Q1 results topped guidance with non‑GAAP gross billings of $25.8 billion (up 24% YoY) and non‑GAAP EPS of $4.73 (up 69% YoY).

Reporting shifted to two segments — Distribution and Hyve: Distribution delivered broad‑based growth and margin expansion, while Hyve surged 95% to $3.8 billion but saw margin pressure from mix and continues to win programs with top hyperscalers.

Capital return and outlook: board approved a $0.48 quarterly dividend, buybacks are set to increase, and Q2 guidance calls for ~$25.1 billion non‑GAAP gross billings and ~$4.00 non‑GAAP diluted EPS.

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TD SYNNEX (NYSE:SNX) reported what CEO Patrick Zammit called a “very pleased” start to fiscal 2026, with the company delivering record first-quarter non-GAAP gross billings and record non-GAAP earnings per share. Management said results were supported by strength in both its core Distribution business and its Hyve operations, which serve hyperscale customers with cloud and AI-enabled data center infrastructure solutions.

Zammit opened the call by explaining a change in how TD SYNNEX will discuss and report its business going forward. The company will “primarily discuss our performance and strategy through two businesses,” he said: Distribution, which includes three regional distribution segments, and Hyve.

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Zammit said the structure “better reflect[s] how I manage the business and allocate capital and resources,” and is intended to provide “clearer insight into how our businesses perform and how we create long-term shareholder value.”

CFO David Jordan said the quarter “exceeded our expectations across all key metrics.” For the first quarter, TD SYNNEX reported:

Non-GAAP gross billings of $25.8 billion, up 24% year-over-year (or 20% in constant currency), above the high end of guidance.

Non-GAAP operating income of $590 million, up 48% year-over-year (or 44% in constant currency).

Non-GAAP EPS of $4.73, up 69% year-over-year, also above the high end of guidance.

GAAP operating income of $489 million, up 61% year-over-year (or 57% in constant currency).

GAAP EPS of $4.04, up 104% year-over-year, above the high end of guidance.

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Jordan said the results demonstrated the company’s ability to convert top-line growth into “operating leverage and meaningful shareholder value.”

In Distribution, Jordan reported non-GAAP gross billings of $22.0 billion, up 17% year-over-year, driven by strength across product categories and geographies. Endpoint Solutions grew 14%, supported by “ongoing PC refresh activity and strong demand for premium devices,” while Advanced Solutions grew 19% on strength in “infrastructure, security, and software,” Jordan said.

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Distribution non-GAAP operating income was $431 million, up 42%, and operating margin as a percentage of gross billings improved to 2.0%, up 34 basis points year-over-year. Jordan added that the company estimated distribution gross margins benefited by roughly 10 to 15 basis points from “incremental profit from strategic inventory purchasing.”

Management also discussed pricing and demand behavior. Jordan said TD SYNNEX estimated about 2 percentage points of year-over-year gross billings growth reflected “higher average selling prices and modest pull-forward activity” tied to working with OEMs to pass through higher memory and component costs.

On investor questions about whether price increases could pressure distributor margins, Zammit said there was “no impact on margin” in the first quarter, adding TD SYNNEX built inventory at the end of the prior fiscal year to “smoothen the introduction of price increases” for customers. “We believe that the price increases will not impact our margin because of this close collaboration with vendors but also the customers,” he said.

On PCs, Zammit said the company remains “reasonably optimistic” for the second quarter, emphasizing TD SYNNEX’s focus on B2B PCs. He said the company expects higher average selling prices to be a tailwind, while acknowledging some unit elasticity. “We foresee some reduction in units, but … significantly less than in the consumer space,” he said.

Hyve posted non-GAAP gross billings of $3.8 billion, up 95% year-over-year and ahead of expectations. Jordan said demand was broad-based across manufacturing and supply chain services, with manufacturing and assembly up in the “mid-70%” range and supply chain services up “in excess of 100%,” driven by AI infrastructure component demand.

Hyve non-GAAP operating income was $159 million, up 66% year-over-year. Operating margin as a percentage of gross billings was 4.2%, down 72 basis points, which Jordan attributed primarily to mix.

In Q&A, Zammit told RBC that Hyve’s growth in the quarter “came from the two main customers,” while diversification is underway but program ramps “are going to take a little bit of time.” He said TD SYNNEX expects to see more ramp impact “more towards the end of fiscal year 2026 and in 2027.”

Jordan later added that the year-over-year margin decline in Hyve was “largely driven by mix,” specifically “some large … GPU fulfillment deals” that flowed through. He noted some programs are recorded on a net basis, which can affect the relationship between gross billings, revenue, and margins, and reiterated that the company evaluates Hyve primarily on a gross billings basis.

Zammit said Hyve is evolving toward “more complete system-level solutions” across “traditional compute, accelerated compute, networking, and storage offerings,” supported by investments in engineering and manufacturing. He also said TD SYNNEX signed programs with two new hyperscale customers in 2026 that are expected to contribute in future quarters, and that with those wins the company now has “at least one program secured with each of the top five U.S.-based hyperscalers.”

On the nature of the new programs, Zammit told Bank of America the wins referenced were “full racks,” primarily tied to Hyve’s manufacturing activity, while also noting some supply chain wins can be more volatile.

Jordan said free cash flow usage in the quarter was approximately $929 million, consistent with the first quarter of the prior fiscal year. Over the trailing 12 months, TD SYNNEX generated $1.2 billion of free cash flow and returned $723 million to shareholders.

In the quarter, the company returned $118 million through share repurchases and dividends. Net working capital ended at $4.2 billion, with a gross cash conversion cycle of 16 days, an improvement of four days year-over-year. TD SYNNEX ended the quarter with $1.6 billion of cash and cash equivalents and a leverage ratio of 1.5x, which Jordan said was “modestly below our medium-term framework.”

The board approved a cash dividend of $0.48 per common share, payable April 29, 2026, to shareholders of record as of April 15, 2026.

For the fiscal second quarter, TD SYNNEX guided to:

Non-GAAP gross billings of approximately $25.1 billion ± $500 million (about 16% year-over-year growth at the midpoint).

Revenue of approximately $16.5 billion ± $400 million, with a gross-to-net adjustment of about 34%.

Non-GAAP net income of approximately $322 million ± $20 million.

Non-GAAP diluted EPS of approximately $4.00 ± $0.25 on about 79.8 million diluted shares (about 34% year-over-year growth at the midpoint).

Jordan said the company expects share repurchases “to increase” from the first-quarter level. While management did not provide guidance beyond the second quarter, Jordan said demand “remains strong” but the company is “cautiously optimistic for the second half,” noting that the second half of the prior year was “very strong.”

TD SYNNEX (NYSE: SNX) is a leading global distributor and solutions aggregator for the information technology industry. Formed in September 2021 through the merger of Tech Data and SYNNEX Corporation, the company provides a comprehensive range of products, services and solutions that span hardware, software, cloud, mobility, security and data center technologies. TD SYNNEX partners with vendors, resellers and system integrators to design, deploy and support IT infrastructures across diverse market segments, including commercial enterprises, public sector organizations and retail operations.

The company's core business activities include the distribution of technology products from manufacturers such as servers, storage, networking equipment and peripherals, as well as the resale and provisioning of software licenses and cloud-based solutions.

The article "TD SYNNEX Q1 Earnings Call Highlights" was originally published by MarketBeat.