Colicchio (Barrington Research): Do you have the resources to meet current AI demand, or is it hard to access needed supply?
  Response: Insight is actively building AI skills internally and recruiting, and has been in 'pretty good shape' to meet demand so far.

Contradiction Point 1

Large Enterprise Spending Outlook and IT Budget Trends

Contradiction on the current and near-term health of large enterprise IT spending.

How did you determine the more conservative 2026 guidance, and what are current IT budgets and early-year trends? - Adam Tindle (Raymond James & Associates, Inc.)

2025Q4: IT budget trends are expected to be similar to 2025, with subdued large enterprise spending focused on preserving budgets for AI readiness... - Joyce Mullen(CEO)

What's the current status of core services project headwinds, and what's causing the slower hardware performance compared to 90 days ago? - Joseph Cardoso (JPMorgan Chase & Co, Research Division)

2025Q3: Large enterprises are grappling with budget allocation changes, macro uncertainty, and reprioritizing spend... Bookings in services are encouraging, but demand from large clients remains muted. - Joyce Mullen(CEO)

Contradiction Point 2

Cloud Gross Profit Growth Trajectory

Contradiction on the expected growth pattern for cloud gross profit in the coming year.

Can you clarify the magnitude and concentration of drivers (hardware/PCs vs. broader) behind the full-year guidance weighted toward the first half, and the cloud gross profit growth trajectory excluding partner headwinds? - Joseph Cardoso (JPMorgan Chase & Co)

2025Q4: First-half cloud growth is expected to be slightly above the low double-digit guidance, with second-half growth slightly below it. - James Morgado(CFO)

How is cloud gross profit growth tracking, excluding partner program changes, and what factors should be considered for underlying growth next year? - Joseph Cardoso (JPMorgan Chase & Co, Research Division)

2025Q3: Underlying growth is expected to carry into next year, leading all areas of growth. - James Morgado(CFO)

Contradiction Point 3

Partner Program Changes Financial Impact and Normalization

Contradiction on when the financial headwind from program changes will be fully resolved.

What is the impact of 2025 partner program changes and expected residual effects in 2026? - Adam Tindle (Raymond James & Associates, Inc.)

2025Q4: A financial 'tail' effect is expected to persist into 2026, primarily affecting the second half... This will cause cloud performance to be a bit better in the first half than the second half of 2026. - James Morgado(CFO)

What is the early outlook for 2026 gross margins following 2025 partner program changes? - Anthony Chester Lebiedzinski (Sidoti & Company)

2025Q2: The $70M program change headwind is expected to largely normalize by the end of Q4 2025, becoming a far less significant factor in 2026. - James Morgado(CFO)

Contradiction Point 4

2026 Guidance Formulation and Market Outlook

Contradiction in the approach to setting guidance and describing IT budget trends.

For the 2026 guidance, how does the conservatism compare to prior years, and could you explain the process used to establish this guidance? - Adam Tindle (Raymond James & Associates, Inc.)

2025Q4: The guidance process considered customer and partner feedback... This year's approach placed greater emphasis on accounting for market uncertainty and weighting past performance more heavily. - James Morgado(CFO)

What are the key drivers behind the mid-single-digit gross profit growth in the second half despite flat full-year guidance? - Adam Tyler Tindle (Raymond James & Associates)

2025Q2: The outlook is based on three key areas: Cloud, Hardware, Core Services... This reflects a more forward-looking view based on current trends. - James Morgado(CFO)

Contradiction Point 5

IT Budget Outlook for 2026 vs 2025

Contradiction on whether 2026 IT budget trends are expected to be similar to 2025.

What factors influenced the more conservative 2026 guidance compared to prior years, and how do customer conversations indicate IT budgets will evolve in 2026? - Adam Tindle (Raymond James & Associates, Inc.)

2025Q4: IT budget trends are expected to be similar to 2025, with subdued large enterprise spending... - Joyce Mullen(CEO)

What are the current views on the causes of delays in large enterprise projects? - Joseph Lima Cardoso (JPMorgan Chase & Co)

2025Q2: Beyond macroeconomic uncertainty... enterprises wanting to preserve spending flexibility to invest in AI... The company expects to deliver pragmatic, short-term AI solutions first... before larger projects resume. - Joyce Mullen(CEO)