TD SYNNEX CORP — Call Transcript 2026

Good morning. My name is Tracy, and I will be your conference operator today. I'd like to welcome everyone to the TD SYNNEX second quarter fiscal 2026 earnings call. Today's call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. At this time, for opening remarks, I would like to pass the call over to Nate Friedel, Head of Investor Relations at TD SYNNEX. Nate, you may begin. Good morning, everyone and welcome to TD SYNNEX's fiscal 2026 second quarter earnings call. Joining me on today's call are Chief Executive Officer, Patrick Zammit, and Chief Financial Officer, David Jordan. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, including statements about our strategy, demand, plans and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our financial expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release in the Form 8-K we filed today, in the Risk Factors section of our Form 10-K, and our other reports and filings with the SEC. We do not intend to update any forward-looking statements. Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our investor relations website, ir.tdsynnex.com. This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission. I will now turn the call over to Patrick. Thank you, Nate and good morning, everyone. We delivered a record quarter with broad-based strength across distribution and Hyve, building on the momentum we have carried out of recent quarters. Our results reflect consistent execution against our strategy and deepening relationships within the macro environment that is becoming increasingly complex. Rising component costs, supply constraints, geopolitical uncertainty, and a once-in-a-generation AI build-out are challenging businesses to move faster and with more precision. That complexity is exactly where TD SYNNEX adds the most value, and you can see it in the demand across our business. AI is becoming a growing portion of our mix and is driving demand across both businesses, from hyperscale infrastructure build-outs to enterprise data center modernization, to AI-capable devices in our endpoint mix, and we are capturing that growth across technologies, regions, and customers. With that context, I start with our distribution performance. Distribution had an excellent quarter. Non-GAAP gross billings of $23.4 billion, up 22% year-over-year. Strength was broad-based across every region and the portfolio, with international growth and operating margin expansion as a real bright spot. We believe the combination of our global reach, end-to-end portfolio, and specialized go-to-market is very difficult to replicate. This differentiated value proposition, coupled with strong execution against our strategy, has driven new customer wins, new expanded vendor partnerships, and a large share of wallet with our most strategic relationships, all of which have proven to be incremental growth drivers. Three pillars of our strategy are driving our growth. First, we meet our customers however they want to engage in a true omnichannel motion. Digital when they want self-serve speed, human when they want expertise and enablement, and we move seamlessly between the two in real time. Our digital capabilities are enabled by PartnerFirst, which we've built for depth and speed at scale to deliver a connected experience for our partners. As one of the world's largest distributors, we have the data and intelligence to support our partners in identifying demand opportunities. We're applying machine learning, generative and agentic AI to the data we gather across our ecosystem to personalize each partner's experience, be it navigation by dashboards and customized recommendations and opportunities we surface. This reduces friction and drives higher conversion, stronger attachment, and faster cycle types. Second, we segment our commercial teams in groups of specialists. We break our customer base into strategic tiers, and in some cases, we reallocate resources monthly based on what each tier needs. We use the same discipline on the technology and vendor side. The impact shows up in the data. SMB customers are growing well above market, and some of our most strategic accounts have surfaced billions of dollars of untapped opportunity. Third, we invest in enablement. We accelerate our customers' time to market by equipping them with advanced training, certifications, and technical expertise tailored to each customer's technologies and segment. We provide labs to test the solutions. We believe that our partnership sharpens their capabilities and drives faster adoption of solutions. When we can help customers become more successful, they stay with us and grow with us. Europe is a clear proof point. Our EMEA team competes head-to-head against pure play specialists, runs digital and high-touch motions in parallel, and is weighted toward high-growth technologies and segments. The share gains there are structural, and it's the same model we've extended across our entire distribution business globally. These are the reasons why earlier this quarter, HP selected TD SYNNEX as one of just two global distribution partners across its full networking, cloud, and AI portfolio, including the assets from the Juniper acquisition. It unifies our reach and meaningfully expands our relationship with one of the most strategic vendors in the industry. These are the kinds of outcomes our model produces. Hyve also had an excellent quarter. Non-GAAP gross billings of $5.5 billion, up 117% year-over-year, driven by new programs with existing customers. We have built a suite of services to support hyperscalers' digital infrastructure deployments, which is key to our success. Coupled with strong execution against core pillars of our strategy, we've earned expanded program opportunities with some of our most strategic relationships, which has driven the triple-digit growth we have experienced year-to-date. Hyve's North Star is simple: to be the partner of choice that hyperscalers trust to design, build, and deploy their data center infrastructure globally. That starts with design and co-design, from board manufacturing to full rack integration and other key components, helping customers accelerate time to deployment. Beyond the build, we offer supply chain services that are designed to support our customers across the full data center lifecycle. Ahead of demand, we aim to secure key components to give our customers supply assurance in a complex environment, and throughout the lifecycle, we manage the spare parts and final components to help ensure our customers have what they need when they need it. As we mentioned last quarter, we have secured at least one program with each of the top five U.S.-based hyperscalers. We have begun the early stages of the ramp with our third, and the programs with the additional two hyperscalers are on track with ramp expected in late fiscal year 2026 or early fiscal year 2027. We also issued an equity warrant to Amazon, a longstanding customer of ours, structured to grow in value as our programs together expand. Across these partnerships, we are being selected as a manufacturing and supply chain partner for multiple aspects of our customers' digital infrastructure build-outs. To support the future growth and needs of our customers, we're in the process of expanding our manufacturing facilities by more than 1 million sq ft in several locations throughout the U.S., with current plans to add more. Hyve is quickly becoming the go-to partner for U.S. hyperscalers seeking a consolidated approach to the design and build of their digital infrastructure that is paired with full lifecycle supply chain services. This full set of capabilities is key to winning new programs and onboarding new customers, ultimately enabling Hyve to grow at a premium to market. In closing, there are three key things I'm focused on as we move through the year. First, partnering with vendors and our customers through the current demand environment. The macro backdrop creates complexity and challenges that we aim to solve, but the underlying demand signals currently remain solid. We believe the shift to AI-capable devices is just beginning. Enterprises are prioritizing the modernization of their data centers, and AI is driving incremental investment across the stack. We are watching unit elasticity carefully, but the net revenue impact from higher ASPs has been positive. Second, our execution at Hyve. We are bringing new capacity online, investing in engineering capabilities ahead of the ramp, and standing up new programs alongside expansion at existing customers. The bar I'm holding the team to is best-in-class service. That's what's gotten us here, and it's what wins the next program. Third, growing operating profit faster than billings. David will cover the details, but this is the metric that matters most to me. We aim to convert top-line growth into margin expansion and shareholder value. I now pass it to David to go over the financial performance and outlook. Thanks, Patrick, and good morning, everyone. This was a record quarter for TD SYNNEX. What's encouraging is that both of our businesses continue to perform extremely well, extending the growth trajectory that we've been on. Starting with the top line, our non-GAAP gross billings for the second quarter was $28.9 billion, increasing 33% year-over-year or 32% year-over-year in constant currency, and exceeding the high end of our guidance range. Non-GAAP operating income was $615 million, an increase of 49% year-over-year or 48% year-over-year in constant currency. Non-GAAP earnings per share was $4.85, an increase of 62% year-over-year and above the high end of our guidance range. GAAP operating income was $519 million, an increase of 58% year-over-year. GAAP earnings per share was $4.15, an increase of 88% year-over-year and above the high end of our guidance range. As we grow, we're focused on creating operating leverage so that earnings consistently grows faster than the top line. Driving that conversion is central to our strategy, how we allocate resources, and manage cost. Turning to quarterly performance for each business. Distribution delivered non-GAAP gross billings of $23.4 billion, increasing 22% year-over-year and well ahead of plan. Our end-to-end portfolio is indexed toward faster-growing technologies, which is positioning us to grow at a premium to market. Endpoint solutions gross billings increased 13% year-over-year, supported by strong growth in PCs, driven by higher ASPs, coupled with mid-single-digit growth in units. Advanced solutions gross billings increased 31% year-over-year, driven by continued strength in infrastructure and security. Distribution non-GAAP operating income was $434 million, increasing 36% year-over-year, and non-GAAP operating margin as a percentage of gross billings was 1.9%, an improvement of 19 basis points year-over-year. We estimate the distribution gross margins benefited by approximately 5-10 basis points during the quarter, driven by incremental profit from strategic inventory purchasing. Turning to Hyve. Hyve generated non-GAAP gross billings of $5.5 billion, increasing 117% year-over-year and ahead of expectations, with both manufacturing and supply chain services contributing. Manufacturing represented approximately 2/3 of Hyve in the quarter, and gross billings growth increased more than the total business, primarily driven by increased volumes with our existing customer base. Supply chain services represented approximately 1/3 of Hyve in the quarter, and growth was driven by component demand supporting our customers' infrastructure deployments. Margins and overall mix of supply chain services can vary quarter-to-quarter. Hyve non-GAAP operating income was $181 million, increasing 89% year-over-year, and non-GAAP operating margin as a percentage of gross billings was 3.3%, decreasing 50 basis points year-over-year, primarily driven by mix. We're laser-focused on continuing to make investments in both businesses that will position them to continue to grow at a premium to market over time. Shifting to cash flow and capital allocation. Free cash flow consumption for the quarter was approximately $330 million. Given the accelerated growth in Hyve, we're continuing to invest in working capital to support the growth of both new customers and new programs with existing customers. We're prioritizing making incremental investments where we can generate the healthiest returns, and this is showing up directly in our improving return on equity. Net working capital closed at $4.9 billion with a gross cash conversion cycle of 17 days, an increase of one day sequentially and flat year-over-year, reflecting an increased mix of Hyve. Both businesses improved their cash days year-over-year, but we do expect additional efficiencies from Hyve as new programs mature. We ended with $1.1 billion of cash and cash equivalents and net leverage of 1.6x, modestly below our medium-term framework, which gives us ample capacity to continue to invest in the business while returning capital to shareholders. During the second quarter, we returned $112 million to shareholders through repurchases and an additional $39 million through dividends. Our Board of Directors approved a cash dividend of $0.48 per common share, payable on July 31st, 2026, to shareholders of record as of the close of business on July 17th, 2026. Turning to our outlook for the third quarter of fiscal 2026, we expect non-GAAP gross billings of approximately $27.7 billion ±$500 million, up approximately 22% at the midpoint; a gross to net adjustment of approximately 33%; revenue of approximately $18.6 billion ±$400 million; non-GAAP net income of approximately $361 million ±$20 million; non-GAAP diluted earnings per share of approximately $4.50 ±$0.25, up approximately 26% at the midpoint, based on approximately 79.4 million diluted shares outstanding. Our Q3 guidance assumes no material contribution from Hyve's newly onboarded customers, which we are still expecting to ramp in late fiscal 2026 or early fiscal 2027. To close, we're extremely proud of our teams for the results they continue to deliver. We're entering the second half with forward momentum in both distribution and Hyve. With our global reach, differentiated capabilities, and broadening portfolio, we believe we're positioning ourselves to grow at a premium to market through time. With that, we'll open the call for questions. Operator? We will now begin the question-and-answer session. We request that you limit yourself to one question and one short follow-up to allow time for the other participants to ask their questions. If there is remaining time, you are welcome to re-queue with additional questions. To ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please pick up your handset when you're asking a question to allow for optimum sound quality, and if you are muted locally, remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead. Hi, thanks for taking my questions. Patrick, you've seen strong revenue growth and billings growth across all of your segments this quarter. The question I have is, have you seen any evidence of demand destruction or any weakening of demand given component cost increases? Are customers showing any hesitancy to purchase either endpoint solutions and/or advanced solutions? Likewise, if units are going to be down year-on-year, have you seen any change in channel incentives from the vendors? And I have a follow-up for David. Ruplu, good morning. Thanks a lot for the question. So, I mean, focusing on Q2, I mean, very strong quarter both on distribution and Hyve. Very transparently, we haven't seen, for the moment, any destruction of demand because of the price increases. The price increases are really starting to kick in, and it's probably going to accelerate in Q3. On the other hand, we see underlying demand, which continues to be healthy across the portfolio. I'm anticipating a question on maybe what happened on PCs. Even on PCs, we saw unit growth, so for the moment, we don't see that phenomenon. I just add, that has been one of our assumptions for the guidance, that on most of the categories, companies need to continue to invest, especially infrastructure, and combined with the ASP increase, I think, the demand will continue to remain healthy, at least for what we can see for Q3. Any change in channel incentives from the vendors? No, not yet. Okay. A quick follow-up for David. Yeah. Just to add. Sorry, Ruplu. Just to add, so, no, we don't see changes, material changes from our vendors. I add that our margin quality for distribution stayed very healthy in the quarter, as you can see, so no. Okay, great. David, just quickly, inventory was up 30% almost sequentially. Can you talk about working capital and free cash flow and what is driving that inventory? Are you using the strength of your balance sheet to buy any components? Thanks for all the details. Thanks, Ruplu. We've got a couple of pieces to cover here. When you think about cash flow and cash days, so cash days were flat year-over-year. I think the important point to make, though, is both of our businesses improved their cash days year-over-year, and you've got the mix of Hyve that caused the totality to be flat. Hyve continues to experience a period of accelerated growth in that business, given the cash conversion cycle takes capital to run, and so we continue to make those investments. When you start looking at inventory, I think ballpark, the days are up, call it eight days or so year-over-year, and it's largely driven by some additional inventory that we've taken in Hyve to help fund new programs, existing programs, and help make sure that our customers have adequate supply given the broader macro. Yeah. Thanks for all the details. Ruplu, sorry. Just want to add one thing, which is, we've been, for the last quarters, a little bit more aggressive on inventory levels because we've anticipated on the price increases. I mean, that gave us several advantages. One, it helped us smooth the impact of the price increase for our customers, and that's very important. It also helped our vendors by having inventory. Again, it positions us well in the market. Demand is strong. We are probably one of the best inventory profile in the industry. Again, that has helped us grow faster than the market overall. Your next question comes from the line of David Vogt with UBS. Your line is open. Great. Thanks for taking my questions. Patrick, one for you and one for David. Patrick, can you help us unpack how the incremental manufacturing facility square footage plays out this year and next? Is it basically designed to support the incremental programs that you laid out with your current and future programs with your hyperscalers? Is there a rule of thumb to think about what that incremental capacity could mean for whether it's billings or revenue? Then I have one for David as well. Yes, good morning. Thanks a lot for the question. As we mentioned, we have now won programs with all five U.S.-based hyperscalers. We have now three hyperscalers where we have won more than one program. What we see is a very nice pipeline of opportunities, which are going to ramp up probably end of Q4, beginning of Q1 fiscal year 2027. Basically, we have to invest. We have to invest in footprint. We are going to invest in additional equipment, in liquid cooling, to be able to support the various programs we have won. We haven't yet established a correlation between investment and revenue. What I can tell you is that we are very comfortable with that expansion of capabilities and capacity, that we are going to meet the demands we are seeing and be in a position to deliver the products with the right quality, which is the most important for us at the moment. Okay, great. That's helpful. David, I know this might be a tough question to answer, and I know there's some confidential kind of data here, but can you help us understand sort of the gross margin differentials within Hyve? Is it better to think about it relative to like ODM/CM margins versus supply chain margins, or is there a lot of variability between programs with existing hyperscalers or between actual hyperscalers themselves? Can you help us understand how to think about the margin profile of these programs, particularly as you start to ramp, obviously, new programs later this fiscal year into fiscal 2027? Thanks. It's a good question. When you take a huge step back, Hyve has two businesses, manufacturing and assembly, and supply chain. On average, historically, the margin profiles have been relatively similar. I will tell you, as you start looking at things by program, there can be differences. I'll give you a couple of examples. If you're building AI servers, that tends to have a slightly lower margin profile. If you are building complex networking racks, that tends to have a slightly higher margin profile, so on and so forth. Same thing on the supply chain side. Depending on what we're buying, how long we're holding it, and how complex it is, it does dictate the margin profile. But all in all, here's what I would anchor you to. We feel very good about the performance that Hyve's been able to generate. We continue to make investments in new capabilities, new programs, new products that will allow Hyve to continue to maintain, if not improve, its margin profile through time. We're super excited with what the team's been able to produce thus far. I just would like to add. Great. Thanks, David. Two more things. The first one is, I mean, similar to distribution, gross margin quality is very important, and I can tell you that the team is very focused on that. That's point number one. Point number two is, obviously, as you ramp up a program, you have some inefficiencies, which will disappear over time based on the learnings and the optimization. Again, hypergrowth as we speak, lots of programs being launched, some impact on the GM quality because of that. Again, looking forward, it's a priority for us to optimize also the GM quality. Great. Thanks, guys. Your next question comes from the line of Keith Housum with Northcoast Research. Your line is open. Good morning, gentlemen. Congratulations on a great quarter. As we think about the evolving business out there with memory, and we're hearing more and more about supply constraints coming into place here, are you guys seeing the supply constraints come into place right now, or is there concerns that you'll see some perhaps limiting the amount of growth you can have for the rest of the year or maybe into FY 2027? How are you thinking about the supply availability right now? Keith, good morning. Thanks for the question. For Q2, we haven't felt it really, but you're right, in our Q3 guidance, we took into account some risk with component availability. It's memory, obviously is one of the category. Some CPUs could come also, some challenges on delivery of CPUs could come also. We factored it into our guidance, and we will see. Again, so far it has been good. I would just add that when you look at Hyve, it's our customers primarily who secure the supply, and they have, I would say, some good arguments with the vendors. On the distribution side, so far, our key vendors have done a very good job with their supply chain. Yes, for Q3, we've been a little bit more cautious because of that in our guidance. Okay. If I could follow up on that. In terms of the HPE win, in terms of being one of two global distributors, have you seen that benefit completely in the quarter, or is this still going to ramp up over time? No, no. We are going to see the ramp up over time. What's happening, just to put things in context, so HPE has decided to rationalize its go-to-market. They are going to focus on two global distributors in certain areas, and the benefit takes some time. Okay? We are going to probably see the benefit, I would say, first half of next year. We won some new countries. We're going to see the rationalization of the distribution network in some other countries. It takes a little bit of time. Just to comment from a more strategic standpoint on the HPE win, it's very interesting that the fact that we are global has been one of the reasons for the win. What we see more and more from the vendors is that being global is becoming the differentiator when they rationalize their go-to markets. We think that probably there's more to come. Other vendors are now looking at their global distribution landscape. Our strategy to expand in APJ, in Latin America, potentially one day in the Middle East, is clearly positioning us well to benefit from that market trend. Great. Thank you. Your next question is from the line of Katherine Murphy with Goldman Sachs. Your line is open. Thank you very much. Maybe switching gears here a little bit, the margin profile of the endpoint solutions segment was, seems like a record high from what I can see at 5%. Can you talk about what drove the strength in the quarter, and if there were any one-time benefits like the strategic inventory purchases you mentioned that benefited results in the quarter? Then, to just quickly ask my follow-up now, are there any expectations for continued benefits from this strategic inventory build as we look into the back half of the year and into 2027, so long as we continue to see increasing ASP environment? Thank you very much. Good morning, Kat. Couple of comments. One, we put in the prepared remarks that on the distribution side, we had 5-10 basis points of additional margin from strategically purchasing inventory. A lot of that manifests itself in the endpoint business. Here's the way I would think about it. Our goal is to secure the right amount of supply, and as Patrick said, to help our vendors smooth supply constraints, make sure there's proper availability. It is true, when in a rising price world, we can benefit from that, and so what I would tell you is, yes, if prices continue to rise, there will be a benefit. But we're also not greedy as it relates to this, right? We want to be paid for the additional capital that we've got deployed, but we also share some of these benefits with our customers as well, so we can build better long-term partnerships. I would anticipate as we move forward, these types of benefits will be more one-time in nature and slowly dissipate, and that's why we tried to call them out in the script. Your next question comes from the line of Erik Woodring with Morgan Stanley. Your line is open. Awesome. Thank you. Thank you for taking my questions, guys. Congrats on the results. Patrick, I guess I'll combine my two questions because it's a three-part question, so sorry, but they're all related. I'd love if you could just take a big step back and help us understand three things. First, just again, help us understand the sustainability of hardware spending as we look through the second half and into next year, just given what you know today and the pipeline that you see. Second, just what products are showing to have greater inelasticity than others as you face these record price hikes. Third, are there any products or segments as you look forward where you don't believe you can fully pass through the higher device costs and potentially see some margin pressure, just if there's any customer pushback? I'll combine those and make those my two questions, even though it's a three-parter. Thank you, guys. Thank you, Erik. Good morning. Let me start with the last one on the margin. Again, and it's true for both businesses, distribution and Hyve, we are a cost-plus business, so if cost increase, we pass it to the customers. We have no other choice. We have a very good track record as an industry and as TD SYNNEX. You look at what happened last year with the tariffs, you look at what has been happening the last two quarters. We had already some categories where we saw the price increases, and again, we're able to pass it. We had inventory to smooth the impact for our customers, but overall, I mean, no concerns there. In terms of product elasticity, the category I'm watching is PCs, with some caveats. Consumer PCs, I think the elasticity will be relatively high, but we focus on B2B. So, I'm expecting some impact of the ASP increase on the PC consumption. If you look at our Q2 results, we were able to mitigate the impact by gaining share, and also because we are positioned on B2B and the refresh is not over, and you still have many enterprises or companies who have to upgrade their PCs. That's probably the category where I am the most cautious. We are the most cautious in our outlook. If you look at infrastructure, if you look at networking, yeah, for the moment, we see very solid demand, networking very rapidly. The two last years were tough. Networking is back on a lower base. You have the refresh driven by Wi-Fi 7, then you have the investments related to AI in that space. I think that's sustainable. If you look at data centers or server and storage, I mean, this quarter, I mentioned last quarter that storage was starting to come back, and I wanted a confirmation. We had a very strong storage quarter, and I think it's going to last. The AI, I mean, drove first the compute upgrade, and I think now storage, then switches, and I think storage is next. Then on compute, we see very, very solid demand, and it's driven by several things. Obviously, ASP increase is driving the value up. Even in volume, what's happening is that you have still the refresh of the general compute servers happening. It's not over, so that's an opportunity. You have an acceleration of the purchase of general compute servers because they have become critical when you speak about agentic AI. Then the cost of tokens is going to become a big topic. If you want to mitigate the cost of tokens, I mean, running your workloads on premise is going to be a good solution. I think that's going to drive demand and remain a tailwind. Then an accelerated compute. Companies are starting, enterprises in particular, but also you have the sovereign clouds, especially in Europe and APJ and the neoclouds in North America. They are investing heavily. We are a source of supply for them, and I see the demand remaining healthy here. In summary, except on PCs where units could be impacted by the ASP increase, I think on the other categories, I think it's sustainable. Software was also a very strong quarter for us, so ASP increase is less of a topic. I think it's going to be sustainable. Security, especially now that you have to manage the risk related to agents, is going to drive additional demand. I continue to be cautiously optimistic across most of the technologies. Awesome. Thank you very much, Patrick, for all that detail. Your next question comes from the line of Adam Tindle with Raymond James. Your line is open. Hi, good morning. Patrick, I just wanted to start here taking a step back. If I look at the quarter, incredible growth and negative cash flow. I wonder if you might just talk about how to strike the right balance between pursuing growth versus generating cash. More specifically, if I look at where that cash is going, it's heavy investments into Hyve in particular, and I think what we're learning on a forward basis is some of that's going to be incrementally fixed investment with this capacity build-out. How do you protect against downside there, where customers are right now kind of rationalizing AI spend, token spend, like you said, the fear that you might be building fixed investment into a peak AI market? Thanks. Thanks, Adam, for the question. Let me distinguish between distribution and Hyve very rapidly. Distribution continues to, I mean, cash days are down on both businesses, but cash days are really low on distribution, so the growth on distribution is generating free cash flow, significant free cash flow. Which is true today, we are investing in Hyve to fuel the Hyve growth, both working capital and of course, fixed assets. One, Hyve continues to have a very nice return. If you look at our key ratios, it's not that we are financing a growth business at the expense of our key financial metrics, it's the other way around. It's accretive for our margin. It's accretive for our return on equity. From that standpoint, we feel very comfortable. In terms of building fixed costs in case the market is going to correct, it's true that the working capital will adjust immediately if the market goes down. We have no concern. It's like distribution. If I can speak like that, the elasticity is high. I mean, as soon as the market goes down, we are going to see the working capital going down very rapidly, and so it will generate free cash flow. From a fixed asset standpoint, yes, it's a business which requires significantly more investments than distribution, relatively speaking. Again, it's not either a fixed cost which we could not absorb. If you look at this year, we're going to invest for Hyve roughly $100 million, amortized over five, six years. The cost is absolutely bearable in case the market turns. The other costs for Hyve are mostly variable. Again, in case of downturn, I think it's going to be something similar to what we see in distribution. You have a lot of cash flow generated because working capital goes down, and we are very good at reacting and adjusting our cost base to the new market reality. I am not very concerned here. I can just finish with this continues to be top of mind for us, so we think about it all the time as we do the investments. Again, for the moment, I think we should be in a safe position. The only other thing I'd add, Adam, if it helps, is one, we ladder leases. That obviously helps if there's a change in demand. Two, we don't speculate on demand, so we largely build and outfit facilities based on long-term programs once they're committed. I will tell you, the team is incredibly prudent at how they manage Hyve from a capacity perspective, and they've done a nice job. As Patrick said on the cash flow, there is, as you're ramping a new program, there is more working capital inefficiencies that ultimately unlock as things mature. We are aware of the cash consumption. We are pleased with the reduction in cash days year-over-year, but we do believe long term, there are additional efficiencies that we'll look to achieve as well. Great. Just a quick follow-up. By the way, I know that question [audio distortion]. Your next question comes from the line of Joe Cardoso with JPMorgan. Your line is open. Hi. Thank you for taking my question. This is [MP] on behalf of Joe Cardoso from JPMorgan. Can you please double-click on the mix of Hyve business between supply chain versus contract manufacturing during the quarter? Particularly, how did it track relative to your expectations heading into the quarter? Also, how do you expect it to track into the second half and any potential gross margin impacts from that? Thank you, and I have a follow. Good morning and thanks for joining. When you think about Hyve, we put in the prepared remarks, 2/3 of it, 2/3 of the business was manufacturing this quarter, and about 1/3 of it was supply chain. When you think about performance versus expectations, both businesses exceeded expectations. It's a little tricky to try and figure out what's long-term guidance split at kind of a sub-segment level, but here's what I would tell you. Our teams have done an excellent job winning new programs. We're very focused on expanding our manufacturing business and expanding our manufacturing programs, but we also recognize that because we have an end-to-end offering, being able to tie it all together is hugely advantageous for both our customers and for TD SYNNEX. They should grow together through time, but our hope is that long term, we continue to increase the manufacturing as a percentage of the total. I just want to add that our supply chain services is a service. In today's environment where you have this big ASP increase and shortages, our customers have more needs than in environments which will normalize. Again, the team is first focused on winning programs to grow the manufacturing business. That's really the core of the activity. The service part is a little bit more volatile because of the context I just explained. Thank you. For my follow-up, I just wanted to ask about pricing. Can you please comment how is the pricing environment right now? How you think the pricing environment is right now versus 90 days ago, and any particular product categories which you want to call out where the pricing pressures are more pronounced relative to others? Thank you. Pricing is up. You had this inventory in the channel, and that inventory has been shipped, so we're going to see the impact more and more. The category where the price increase are the most significant are obviously storage and servers, because they are the most impacted by the memory price increases. But we see it also in PCs. By the way, we're expecting some new price increases in both categories in July. The price increase are not over. Thank you. Your next question is from the line of Adam Tindle of Raymond James. Your line is open now. Okay, I was just going to continue on that thread, Patrick. I know that that question that I asked earlier about cash flow versus growth sounded challenging. I actually think you're doing the right strategy because your balance sheet is clean. You don't necessarily need to be generating cash right now. On that thread, I wanted to ask the follow-up to David, the timing and magnitude to cash flow reversing. I think previously you had talked about 95% of non-GAAP net income for the combination of fiscal year 2025 and 2026, but I think you'd need, like, $2 billion+ of free cash flow over the next two quarters to do that, and I wonder if we should sort of recalibrate our thinking. I know this is a tough question in a dynamic environment. Just any help for our models. Thanks. No, it's a good question, Adam. I think you're thinking about it the right way, which is Hyve is in a period of accelerated growth. What we've reflected in the Q3 outlook is continued momentum in both businesses. The 95% net income to free cash flow conversion ratio is absolutely our North Star metric on a long-term basis, but in periods of accelerated growth, we will consume cash. We believe it's a good use of capital, and the incremental ROIC is good. Hopefully, that helps give you a little bit of color around our optimism in Hyve and some of the short-term cash impacts of making investments in that business. But we think it's a great investment to make. Okay, thank you. Yeah, makes sense. Thank you. You're welcome. Your next question is from the line of Guy Hardwick with Barclays. Your line is open. Hi. Good morning. A follow-up question on the strategic inventory. Just wondering how much of the 13-day year-on-year increase related to strategic inventory purchases. I assume in the Q3 guidance, you're also assuming further margin benefits from these purchases, maybe similar to what you had in the 5-10 basis points you had in just the recent quarter. This is a tough question to answer because it's very difficult to quantify, but what I would tell you is our teams are able to increase their days of supply around specific categories if they believe that we need to hold additional stock to kind of smooth out supply chains. They don't go after this as a business. They're not trying to capitalize on price changes and speculate, but in situations where, I'm just going to make it up, let's say lead times are going to extend by three or four weeks, they might hold an extra couple of weeks of stock and for certain categories, and they'll get benefits from that if prices go up. What we do as a matter of course, is, we don't forecast a lot of these benefits. We call them out when they come. It tends to be fairly opportunistic in nature. Not necessarily opportunistic, but I would tell you, we don't forecast and plan for a lot of these things, but when we do realize them, we tend to call them out in the quarter. It is part of the reason that inventory is up on a year-over-year basis. I would tell you the predominance of that increase was largely driven by the investments we've made in Hyve due to new programs and expanded programs with existing customers. Just to be clear, so the guidance of Q3 does not include any margin benefits from strategic inventory? It's hard to say. We don't have the teams break it down to that level of detail. What I would tell you is we do a bottoms-up roll based on our guidance, and the teams will factor a variety of risk and opportunities in there to quantify exactly whether it's in or out or what degree is a little difficult. To be candid with you, I would say there's probably a little, but as you've seen based on the Q2 results, it's relatively small, 5-10 basis points. It does tend to dwindle down through time Thank you. Your next question is from the line of David Paige with RBC Capital Markets. Your line is open. Good morning, Patrick. Morning. Good morning, Patrick, David. Thanks for taking my question. I want to start on the Amazon warrant. I was curious what was the strategic rationale for that and how that warrant came to be, and is it something that we should expect maybe with some of the other hyperscalers that you're ramping up? Thank you. Hey, good morning, David. First thing, the warrant concerns Hyve. Okay. Hyve has had a long-term relationship, historical and strong relationship with AWS. The relationship has been very successful historically. The value proposition we deliver to Amazon has been very much valued. When they came to us to discuss the opportunity, we saw it as a big opportunity. With the warrant in place now, we think we have an agreement which is going to be mutually beneficial. Yeah. Let's see how it materializes in the future, but we are very pleased with that agreement. Great. That's helpful. Just a quick follow-up. I think in the past you have spoken about traditional compute versus accelerated compute. If you could you provide some color on the mix of traditional versus accelerated that you had in the quarter or that you're expecting in late 4Q and early 2027? Thank you. I guess your question is for Hyve specifically? Yeah. Yeah. This quarter we had the ramp-up of an accelerated compute program at Hyve. Generally speaking, we think that, when you look at our mix of programs, we believe that we are going to see more of networking, general compute, and storage going forward, but we want to continue to maintain and develop our expertise in accelerated compute. In terms of mix, so we have this nice ramp-up, but when I look at the profile of the wins we are having, we will continue to see more of the other programs than the accelerated compute programs, I think, going forward. Your next question comes from the line of Vincent Colicchio with Barrington Research. Your line is open. Yeah. Patrick, if hardware demand moderates, would you expect software, cloud, and recurring revenue streams to offset some of that pressure? Thanks for the question. Software, cloud, security continue to grow at double digits. For sure that, when you look at the underlying reason for that success, I'm quite positive and optimistic on those underlying trends to continue in the future. I will tell you that when I look at hardware and when I look at the impact of AI, or the potential impact of AI on on-premise and even, I should say, on edge computing, I think hardware is becoming a very interesting category again. It could be poised for very interesting growth. AI could be really a game changer here. It's a little bit too early to call it out, but there are some indicators that could speak well. As I said, I mentioned it before, the cost of the tokens is going to have an impact, I think, on some of the behaviors beyond the issue of latency, the issue of security and privacy. I think the cost of the tokens could have a very positive impact on on-premise hardware, and both in the data center, but also at the edge. Thank you. Your next question comes from the line of Alek Valero with Loop Capital. Your line is open. Hey, guys. Thank you for taking all my question. My question to you is, I don't know if you mentioned this earlier, but on the 1 million sq ft that you're adding, any color on when we can see this capacity start to contribute to revenue? Yeah. Thank you for the question. Again, I mean, we have a strong pipeline, strong backlog, and what we, sort of, we see the ramp-up of the programs we have won to start impacting our revenue in Q4 fiscal year 2026, and most probably in Q1 fiscal year 2027. The capacity we are adding will convert into additional revenue, potentially in Q4 and most probably in Q1 next year. Oh, got it. Thank you for that. Just a quick follow-up. On Hyve, obviously, you said manufacturing is now 2/3 of that. What can we expect that mix to look like throughout the year? Alek, it's hard to give you an exact answer on that. Here's the way I would tell you to think about it. Over a long period of time, we expect manufacturing to increase as a mix of the total, but as Patrick said, in certain types of environments, our supply chain business becomes very critical to helping support our customers, and so it will ebb and flow. It's hard to tell you exactly quarter-to-quarter, year-to-year what that might look like, but over a longer period of time, we expect to increase the percentage of Hyve associated with manufacturing. Got it. Super helpful. Thank you, guys. Appreciate it. We've reached the end of the Q&A session. I would now like to turn the call back over to Patrick for closing remarks. Thank you all for joining us this morning. I want to close by thanking our coworkers across the globe, whose commitment and dedication drive everything we accomplish, and our partners for the continued confidence they place in us. To everyone on today's call, we appreciate your ongoing interest in TD SYNNEX. Thank you and wishing you a great day. That concludes today's conference call. You may now disconnect. Have a nice day.

Speaker 11: Good morning. My name is Tracy, and I will be your conference operator today. I'd like to welcome everyone to the TD SYNNEX second quarter fiscal 2026 earnings call. Today's call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. At this time, for opening remarks, I would like to pass the call over to Nate Friedel, Head of Investor Relations at TD SYNNEX. Nate, you may begin. Good morning. good morning My name is Tracy, and I will be your conference operator today. my name is tracy and i will be your conference operator today I'd like to welcome everyone to the TD SYNNEX second quarter fiscal 2026 earnings call. i'd like to welcome everyone to the td synnex second quarter fiscal 2026 earnings call Today's call is being recorded, and all lines have been placed on mute to prevent any background noise. today's call is being recorded and all lines have been placed on mute to prevent any background noise After the speaker's remarks, there will be a question-and-answer session. after the speaker's remarks there will be a question-and-answer session At this time, for opening remarks, I would like to pass the call over to Nate Friedel , Head of Investor Relations at TD SYNNEX. at this time for opening remarks i would like to pass the call over to nate friedel head of investor relations at td synnex Nate, you may begin. nate you may begin

Speaker 10: Good morning, everyone and welcome to TD SYNNEX's fiscal 2026 second quarter earnings call. Joining me on today's call are Chief Executive Officer, Patrick Zammit, and Chief Financial Officer, David Jordan. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, including statements about our strategy, demand, plans and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our financial expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release in the Form 8-K we filed today, in the Risk Factors section of our Form 10-K, and our other reports and filings with the SEC. We do not intend to update any forward-looking statements. Good morning, everyone and w elcome to TD SYNNEX's fiscal 2026 second quarter earnings call. good morning everyone and w elcome to td synnex's fiscal 2026 second quarter earnings call Joining me on today's call are Chief Executive Officer, Patrick Zammit, and Chief Financial Officer, David Jordan. joining me on today's call are chief executive officer patrick zammit and chief financial officer david jordan Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, including statements about our strategy, demand, plans and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our financial expectations for future fiscal periods. before we continue let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws including predictions estimates projections or other statements about future events including statements about our strategy demand plans and positioning growth cash flow capital allocation and stockholder return as well as our financial expectations for future fiscal periods Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release in the Form 8-K we filed today, in the Risk Factors section of our Form 10-K, and our other reports and filings with the SEC. actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release in the form 8-k we filed today in the risk factors section of our form 10-k and our other reports and filings with the sec We do not intend to update any forward-looking statements. we do not intend to update any forward-looking statements Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our investor relations website, ir.tdsynnex.com. This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission. I will now turn the call over to Patrick. Also, during this call, we will reference certain non-GAAP financial information. also, during this call we will reference certain non-gaap financial information Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our investor relations website, ir.tdsynnex.com. reconciliations of gaap to non-gaap results are included in our earnings press release and the related form 8-k available on our investor relations website ir.tdsynnex.com This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission. this conference call is the property of td synnex and may not be recorded or rebroadcast without our permission I will now turn the call over to Patrick. i will now turn the call over to patrick

Speaker 12: Thank you, Nate and good morning, everyone. We delivered a record quarter with broad-based strength across distribution and Hyve, building on the momentum we have carried out of recent quarters. Our results reflect consistent execution against our strategy and deepening relationships within the macro environment that is becoming increasingly complex. Rising component costs, supply constraints, geopolitical uncertainty, and a once-in-a-generation AI build-out are challenging businesses to move faster and with more precision. That complexity is exactly where TD SYNNEX adds the most value, and you can see it in the demand across our business. AI is becoming a growing portion of our mix and is driving demand across both businesses, from hyperscale infrastructure build-outs to enterprise data center modernization, to AI-capable devices in our endpoint mix, and we are capturing that growth across technologies, regions, and customers. With that context, I start with our distribution performance. Thank you, Nate and g ood morning, everyone. thank you nate and g ood morning everyone We delivered a record quarter with broad-based strength across distribution and Hyve, building on the momentum we have carried out of recent quarters. we delivered a record quarter with broad-based strength across distribution and hyve building on the momentum we have carried out of recent quarters Our results reflect consistent execution against our strategy and deepening relationships within the macro environment that is becoming increasingly complex. our results reflect consistent execution against our strategy and deepening relationships within the macro environment that is becoming increasingly complex Rising component costs, supply constraints, geopolitical uncertainty, and a once-in-a-generation AI build-out are challenging businesses to move faster and with more precision. rising component costs supply constraints geopolitical uncertainty and a once-in-a-generation ai build-out are challenging businesses to move faster and with more precision That complexity is exactly where TD SYNNEX adds the most value, and y ou can see it in the demand across our business. that complexity is exactly where td synnex adds the most value, and y ou can see it in the demand across our business AI is becoming a growing portion of our mix and is driving demand across both businesses, from hyperscale infrastructure build-outs to enterprise data center modernization, to AI-capable devices in our endpoint mix, and w e are capturing that growth across technologies, regions, and customers. ai is becoming a growing portion of our mix and is driving demand across both businesses from hyperscale infrastructure build-outs to enterprise data center modernization to ai-capable devices in our endpoint mix, and w e are capturing that growth across technologies regions and customers With that context, I start with our distribution performance. with that context i start with our distribution performance Distribution had an excellent quarter. Non-GAAP gross billings of $23.4 billion, up 22% year-over-year. Strength was broad-based across every region and the portfolio, with international growth and operating margin expansion as a real bright spot. We believe the combination of our global reach, end-to-end portfolio, and specialized go-to-market is very difficult to replicate. This differentiated value proposition, coupled with strong execution against our strategy, has driven new customer wins, new expanded vendor partnerships, and a large share of wallet with our most strategic relationships, all of which have proven to be incremental growth drivers. Three pillars of our strategy are driving our growth. First, we meet our customers however they want to engage in a true omnichannel motion. Digital when they want self-serve speed, human when they want expertise and enablement, and we move seamlessly between the two in real time. Distribution had an excellent quarter. distribution had an excellent quarter Non-GAAP gross billings of $23.4 billion, up 22% year-over-year. non-gaap gross billings of $23.4 billion up 22% year-over-year Strength was broad-based across every region and the portfolio, with international growth and operating margin expansion as a real bright spot. strength was broad-based across every region and the portfolio with international growth and operating margin expansion as a real bright spot We believe the combination of our global reach, end-to-end portfolio, and specialized go-to-market is very difficult to replicate. we believe the combination of our global reach end-to-end portfolio and specialized go-to-market is very difficult to replicate This differentiated value proposition, coupled with strong execution against our strategy, has driven new customer wins, new expanded vendor partnerships, and a large share of wallet with our most strategic relationships, all of which have proven to be incremental growth drivers. this differentiated value proposition coupled with strong execution against our strategy has driven new customer wins new expanded vendor partnerships and a large share of wallet with our most strategic relationships all of which have proven to be incremental growth drivers Three pillars of our strategy are driving our growth. three pillars of our strategy are driving our growth First, we meet our customers however they want to engage in a true omnichannel motion. first we meet our customers however they want to engage in a true omnichannel motion Digital when they want self-serve speed, human when they want expertise and enablement, and we move seamlessly between the two in real time. digital when they want self-serve speed human when they want expertise and enablement and we move seamlessly between the two in real time Our digital capabilities are enabled by PartnerFirst, which we've built for depth and speed at scale to deliver a connected experience for our partners. As one of the world's largest distributors, we have the data and intelligence to support our partners in identifying demand opportunities. We're applying machine learning, generative and agentic AI to the data we gather across our ecosystem to personalize each partner's experience, be it navigation by dashboards and customized recommendations and opportunities we surface. This reduces friction and drives higher conversion, stronger attachment, and faster cycle types. Second, we segment our commercial teams in groups of specialists. We break our customer base into strategic tiers, and in some cases, we reallocate resources monthly based on what each tier needs. We use the same discipline on the technology and vendor side. The impact shows up in the data. Our digital capabilities are enabled by PartnerFirst, which we've built for depth and speed at scale to deliver a connected experience for our partners. our digital capabilities are enabled by partnerfirst which we've built for depth and speed at scale to deliver a connected experience for our partners As one of the world's largest distributors, we have the data and intelligence to support our partners in identifying demand opportunities. as one of the world's largest distributors we have the data and intelligence to support our partners in identifying demand opportunities We're applying machine learning, generative and agentic AI to the data we gather across our ecosystem to personalize each partner's experience, be it navigation by dashboards and customized recommendations and opportunities we surface. we're applying machine learning generative and agentic ai to the data we gather across our ecosystem to personalize each partner's experience be it navigation by dashboards and customized recommendations and opportunities we surface This reduces friction and drives higher conversion, stronger attachment, and faster cycle types. this reduces friction and drives higher conversion stronger attachment and faster cycle types Second, we segment our commercial teams in groups of specialists. second we segment our commercial teams in groups of specialists We break our customer base into strategic tiers, and in some cases, we reallocate resources monthly based on what each tier needs. we break our customer base into strategic tiers and in some cases we reallocate resources monthly based on what each tier needs We use the same discipline on the technology and vendor side. we use the same discipline on the technology and vendor side The impact shows up in the data. the impact shows up in the data SMB customers are growing well above market, and some of our most strategic accounts have surfaced billions of dollars of untapped opportunity. Third, we invest in enablement. We accelerate our customers' time to market by equipping them with advanced training, certifications, and technical expertise tailored to each customer's technologies and segment. We provide labs to test the solutions. We believe that our partnership sharpens their capabilities and drives faster adoption of solutions. When we can help customers become more successful, they stay with us and grow with us. Europe is a clear proof point. Our EMEA team competes head-to-head against pure play specialists, runs digital and high-touch motions in parallel, and is weighted toward high-growth technologies and segments. The share gains there are structural, and it's the same model we've extended across our entire distribution business globally. SMB customers are growing well above market, and some of our most strategic accounts have surfaced billions of dollars of untapped opportunity. smb customers are growing well above market and some of our most strategic accounts have surfaced billions of dollars of untapped opportunity Third, we invest in enablement. third we invest in enablement We accelerate our customers' time to market by equipping them with advanced training, certifications, and technical expertise tailored to each customer's technologies and segment. we accelerate our customers' time to market by equipping them with advanced training certifications and technical expertise tailored to each customer's technologies and segment We provide labs to test the solutions. we provide labs to test the solutions We believe that our partnership sharpens their capabilities and drives faster adoption of solutions. we believe that our partnership sharpens their capabilities and drives faster adoption of solutions When we can help customers become more successful, they stay with us and grow with us. when we can help customers become more successful they stay with us and grow with us Europe is a clear proof point. europe is a clear proof point Our EMEA team competes head-to-head against pure play specialists, runs digital and high-touch motions in parallel, and is weighted toward high-growth technologies and segments. our emea team competes head-to-head against pure play specialists runs digital and high-touch motions in parallel and is weighted toward high-growth technologies and segments The share gains there are structural, and it's the same model we've extended across our entire distribution business globally. the share gains there are structural and it's the same model we've extended across our entire distribution business globally These are the reasons why earlier this quarter, HP selected TD SYNNEX as one of just two global distribution partners across its full networking, cloud, and AI portfolio, including the assets from the Juniper acquisition. It unifies our reach and meaningfully expands our relationship with one of the most strategic vendors in the industry. These are the kinds of outcomes our model produces. Hyve also had an excellent quarter. Non-GAAP gross billings of $5.5 billion, up 117% year-over-year, driven by new programs with existing customers. We have built a suite of services to support hyperscalers' digital infrastructure deployments, which is key to our success. Coupled with strong execution against core pillars of our strategy, we've earned expanded program opportunities with some of our most strategic relationships, which has driven the triple-digit growth we have experienced year-to-date. These are the reasons why earlier this quarter, HP selected TD SYNNEX as one of just two global distribution partners across its full networking, cloud, and AI portfolio, including the assets from the Juniper acquisition. these are the reasons why earlier this quarter hp selected td synnex as one of just two global distribution partners across its full networking cloud and ai portfolio including the assets from the juniper acquisition It unifies our reach and meaningfully expands our relationship with one of the most strategic vendors in the industry. it unifies our reach and meaningfully expands our relationship with one of the most strategic vendors in the industry These are the kinds of outcomes our model produces. these are the kinds of outcomes our model produces Hyve also had an excellent quarter. hyve also had an excellent quarter Non-GAAP gross billings of $5.5 billion, up 117% year-over-year, driven by new programs with existing customers. non-gaap gross billings of $5.5 billion up 117% year-over-year driven by new programs with existing customers We have built a suite of services to support hyperscalers' digital infrastructure deployments, which is key to our success. we have built a suite of services to support hyperscalers' digital infrastructure deployments which is key to our success Coupled with strong execution against core pillars of our strategy, we've earned expanded program opportunities with some of our most strategic relationships, which has driven the triple-digit growth we have experienced year-to-date. coupled with strong execution against core pillars of our strategy we've earned expanded program opportunities with some of our most strategic relationships which has driven the triple-digit growth we have experienced year-to-date Hyve's North Star is simple: to be the partner of choice that hyperscalers trust to design, build, and deploy their data center infrastructure globally. That starts with design and co-design, from board manufacturing to full rack integration and other key components, helping customers accelerate time to deployment. Beyond the build, we offer supply chain services that are designed to support our customers across the full data center lifecycle. Ahead of demand, we aim to secure key components to give our customers supply assurance in a complex environment, and throughout the lifecycle, we manage the spare parts and final components to help ensure our customers have what they need when they need it. As we mentioned last quarter, we have secured at least one program with each of the top five U.S.-based hyperscalers. Hyve's North Star is simple: to be the partner of choice that hyperscalers trust to design, build, and deploy their data center infrastructure globally. hyve's north star is simple to be the partner of choice that hyperscalers trust to design build and deploy their data center infrastructure globally That starts with design and co-design, from board manufacturing to full rack integration and other key components, helping customers accelerate time to deployment. that starts with design and co-design from board manufacturing to full rack integration and other key components helping customers accelerate time to deployment Beyond the build, we offer supply chain services that are designed to support our customers across the full data center lifecycle. beyond the build we offer supply chain services that are designed to support our customers across the full data center lifecycle Ahead of demand, we aim to secure key components to give our customers supply assurance in a complex environment, a nd throughout the lifecycle, we manage the spare parts and final components to help ensure our customers have what they need when they need it. ahead of demand we aim to secure key components to give our customers supply assurance in a complex environment, a nd throughout the lifecycle we manage the spare parts and final components to help ensure our customers have what they need when they need it As we mentioned last quarter, we have secured at least one program with each of the top five U.S.-based hyperscalers. as we mentioned last quarter we have secured at least one program with each of the top five u.s.-based hyperscalers We have begun the early stages of the ramp with our third, and the programs with the additional two hyperscalers are on track with ramp expected in late fiscal year 2026 or early fiscal year 2027. We also issued an equity warrant to Amazon, a longstanding customer of ours, structured to grow in value as our programs together expand. Across these partnerships, we are being selected as a manufacturing and supply chain partner for multiple aspects of our customers' digital infrastructure build-outs. To support the future growth and needs of our customers, we're in the process of expanding our manufacturing facilities by more than 1 million sq ft in several locations throughout the U.S., with current plans to add more. We have begun the early stages of the ramp with our third, and the programs with the additional two hyperscalers are on track with ramp expected in late fiscal year 2026 or early fiscal year 2027. we have begun the early stages of the ramp with our third and the programs with the additional two hyperscalers are on track with ramp expected in late fiscal year 2026 or early fiscal year 2027 We also issued an equity warrant to Amazon, a longstanding customer of ours, structured to grow in value as our programs together expand. we also issued an equity warrant to amazon a longstanding customer of ours structured to grow in value as our programs together expand Across these partnerships, we are being selected as a manufacturing and supply chain partner for multiple aspects of our customers' digital infrastructure build-outs. across these partnerships we are being selected as a manufacturing and supply chain partner for multiple aspects of our customers' digital infrastructure build-outs To support the future growth and needs of our customers, we're in the process of expanding our manufacturing facilities by more than 1 million sq ft in several locations throughout the U.S., with current plans to add more. to support the future growth and needs of our customers we're in the process of expanding our manufacturing facilities by more than 1 million sq ft in several locations throughout the u.s with current plans to add more Hyve is quickly becoming the go-to partner for U.S. hyperscalers seeking a consolidated approach to the design and build of their digital infrastructure that is paired with full lifecycle supply chain services. This full set of capabilities is key to winning new programs and onboarding new customers, ultimately enabling Hyve to grow at a premium to market. In closing, there are three key things I'm focused on as we move through the year. First, partnering with vendors and our customers through the current demand environment. The macro backdrop creates complexity and challenges that we aim to solve, but the underlying demand signals currently remain solid. We believe the shift to AI-capable devices is just beginning. Enterprises are prioritizing the modernization of their data centers, and AI is driving incremental investment across the stack. We are watching unit elasticity carefully, but the net revenue impact from higher ASPs has been positive. Hyve is quickly becoming the go-to partner for U.S. hyperscalers seeking a consolidated approach to the design and build of their digital infrastructure that is paired with full lifecycle supply chain services. hyve is quickly becoming the go-to partner for u.s hyperscalers seeking a consolidated approach to the design and build of their digital infrastructure that is paired with full lifecycle supply chain services This full set of capabilities is key to winning new programs and onboarding new customers, ultimately enabling Hyve to grow at a premium to market. this full set of capabilities is key to winning new programs and onboarding new customers ultimately enabling hyve to grow at a premium to market In closing, there are three key things I'm focused on as we move through the year. in closing there are three key things i'm focused on as we move through the year First, partnering with vendors and our customers through the current demand environment. first partnering with vendors and our customers through the current demand environment The macro backdrop creates complexity and challenges that we aim to solve, but the underlying demand signals currently remain solid. the macro backdrop creates complexity and challenges that we aim to solve but the underlying demand signals currently remain solid We believe the shift to AI-capable devices is just beginning. we believe the shift to ai-capable devices is just beginning Enterprises are prioritizing the modernization of their data centers, and AI is driving incremental investment across the stack. enterprises are prioritizing the modernization of their data centers and ai is driving incremental investment across the stack We are watching unit elasticity carefully, but the net revenue impact from higher ASPs has been positive. we are watching unit elasticity carefully but the net revenue impact from higher asps has been positive Second, our execution at Hyve. We are bringing new capacity online, investing in engineering capabilities ahead of the ramp, and standing up new programs alongside expansion at existing customers. The bar I'm holding the team to is best-in-class service. That's what's gotten us here, and it's what wins the next program. Third, growing operating profit faster than billings. David will cover the details, but this is the metric that matters most to me. We aim to convert top-line growth into margin expansion and shareholder value. I now pass it to David to go over the financial performance and outlook. Second, our execution at Hyve. second our execution at hyve We are bringing new capacity online, investing in engineering capabilities ahead of the ramp, and standing up new programs alongside expansion at existing customers. we are bringing new capacity online investing in engineering capabilities ahead of the ramp and standing up new programs alongside expansion at existing customers The bar I'm holding the team to is best-in-class service. the bar i'm holding the team to is best-in-class service That's what's gotten us here, and it's what wins the next program. that's what's gotten us here and it's what wins the next program Third, growing operating profit faster than billings. third growing operating profit faster than billings David will cover the details, but this is the metric that matters most to me. david will cover the details but this is the metric that matters most to me We aim to convert top-line growth into margin expansion and shareholder value. we aim to convert top-line growth into margin expansion and shareholder value I now pass it to David to go over the financial performance and outlook. i now pass it to david to go over the financial performance and outlook

Speaker 3: Thanks, Patrick, and good morning, everyone. This was a record quarter for TD SYNNEX. What's encouraging is that both of our businesses continue to perform extremely well, extending the growth trajectory that we've been on. Starting with the top line, our non-GAAP gross billings for the second quarter was $28.9 billion, increasing 33% year-over-year or 32% year-over-year in constant currency, and exceeding the high end of our guidance range. Non-GAAP operating income was $615 million, an increase of 49% year-over-year or 48% year-over-year in constant currency. Non-GAAP earnings per share was $4.85, an increase of 62% year-over-year and above the high end of our guidance range. GAAP operating income was $519 million, an increase of 58% year-over-year. Thanks, Patrick, and good morning, everyone. thanks patrick and good morning everyone This was a record quarter for TD SYNNEX. this was a record quarter for td synnex What's encouraging is that both of our businesses continue to perform extremely well, extending the growth trajectory that we've been on. what's encouraging is that both of our businesses continue to perform extremely well extending the growth trajectory that we've been on Starting with the top line, our non-GAAP gross billings for the second quarter was $28.9 billion, increasing 33% year-over-year or 32% year-over-year in constant currency, and exceeding the high end of our guidance range. starting with the top line our non-gaap gross billings for the second quarter was $28.9 billion increasing 33% year-over-year or 32% year-over-year in constant currency and exceeding the high end of our guidance range Non-GAAP operating income was $615 million, an increase of 49% year-over-year or 48% year-over-year in constant currency. non-gaap operating income was $615 million an increase of 49% year-over-year or 48% year-over-year in constant currency Non-GAAP earnings per share was $4.85, an increase of 62% year-over-year and above the high end of our guidance range. non-gaap earnings per share was $4.85 an increase of 62% year-over-year and above the high end of our guidance range GAAP operating income was $519 million, an increase of 58% year-over-year. gaap operating income was $519 million an increase of 58% year-over-year GAAP earnings per share was $4.15, an increase of 88% year-over-year and above the high end of our guidance range. As we grow, we're focused on creating operating leverage so that earnings consistently grows faster than the top line. Driving that conversion is central to our strategy, how we allocate resources, and manage cost. Turning to quarterly performance for each business. Distribution delivered non-GAAP gross billings of $23.4 billion, increasing 22% year-over-year and well ahead of plan. Our end-to-end portfolio is indexed toward faster-growing technologies, which is positioning us to grow at a premium to market. Endpoint solutions gross billings increased 13% year-over-year, supported by strong growth in PCs, driven by higher ASPs, coupled with mid-single-digit growth in units. Advanced solutions gross billings increased 31% year-over-year, driven by continued strength in infrastructure and security. GAAP earnings per share was $4.15, an increase of 88% year-over-year and above the high end of our guidance range. gaap earnings per share was $4.15 an increase of 88% year-over-year and above the high end of our guidance range As we grow, we're focused on creating operating leverage so that earnings consistently grows faster than the top line. as we grow we're focused on creating operating leverage so that earnings consistently grows faster than the top line Driving that conversion is central to our strategy, how we allocate resources, and manage cost. driving that conversion is central to our strategy how we allocate resources and manage cost Turning to quarterly performance for each business. turning to quarterly performance for each business Distribution delivered non-GAAP gross billings of $23.4 billion, increasing 22% year-over-year and well ahead of plan. distribution delivered non-gaap gross billings of $23.4 billion increasing 22% year-over-year and well ahead of plan Our end-to-end portfolio is indexed toward faster-growing technologies, which is positioning us to grow at a premium to market. our end-to-end portfolio is indexed toward faster-growing technologies which is positioning us to grow at a premium to market Endpoint solutions gross billings increased 13% year-over-year, supported by strong growth in PCs, driven by higher ASPs, coupled with mid-single-digit growth in units. endpoint solutions gross billings increased 13% year-over-year supported by strong growth in pcs driven by higher asps coupled with mid-single-digit growth in units Advanced solutions gross billings increased 31% year-over-year, driven by continued strength in infrastructure and security. advanced solutions gross billings increased 31% year-over-year driven by continued strength in infrastructure and security Distribution non-GAAP operating income was $434 million, increasing 36% year-over-year, and non-GAAP operating margin as a percentage of gross billings was 1.9%, an improvement of 19 basis points year-over-year. We estimate the distribution gross margins benefited by approximately 5-10 basis points during the quarter, driven by incremental profit from strategic inventory purchasing. Turning to Hyve. Hyve generated non-GAAP gross billings of $5.5 billion, increasing 117% year-over-year and ahead of expectations, with both manufacturing and supply chain services contributing. Manufacturing represented approximately 2/3 of Hyve in the quarter, and gross billings growth increased more than the total business, primarily driven by increased volumes with our existing customer base. Supply chain services represented approximately 1/3 of Hyve in the quarter, and growth was driven by component demand supporting our customers' infrastructure deployments. Distribution non-GAAP operating income was $434 million, increasing 36% year-over-year, and non-GAAP operating margin as a percentage of gross billings was 1.9%, an improvement of 19 basis points year-over-year. distribution non-gaap operating income was $434 million increasing 36% year-over-year and non-gaap operating margin as a percentage of gross billings was 1.9% an improvement of 19 basis points year-over-year We estimate the distribution gross margins benefited by approximately 5-10 basis points during the quarter, driven by incremental profit from strategic inventory purchasing. we estimate the distribution gross margins benefited by approximately 5-10 basis points during the quarter driven by incremental profit from strategic inventory purchasing Turning to Hyve. turning to hyve Hyve generated non-GAAP gross billings of $5.5 billion, increasing 117% year-over-year and ahead of expectations, with both manufacturing and supply chain services contributing. hyve generated non-gaap gross billings of $5.5 billion increasing 117% year-over-year and ahead of expectations with both manufacturing and supply chain services contributing Manufacturing represented approximately 2/3 of Hyve in the quarter, and gross billings growth increased more than the total business, primarily driven by increased volumes with our existing customer base. manufacturing represented approximately 2/3 of hyve in the quarter and gross billings growth increased more than the total business primarily driven by increased volumes with our existing customer base Supply chain services represented approximately 1/3 of Hyve in the quarter, and growth was driven by component demand supporting our customers' infrastructure deployments. supply chain services represented approximately 1/3 of hyve in the quarter and growth was driven by component demand supporting our customers' infrastructure deployments Margins and overall mix of supply chain services can vary quarter-to-quarter. Hyve non-GAAP operating income was $181 million, increasing 89% year-over-year, and non-GAAP operating margin as a percentage of gross billings was 3.3%, decreasing 50 basis points year-over-year, primarily driven by mix. We're laser-focused on continuing to make investments in both businesses that will position them to continue to grow at a premium to market over time. Shifting to cash flow and capital allocation. Free cash flow consumption for the quarter was approximately $330 million. Given the accelerated growth in Hyve, we're continuing to invest in working capital to support the growth of both new customers and new programs with existing customers. We're prioritizing making incremental investments where we can generate the healthiest returns, and this is showing up directly in our improving return on equity. Margins and overall mix of supply chain services can vary quarter-to-quarter. margins and overall mix of supply chain services can vary quarter-to-quarter Hyve non-GAAP operating income was $181 million, increasing 89% year-over-year, and non-GAAP operating margin as a percentage of gross billings was 3.3%, decreasing 50 basis points year-over-year, primarily driven by mix. hyve non-gaap operating income was $181 million increasing 89% year-over-year and non-gaap operating margin as a percentage of gross billings was 3.3% decreasing 50 basis points year-over-year primarily driven by mix We're laser-focused on continuing to make investments in both businesses that will position them to continue to grow at a premium to market over time. we're laser-focused on continuing to make investments in both businesses that will position them to continue to grow at a premium to market over time Shifting to cash flow and capital allocation. shifting to cash flow and capital allocation Free cash flow consumption for the quarter was approximately $330 million. free cash flow consumption for the quarter was approximately $330 million Given the accelerated growth in Hyve, we're continuing to invest in working capital to support the growth of both new customers and new programs with existing customers. given the accelerated growth in hyve we're continuing to invest in working capital to support the growth of both new customers and new programs with existing customers We're prioritizing making incremental investments where we can generate the healthiest returns, and this is showing up directly in our improving return on equity. we're prioritizing making incremental investments where we can generate the healthiest returns and this is showing up directly in our improving return on equity Net working capital closed at $4.9 billion with a gross cash conversion cycle of 17 days, an increase of one day sequentially and flat year-over-year, reflecting an increased mix of Hyve. Both businesses improved their cash days year-over-year, but we do expect additional efficiencies from Hyve as new programs mature. We ended with $1.1 billion of cash and cash equivalents and net leverage of 1.6x, modestly below our medium-term framework, which gives us ample capacity to continue to invest in the business while returning capital to shareholders. During the second quarter, we returned $112 million to shareholders through repurchases and an additional $39 million through dividends. Our Board of Directors approved a cash dividend of $0.48 per common share, payable on July 31st, 2026, to shareholders of record as of the close of business on July 17th, 2026. Net working capital closed at $4.9 billion with a gross cash conversion cycle of 17 days, an increase of one day sequentially and flat year-over-year, reflecting an increased mix of Hyve. net working capital closed at $4.9 billion with a gross cash conversion cycle of 17 days an increase of one day sequentially and flat year-over-year reflecting an increased mix of hyve Both businesses improved their cash days year-over-year, but we do expect additional efficiencies from Hyve as new programs mature. both businesses improved their cash days year-over-year but we do expect additional efficiencies from hyve as new programs mature We ended with $1.1 billion of cash and cash equivalents and net leverage of 1.6x , modestly below our medium-term framework, which gives us ample capacity to continue to invest in the business while returning capital to shareholders. we ended with $1.1 billion of cash and cash equivalents and net leverage of 1.6x modestly below our medium-term framework which gives us ample capacity to continue to invest in the business while returning capital to shareholders During the second quarter, we returned $112 million to shareholders through repurchases and an additional $39 million through dividends. during the second quarter we returned $112 million to shareholders through repurchases and an additional $39 million through dividends Our Board of Directors approved a cash dividend of $0.48 per common share, payable on July 31st, 2026, to shareholders of record as of the close of business on July 17th, 2026. our board of directors approved a cash dividend of $0.48 per common share payable on july 31st 2026 to shareholders of record as of the close of business on july 17th 2026 Turning to our outlook for the third quarter of fiscal 2026, we expect non-GAAP gross billings of approximately $27.7 billion ±$500 million, up approximately 22% at the midpoint; a gross to net adjustment of approximately 33%; revenue of approximately $18.6 billion ±$400 million; non-GAAP net income of approximately $361 million ±$20 million; non-GAAP diluted earnings per share of approximately $4.50 ±$0.25, up approximately 26% at the midpoint, based on approximately 79.4 million diluted shares outstanding. Our Q3 guidance assumes no material contribution from Hyve's newly onboarded customers, which we are still expecting to ramp in late fiscal 2026 or early fiscal 2027. To close, we're extremely proud of our teams for the results they continue to deliver. We're entering the second half with forward momentum in both distribution and Hyve. Turning to our outlook for the third quarter of fiscal 2026, we expect non-GAAP gross billings of approximately $27.7 billion ±$500 million, up approximately 22% at the midpoint; a gross to net adjustment of approximately 33%; r evenue of approximately $18.6 billion ±$400 million; n on-GAAP net income of approximately $361 million ±$20 million; n on-GAAP diluted earnings per share of approximately $4.50 ±$0.25, up approximately 26% at the midpoint, based on approximately 79.4 million diluted shares outstanding. turning to our outlook for the third quarter of fiscal 2026 we expect non-gaap gross billings of approximately $27.7 billion ±$500 million up approximately 22% at the midpoint; a gross to net adjustment of approximately 33%; r evenue of approximately $18.6 billion ±$400 million; n on-gaap net income of approximately $361 million ±$20 million; n on-gaap diluted earnings per share of approximately $4.50 ±$0.25 up approximately 26% at the midpoint based on approximately 79.4 million diluted shares outstanding Our Q3 guidance assumes no material contribution from Hyve's newly onboarded customers, which we are still expecting to ramp in late fiscal 2026 or early fiscal 2027. our q3 guidance assumes no material contribution from hyve's newly onboarded customers which we are still expecting to ramp in late fiscal 2026 or early fiscal 2027 To close, we're extremely proud of our teams for the results they continue to deliver. to close we're extremely proud of our teams for the results they continue to deliver We're entering the second half with forward momentum in both distribution and Hyve. we're entering the second half with forward momentum in both distribution and hyve With our global reach, differentiated capabilities, and broadening portfolio, we believe we're positioning ourselves to grow at a premium to market through time. With that, we'll open the call for questions. Operator? With our global reach, differentiated capabilities, and broadening portfolio, we believe we're positioning ourselves to grow at a premium to market through time. with our global reach differentiated capabilities and broadening portfolio we believe we're positioning ourselves to grow at a premium to market through time With that, we'll open the call for questions. with that we'll open the call for questions Operator? operator

Speaker 11: We will now begin the question-and-answer session. We request that you limit yourself to one question and one short follow-up to allow time for the other participants to ask their questions. If there is remaining time, you are welcome to re-queue with additional questions. To ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please pick up your handset when you're asking a question to allow for optimum sound quality, and if you are muted locally, remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead. We will now begin the question-and-answer session. we will now begin the question-and-answer session We request that you limit yourself to one question and one short follow-up to allow time for the other participants to ask their questions. we request that you limit yourself to one question and one short follow-up to allow time for the other participants to ask their questions If there is remaining time, you are welcome to re-queue with additional questions. if there is remaining time you are welcome to re-queue with additional questions To ask a question, please press star one to raise your hand. to ask a question please press star one to raise your hand To withdraw your question, press star one again. to withdraw your question press star one again Please pick up your handset when you're asking a question to allow for optimum sound quality, and if you are muted locally, remember to unmute your device. please pick up your handset when you're asking a question to allow for optimum sound quality and if you are muted locally remember to unmute your device Please stand by now while we compile the Q&A roster. please stand by now while we compile the q&a roster Your first question comes from Ruplu Bhattacharya with Bank of America. your first question comes from ruplu bhattacharya with bank of america Your line is open. your line is open Please go ahead. please go ahead

Speaker 13: Hi, thanks for taking my questions. Patrick, you've seen strong revenue growth and billings growth across all of your segments this quarter. The question I have is, have you seen any evidence of demand destruction or any weakening of demand given component cost increases? Are customers showing any hesitancy to purchase either endpoint solutions and/or advanced solutions? Likewise, if units are going to be down year-on-year, have you seen any change in channel incentives from the vendors? And I have a follow-up for David. Hi, thanks for taking my questions. hi thanks for taking my questions Patrick, you've seen strong revenue growth and billings growth across all of your segments this quarter. patrick you've seen strong revenue growth and billings growth across all of your segments this quarter The question I have is, have you seen any evidence of demand destruction or any weakening of demand given component cost increases? the question i have is have you seen any evidence of demand destruction or any weakening of demand given component cost increases Are customers showing any hesitancy to purchase either endpoint solutions and/or advanced solutions? are customers showing any hesitancy to purchase either endpoint solutions and/or advanced solutions Likewise, if units are going to be down year-on-year, have you seen any change in channel incentives from the vendors? likewise if units are going to be down year-on-year have you seen any change in channel incentives from the vendors And I have a follow-up for David. and i have a follow-up for david

Speaker 12: Ruplu, good morning. Thanks a lot for the question. So, I mean, focusing on Q2, I mean, very strong quarter both on distribution and Hyve. Very transparently, we haven't seen, for the moment, any destruction of demand because of the price increases. The price increases are really starting to kick in, and it's probably going to accelerate in Q3. On the other hand, we see underlying demand, which continues to be healthy across the portfolio. I'm anticipating a question on maybe what happened on PCs. Even on PCs, we saw unit growth, so for the moment, we don't see that phenomenon. Ruplu, good morning. ruplu good morning Thanks a lot for the question. thanks a lot for the question So, I mean, focusing on Q2, I mean, very strong quarter both on distribution and Hyve. so, i mean, focusing on q2 i mean, very strong quarter both on distribution and hyve Very transparently, we haven't seen, for the moment, any destruction of demand because of the price increases. very transparently we haven't seen for the moment any destruction of demand because of the price increases The price increases are really starting to kick in, and it's probably going to accelerate in Q3. the price increases are really starting to kick in and it's probably going to accelerate in q3 On the other hand, we see underlying demand, which continues to be healthy across the portfolio. on the other hand we see underlying demand which continues to be healthy across the portfolio I'm anticipating a question on maybe what happened on PCs. i'm anticipating a question on maybe what happened on pcs Even on PCs, we saw unit growth, so f or the moment, we don't see that phenomenon. even on pcs we saw unit growth, so f or the moment we don't see that phenomenon I just add, that has been one of our assumptions for the guidance, that on most of the categories, companies need to continue to invest, especially infrastructure, and combined with the ASP increase, I think, the demand will continue to remain healthy, at least for what we can see for Q3. I just add, that has been one of our assumptions for the guidance, that on most of the categories, companies need to continue to invest, especially infrastructure, and combined with the ASP increase, I think, the demand will continue to remain healthy, at least for what we can see for Q3. i just add that has been one of our assumptions for the guidance that on most of the categories companies need to continue to invest especially infrastructure and combined with the asp increase i think the demand will continue to remain healthy at least for what we can see for q3

Speaker 13: Any change in channel incentives from the vendors? Any change in channel incentives from the vendors? any change in channel incentives from the vendors

Speaker 12: No, not yet. No, not yet. no not yet

Speaker 13: Okay. A quick follow-up for David. Okay. okay A quick follow-up for David. a quick follow-up for david

Speaker 12: Yeah. Just to add. Sorry, Ruplu. Just to add, so, no, we don't see changes, material changes from our vendors. I add that our margin quality for distribution stayed very healthy in the quarter, as you can see, so no. Yeah. yeah Just to add. just to add Sorry, Ruplu. sorry ruplu Just to add, so, no, we don't see changes, material changes from our vendors. just to add so, no we don't see changes, material changes from our vendors I add that our margin quality for distribution stayed very healthy in the quarter, as you can see, so n o. i add that our margin quality for distribution stayed very healthy in the quarter as you can see, so n o

Speaker 13: Okay, great. David, just quickly, inventory was up 30% almost sequentially. Can you talk about working capital and free cash flow and what is driving that inventory? Are you using the strength of your balance sheet to buy any components? Thanks for all the details. Okay, great. okay great David, just quickly, inventory was up 30% almost sequentially. david just quickly inventory was up 30% almost sequentially Can you talk about working capital and free cash flow and what is driving that inventory? can you talk about working capital and free cash flow and what is driving that inventory Are you using the strength of your balance sheet to buy any components? are you using the strength of your balance sheet to buy any components Thanks for all the details. thanks for all the details

Speaker 3: Thanks, Ruplu. We've got a couple of pieces to cover here. When you think about cash flow and cash days, so cash days were flat year-over-year. I think the important point to make, though, is both of our businesses improved their cash days year-over-year, and you've got the mix of Hyve that caused the totality to be flat. Hyve continues to experience a period of accelerated growth in that business, given the cash conversion cycle takes capital to run, and so we continue to make those investments. When you start looking at inventory, I think ballpark, the days are up, call it eight days or so year-over-year, and it's largely driven by some additional inventory that we've taken in Hyve to help fund new programs, existing programs, and help make sure that our customers have adequate supply given the broader macro. Thanks, Ruplu. thanks ruplu We've got a couple of pieces to cover here. we've got a couple of pieces to cover here When you think about cash flow and cash days, so cash days were flat year-over-year. when you think about cash flow and cash days so cash days were flat year-over-year I think the important point to make, though, is both of our businesses improved their cash days year-over-year, and you've got the mix of Hyve that caused the totality to be flat. i think the important point to make though is both of our businesses improved their cash days year-over-year and you've got the mix of hyve that caused the totality to be flat Hyve continues to experience a period of accelerated growth in that business, given the cash conversion cycle takes capital to run, and so we continue to make those investments. hyve continues to experience a period of accelerated growth in that business given the cash conversion cycle takes capital to run and so we continue to make those investments When you start looking at inventory, I think ballpark, the days are up, call it eight days or so year-over-year, and it's largely driven by some additional inventory that we've taken in Hyve to help fund new programs, existing programs, and help make sure that our customers have adequate supply given the broader macro. when you start looking at inventory i think ballpark the days are up call it eight days or so year-over-year and it's largely driven by some additional inventory that we've taken in hyve to help fund new programs existing programs and help make sure that our customers have adequate supply given the broader macro

Speaker 13: Yeah. Thanks for all the details. Yeah. yeah Thanks for all the details. thanks for all the details

Speaker 12: Ruplu, sorry. Just want to add one thing, which is, we've been, for the last quarters, a little bit more aggressive on inventory levels because we've anticipated on the price increases. I mean, that gave us several advantages. One, it helped us smooth the impact of the price increase for our customers, and that's very important. It also helped our vendors by having inventory. Again, it positions us well in the market. Demand is strong. We are probably one of the best inventory profile in the industry. Again, that has helped us grow faster than the market overall. Ruplu, sorry. ruplu sorry Just want to add one thing, which is, we've been, for the last quarters, a little bit more aggressive on inventory levels because we've anticipated on the price increases. just want to add one thing which is we've been for the last quarters a little bit more aggressive on inventory levels because we've anticipated on the price increases I mean, that gave us several advantages. i mean, that gave us several advantages One, it helped us smooth the impact of the price increase for our customers, and that's very important. one it helped us smooth the impact of the price increase for our customers and that's very important It also helped our vendors by having inventory. it also helped our vendors by having inventory Again, it positions us well in the market. again it positions us well in the market Demand is strong. demand is strong We are probably one of the best inventory profile in the industry. we are probably one of the best inventory profile in the industry Again, that has helped us grow faster than the market overall. again that has helped us grow faster than the market overall

Speaker 11: Your next question comes from the line of David Vogt with UBS. Your line is open. Your next question comes from the line of David Vogt with UBS. your next question comes from the line of david vogt with ubs Your line is open. your line is open

Speaker 5: Great. Thanks for taking my questions. Patrick, one for you and one for David. Patrick, can you help us unpack how the incremental manufacturing facility square footage plays out this year and next? Is it basically designed to support the incremental programs that you laid out with your current and future programs with your hyperscalers? Is there a rule of thumb to think about what that incremental capacity could mean for whether it's billings or revenue? Then I have one for David as well. Great. great Thanks for taking my questions. thanks for taking my questions Patrick, one for you and one for David. patrick one for you and one for david Patrick, can you help us unpack how the incremental manufacturing facility square footage plays out this year and next? patrick can you help us unpack how the incremental manufacturing facility square footage plays out this year and next Is it basically designed to support the incremental programs that you laid out with your current and future programs with your hyperscalers? is it basically designed to support the incremental programs that you laid out with your current and future programs with your hyperscalers Is there a rule of thumb to think about what that incremental capacity could mean for whether it's billings or revenue? is there a rule of thumb to think about what that incremental capacity could mean for whether it's billings or revenue Then I have one for David as well. then i have one for david as well

Speaker 12: Yes, good morning. Thanks a lot for the question. As we mentioned, we have now won programs with all five U.S.-based hyperscalers. We have now three hyperscalers where we have won more than one program. What we see is a very nice pipeline of opportunities, which are going to ramp up probably end of Q4, beginning of Q1 fiscal year 2027. Basically, we have to invest. We have to invest in footprint. We are going to invest in additional equipment, in liquid cooling, to be able to support the various programs we have won. We haven't yet established a correlation between investment and revenue. Yes, good morning. yes good morning Thanks a lot for the question. thanks a lot for the question As we mentioned, we have now won programs with all five U.S.-based hyperscalers. as we mentioned we have now won programs with all five u.s.-based hyperscalers We have now three hyperscalers where we have won more than one program. we have now three hyperscalers where we have won more than one program What we see is a very nice pipeline of opportunities, which are going to ramp up probably end of Q4, beginning of Q1 fiscal year 2027. what we see is a very nice pipeline of opportunities which are going to ramp up probably end of q4 beginning of q1 fiscal year 2027 Basically, we have to invest. basically we have to invest We have to invest in footprint. we have to invest in footprint We are going to invest in additional equipment, in liquid cooling, to be able to support the various programs we have won. we are going to invest in additional equipment in liquid cooling to be able to support the various programs we have won We haven't yet established a correlation between investment and revenue. we haven't yet established a correlation between investment and revenue What I can tell you is that we are very comfortable with that expansion of capabilities and capacity, that we are going to meet the demands we are seeing and be in a position to deliver the products with the right quality, which is the most important for us at the moment. What I can tell you is that we are very comfortable with that expansion of capabilities and capacity, that we are going to meet the demands we are seeing and be in a position to deliver the products with the right quality, which is the most important for us at the moment. what i can tell you is that we are very comfortable with that expansion of capabilities and capacity that we are going to meet the demands we are seeing and be in a position to deliver the products with the right quality which is the most important for us at the moment

Speaker 5: Okay, great. That's helpful. David, I know this might be a tough question to answer, and I know there's some confidential kind of data here, but can you help us understand sort of the gross margin differentials within Hyve? Is it better to think about it relative to like ODM/CM margins versus supply chain margins, or is there a lot of variability between programs with existing hyperscalers or between actual hyperscalers themselves? Can you help us understand how to think about the margin profile of these programs, particularly as you start to ramp, obviously, new programs later this fiscal year into fiscal 2027? Thanks. Okay, great. okay great That's helpful. that's helpful David, I know this might be a tough question to answer, and I know there's some confidential kind of data here, but can you help us understand sort of the gross margin differentials within Hyve? david i know this might be a tough question to answer and i know there's some confidential kind of data here but can you help us understand sort of the gross margin differentials within hyve Is it better to think about it relative to like ODM/CM margins versus supply chain margins, or is there a lot of variability between programs with existing hyperscalers or between actual hyperscalers themselves? is it better to think about it relative to like odm/cm margins versus supply chain margins or is there a lot of variability between programs with existing hyperscalers or between actual hyperscalers themselves Can you help us understand how to think about the margin profile of these programs, particularly as you start to ramp, obviously, new programs later this fiscal year into fiscal 2027? can you help us understand how to think about the margin profile of these programs particularly as you start to ramp obviously new programs later this fiscal year into fiscal 2027 Thanks. thanks

Speaker 3: It's a good question. When you take a huge step back, Hyve has two businesses, manufacturing and assembly, and supply chain. On average, historically, the margin profiles have been relatively similar. I will tell you, as you start looking at things by program, there can be differences. I'll give you a couple of examples. If you're building AI servers, that tends to have a slightly lower margin profile. If you are building complex networking racks, that tends to have a slightly higher margin profile, so on and so forth. Same thing on the supply chain side. Depending on what we're buying, how long we're holding it, and how complex it is, it does dictate the margin profile. But all in all, here's what I would anchor you to. We feel very good about the performance that Hyve's been able to generate. It's a good question. it's a good question When you take a huge step back, Hyve has two businesses, manufacturing and assembly, and supply chain. when you take a huge step back hyve has two businesses manufacturing and assembly and supply chain On average, historically, the margin profiles have been relatively similar. on average historically the margin profiles have been relatively similar I will tell you, as you start looking at things by program, there can be differences. i will tell you as you start looking at things by program there can be differences I'll give you a couple of examples. i'll give you a couple of examples If you're building AI servers, that tends to have a slightly lower margin profile. if you're building ai servers that tends to have a slightly lower margin profile If you are building complex networking racks, that tends to have a slightly higher margin profile, so on and so forth. if you are building complex networking racks that tends to have a slightly higher margin profile so on and so forth Same thing on the supply chain side. same thing on the supply chain side Depending on what we're buying, how long we're holding it, and how complex it is, it does dictate the margin profile. depending on what we're buying how long we're holding it and how complex it is it does dictate the margin profile But all in all, here's what I would anchor you to. but all in all here's what i would anchor you to We feel very good about the performance that Hyve's been able to generate. we feel very good about the performance that hyve's been able to generate We continue to make investments in new capabilities, new programs, new products that will allow Hyve to continue to maintain, if not improve, its margin profile through time. We're super excited with what the team's been able to produce thus far. We continue to make investments in new capabilities, new programs, new products that will allow Hyve to continue to maintain, if not improve, its margin profile through time. we continue to make investments in new capabilities new programs new products that will allow hyve to continue to maintain if not improve its margin profile through time We're super excited with what the team's been able to produce thus far. we're super excited with what the team's been able to produce thus far

Speaker 12: I just would like to add. I just would like to add. i just would like to add

Speaker 5: Great. Thanks, David. Great. great Thanks, David. thanks david

Speaker 12: Two more things. The first one is, I mean, similar to distribution, gross margin quality is very important, and I can tell you that the team is very focused on that. That's point number one. Point number two is, obviously, as you ramp up a program, you have some inefficiencies, which will disappear over time based on the learnings and the optimization. Again, hypergrowth as we speak, lots of programs being launched, some impact on the GM quality because of that. Again, looking forward, it's a priority for us to optimize also the GM quality. Two more things. two more things The first one is, I mean, similar to distribution, gross margin quality is very important, and I can tell you that the team is very focused on that. the first one is i mean, similar to distribution gross margin quality is very important and i can tell you that the team is very focused on that That's point number one. that's point number one Point number two is, obviously, as you ramp up a program, you have some inefficiencies, which will disappear over time based on the learnings and the optimization. point number two is obviously as you ramp up a program you have some inefficiencies which will disappear over time based on the learnings and the optimization Again, hypergrowth as we speak, lots of programs being launched, s ome impact on the GM quality because of that. again hypergrowth as we speak lots of programs being launched, s ome impact on the gm quality because of that Again, looking forward, it's a priority for us to optimize also the GM quality. again looking forward it's a priority for us to optimize also the gm quality

Speaker 5: Great. Thanks, guys. Great. great Thanks, guys. thanks guys

Speaker 11: Your next question comes from the line of Keith Housum with Northcoast Research. Your line is open. Your next question comes from the line of Keith Housum with Northcoast Research. your next question comes from the line of keith housum with northcoast research Your line is open. your line is open

Speaker 9: Good morning, gentlemen. Congratulations on a great quarter. As we think about the evolving business out there with memory, and we're hearing more and more about supply constraints coming into place here, are you guys seeing the supply constraints come into place right now, or is there concerns that you'll see some perhaps limiting the amount of growth you can have for the rest of the year or maybe into FY 2027? How are you thinking about the supply availability right now? Good morning, gentlemen. good morning gentlemen Congratulations on a great quarter. congratulations on a great quarter As we think about the evolving business out there with memory, and we're hearing more and more about supply constraints coming into place here, are you guys seeing the supply constraints come into place right now, or is there concerns that you'll see some perhaps limiting the amount of growth you can have for the rest of the year or maybe into FY 2027? as we think about the evolving business out there with memory and we're hearing more and more about supply constraints coming into place here are you guys seeing the supply constraints come into place right now or is there concerns that you'll see some perhaps limiting the amount of growth you can have for the rest of the year or maybe into fy 2027 How are you thinking about the supply availability right now? how are you thinking about the supply availability right now

Speaker 12: Keith, good morning. Thanks for the question. For Q2, we haven't felt it really, but you're right, in our Q3 guidance, we took into account some risk with component availability. It's memory, obviously is one of the category. Some CPUs could come also, some challenges on delivery of CPUs could come also. We factored it into our guidance, and we will see. Again, so far it has been good. I would just add that when you look at Hyve, it's our customers primarily who secure the supply, and they have, I would say, some good arguments with the vendors. On the distribution side, so far, our key vendors have done a very good job with their supply chain. Yes, for Q3, we've been a little bit more cautious because of that in our guidance. Keith, good morning. keith good morning Thanks for the question. thanks for the question For Q2, we haven't felt it really, but y ou're right, in our Q3 guidance, we took into account some risk with component availability. for q2 we haven't felt it really, but y ou're right in our q3 guidance we took into account some risk with component availability It's memory, obviously is one of the category. it's memory obviously is one of the category Some CPUs could come also, some challenges on delivery of CPUs could come also. some cpus could come also some challenges on delivery of cpus could come also We factored it into our guidance, and we will see. we factored it into our guidance and we will see Again, so far it has been good. again so far it has been good I would just add that when you look at Hyve, it's our customers primarily who secure the supply, and they have, I would say, some good arguments with the vendors. i would just add that when you look at hyve it's our customers primarily who secure the supply and they have i would say some good arguments with the vendors On the distribution side, so far, our key vendors have done a very good job with their supply chain. on the distribution side so far our key vendors have done a very good job with their supply chain Yes, for Q3, we've been a little bit more cautious because of that in our guidance. yes for q3 we've been a little bit more cautious because of that in our guidance

Speaker 9: Okay. If I could follow up on that. In terms of the HPE win, in terms of being one of two global distributors, have you seen that benefit completely in the quarter, or is this still going to ramp up over time? Okay. okay If I could follow up on that. if i could follow up on that In terms of the HPE win, in terms of being one of two global distributors, have you seen that benefit completely in the quarter, or is this still going to ramp up over time? in terms of the hpe win in terms of being one of two global distributors have you seen that benefit completely in the quarter or is this still going to ramp up over time

Speaker 12: No, no. We are going to see the ramp up over time. What's happening, just to put things in context, so HPE has decided to rationalize its go-to-market. They are going to focus on two global distributors in certain areas, and the benefit takes some time. Okay? We are going to probably see the benefit, I would say, first half of next year. We won some new countries. We're going to see the rationalization of the distribution network in some other countries. It takes a little bit of time. Just to comment from a more strategic standpoint on the HPE win, it's very interesting that the fact that we are global has been one of the reasons for the win. What we see more and more from the vendors is that being global is becoming the differentiator when they rationalize their go-to markets. No, no. no no We are going to see the ramp up over time. we are going to see the ramp up over time What's happening, just to put things in context, so HPE has decided to rationalize its go-to-market. what's happening just to put things in context, so hpe has decided to rationalize its go-to-market They are going to focus on two global distributors in certain areas, and the benefit takes some time. they are going to focus on two global distributors in certain areas and the benefit takes some time Okay? okay We are going to probably see the benefit, I would say, first half of next year. we are going to probably see the benefit i would say first half of next year We won some new countries. we won some new countries We're going to see the rationalization of the distribution network in some other countries. we're going to see the rationalization of the distribution network in some other countries It takes a little bit of time. it takes a little bit of time Just to comment from a more strategic standpoint on the HPE win, it's very interesting that the fact that we are global has been one of the reasons for the win. just to comment from a more strategic standpoint on the hpe win it's very interesting that the fact that we are global has been one of the reasons for the win What we see more and more from the vendors is that being global is becoming the differentiator when they rationalize their go-to markets. what we see more and more from the vendors is that being global is becoming the differentiator when they rationalize their go-to markets We think that probably there's more to come. Other vendors are now looking at their global distribution landscape. Our strategy to expand in APJ, in Latin America, potentially one day in the Middle East, is clearly positioning us well to benefit from that market trend. We think that probably there's more to come. we think that probably there's more to come Other vendors are now looking at their global distribution landscape. other vendors are now looking at their global distribution landscape Our strategy to expand in APJ, in Latin America, potentially one day in the Middle East, is clearly positioning us well to benefit from that market trend. our strategy to expand in apj in latin america potentially one day in the middle east is clearly positioning us well to benefit from that market trend

Speaker 9: Great. Thank you. Great. great Thank you. thank you

Speaker 11: Your next question is from the line of Katherine Murphy with Goldman Sachs. Your line is open. Your next question is from the line of Katherine Murphy with Goldman Sachs. your next question is from the line of katherine murphy with goldman sachs Your line is open. your line is open

Speaker 8: Thank you very much. Maybe switching gears here a little bit, the margin profile of the endpoint solutions segment was, seems like a record high from what I can see at 5%. Can you talk about what drove the strength in the quarter, and if there were any one-time benefits like the strategic inventory purchases you mentioned that benefited results in the quarter? Then, to just quickly ask my follow-up now, are there any expectations for continued benefits from this strategic inventory build as we look into the back half of the year and into 2027, so long as we continue to see increasing ASP environment? Thank you very much. Thank you very much. thank you very much Maybe switching gears here a little bit, the margin profile of the endpoint solutions segment was, seems like a record high from what I can see at 5%. maybe switching gears here a little bit the margin profile of the endpoint solutions segment was, seems like a record high from what i can see at 5% Can you talk about what drove the strength in the quarter, and if there were any one-time benefits like the strategic inventory purchases you mentioned that benefited results in the quarter? can you talk about what drove the strength in the quarter and if there were any one-time benefits like the strategic inventory purchases you mentioned that benefited results in the quarter Then, to just quickly ask my follow-up now, are there any expectations for continued benefits from this strategic inventory build as we look into the back half of the year and into 2027, so long as we continue to see increasing ASP environment? then, to just quickly ask my follow-up now are there any expectations for continued benefits from this strategic inventory build as we look into the back half of the year and into 2027 so long as we continue to see increasing asp environment Thank you very much. thank you very much

Speaker 3: Good morning, Kat. Couple of comments. One, we put in the prepared remarks that on the distribution side, we had 5-10 basis points of additional margin from strategically purchasing inventory. A lot of that manifests itself in the endpoint business. Here's the way I would think about it. Our goal is to secure the right amount of supply, and as Patrick said, to help our vendors smooth supply constraints, make sure there's proper availability. It is true, when in a rising price world, we can benefit from that, and so what I would tell you is, yes, if prices continue to rise, there will be a benefit. But we're also not greedy as it relates to this, right? Good morning, Kat. good morning kat Couple of comments. couple of comments One, we put in the prepared remarks that on the distribution side, we had 5- 10 basis points of additional margin from strategically purchasing inventory. one we put in the prepared remarks that on the distribution side we had 5- 10 basis points of additional margin from strategically purchasing inventory A lot of that manifests itself in the endpoint business. a lot of that manifests itself in the endpoint business Here's the way I would think about it. here's the way i would think about it Our goal is to secure the right amount of supply, and as Patrick said, to help our vendors smooth supply constraints, make sure there's proper availability. our goal is to secure the right amount of supply and as patrick said to help our vendors smooth supply constraints make sure there's proper availability It is true, when in a rising price world, we can benefit from that, and so w hat I would tell you is, yes, if prices continue to rise, there will be a benefit. it is true when in a rising price world we can benefit from that, and so w hat i would tell you is yes if prices continue to rise there will be a benefit But we're also not greedy as it relates to this, right? but we're also not greedy as it relates to this right We want to be paid for the additional capital that we've got deployed, but we also share some of these benefits with our customers as well, so we can build better long-term partnerships. I would anticipate as we move forward, these types of benefits will be more one-time in nature and slowly dissipate, and that's why we tried to call them out in the script. We want to be paid for the additional capital that we've got deployed, but we also share some of these benefits with our customers as well, so we can build better long-term partnerships. we want to be paid for the additional capital that we've got deployed but we also share some of these benefits with our customers as well so we can build better long-term partnerships I would anticipate as we move forward, these types of benefits will be more one-time in nature and slowly dissipate, and that's why we tried to call them out in the script. i would anticipate as we move forward these types of benefits will be more one-time in nature and slowly dissipate and that's why we tried to call them out in the script

Speaker 11: Your next question comes from the line of Erik Woodring with Morgan Stanley. Your line is open. Your next question comes from the line of Erik Woodring with Morgan Stanley. your next question comes from the line of erik woodring with morgan stanley Your line is open. your line is open

Speaker 6: Awesome. Thank you. Thank you for taking my questions, guys. Congrats on the results. Patrick, I guess I'll combine my two questions because it's a three-part question, so sorry, but they're all related. I'd love if you could just take a big step back and help us understand three things. First, just again, help us understand the sustainability of hardware spending as we look through the second half and into next year, just given what you know today and the pipeline that you see. Second, just what products are showing to have greater inelasticity than others as you face these record price hikes. Third, are there any products or segments as you look forward where you don't believe you can fully pass through the higher device costs and potentially see some margin pressure, just if there's any customer pushback? Awesome. awesome Thank you. thank you Thank you for taking my questions, guys. thank you for taking my questions guys Congrats on the results. congrats on the results Patrick, I guess I'll combine my two questions because it's a three-part question, so sorry, but they're all related. patrick i guess i'll combine my two questions because it's a three-part question so sorry but they're all related I'd love if you could just take a big step back and help us understand three things. i'd love if you could just take a big step back and help us understand three things First, just again, help us understand the sustainability of hardware spending as we look through the second half and into next year, just given what you know today and the pipeline that you see. first just again help us understand the sustainability of hardware spending as we look through the second half and into next year just given what you know today and the pipeline that you see Second, just what products are showing to have greater inelasticity than others as you face these record price hikes. second just what products are showing to have greater inelasticity than others as you face these record price hikes Third, are there any products or segments as you look forward where you don't believe you can fully pass through the higher device costs and potentially see some margin pressure, just if there's any customer pushback? third are there any products or segments as you look forward where you don't believe you can fully pass through the higher device costs and potentially see some margin pressure just if there's any customer pushback I'll combine those and make those my two questions, even though it's a three-parter. Thank you, guys. I'll combine those and make those my two questions, even though it's a three-parter. i'll combine those and make those my two questions even though it's a three-parter Thank you, guys. thank you guys

Speaker 12: Thank you, Erik. Good morning. Let me start with the last one on the margin. Again, and it's true for both businesses, distribution and Hyve, we are a cost-plus business, so if cost increase, we pass it to the customers. We have no other choice. We have a very good track record as an industry and as TD SYNNEX. You look at what happened last year with the tariffs, you look at what has been happening the last two quarters. We had already some categories where we saw the price increases, and again, we're able to pass it. We had inventory to smooth the impact for our customers, but overall, I mean, no concerns there. In terms of product elasticity, the category I'm watching is PCs, with some caveats. Consumer PCs, I think the elasticity will be relatively high, but we focus on B2B. Thank you, Erik. thank you erik Good morning. good morning Let me start with the last one on the margin. let me start with the last one on the margin Again, and it's true for both businesses, distribution and Hyve, we are a cost-plus business, so if cost increase, we pass it to the customers. again and it's true for both businesses distribution and hyve we are a cost-plus business so if cost increase we pass it to the customers We have no other choice. we have no other choice We have a very good track record as an industry and as TD SYNNEX. we have a very good track record as an industry and as td synnex You look at what happened last year with the tariffs, you look at what has been happening the last two quarters. you look at what happened last year with the tariffs you look at what has been happening the last two quarters We had already some categories where we saw the price increases, and again, we're able to pass it. we had already some categories where we saw the price increases and again we're able to pass it We had inventory to smooth the impact for our customers, but overall, I mean, no concerns there. we had inventory to smooth the impact for our customers but overall, i mean no concerns there In terms of product elasticity, the category I'm watching is PCs, with some caveats. in terms of product elasticity the category i'm watching is pcs with some caveats Consumer PCs, I think the elasticity will be relatively high, but we focus on B2B. consumer pcs i think the elasticity will be relatively high but we focus on b2b So, I'm expecting some impact of the ASP increase on the PC consumption. If you look at our Q2 results, we were able to mitigate the impact by gaining share, and also because we are positioned on B2B and the refresh is not over, and you still have many enterprises or companies who have to upgrade their PCs. That's probably the category where I am the most cautious. We are the most cautious in our outlook. If you look at infrastructure, if you look at networking, yeah, for the moment, we see very solid demand, networking very rapidly. The two last years were tough. Networking is back on a lower base. You have the refresh driven by Wi-Fi 7, then you have the investments related to AI in that space. I think that's sustainable. So, I'm expecting some impact of the ASP increase on the PC consumption. so, i'm expecting some impact of the asp increase on the pc consumption If you look at our Q2 results, we were able to mitigate the impact by gaining share, and also because we are positioned on B2B and the refresh is not over, and you still have many enterprises or companies who have to upgrade their PCs. if you look at our q2 results we were able to mitigate the impact by gaining share and also because we are positioned on b2b and the refresh is not over and you still have many enterprises or companies who have to upgrade their pcs That's probably the category where I am the most cautious. that's probably the category where i am the most cautious We are the most cautious in our outlook. we are the most cautious in our outlook If you look at infrastructure, if you look at networking, yeah, for the moment, we see very solid demand, n etworking very rapidly. if you look at infrastructure if you look at networking yeah, for the moment we see very solid demand, n etworking very rapidly The two last years were tough. the two last years were tough Networking is back on a lower base. networking is back on a lower base You have the refresh driven by Wi-Fi 7, then you have the investments related to AI in that space. you have the refresh driven by wi-fi 7 then you have the investments related to ai in that space I think that's sustainable. i think that's sustainable If you look at data centers or server and storage, I mean, this quarter, I mentioned last quarter that storage was starting to come back, and I wanted a confirmation. We had a very strong storage quarter, and I think it's going to last. The AI, I mean, drove first the compute upgrade, and I think now storage, then switches, and I think storage is next. Then on compute, we see very, very solid demand, and it's driven by several things. Obviously, ASP increase is driving the value up. Even in volume, what's happening is that you have still the refresh of the general compute servers happening. It's not over, so that's an opportunity. You have an acceleration of the purchase of general compute servers because they have become critical when you speak about agentic AI. Then the cost of tokens is going to become a big topic. If you look at data centers or server and storage, I mean, this quarter, I mentioned last quarter that storage was starting to come back, and I wanted a confirmation. if you look at data centers or server and storage i mean, this quarter i mentioned last quarter that storage was starting to come back and i wanted a confirmation We had a very strong storage quarter, and I think it's going to last. we had a very strong storage quarter and i think it's going to last The AI, I mean, drove first the compute upgrade, and I think now storage, then switches, and I think storage is next. the ai, i mean drove first the compute upgrade and i think now storage then switches and i think storage is next Then on compute, we see very, very solid demand, and it's driven by several things. then on compute we see very, very solid demand and it's driven by several things Obviously, ASP increase is driving the value up. obviously asp increase is driving the value up Even in volume, what's happening is that you have still the refresh of the general compute servers happening. even in volume what's happening is that you have still the refresh of the general compute servers happening It's not over, so t hat's an opportunity. it's not over, so t hat's an opportunity You have an acceleration of the purchase of general compute servers because they have become critical when you speak about agentic AI. you have an acceleration of the purchase of general compute servers because they have become critical when you speak about agentic ai Then the cost of tokens is going to become a big topic. then the cost of tokens is going to become a big topic If you want to mitigate the cost of tokens, I mean, running your workloads on premise is going to be a good solution. I think that's going to drive demand and remain a tailwind. Then an accelerated compute. Companies are starting, enterprises in particular, but also you have the sovereign clouds, especially in Europe and APJ and the neoclouds in North America. They are investing heavily. We are a source of supply for them, and I see the demand remaining healthy here. In summary, except on PCs where units could be impacted by the ASP increase, I think on the other categories, I think it's sustainable. Software was also a very strong quarter for us, so ASP increase is less of a topic. I think it's going to be sustainable. If you want to mitigate the cost of tokens, I mean, running your workloads on premise is going to be a good solution. if you want to mitigate the cost of tokens i mean, running your workloads on premise is going to be a good solution I think that's going to drive demand and remain a tailwind. i think that's going to drive demand and remain a tailwind Then an accelerated compute. then an accelerated compute Companies are starting, enterprises in particular, but also you have the sovereign clouds, especially in Europe and APJ and the neoclouds in North America. companies are starting enterprises in particular but also you have the sovereign clouds especially in europe and apj and the neoclouds in north america They are investing heavily. they are investing heavily We are a source of supply for them, and I see the demand remaining healthy here. we are a source of supply for them and i see the demand remaining healthy here In summary, except on PCs where units could be impacted by the ASP increase, I think on the other categories, I think it's sustainable. in summary except on pcs where units could be impacted by the asp increase i think on the other categories i think it's sustainable Software was also a very strong quarter for us, so ASP increase is less of a topic. software was also a very strong quarter for us so asp increase is less of a topic I think it's going to be sustainable. i think it's going to be sustainable Security, especially now that you have to manage the risk related to agents, is going to drive additional demand. I continue to be cautiously optimistic across most of the technologies. Security, especially now that you have to manage the risk related to agents, is going to drive additional demand. security especially now that you have to manage the risk related to agents is going to drive additional demand I continue to be cautiously optimistic across most of the technologies. i continue to be cautiously optimistic across most of the technologies

Speaker 6: Awesome. Thank you very much, Patrick, for all that detail. Awesome. awesome Thank you very much, Patrick, for all that detail. thank you very much patrick for all that detail

Speaker 11: Your next question comes from the line of Adam Tindle with Raymond James. Your line is open. Your next question comes from the line of Adam Tindle with Raymond James. your next question comes from the line of adam tindle with raymond james Your line is open. your line is open

Speaker 1: Hi, good morning. Patrick, I just wanted to start here taking a step back. If I look at the quarter, incredible growth and negative cash flow. I wonder if you might just talk about how to strike the right balance between pursuing growth versus generating cash. More specifically, if I look at where that cash is going, it's heavy investments into Hyve in particular, and I think what we're learning on a forward basis is some of that's going to be incrementally fixed investment with this capacity build-out. How do you protect against downside there, where customers are right now kind of rationalizing AI spend, token spend, like you said, the fear that you might be building fixed investment into a peak AI market? Thanks. Hi, good morning. hi good morning Patrick, I just wanted to start here taking a step back. patrick i just wanted to start here taking a step back If I look at the quarter, incredible growth and negative cash flow. if i look at the quarter incredible growth and negative cash flow I wonder if you might just talk about how to strike the right balance between pursuing growth versus generating cash. i wonder if you might just talk about how to strike the right balance between pursuing growth versus generating cash More specifically, if I look at where that cash is going, it's heavy investments into Hyve in particular, and I think what we're learning on a forward basis is some of that's going to be incrementally fixed investment with this capacity build-out. more specifically if i look at where that cash is going it's heavy investments into hyve in particular and i think what we're learning on a forward basis is some of that's going to be incrementally fixed investment with this capacity build-out How do you protect against downside there, where customers are right now kind of rationalizing AI spend, token spend, like you said, the fear that you might be building fixed investment into a peak AI market? how do you protect against downside there where customers are right now kind of rationalizing ai spend token spend like you said the fear that you might be building fixed investment into a peak ai market Thanks. thanks

Speaker 12: Thanks, Adam, for the question. Let me distinguish between distribution and Hyve very rapidly. Distribution continues to, I mean, cash days are down on both businesses, but cash days are really low on distribution, so the growth on distribution is generating free cash flow, significant free cash flow. Which is true today, we are investing in Hyve to fuel the Hyve growth, both working capital and of course, fixed assets. One, Hyve continues to have a very nice return. If you look at our key ratios, it's not that we are financing a growth business at the expense of our key financial metrics, it's the other way around. It's accretive for our margin. It's accretive for our return on equity. From that standpoint, we feel very comfortable. Thanks, Adam, for the question. thanks adam for the question Let me distinguish between distribution and Hyve very rapidly. let me distinguish between distribution and hyve very rapidly Distribution continues to, I mean, cash days are down on both businesses, but cash days are really low on distribution, so t he growth on distribution is generating free cash flow, significant free cash flow. distribution continues to, i mean, cash days are down on both businesses but cash days are really low on distribution, so t he growth on distribution is generating free cash flow significant free cash flow Which is true today, we are investing in Hyve to fuel the Hyve growth, both working capital and of course, fixed assets. which is true today we are investing in hyve to fuel the hyve growth both working capital and of course fixed assets One, Hyve continues to have a very nice return. one hyve continues to have a very nice return If you look at our key ratios, it's not that we are financing a growth business at the expense of our key financial metrics, it's the other way around. if you look at our key ratios it's not that we are financing a growth business at the expense of our key financial metrics it's the other way around It's accretive for our margin. it's accretive for our margin It's accretive for our return on equity. it's accretive for our return on equity From that standpoint, we feel very comfortable. from that standpoint we feel very comfortable In terms of building fixed costs in case the market is going to correct, it's true that the working capital will adjust immediately if the market goes down. We have no concern. It's like distribution. If I can speak like that, the elasticity is high. I mean, as soon as the market goes down, we are going to see the working capital going down very rapidly, and so it will generate free cash flow. From a fixed asset standpoint, yes, it's a business which requires significantly more investments than distribution, relatively speaking. Again, it's not either a fixed cost which we could not absorb. If you look at this year, we're going to invest for Hyve roughly $100 million, amortized over five, six years. The cost is absolutely bearable in case the market turns. The other costs for Hyve are mostly variable. In terms of building fixed costs in case the market is going to correct, it's true that the working capital will adjust immediately if the market goes down. in terms of building fixed costs in case the market is going to correct it's true that the working capital will adjust immediately if the market goes down We have no concern. we have no concern It's like distribution. it's like distribution If I can speak like that, the elasticity is high. if i can speak like that the elasticity is high I mean, as soon as the market goes down, we are going to see the working capital going down very rapidly, and so it will generate free cash flow. i mean, as soon as the market goes down we are going to see the working capital going down very rapidly and so it will generate free cash flow From a fixed asset standpoint, yes, it's a business which requires significantly more investments than distribution, relatively speaking. from a fixed asset standpoint yes it's a business which requires significantly more investments than distribution relatively speaking Again, it's not either a fixed cost which we could not absorb. again it's not either a fixed cost which we could not absorb If you look at this year, we're going to invest for Hyve roughly $100 million, amortized over five, six years. if you look at this year we're going to invest for hyve roughly $100 million amortized over five, six years The cost is absolutely bearable in case the market turns. the cost is absolutely bearable in case the market turns The other costs for Hyve are mostly variable. the other costs for hyve are mostly variable Again, in case of downturn, I think it's going to be something similar to what we see in distribution. You have a lot of cash flow generated because working capital goes down, and we are very good at reacting and adjusting our cost base to the new market reality. I am not very concerned here. I can just finish with this continues to be top of mind for us, so we think about it all the time as we do the investments. Again, for the moment, I think we should be in a safe position. Again, in case of downturn, I think it's going to be something similar to what we see in distribution. again in case of downturn i think it's going to be something similar to what we see in distribution You have a lot of cash flow generated because working capital goes down, and we are very good at reacting and adjusting our cost base to the new market reality. you have a lot of cash flow generated because working capital goes down and we are very good at reacting and adjusting our cost base to the new market reality I am not very concerned here. i am not very concerned here I can just finish with this continues to be top of mind for us, so we think about it all the time as we do the investments. i can just finish with this continues to be top of mind for us, so we think about it all the time as we do the investments Again, for the moment, I think we should be in a safe position. again for the moment i think we should be in a safe position

Speaker 3: The only other thing I'd add, Adam, if it helps, is one, we ladder leases. That obviously helps if there's a change in demand. Two, we don't speculate on demand, so we largely build and outfit facilities based on long-term programs once they're committed. I will tell you, the team is incredibly prudent at how they manage Hyve from a capacity perspective, and they've done a nice job. As Patrick said on the cash flow, there is, as you're ramping a new program, there is more working capital inefficiencies that ultimately unlock as things mature. We are aware of the cash consumption. We are pleased with the reduction in cash days year-over-year, but we do believe long term, there are additional efficiencies that we'll look to achieve as well. The only other thing I'd add, Adam, if it helps, is one, we ladder leases. the only other thing i'd add adam if it helps is one we ladder leases That obviously helps if there's a change in demand. that obviously helps if there's a change in demand Two, we don't speculate on demand, so we largely build and outfit facilities based on long-term programs once they're committed. two we don't speculate on demand so we largely build and outfit facilities based on long-term programs once they're committed I will tell you, the team is incredibly prudent at how they manage Hyve from a capacity perspective, and they've done a nice job. i will tell you the team is incredibly prudent at how they manage hyve from a capacity perspective and they've done a nice job As Patrick said on the cash flow, there is, as you're ramping a new program, there is more working capital inefficiencies that ultimately unlock as things mature. as patrick said on the cash flow there is, as you're ramping a new program there is more working capital inefficiencies that ultimately unlock as things mature We are aware of the cash consumption. we are aware of the cash consumption We are pleased with the reduction in cash days year-over-year, but w e do believe long term, there are additional efficiencies that we'll look to achieve as well. we are pleased with the reduction in cash days year-over-year, but w e do believe long term there are additional efficiencies that we'll look to achieve as well

Speaker 1: Great. Just a quick follow-up. By the way, I know that question [audio distortion]. Great. great Just a quick follow-up. just a quick follow-up By the way, I know that question [audio distortion]. by the way i know that question [audio distortion]

Speaker 11: Your next question comes from the line of Joe Cardoso with JPMorgan. Your line is open. Your next question comes from the line of Joe Cardoso with JP Morgan. your next question comes from the line of joe cardoso with jp morgan Your line is open. your line is open

Speaker 15: Hi. Thank you for taking my question. This is [MP] on behalf of Joe Cardoso from JPMorgan. Can you please double-click on the mix of Hyve business between supply chain versus contract manufacturing during the quarter? Particularly, how did it track relative to your expectations heading into the quarter? Also, how do you expect it to track into the second half and any potential gross margin impacts from that? Thank you, and I have a follow. Hi. hi Thank you for taking my question. thank you for taking my question This is [MP] on behalf of Joe Cardoso from JP Morgan. this is [mp] on behalf of joe cardoso from jp morgan Can you please double-click on the mix of Hyve business between supply chain versus contract manufacturing during the quarter? can you please double-click on the mix of hyve business between supply chain versus contract manufacturing during the quarter Particularly, how did it track relative to your expectations heading into the quarter? particularly how did it track relative to your expectations heading into the quarter Also, how do you expect it to track into the second half and any potential gross margin impacts from that? also how do you expect it to track into the second half and any potential gross margin impacts from that Thank you, and I have a follow. thank you and i have a follow

Speaker 3: Good morning and thanks for joining. When you think about Hyve, we put in the prepared remarks, 2/3 of it, 2/3 of the business was manufacturing this quarter, and about 1/3 of it was supply chain. When you think about performance versus expectations, both businesses exceeded expectations. It's a little tricky to try and figure out what's long-term guidance split at kind of a sub-segment level, but here's what I would tell you. Our teams have done an excellent job winning new programs. We're very focused on expanding our manufacturing business and expanding our manufacturing programs, but we also recognize that because we have an end-to-end offering, being able to tie it all together is hugely advantageous for both our customers and for TD SYNNEX. Good morning and thanks for joining. good morning and thanks for joining When you think about Hyve, we put in the prepared remarks, 2/3 of it, 2/3 of the business was manufacturing this quarter, and about 1/3 of it was supply chain. when you think about hyve we put in the prepared remarks 2/3 of it, 2/3 of the business was manufacturing this quarter and about 1/3 of it was supply chain When you think about performance versus expectations, both businesses exceeded expectations. when you think about performance versus expectations both businesses exceeded expectations It's a little tricky to try and figure out what's long-term guidance split at kind of a sub-segment level, but here's what I would tell you. it's a little tricky to try and figure out what's long-term guidance split at kind of a sub-segment level but here's what i would tell you Our teams have done an excellent job winning new programs. our teams have done an excellent job winning new programs We're very focused on expanding our manufacturing business and expanding our manufacturing programs, but w e also recognize that because we have an end-to-end offering, being able to tie it all together is hugely advantageous for both our customers and for TD SYNNEX. we're very focused on expanding our manufacturing business and expanding our manufacturing programs, but w e also recognize that because we have an end-to-end offering being able to tie it all together is hugely advantageous for both our customers and for td synnex They should grow together through time, but our hope is that long term, we continue to increase the manufacturing as a percentage of the total. They should grow together through time, but o ur hope is that long term, we continue to increase the manufacturing as a percentage of the total. they should grow together through time, but o ur hope is that long term we continue to increase the manufacturing as a percentage of the total

Speaker 12: I just want to add that our supply chain services is a service. In today's environment where you have this big ASP increase and shortages, our customers have more needs than in environments which will normalize. Again, the team is first focused on winning programs to grow the manufacturing business. That's really the core of the activity. The service part is a little bit more volatile because of the context I just explained. I just want to add that our supply chain services is a service. i just want to add that our supply chain services is a service In today's environment where you have this big ASP increase and shortages, our customers have more needs than in environments which will normalize. in today's environment where you have this big asp increase and shortages our customers have more needs than in environments which will normalize Again, the team is first focused on winning programs to grow the manufacturing business. again the team is first focused on winning programs to grow the manufacturing business That's really the core of the activity. that's really the core of the activity The service part is a little bit more volatile because of the context I just explained. the service part is a little bit more volatile because of the context i just explained

Speaker 15: Thank you. For my follow-up, I just wanted to ask about pricing. Can you please comment how is the pricing environment right now? How you think the pricing environment is right now versus 90 days ago, and any particular product categories which you want to call out where the pricing pressures are more pronounced relative to others? Thank you. Thank you. thank you For my follow-up, I just wanted to ask about pricing. for my follow-up i just wanted to ask about pricing Can you please comment how is the pricing environment right now? can you please comment how is the pricing environment right now How you think the pricing environment is right now versus 90 days ago, and any particular product categories which you want to call out where the pricing pressures are more pronounced relative to others? how you think the pricing environment is right now versus 90 days ago and any particular product categories which you want to call out where the pricing pressures are more pronounced relative to others Thank you. thank you

Speaker 12: Pricing is up. You had this inventory in the channel, and that inventory has been shipped, so we're going to see the impact more and more. The category where the price increase are the most significant are obviously storage and servers, because they are the most impacted by the memory price increases. But we see it also in PCs. By the way, we're expecting some new price increases in both categories in July. The price increase are not over. Pricing is up. pricing is up You had this inventory in the channel, and that inventory has been shipped, so we're going to see the impact more and more. you had this inventory in the channel and that inventory has been shipped so we're going to see the impact more and more The category where the price increase are the most significant are obviously storage and servers, because they are the most impacted by the memory price increases. the category where the price increase are the most significant are obviously storage and servers because they are the most impacted by the memory price increases But we see it also in PCs. but we see it also in pcs By the way, we're expecting some new price increases in both categories in July. by the way we're expecting some new price increases in both categories in july The price increase are not over. the price increase are not over

Speaker 15: Thank you. Thank you. thank you

Speaker 11: Your next question is from the line of Adam Tindle of Raymond James. Your line is open now. Your next question is from the line of Adam Tindle of Raymond James. your next question is from the line of adam tindle of raymond james Your line is open now. your line is open now

Speaker 1: Okay, I was just going to continue on that thread, Patrick. I know that that question that I asked earlier about cash flow versus growth sounded challenging. I actually think you're doing the right strategy because your balance sheet is clean. You don't necessarily need to be generating cash right now. On that thread, I wanted to ask the follow-up to David, the timing and magnitude to cash flow reversing. I think previously you had talked about 95% of non-GAAP net income for the combination of fiscal year 2025 and 2026, but I think you'd need, like, $2 billion+ of free cash flow over the next two quarters to do that, and I wonder if we should sort of recalibrate our thinking. I know this is a tough question in a dynamic environment. Just any help for our models. Thanks. Okay, I was just going to continue on that thread, Patrick. okay i was just going to continue on that thread patrick I know that that question that I asked earlier about cash flow versus growth sounded challenging. i know that that question that i asked earlier about cash flow versus growth sounded challenging I actually think you're doing the right strategy because your balance sheet is clean. i actually think you're doing the right strategy because your balance sheet is clean You don't necessarily need to be generating cash right now. you don't necessarily need to be generating cash right now On that thread, I wanted to ask the follow-up to David, the timing and magnitude to cash flow reversing. on that thread i wanted to ask the follow-up to david the timing and magnitude to cash flow reversing I think previously you had talked about 95% of non-GAAP net income for the combination of fiscal year 2025 and 2026, but I think you'd need, like, $2 billion+ of free cash flow over the next two quarters to do that, and I wonder if we should sort of recalibrate our thinking. i think previously you had talked about 95% of non-gaap net income for the combination of fiscal year 2025 and 2026 but i think you'd need like $2 billion+ of free cash flow over the next two quarters to do that, and i wonder if we should sort of recalibrate our thinking I know this is a tough question in a dynamic environment. i know this is a tough question in a dynamic environment Just any help for our models. just any help for our models Thanks. thanks

Speaker 3: No, it's a good question, Adam. I think you're thinking about it the right way, which is Hyve is in a period of accelerated growth. What we've reflected in the Q3 outlook is continued momentum in both businesses. The 95% net income to free cash flow conversion ratio is absolutely our North Star metric on a long-term basis, but in periods of accelerated growth, we will consume cash. We believe it's a good use of capital, and the incremental ROIC is good. Hopefully, that helps give you a little bit of color around our optimism in Hyve and some of the short-term cash impacts of making investments in that business. But we think it's a great investment to make. No, it's a good question, Adam . no it's a good question adam I think you're thinking about it the right way, which is Hyve is in a period of accelerated growth. i think you're thinking about it the right way which is hyve is in a period of accelerated growth What we've reflected in the Q3 outlook is continued momentum in both businesses. what we've reflected in the q3 outlook is continued momentum in both businesses The 95% net income to free cash flow conversion ratio is absolutely our North Star metric on a long-term basis, but i n periods of accelerated growth, we will consume cash. the 95% net income to free cash flow conversion ratio is absolutely our north star metric on a long-term basis, but i n periods of accelerated growth we will consume cash We believe it's a good use of capital, and the incremental ROIC is good. we believe it's a good use of capital and the incremental roic is good Hopefully, that helps give you a little bit of color around our optimism in Hyve and some of the short-term cash impacts of making investments in that business. hopefully that helps give you a little bit of color around our optimism in hyve and some of the short-term cash impacts of making investments in that business But we think it's a great investment to make. but we think it's a great investment to make

Speaker 1: Okay, thank you. Yeah, makes sense. Thank you. Okay, thank you. Yeah, makes sense. okay, thank you. yeah makes sense Thank you. thank you

Speaker 3: You're welcome. You're welcome. you're welcome

Speaker 11: Your next question is from the line of Guy Hardwick with Barclays. Your line is open. Your next question is from the line of Guy Hardwick with Barclays. your next question is from the line of guy hardwick with barclays Your line is open. your line is open

Speaker 7: Hi. Good morning. A follow-up question on the strategic inventory. Just wondering how much of the 13-day year-on-year increase related to strategic inventory purchases. I assume in the Q3 guidance, you're also assuming further margin benefits from these purchases, maybe similar to what you had in the 5-10 basis points you had in just the recent quarter. Hi. hi Good morning. good morning A follow-up question on the strategic inventory. a follow-up question on the strategic inventory Just wondering how much of the 13-day year-on-year increase related to strategic inventory purchases. just wondering how much of the 13-day year-on-year increase related to strategic inventory purchases I assume in the Q3 guidance, you're also assuming further margin benefits from these purchases, maybe similar to what you had in the 5- 10 basis points you had in just the recent quarter. i assume in the q3 guidance you're also assuming further margin benefits from these purchases maybe similar to what you had in the 5- 10 basis points you had in just the recent quarter

Speaker 3: This is a tough question to answer because it's very difficult to quantify, but what I would tell you is our teams are able to increase their days of supply around specific categories if they believe that we need to hold additional stock to kind of smooth out supply chains. They don't go after this as a business. They're not trying to capitalize on price changes and speculate, but in situations where, I'm just going to make it up, let's say lead times are going to extend by three or four weeks, they might hold an extra couple of weeks of stock and for certain categories, and they'll get benefits from that if prices go up. What we do as a matter of course, is, we don't forecast a lot of these benefits. We call them out when they come. It tends to be fairly opportunistic in nature. This is a tough question to answer because it's very difficult to quantify, but w hat I would tell you is our teams are able to increase their days of supply around specific categories if they believe that we need to hold additional stock to kind of smooth out supply chains. this is a tough question to answer because it's very difficult to quantify, but w hat i would tell you is our teams are able to increase their days of supply around specific categories if they believe that we need to hold additional stock to kind of smooth out supply chains They don't go after this as a business. they don't go after this as a business They're not trying to capitalize on price changes and speculate, but i n situations where, I'm just going to make it up, let's say lead times are going to extend by three or four weeks, they might hold an extra couple of weeks of stock and for certain categories, and they'll get benefits from that if prices go up. they're not trying to capitalize on price changes and speculate, but i n situations where i'm just going to make it up let's say lead times are going to extend by three or four weeks they might hold an extra couple of weeks of stock and for certain categories and they'll get benefits from that if prices go up What we do as a matter of course, is, we don't forecast a lot of these benefits. what we do as a matter of course is we don't forecast a lot of these benefits We call them out when they come. we call them out when they come It tends to be fairly opportunistic in nature. it tends to be fairly opportunistic in nature Not necessarily opportunistic, but I would tell you, we don't forecast and plan for a lot of these things, but when we do realize them, we tend to call them out in the quarter. It is part of the reason that inventory is up on a year-over-year basis. I would tell you the predominance of that increase was largely driven by the investments we've made in Hyve due to new programs and expanded programs with existing customers. Not necessarily opportunistic, but I would tell you, we don't forecast and plan for a lot of these things, but when we do realize them, we tend to call them out in the quarter. not necessarily opportunistic but i would tell you we don't forecast and plan for a lot of these things but when we do realize them we tend to call them out in the quarter It is part of the reason that inventory is up on a year-over-year basis. it is part of the reason that inventory is up on a year-over-year basis I would tell you the predominance of that increase was largely driven by the investments we've made in Hyve due to new programs and expanded programs with existing customers. i would tell you the predominance of that increase was largely driven by the investments we've made in hyve due to new programs and expanded programs with existing customers

Speaker 7: Just to be clear, so the guidance of Q3 does not include any margin benefits from strategic inventory? Just to be clear, so the guidance of Q3 does not include any margin benefits from strategic inventory? just to be clear so the guidance of q3 does not include any margin benefits from strategic inventory

Speaker 3: It's hard to say. We don't have the teams break it down to that level of detail. What I would tell you is we do a bottoms-up roll based on our guidance, and the teams will factor a variety of risk and opportunities in there to quantify exactly whether it's in or out or what degree is a little difficult. To be candid with you, I would say there's probably a little, but as you've seen based on the Q2 results, it's relatively small, 5-10 basis points. It does tend to dwindle down through time It's hard to say. it's hard to say We don't have the teams break it down to that level of detail. we don't have the teams break it down to that level of detail What I would tell you is we do a bottoms-up roll based on our guidance, and the teams will factor a variety of risk and opportunities in there to quantify exactly whether it's in or out or what degree is a little difficult. what i would tell you is we do a bottoms-up roll based on our guidance and the teams will factor a variety of risk and opportunities in there to quantify exactly whether it's in or out or what degree is a little difficult To be candid with you, I would say there's probably a little, but as you've seen based on the Q2 results, it's relatively small, 5-10 basis points. to be candid with you i would say there's probably a little but as you've seen based on the q2 results it's relatively small 5-10 basis points It does tend to dwindle down through time it does tend to dwindle down through time

Speaker 7: Thank you. Thank you. thank you

Speaker 11: Your next question is from the line of David Paige with RBC Capital Markets. Your line is open. Your next question is from the line of David Paige with RBC Capital Markets. your next question is from the line of david paige with rbc capital markets Your line is open. your line is open

Speaker 4: Good morning, Patrick. Good morning, Patrick. good morning patrick

Speaker 12: Morning. Morning. morning

Speaker 4: Good morning, Patrick, David. Thanks for taking my question. I want to start on the Amazon warrant. I was curious what was the strategic rationale for that and how that warrant came to be, and is it something that we should expect maybe with some of the other hyperscalers that you're ramping up? Thank you. Good morning, Patrick, David. Th anks for taking my question. good morning patrick david. th anks for taking my question I want to start on the Amazon warrant. i want to start on the amazon warrant I was curious what was the strategic rationale for that and how that warrant came to be, and is it something that we should expect maybe with some of the other hyperscalers that you're ramping up? i was curious what was the strategic rationale for that and how that warrant came to be and is it something that we should expect maybe with some of the other hyperscalers that you're ramping up Thank you. thank you

Speaker 12: Hey, good morning, David. First thing, the warrant concerns Hyve. Okay. Hyve has had a long-term relationship, historical and strong relationship with AWS. The relationship has been very successful historically. The value proposition we deliver to Amazon has been very much valued. When they came to us to discuss the opportunity, we saw it as a big opportunity. With the warrant in place now, we think we have an agreement which is going to be mutually beneficial. Yeah. Let's see how it materializes in the future, but we are very pleased with that agreement. Hey, good morning, David. hey good morning david First thing, the warrant concerns Hyve. first thing the warrant concerns hyve Okay. okay Hyve has had a long-term relationship, historical and strong relationship with AWS. hyve has had a long-term relationship historical and strong relationship with aws The relationship has been very successful historically. the relationship has been very successful historically The value proposition we deliver to Amazon has been very much valued. the value proposition we deliver to amazon has been very much valued When they came to us to discuss the opportunity, we saw it as a big opportunity. when they came to us to discuss the opportunity we saw it as a big opportunity With the warrant in place now, we think we have an agreement which is going to be mutually beneficial. with the warrant in place now we think we have an agreement which is going to be mutually beneficial Yeah. yeah Let's see how it materializes in the future, but we are very pleased with that agreement. let's see how it materializes in the future but we are very pleased with that agreement

Speaker 4: Great. That's helpful. Just a quick follow-up. I think in the past you have spoken about traditional compute versus accelerated compute. If you could you provide some color on the mix of traditional versus accelerated that you had in the quarter or that you're expecting in late 4Q and early 2027? Thank you. Great. great That's helpful. that's helpful Just a quick follow-up. just a quick follow-up I think in the past you have spoken about traditional compute versus accelerated compute. i think in the past you have spoken about traditional compute versus accelerated compute If you could you provide some color on the mix of traditional versus accelerated that you had in the quarter or that you're expecting in late 4Q and early 2027? if you could you provide some color on the mix of traditional versus accelerated that you had in the quarter or that you're expecting in late 4q and early 2027 Thank you. thank you

Speaker 12: I guess your question is for Hyve specifically? I guess your question is for Hyve specifically? i guess your question is for hyve specifically

Speaker 4: Yeah. Yeah. yeah

Speaker 12: Yeah. This quarter we had the ramp-up of an accelerated compute program at Hyve. Generally speaking, we think that, when you look at our mix of programs, we believe that we are going to see more of networking, general compute, and storage going forward, but we want to continue to maintain and develop our expertise in accelerated compute. In terms of mix, so we have this nice ramp-up, but when I look at the profile of the wins we are having, we will continue to see more of the other programs than the accelerated compute programs, I think, going forward. Yeah. yeah This quarter we had the ramp-up of an accelerated compute program at Hyve. this quarter we had the ramp-up of an accelerated compute program at hyve Generally speaking, we think that, when you look at our mix of programs, we believe that we are going to see more of networking, general compute, and storage going forward, but w e want to continue to maintain and develop our expertise in accelerated compute. generally speaking, we think that, when you look at our mix of programs we believe that we are going to see more of networking general compute and storage going forward, but w e want to continue to maintain and develop our expertise in accelerated compute In terms of mix, so we have this nice ramp-up, but when I look at the profile of the wins we are having, we will continue to see more of the other programs than the accelerated compute programs, I think, going forward. in terms of mix, so we have this nice ramp-up but when i look at the profile of the wins we are having we will continue to see more of the other programs than the accelerated compute programs i think going forward

Speaker 11: Your next question comes from the line of Vincent Colicchio with Barrington Research. Your line is open. Your next question comes from the line of Vincent Colicchio with Barrington Research. your next question comes from the line of vincent colicchio with barrington research Your line is open. your line is open

Speaker 14: Yeah. Patrick, if hardware demand moderates, would you expect software, cloud, and recurring revenue streams to offset some of that pressure? Yeah. yeah Patrick, if hardware demand moderates, would you expect software, cloud, and recurring revenue streams to offset some of that pressure? patrick if hardware demand moderates would you expect software cloud and recurring revenue streams to offset some of that pressure

Speaker 12: Thanks for the question. Software, cloud, security continue to grow at double digits. For sure that, when you look at the underlying reason for that success, I'm quite positive and optimistic on those underlying trends to continue in the future. I will tell you that when I look at hardware and when I look at the impact of AI, or the potential impact of AI on on-premise and even, I should say, on edge computing, I think hardware is becoming a very interesting category again. It could be poised for very interesting growth. Thanks for the question. thanks for the question Software, cloud, security continue to grow at double digits. software cloud security continue to grow at double digits For sure that, when you look at the underlying reason for that success, I'm quite positive and optimistic on those underlying trends to continue in the future. for sure that when you look at the underlying reason for that success i'm quite positive and optimistic on those underlying trends to continue in the future I will tell you that when I look at hardware and when I look at the impact of AI, or the potential impact of AI on on-premise and even, I should say, on edge computing, I think hardware is becoming a very interesting category again. It could be poised for very interesting growth. i will tell you that when i look at hardware and when i look at the impact of ai or the potential impact of ai on on-premise and even i should say on edge computing i think hardware is becoming a very interesting category again. it could be poised for very interesting growth AI could be really a game changer here. It's a little bit too early to call it out, but there are some indicators that could speak well. As I said, I mentioned it before, the cost of the tokens is going to have an impact, I think, on some of the behaviors beyond the issue of latency, the issue of security and privacy. I think the cost of the tokens could have a very positive impact on on-premise hardware, and both in the data center, but also at the edge. AI could be really a game changer here. ai could be really a game changer here It's a little bit too early to call it out, but there are some indicators that could speak well. it's a little bit too early to call it out but there are some indicators that could speak well As I said, I mentioned it before, the cost of the tokens is going to have an impact, I think, on some of the behaviors beyond the issue of latency, the issue of security and privacy. as i said i mentioned it before the cost of the tokens is going to have an impact i think on some of the behaviors beyond the issue of latency the issue of security and privacy I think the cost of the tokens could have a very positive impact on on-premise hardware, and both in the data center, but also at the edge. i think the cost of the tokens could have a very positive impact on on-premise hardware and both in the data center but also at the edge

Speaker 14: Thank you. Thank you. thank you

Speaker 11: Your next question comes from the line of Alek Valero with Loop Capital. Your line is open. Your next question comes from the line of Alek Valero with Loop Capital. your next question comes from the line of alek valero with loop capital Your line is open. your line is open

Speaker 2: Hey, guys. Thank you for taking all my question. My question to you is, I don't know if you mentioned this earlier, but on the 1 million sq ft that you're adding, any color on when we can see this capacity start to contribute to revenue? Hey, guys. hey guys Thank you for taking all my question. thank you for taking all my question My question to you is, I don't know if you mentioned this earlier, but on the 1 million sq ft that you're adding, any color on when we can see this capacity start to contribute to revenue? my question to you is i don't know if you mentioned this earlier but on the 1 million sq ft that you're adding any color on when we can see this capacity start to contribute to revenue

Speaker 12: Yeah. Thank you for the question. Again, I mean, we have a strong pipeline, strong backlog, and what we, sort of, we see the ramp-up of the programs we have won to start impacting our revenue in Q4 fiscal year 2026, and most probably in Q1 fiscal year 2027. The capacity we are adding will convert into additional revenue, potentially in Q4 and most probably in Q1 next year. Yeah. yeah Thank you for the question. thank you for the question Again, I mean, we have a strong pipeline, strong backlog, and what we, sort of, w e see the ramp-up of the programs we have won to start impacting our revenue in Q4 fiscal year 2026, and most probably in Q1 fiscal year 2027. again i mean, we have a strong pipeline strong backlog, and what we, sort of, w e see the ramp-up of the programs we have won to start impacting our revenue in q4 fiscal year 2026 and most probably in q1 fiscal year 2027 The capacity we are adding will convert into additional revenue, potentially in Q4 and most probably in Q1 next year. the capacity we are adding will convert into additional revenue potentially in q4 and most probably in q1 next year

Speaker 2: Oh, got it. Thank you for that. Just a quick follow-up. On Hyve, obviously, you said manufacturing is now 2/3 of that. What can we expect that mix to look like throughout the year? Oh, got it. oh got it Thank you for that. thank you for that Just a quick follow-up. just a quick follow-up On Hyve, obviously, you said manufacturing is now 2/3 of that. on hyve obviously you said manufacturing is now 2/3 of that What can we expect that mix to look like throughout the year? what can we expect that mix to look like throughout the year

Speaker 3: Alek, it's hard to give you an exact answer on that. Here's the way I would tell you to think about it. Over a long period of time, we expect manufacturing to increase as a mix of the total, but as Patrick said, in certain types of environments, our supply chain business becomes very critical to helping support our customers, and so it will ebb and flow. It's hard to tell you exactly quarter-to-quarter, year-to-year what that might look like, but over a longer period of time, we expect to increase the percentage of Hyve associated with manufacturing. Alek, it's hard to give you an exact answer on that. alek it's hard to give you an exact answer on that Here's the way I would tell you to think about it. here's the way i would tell you to think about it Over a long period of time, we expect manufacturing to increase as a mix of the total, but a s Patrick said, in certain types of environments, our supply chain business becomes very critical to helping support our customers, and so it will ebb and flow. over a long period of time we expect manufacturing to increase as a mix of the total, but a s patrick said in certain types of environments our supply chain business becomes very critical to helping support our customers and so it will ebb and flow It's hard to tell you exactly quarter- to- quarter, year- to- year what that might look like, but o ver a longer period of time, we expect to increase the percentage of Hyve associated with manufacturing. it's hard to tell you exactly quarter- to- quarter year- to- year what that might look like, but o ver a longer period of time we expect to increase the percentage of hyve associated with manufacturing

Speaker 2: Got it. Super helpful. Thank you, guys. Appreciate it. Got it. got it Super helpful. super helpful Thank you, guys. thank you guys Appreciate it. appreciate it

Speaker 11: We've reached the end of the Q&A session. I would now like to turn the call back over to Patrick for closing remarks. We've reached the end of the Q&A session. we've reached the end of the q&a session I would now like to turn the call back over to Patrick for closing remarks. i would now like to turn the call back over to patrick for closing remarks

Speaker 12: Thank you all for joining us this morning. I want to close by thanking our coworkers across the globe, whose commitment and dedication drive everything we accomplish, and our partners for the continued confidence they place in us. To everyone on today's call, we appreciate your ongoing interest in TD SYNNEX. Thank you and wishing you a great day. Thank you all for joining us this morning. thank you all for joining us this morning I want to close by thanking our coworkers across the globe, whose commitment and dedication drive everything we accomplish, and our partners for the continued confidence they place in us. i want to close by thanking our coworkers across the globe whose commitment and dedication drive everything we accomplish and our partners for the continued confidence they place in us To everyone on today's call, we appreciate your ongoing interest in TD SYNNEX. to everyone on today's call we appreciate your ongoing interest in td synnex Thank you and wishing you a great day. thank you and wishing you a great day

Speaker 11: That concludes today's conference call. You may now disconnect. Have a nice day. That concludes today's conference call. that concludes today's conference call You may now disconnect. you may now disconnect Have a nice day. have a nice day