INGM Q3 Deep Dive: AI and SMB Momentum Drive Growth Amid Margin Pressures

IT distribution giant Ingram Micro (NYSE:INGM) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 7.2% year on year to $12.6 billion. On top of that, next quarter’s revenue guidance ($14.18 billion at the midpoint) was surprisingly good and 3.6% above what analysts were expecting. Its GAAP profit of $0.42 per share was 5.1% below analysts’ consensus estimates.

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StockStory’s Take

Ingram Micro’s third quarter was shaped by continued strength in its core client and endpoint solutions, as well as a notable rebound in the small and medium business (SMB) segment. Management highlighted that the company was able to restore operations quickly following a ransomware incident in July, minimizing disruption and supporting growth. CEO Paul Bay pointed to the expanding adoption of the Xvantage digital platform as a key factor: “Enterprise sales remained strong and our SMB customer category achieved a third straight quarter of sequential growth, which is encouraging.” The company’s focus on integrating AI capabilities and expanding its reach in international markets contributed to its performance, although a shift toward lower-margin product categories moderated gross margin gains.

Looking ahead, Ingram Micro’s guidance is underpinned by expectations of robust demand for AI-enabled products and services, as well as continued growth in its SMB segment across global markets. Management believes momentum in its Xvantage platform and Enable AI program will help drive new revenue streams and operational efficiencies. CFO Mike Zilis noted, “We expect fourth quarter gross profit of $935 million to $990 million, which would represent gross margins of roughly 6.8% at the midpoint.” The company also anticipates ongoing hardware refresh cycles and increasing cloud adoption to support growth, while closely monitoring macroeconomic variables such as tariffs and interest rates.

Key Insights from Management’s Remarks

Management attributed third quarter results to strong PC and server demand, SMB growth, and rapid AI platform adoption, while ongoing mix shifts weighed on margins.

• PC and endpoint refresh strength: Ingram Micro saw continued high demand for notebooks, desktops, and related products, with the desktop and notebook refresh cycle in its later stages but still delivering meaningful growth globally.
• SMB segment recovery: The SMB customer category posted a third consecutive quarter of sequential growth, reversing last year’s softness. Management sees this as a key indicator of health, particularly as SMBs had been most affected by inflation and tariff uncertainty.
• Xvantage and AI ecosystem expansion: The Xvantage platform, now integrated with hundreds of AI models, continued to drive operational efficiency and demand generation. The new Sales Briefing Assistant, powered by Google’s Gemini large language model, was launched to further automate and improve sales processes.
• Geographic performance mixed: Latin America and Asia Pacific delivered double-digit growth rates, while EMEA (Europe, Middle East, Africa) remained soft due to macroeconomic headwinds. North America showed steady but moderate growth.
• Margin pressure from product mix: Gross margins declined year-over-year, primarily due to a higher sales mix in lower-margin client and endpoint solutions and advanced solutions categories, including large GPU deals sold at low margins. Management emphasized that these areas are strategically important for future AI ecosystem opportunities.

Drivers of Future Performance

Management’s outlook centers on sustained AI adoption, further SMB market gains, and investment in digital platforms, tempered by evolving margin dynamics and global economic factors.

• AI-driven product demand: Ingram Micro expects ongoing AI transformation across enterprise customers to stimulate sales, particularly as proof-of-concept projects shift toward mainstream deployment. The Enable AI program and Xvantage platform are positioned to support partners as they scale AI-enabled solutions.
• SMB momentum and geographic growth: The company anticipates continued recovery in the SMB segment, especially as inflation pressures ease and tariffs stabilize. Management is optimistic about international opportunities, particularly in Asia Pacific and Latin America, where growth outpaces mature North American and EMEA markets.
• Margin and cost structure risks: While revenue prospects are strong, management cautioned that a higher mix of lower-margin products—such as client solutions and large GPU deals—could remain a headwind for gross margins. Ongoing investments in automation and optimization are expected to partially offset these pressures, but macroeconomic factors like tariffs and interest rates may still pose risks.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will monitor (1) the pace at which AI-enabled product adoption accelerates across customer segments, (2) sustained momentum and growth in the SMB category, and (3) further expansion and measurable impact of the Xvantage and Enable AI platforms. We will also track whether ongoing margin pressures from changing product mix are mitigated by automation and operational efficiency gains.

Ingram Micro currently trades at $22, in line with $22.06 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).

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