Td Synnex Corp's Q4 2025 Earnings Call: Contradictions Emerge on Hive Demand, Margins, PC Cycle, and Program Pipeline

Business Commentary:

Record Financial Performance and Business Momentum: - TD SYNNEX reported record non-GAAP gross billings of $24.3 billion for Q4, up 15% year-on-year (13% in constant currency). - non-GAAP diluted EPS reached a record $3.83, up 24% year-on-year. - Excluding Hive, gross billings increased 10% year-on-year, with gross profit and operating income each growing double-digits. - Hive gross billings surged more than 50% year-on-year, with ODMCM gross billings rising 39%.

Geographic Growth and Strategic Execution: - Asia-Pacific and Japan (APJ) delivered high double-digit growth, driven by market share gains and investments in high-growth countries like India. - Europe grew faster than anticipated, with market data showing mid-single-digit market growth, indicating significant market share gains. - North America grew steadily, supported by demand across key customer segments. - Latin America maintained double-digit top-line momentum. - This performance reflects successful execution of the company's strategy, including focus on omnichannel engagement, specialized go-to-market, and brand visibility.

Hive Growth and Market Positioning: - Hive gross billings grew more than 50% year-on-year, driven by broad-based demand for cloud data center infrastructure from hyperscalers. - The business is becoming a larger portion of the overall mix, with operating income growing "meaningfully" year-on-year. - Growth is supported by differentiators like production flexibility, U.S. footprint, co-development capabilities, and secure supply chain, positioning it to capture more opportunities in IT distribution. - The company is confident in Hive's long-term value proposition and untapped market opportunities.

PC Market Strength and Forward Outlook: - PC demand remained strong, with global PCs increasing double-digits for four consecutive quarters. - Endpoint Solutions gross billings grew 12% year-on-year in Q4, driven by the ongoing Windows 11 refresh and sustained demand for premium devices. - The PC refresh cycle is not over, and AI PC upgrades and memory price-driven ASP increases are expected to be tailwinds heading into FY26. - The company is primarily focused on commercial PCs, providing a more stable demand outlook compared to consumer PCs.

Financial Framework and Capital Allocation: - The company is focused on delivering against a consistent long-term financial framework: stable growth, margin expansion, and cash generation. - Free cash flow for FY25 was $1.4 billion, with cumulative shareholder returns over the last three years reaching approximately 61% of free cash flow, within the targeted 50-75% medium-term range. - The board approved a Q1 dividend of $0.48 per share. - Looking ahead, cumulative free cash flow over FY25 and FY26 is expected to be in line with the medium-term framework of approximately 95% conversion of net income to free cash flow.

Contradiction Point 1

Hive Business Demand Sustainability and Growth Drivers

This involves a significant change in financial forecast and forward-looking guidance regarding a key business segment. Management's stance shifted from explicitly expecting strong growth drivers to be sustainable into the next quarter (Q3) to providing guidance in Q4 that implies a return to a more normalized, less exceptional performance without confirming the prior positive trajectory.

Was there demand pull-forward due to customers anticipating future price hikes for memory-exposed products? How might this affect revenue or profitability seasonality this year? - Eric Woodring (Morgan Stanley)

2025Q4: The Q1 guidance reflects current regional forecasts... The company is cautiously optimistic on demand... - Patrick Zammit(CEO)

How should we view Hyve dynamics in fiscal Q4 given strong August results and November guidance, along with cloud CapEx momentum? And any high-level insights for next year? - Maya (for Erik Woodring, Morgan Stanley)

2025Q3: The overperformance drivers... are expected to be sustainable into Q4. - Patrick Zammit(CEO)

Contradiction Point 2

Demand Pull-Forward and Seasonality Outlook

This represents a change in the recognition and impact of a demand dynamic on quarterly financials and forward outlook. In Q2, management acknowledged a material, product-specific pull-forward with a quantified revenue impact. By Q4, they categorically state there were "no material pull-forwards" and express cautious optimism, potentially overlooking or downplaying a previously noted headwind that could affect year-over-year comparisons.

Was there any demand pull-forward due to customers anticipating future price increases on memory-exposed products? How might this impact revenue or profit seasonality this year? - Eric Woodring (Morgan Stanley)

2025Q4: There were no material pull-forwards in the last quarter. The Q1 guidance reflects current regional forecasts... The company is cautiously optimistic on demand... - Patrick Zammit(CEO)

Can you provide details on the demand pull forward mentioned in prepared remarks, including specific products (e.g., PCs) impacted and their financial effects? And will this pull forward affect the ES/AS mix for the remainder of the year? - Katherine Campana (Goldman Sachs)

2025Q2: Demand pull-forward was modest, primarily benefiting PCs, with an estimated revenue impact of $100 million to $200 million... The company is being prudent regarding any continued benefit from the Q2 pull-forward in the second half but expects underlying demand to soften. - Marshall W. Witt(CFO)

Contradiction Point 3

Hive's Margin Profile and Growth Outlook

This involves a change in the characterization of a key segment's financial health and strategic investment rationale, which are central to company strategy and financial projections. The narrative shifts from describing Hive margins as actively "accretive" with a clear expectation of future normalization (2024Q4) to a more general statement of feeling "good about the overall margin profile" focused on growing operating profit faster than billings (2025Q4), without reiterating the prior accretive claim.

Will Hive's margins improve with volume scaling? How has visibility for Hive programs changed year-over-year? - Austin Baker (Loop Capital)

2025Q4: The company feels good about the overall margin profile and aims to grow operating profit faster than billings. - David Jordan(CFO)

Given strong growth but declining margins, and Q1 suggesting more of the same, will you revisit your growth-profitability strategy? On Hyve's margin impact, can you discuss your business analysis, incremental investment plans, and reasons? - Adam Tindle (Raymond James)

2024Q4: Hyve's margins are accretive, ROI exceeds cost of capital, so continued investment is justified. After Q1 (which has a tough year-over-year comparison), margins should normalize. - Patrick Zammit(CEO)

Contradiction Point 4

PC Refresh Cycle Position

This reflects a change in market strategy characterization regarding a core end-market. The company's positioning shifted from a specific, temporal description ("in the middle" of a cycle, Q2 2025) to a more perpetual and positively framed description ("tailwind is not over," "expected to continue contributing," Q4 2025). This change could influence expectations for the duration and strength of a key growth driver.

Can you provide an update on the PC market and its current cycle? - Vincent Colicchio (Barrington Research)

2025Q4: The Windows 11 refresh tailwind is not over, AI PC adoption and higher ASPs from memory costs are additional tailwinds. PC demand in Q4 was broad-based... The company is... positioned well for the expected continued refresh. - Patrick Zammit(CEO)

Where are we in the PC refresh cycle—in the beginning, middle, or nearing the end? - David Paige Papadogonas (RBC Capital Markets)

2025Q2: The company is in the middle of the PC refresh cycle, having seen it start at least one to two quarters ago. - Patrick Zammit(CEO)

Contradiction Point 5

Hive Program Pipeline and Visibility Health

This indicates a significant change in the forward outlook for a key business segment's operational momentum. The Q4 2025 description of the pipeline as "in a very healthy position compared to last year" (2025Q4) contrasts sharply with the Q2 2025 discussion, which highlighted specific, persistent challenges: a "demand shortfall" from a customer, a second customer ramping "on the come," and a "lumpy" supply chain segment (2025Q2). This shift from a narrative of overcoming obstacles to one of established health is a substantial change in tone and implied future performance.

How do you expect Hive's margins to evolve as volume scales? Is the visibility for Hive programs better than this time last year? - Austin Baker (Loop Capital)

2025Q4: The current program pipeline is in a very healthy position compared to last year, as reflected in the Q1 guidance. - Patrick Zammit(CEO)

Did Hyve's strong high-teens billings reflect stronger CM performance versus spare parts/ODM this quarter? Did delayed orders from last quarter return this quarter for the second customer? Will they continue into Q3/Q4? - David Vogt (UBS)

2025Q2: Hyve's demand shortfall from a customer was muted against its strong Q2 growth... Demand from a second customer, which had pulled out last quarter, has returned slightly below expectations but is back... The company is actively bidding on new programs with existing and potential new customers. However, these programs take time to ramp... - Patrick Zammit(CEO)