Executive Summary / Key Takeaways

• TD SYNNEX delivered record fiscal Q3 2025 non-GAAP diluted earnings per share of $3.58, a 25% year-over-year increase, driven by strong execution and a diversified portfolio.
• The Hyve business, specializing in hyperscale infrastructure, is a significant growth engine, with gross billings increasing in the mid-thirties year-over-year in Q3 2025, fueled by surging cloud and AI investments.
• Strategic investments in AI enablement (Destination AI, AI Pioneers), digital platforms (Partner First, Digital Bridge, PACE), and the acquisition of Apptium are enhancing competitive differentiation and market reach.
• Despite macroeconomic uncertainties and temporary working capital impacts, the company projects mid-single-digit gross billings growth and robust free cash flow generation for fiscal year 2025.
• TD SYNNEX maintains a strong competitive position through its extensive global distribution network, integrated solutions, and specialized go-to-market strategies, particularly in high-growth technology segments.

The IT Ecosystem's Vital Orchestrator

TD SYNNEX Corporation stands as a leading global distributor and solutions aggregator within the expansive information technology (IT) ecosystem. The company's vision is to be the vital solutions aggregator and orchestrator that connects this complex IT landscape. In an era defined by accelerating digital transformation, pervasive cloud migration, and the burgeoning influence of artificial intelligence (AI), hybrid IT consumption models are becoming the norm, driving a demand for increasingly integrated products, services, and solutions. TD SYNNEX's core business model involves bringing products from the world's leading and emerging technology vendors to market, empowering its customers to craft solutions that maximize business outcomes for end-users.

The company operates in a competitive arena, facing direct rivals such as Arrow Electronics (ARW), Avnet (AVT), and CDW Corporation (CDW), alongside indirect competition from cloud service providers like Amazon Web Services (AWS) and Microsoft Azure. Against this backdrop, TD SYNNEX leverages its foundational strengths: a vast global reach, an unrivaled end-to-end portfolio, and a specialist go-to-market approach that differentiates its offerings.

A History of Strategic Evolution and Integration

Founded in 1980, TD SYNNEX has a history marked by strategic evolution. A pivotal moment arrived on September 1, 2021, with the transformative merger of legacy SYNNEX Corporation and Tech Data Corporation, leading to the rebranding as TD SYNNEX Corporation. This strategic consolidation significantly expanded the company's global footprint and strengthened its vendor partnerships, with the extensive integration and restructuring activities concluding in the first half of fiscal year 2024.

Post-merger, TD SYNNEX solidified its strategic imperatives: unifying its market reach through portfolio expansion, targeting new customer segments with personalized solutions, expanding its addressable market via unique vendor value propositions, diversifying its offerings, and accelerating its services business. These initiatives are all geared towards profitable growth and robust free cash flow generation. A recent example of this strategic expansion is the acquisition of Apptium Technologies, LLC on July 1, 2025, for approximately $111.8 million. Apptium, a software development company and cloud commerce platform provider, represents a critical investment in TD SYNNEX's technology solutions orchestration strategy, further expanding its cloud and everything-as-a-service offerings.

Technological Edge: Powering the Digital Future

TD SYNNEX's competitive advantage is significantly bolstered by its core differentiated technology, primarily manifested in its comprehensive digital platforms and specialized solution aggregation capabilities. The company's StreamOne cloud platform serves as a central hub for "anything as a service" business, seamlessly integrating with key vendors and hyperscaler marketplaces like Microsoft (MSFT) Azure and AWS. This platform provides customers with access to thousands of vendors and offers powerful capabilities such as real-time reporting and billing on infrastructure as a service (IaaS) consumption, FinOps, and SecOps capabilities, along with prebuilt white-label storefronts and automation via PSA connectors.

Further enhancing its digital ecosystem, TD SYNNEX launched the Digital Bridge Microsoft Teams app, which integrates its platform directly into partners' daily applications for real-time information and automated workflows, including quoting and backlog management. The PACE platform, a fully digital customer lifecycle tool, leverages a unique data lake to power the company's digital go-to-market channel. This platform has gained significant traction in Europe, serving over 50,000 partners, and is now expanding into the Americas, driving "growth and profitability significantly above the overall company average."

These technological differentiators offer tangible benefits, simplifying complex IT ecosystems, reducing transaction costs, and accelerating time to market for both partners and vendors. For investors, this translates into a stronger competitive moat, driving higher-margin service revenue and positioning TD SYNNEX at the forefront of cloud and AI adoption, fostering sustainable profitable growth.

In the realm of emerging technologies, TD SYNNEX is actively investing in AI. The company is enhancing its Destination AI enablement program to include three strategic focus areas: "AgenTiKi, security for AI, and AI factory." These programs aim to deliver comprehensive solution support, designing modern architectures that blend multiple AI technologies and enabling hybrid deployment models for flexible, intelligent threat detection, prevention, and responses. Additionally, the AI Pioneers apprenticeship program directly addresses the AI skills gap, connecting partners with real-world AI use cases. These initiatives underscore TD SYNNEX's commitment to technological leadership, ensuring it remains a vital partner as AI adoption accelerates across the IT landscape.

Competitive Positioning: A Differentiated Approach

TD SYNNEX operates in a highly competitive market, directly contending with global IT distributors such as Arrow Electronics, Avnet, and CDW Corporation. Each competitor brings distinct strengths, but TD SYNNEX carves out its niche through a differentiated approach.

Compared to Arrow Electronics, TD SYNNEX's strength lies in its integrated solutions that combine hardware, software, and financing options. This comprehensive offering provides greater efficiency and fosters stronger customer loyalty, particularly for resellers seeking holistic support. While Arrow may exhibit superior cost efficiencies in high-volume electronic components due to its scale, TD SYNNEX's bundled services offer a compelling alternative.

Against Avnet, which excels in embedded and component distribution with potentially faster innovation cycles in specialized technologies, TD SYNNEX's comprehensive software and endpoint solutions provide more holistic packages, potentially leading to greater deployment efficiency for its partners. TD SYNNEX's focus on financing and marketing services further enhances its value proposition in this comparison.

When contrasted with CDW Corporation, known for its sales prowess and U.S.-centric digital transformation capabilities, TD SYNNEX differentiates itself through its extensive global reach and integrated services. This international presence gives TD SYNNEX an advantage in diverse geographies, enabling it to support multi-country solutions and expand into new market verticals.

TD SYNNEX's overall competitive moat is built upon its extensive global distribution network, robust vendor partnerships, and integrated service offerings. These assets translate into superior customer access, efficient logistics, and the potential for recurring revenue streams. The company's strategic focus on high-growth regions like Latin America and APJ, where its market share is more modest, presents significant opportunities for profitable expansion. Management emphasizes that its growth plan in these regions targets margin-rich customer and product segments, aiming for solid growth and strong gross and operating profit generation.

Despite these strengths, TD SYNNEX faces vulnerabilities, including potential supply chain dependencies and customer concentration. However, the company actively mitigates these risks through diversification efforts and its onshore manufacturing capabilities within the Hyve business. High capital requirements and established supplier relationships act as significant barriers to entry in the IT distribution industry, further protecting TD SYNNEX's market position and supporting its strategy of diversified services.

Financial Performance: Delivering Profitable Growth

TD SYNNEX's financial performance in fiscal year 2025 demonstrates its ability to deliver profitable growth amidst a dynamic market. For the third quarter ended August 31, 2025, the company reported record non-GAAP diluted earnings per share of $3.58, a 25% increase year-over-year, surpassing the high end of its guidance. Consolidated gross billings reached $22.7 billion, growing 12% in constant currency. Net revenue for the quarter was $15.65 billion, up 6.6% year-over-year.

Gross profit increased by 17.6% year-over-year to $1.13 million, with the gross margin expanding by 68 basis points to 7.22%. This margin expansion was primarily driven by the presentation of additional revenues on a net basis due to product mix and margin improvements within the Endpoint Solutions portfolio. Non-GAAP operating income rose 20.9% to $474.9 million, resulting in a non-GAAP operating margin of 3.03%, an increase of 35 basis points year-over-year. The company also demonstrated operational efficiency, with non-GAAP selling, general, and administrative (SG&A) expenses at 3% of gross billings, and the cost to gross profit percentage improving to 58% from 60% in the first half of the year.

Segment-wise, Endpoint Solutions saw gross billings increase 10% year-over-year in Q3 2025, propelled by strong demand for AI PCs and the Windows 11 refresh cycle. Advanced Solutions' gross billings grew 13% year-over-year, or 8% excluding Hyve, with software being a standout performer, increasing 26% in gross billings due to cybersecurity and infrastructure software demand. The Hyve business experienced a robust quarter, with gross billings increasing in the mid-thirties year-over-year, and ODM Centimeters gross billings surging 57% year-over-year, as its total gross margins returned to historical levels.

Geographically, all regions contributed to growth. The Americas segment reported revenue of $9.27 billion (up 2% year-over-year) and operating income up 28.4%. Europe's revenue grew 12.7% year-over-year to $5.17 billion, with operating income up 22.6%. The Asia-Pacific and Japan (APJ) segment showed "exceptionally dynamic performance," with revenue increasing 20.4% year-over-year to $1.21 billion and operating income up 20.5%. Latin America and APJ, in particular, demonstrated strong double-digit gross billings growth.
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From a liquidity perspective, net working capital stood at $4 billion as of August 31, 2025. The cash conversion cycle (CCC) was 23 days, an increase from 18 days at November 30, 2024, primarily due to higher accounts receivable and inventory to support business growth. Despite this, gross cash days remained consistent at approximately 16 days. Net cash provided by operating activities for the nine months ended August 31, 2025, was $71.3 million.

The company maintains a strong financial position with $4.2 billion in debt, a gross leverage ratio of 2.3x, and a net leverage ratio of 1.8x. It also has significant credit availability, including a $1.5 billion accounts receivable securitization program (currently unused) and a $3.5 billion revolving credit facility ($245 million outstanding).

Outlook and Strategic Trajectory

Looking ahead, TD SYNNEX's management projects continued momentum. For the fourth quarter of fiscal 2025, non-GAAP gross billings are expected to be in the range of $23 billion to $24 billion, representing an approximate 11% increase at the midpoint. Net revenue is guided between $16.5 billion and $17.3 billion, with non-GAAP diluted EPS anticipated to be between $3.45 and $3.95.

For the full fiscal year 2025, TD SYNNEX expects gross billings to grow in the mid-single digits percentage year-over-year. This growth is anticipated to be driven by a sustained PC and server refresh cycle, a recovery in networking (expected to return to growth due to factors like Wi-Fi 7 and data center switching upgrades for AI), and continued expansion in both Endpoint and Advanced Solutions, particularly in cloud, security, data analytics, and AI-benefiting portfolios.

The company has revised its free cash flow outlook for fiscal year 2025 to approximately $800 million, down from an initial target of $1.1 billion. This adjustment reflects higher-than-anticipated growth rates in the latter half of the year, which increased working capital requirements for both distribution and Hyve. However, management remains committed to achieving a net income to free cash flow conversion of around 95% over the medium term. Capital allocation remains disciplined, with a focus on returning value to shareholders through share repurchases (with $1.4 billion remaining authorization) and quarterly dividends, currently set at $0.44 per common share.

Risks and Challenges

Despite a compelling growth narrative, TD SYNNEX faces several inherent risks. The company's operating results are susceptible to the seasonality of the IT products industry and are highly dependent on broader end-market demand, which can be influenced by macroeconomic factors such as inflation, elevated interest rates, and geopolitical developments. The IT distribution business is characterized by low gross and operating margins as a percentage of revenue, making it sensitive to competitive pricing pressures and operational efficiencies.

The Hyve business, while a significant growth driver, is inherently "lumpy" and susceptible to project-driven demand fluctuations and working capital intensity. Exposure to foreign currency and interest rate risks also presents potential headwinds. Furthermore, the company faces contingent liabilities, including inventory repurchase obligations and ongoing legal proceedings, such as the French competition fine and the eBizcuss civil lawsuit, though management believes the likelihood of a material loss from these is remote. These factors necessitate continuous vigilance and strategic adaptability to sustain long-term performance.

Conclusion

TD SYNNEX is strategically positioned as a vital orchestrator in the evolving IT ecosystem, leveraging its global scale, diversified portfolio, and advanced digital capabilities to capitalize on secular growth trends in cloud, AI, and digital transformation. The company's record-setting performance in Q3 2025, particularly the robust growth in its Hyve business and strategic technology segments, underscores the successful execution of its vision. Investments in proprietary platforms like StreamOne, Digital Bridge, and PACE, coupled with a focused AI enablement program, are enhancing its competitive differentiation and driving profitable growth.

While macroeconomic uncertainties and the working capital intensity of its high-growth segments present ongoing challenges, TD SYNNEX's commitment to operational excellence, disciplined capital allocation, and a specialist go-to-market approach provides resilience. The company's ability to consistently deliver strong financial results and generate substantial free cash flow, alongside its strategic expansion into high-margin customer and product segments globally, reinforces a compelling investment thesis. TD SYNNEX's technological leadership and strategic aggregation model are poised to drive sustained value creation for shareholders in the dynamic IT landscape.