SNX Q4 Deep Dive: Growth in Cloud and AI Infrastructure Offsets Margin Stability Concerns

IT distribution giant TD SYNNEX (NYSE:SNX) reported revenue ahead of Wall Streets expectations in Q4 CY2025, with sales up 9.7% year on year to $17.38 billion. The company expects next quarter’s revenue to be around $15.5 billion, close to analysts’ estimates. Its non-GAAP profit of $3.83 per share was 2.7% above analysts’ consensus estimates.

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StockStory’s Take

TD SYNNEX's fourth quarter saw revenue growth outpace Wall Street expectations, but the market responded negatively, reflecting caution around the sustainability of recent gains. Management attributed the performance to strong demand for cloud and data center infrastructure, especially in Asia Pacific and Europe, driven by hyperscaler clients and ongoing PC refresh cycles. CEO Patrick Zammit emphasized the company's ability to gain market share across multiple regions, noting, “We gained significant share in Asia Pacific, especially in India, and Europe outperformed macro trends due to targeted technology and customer segment focus.”

Looking ahead, TD SYNNEX’s guidance is shaped by expectations for continued investment in cloud, AI, and advanced software-driven solutions. Management sees pricing tailwinds from higher memory costs benefitting average selling prices, while remaining cautious about potential volume pressures. Zammit explained, “The tailwind for us is clearly the increase in component prices, but we remain focused on commercial PCs and enterprise upgrades, which should limit demand elasticity.” The company intends to sustain growth by expanding HIVE’s capabilities and capturing opportunities in high-growth technology markets.

Key Insights from Management’s Remarks

Management cited broad-based demand for cloud, AI, and security solutions as the main drivers behind the quarter's revenue growth, with strong regional execution and product mix enhancements supporting results.

• Asia Pacific and Europe outperformance: Both regions contributed above-average growth, with Asia Pacific benefiting from rapid cloud expansion and digital transformation, and Europe exceeding macro expectations through targeted investments in infrastructure, software, and device upgrades.
• HIVE business expansion: HIVE, TD SYNNEX’s advanced solutions unit, posted more than 50% growth in billings, fueled by sustained hyperscaler demand for server and networking rack builds, and continued investment in engineering and capacity to support future programs.
• PC refresh and AI integration: Commercial PC demand remained a key tailwind, driven by ongoing Windows 11 upgrades and rising adoption of AI-enabled PCs, which command higher average selling prices and create upsell opportunities.
• Shift toward software and cloud: Increased software mix in billings led to a higher proportion of netted-down revenue, as strategic technologies such as cloud, security, and advanced software solutions became a larger part of the business, reflecting evolving customer needs.
• Operational efficiency and cost control: The company improved its cost-to-gross-profit ratio and generated strong free cash flow, supported by disciplined expense management and working capital optimization, even as investments in HIVE and digital platforms continued.

Drivers of Future Performance

TD SYNNEX expects future performance to be driven by demand for advanced cloud, AI, and security solutions, as well as ongoing investments in high-growth technology segments, tempered by potential cost and volume risks.

• Component pricing tailwinds and risks: Management highlighted that rising memory and component prices are currently boosting average selling prices, providing a near-term lift to revenue. However, they remain watchful for signs of demand destruction, particularly in categories sensitive to price elasticity, such as PCs. Zammit noted the company’s focus on commercial PCs, where he expects demand to remain relatively resilient compared to consumer segments.
• Growth in HIVE and strategic technologies: Continued investment in HIVE is expected to strengthen TD SYNNEX’s position with hyperscalers and in complex infrastructure deployments. The mix shift toward cloud, software, and AI-related services is anticipated to drive both revenue and profit growth, though management is monitoring the impact of changing gross-to-net conversion rates as these segments expand.
• Free cash flow and capital allocation discipline: The company plans to maintain strong free cash flow generation and adhere to its capital allocation framework, balancing shareholder returns with reinvestment in strategic growth areas. Management expects seasonal cash flow fluctuations but aims for full-year free cash flow conversion to remain aligned with long-term targets.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the pace of HIVE’s expansion and its success in securing new hyperscaler customers, (2) the impact of rising component prices on both revenue growth and potential volume headwinds, and (3) the continued shift toward high-margin software and cloud solutions. Execution on digital platform enhancements and further penetration in commercial PC and AI infrastructure markets will also be key areas of focus.

TD SYNNEX currently trades at $148.61, down from $151 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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