TD Synnex CEO Patrick Zammit tells CRN that the distributor’s record third fiscal quarter 2026 revenue, Hyve hyperscaler growth, enterprise AI demand, and distribution market share gains are driving momentum despite investor concerns over cash flow.
TD Synnex CEO Patrick Zammit, in an exclusive and wide-ranging discussion with CRN, said the distributor’s record fiscal 2026 third quarter shows that demand across the IT channel remains broad-based even as investors weigh the cash-flow impact of the company’s fast-growing Hyve hyperscale business.
Zammit (pictured) told CRN that TD Synnex, based in Clearwater, Fla. and Fremont, Calif., is seeing growth across geographies, customer segments, technologies, and vendors, with distribution and Hyve both outpacing the market. While the company’s stock slipped after the earnings announcement, he said the reaction may reflect investor concerns over temporary working-capital needs tied to Hyve’s ramp with new hyperscaler customers rather than any weakness in the business.
“That’s to fuel growth for the future,” he said of Hyve spending. “And again, as that business matures, it will also generate free cash flow. So it’s a timing thing more than anything else.”
[Related: TD Synnex CEO On Record Quarter, Seeing ‘Lots Of Tailwinds In The Market’]
Zammit said Hyve, TD Synnex’s hyperscale infrastructure business, has diversified its customer base and now works with all five hyperscalers, including three where it supports three or more programs. Hyve’s value, he said, is its ability to provide end-to-end support from engineering through installation, including strategic supply chain services that help secure key components before production ramps.
“Hyve [revenue] grew 113 percent, where distribution grew 27 percent,” he said. “Manufacturing within Hyve grew 133 percent. These are very impressive figures and in both cases we are growing nicely above market.”
The growth is not merely a matter of higher pricing, Zammit said. While PCs, servers and storage saw significant pressure from component costs, those categories represent only about one-third of TD Synnex’s distribution revenue. The rest, he said, reflects underlying demand and market share gains. He also pointed to enterprise AI moving from proof-of-concept work into production, creating demand for inference infrastructure and security refreshes, both of which play to a two-tier distribution model.
“We think enterprises are starting to move from proof of concept to production,” he said. “That’s going to drive demand for inference, and that’s going to benefit distribution in general and TD Synnex in particular.”
Zammit also pushed back on concerns about an AI bubble, saying TD Synnex sees no current signs of demand slowing in either customer forecasts or backlog. Even if AI investment were to correct sharply, he said the company’s exposure is largely working capital, giving it flexibility to quickly reduce cash needs and respond to changing market conditions.
There’s a lot going on at TD Synnex and in distribution in general. To learn more, read CRN’s complete conversation with Zammit, which has been lightly edited for clarity.
Note that when Zammit talks about “customers,” he refers to solution provider customers, not end users.
TD Synnex By The Numbers
TD Synnex reported fiscal 2026 third quarter revenue of $21.6 billion, up 37.7 percent from the year-ago period. GAAP net income was $416 million or $5.18 per share, compared with $227 million or $2.74 per share a year earlier. Non-GAAP net income was $456 million or $5.68 per share, compared with $296 million or $3.58 per share one year before.
TD Synnex shares fell by 9.9 percent to $259.47 per share Thursday. What are investors missing regarding TD Synnex, driving share prices down after a record quarter?
That’s not the way I would look at it. The first thing is we had a nice increase of the stock price the last three days. The results exceeded their expectations, and now maybe they say, ‘Maybe it’s time to take some of the profits.’ Whatever, we don’t know yet. We think that maybe there were some concerns because of the negative cash flow. I had a few calls with our core investors this afternoon. They understand. But if you are not so familiar with the stock price, you might say that’s a lot of growth but at the expense of free cash flow generation. It’s possible. We’ve explained that when it comes to free cash flow, we’ve done such a good job on distribution. Even at 27 percent growth, distribution is able to generate free cash flow.
But Hyve has got higher cash days, and on top of it we are ramping up two new customers, and so the cash consumption is higher. But that’s to fuel growth for the future. And again, as that business matures, it will also generate free cash flow. So it’s a timing thing more than anything else.
But again, we are very pleased with the results. Hyve, all geographies, all technology. It’s another very good story. And we grew faster than the market, which for us is a very good indicator of the quality of our value proposition. So we’re very pleased with the results. I’m sure many analysts and investors will look at it and we’ll see if they position themselves on the market with us. That’s what we hope.
You said you signed up two new customers. Was that specifically for Hyve?
We announced it a few quarters ago. We have now all five hyperscalers in our portfolio. And we have three hyperscalers where we are working on three programs or more. That’s very exciting. This quarter we started ramping up two new customers, but we should see material growth next quarter. Again, it’s a very good story. If you recall, one of our strategic imperatives for Hyve was to diversify the customer base. It’s done. We are ramping up those programs. It’s very exciting.
What does Hyve provide to hyperscalers? What’s the draw?
The beauty of our model is we provide end-to-end support from engineering to installation, including what we call strategic buys or supply chain services whereby we can secure strategic components for some customers so they are available for them as they launch production. Think about it as an end-to-end service. It’s very important today. Most of it is in the U.S. …
We report distribution separately from Hyve. Hyve [revenue] grew 113 percent, where distribution grew 27 percent. Manufacturing within Hyve grew 133 percent. These are very impressive figures. And in both cases, we are growing nicely above market.
TD Synnex reported record revenue for this, its third fiscal quarter. How much of that revenue growth came from the fact that everything’s more expensive, as opposed to people buying more products?
As I mentioned, it’s broad-based growth. Yes, the market grew double digits, but we grew faster than the market. I will tell you the three categories where we saw the most significant price increases are PCs, servers, and storage, but that’s only 33 percent of our distribution revenue. Of course, in those categories we benefited from price increases, but 67 percent of our revenue was not so much impacted by price increases. It was underlying demand plus market changes. So very healthy growth in total.
And if I peel the onion on where we benefited from the price increase, in PCs we grew 22 percent on roughly an 8-percent, high-single-digit unit decline and 30-plus-percent ASP [average selling price] increase. In servers, we had a small unit decline, but a significant ASP increase. Again, it’s not only because of component costs. It’s also because the new generation is significantly more efficient than the old one.
And then on storage we saw both a price increase and unit increase. So it’s very healthy.
What kind of impact are you seeing from AI and are partners bringing any questions to TD Synnex about things like AI guardrails?
Not so much. We will hold our Inspire conference in two weeks. I have roundtables with our customers and that’s a topic I want to discuss with them. But as far as I can see, this is not a major topic. What we see on the other hand is more acceleration of the demand for AI compute related to implementing agentic AI factories. We reported a very big win in North America and it’s just the start. We see Dell, by the way, was also very specific on seeing a lot of opportunities at enterprise. We think enterprises are starting to move from proof of concept to production. That’s going to drive demand for inference, and that’s going to benefit distribution in general and TD Synnex in particular.
To open the aperture a little bit, here’s another category which will benefit from AI: security. We know that AI has dramatically reduced the cost of launching attacks, and you need to be much faster to react to AI-driven attacks. So I feel we are going to see a very big refresh of cybersecurity tools, which will benefit distribution because security basically is a two-tier go-to-market model.
Speaking of Dell, with the change in how Dell approaches distribution over the last quarter or so, how has that impacted TD Synnex?
In North America we started to see the benefits of it. We are working closely with our partners and Dell to get our share of the opportunity. We see it, and we are going to see more of it in the coming quarters.
Going forward, should we expect to see a record fourth fiscal quarter?
We provided guidance for Q4 and the guidance is on its own a record quarter. … We, of course, built into our guidance some risks and some uncertainties, especially on the high side. So again, if everything goes smoothly, it could be a very solid quarter again. The guidance alone is for a very good quarter.
TD Synnex’s Inspire 2026 conference will be later this month. Can you give us a preview of what to expect?
Obviously, we’re going to speak about the market opportunities. And we see many market opportunities. AI, of course, is a big one, but not the only one. And I talked about security.
The theme of Inspire this year is really about the human aspect of the business. With AI there are a lot of question marks. Are agents going to replace humans? Will digital platforms replace humans? And so on. What we want to show is that digitalization and AI will continue to drive productivity and the ease of doing business, but it will not replace the importance of relationships in our businesses.
There are several reasons. One of them is that technology is getting more and more complex to implement, and I don’t think machines can replace humans for that. Second, we just had a very successful customer event called Direction of Industry, and I can tell you relationships have never been so important as in this new environment. The importance of sitting, brainstorming, discussing the opportunities, discussing the threats, being strategic and intentional, all that, has never been more important than today.
And yes, technology is going to enable us to automate, which I like to call transactional. But everything which is value-add. Humans will continue to make the difference, and that’s also what we want to convey as a message.
There is a lot of talk about a possible AI bubble. Maybe not this year or next year. But with all the investment in AI, especially among the hyperscalers that Hyve has worked with, does TD Synnex need to prepare for a possible AI bubble bursting in the future?
Generally speaking, we always look at a worst-case scenario and how we would react in case it happens. Always. The thing is, let’s not forget, both for distribution and Hyve, the vast majority of our investment is in working capital. And so, if there’s a correction, a lot of the working capital needs will reduce, and we then generate a lot of cash. And from a cost management standpoint, we have a track record of reacting rapidly to new market conditions.
But at this moment, I just want to call out a few things. One, when I look at the forecast we receive from customers and our backlog, there are no signs of demand slowing down. Second, if you look at what the OEMs, the AI champions, have reported, in particular the cloud in Q3, you see that all of them are claiming that there is a lack of capacity and they need to continue to invest. Third, as long as you have healthy competition between the frontier model producers, including open models, they are forced to invest in and train their models and issue better models.
So I think, for the moment, with that in mind, I don’t see a bubble. But again, if for whatever reason the level of investments is dramatically adjusted, we have the flexibility to adjust very rapidly too.
Is there anything else you would like to add?
Market conditions continue to be positive. That’s my first message. It’s a healthy market environment, but it’s not a healthy market environment driven by one or two things. It’s really broad-based from a geography, a customer segment, a technology, and a vendor standpoint. And TD Synnex continues to evolve its value proposition to take advantage of those market opportunities and help vendors and customers grow faster. That’s the key message I would convey after this quarter.
