‘We had a very strong quarter, a double-digit growth in software driven by virtualization software,’ says TD Synnex CEO Patrick Zammit on the company’s earnings call Tuesday.
IT distribution king TD Synnex Tuesday saw its stock price rise more than 7 percent after reporting unexpectedly positive growth in its second fiscal quarter sales and income despite the headwinds caused by the Trump administration’s tariffs.
Even TD Synnex’s Hyve hyperscaler business saw growth in the quarter after some timing issues were resolved, said Patrick Zammit, CEO of the company with dual headquarters in Fremont, Calif. and Clearwater, Fla.
“Many of the timing issues were resolved in this quarter,” Zammit told CRN. “So distribution continues to be a good story.”
[Related: TD Synnex, Partners Prioritize Flexibility Amid Tariff Environment]
TD Synnex reported total revenue growth for the quarter of 7.2 percent over the same period last year, while net income saw a significant jump over last year as well.
That growth is expected to continue, Zammit said.
TD Synnex is expecting to see growth coming from PCs this quarter, which will come from a combination of the Windows 11 refresh cycle and what Zammit called “pull-ins,” or ordering earlier than expected, which he already started in the second quarter because of the tariffs.
Another growth area is software, Zammit said.
“We see growth coming from software,” he said. “We had a very strong quarter, a double-digit growth in software driven by virtualization software. Just as important is security. Security continues to be a strong story for us. We are expanding globally with very important vendors, and that helps. So software is strong. Public cloud continues to be very strong. Networking is back to growth. The component business continues to be very strong, and compute was also strong. So all those categories contributed to the growth in Q2, and we believe that will continue to contribute to the growth in Q3.
TD Synnex’s Hyve hyperscaler enjoyed a double-digit growth for the quarter, Zammit said.
“For the next quarter, we are a little bit more prudent,” he said. “We see Hyve being flat, and we will see if we get some good news or not there. There are two reasons. First, last year’s Q3 was the first quarter where we saw distribution coming back, and Hyve had a record quarter, so a tough compare. And second, we are a little bit cautious because we don’t know what will happen with tariffs. We don’t know what will happen in the Middle East. Could it have a negative effect on our demand? It’s possible.”
Overall, the impact from the Trump administration’s tariffs has been limited so far, Zammit said.
“You have the vendors watching,” he said. “We’re waiting for July to get more visibility. For the moment, the U.S. is in negotiations with most of the countries, and so we’ll see. In terms of pull-ins, we were very explicit about it. We saw some pull-ins because of the tariffs on PCs, but it wasn’t material. Our assessment is $100 million, $200 million of pull-ins on PCs in North America. Basically, customers are afraid of potential price increases because of tariffs and deciding to buy before any tariffs are being charged. We saw a little bit of it, as I said. It’s tough to assess, but our assessment is $100 million to $200 million, so it’s not material when you look at our overall revenue.”
TD Synnex hasn’t really directly seen a change in the mix of the origin of the products that it brings to distribution, Zammit said.
“In most cases, in North America and the U.S. in particular, we are not the importer of record,” he said. “We receive the goods from the vendors, and they are the ones bringing in the products. It’s not something we can directly influence because it’s the vendors reporting the goods.”
Zammit also said TD Synnex didn’t see any shortages caused by the tariffs or for any other reasons.
TD Synnex’s sales growth in the U.S. during the quarter was lower than the growth it saw in Europe and APJ, Zammit said.
“But don’t forget you have the impact of currency,” he said. “The dollar depreciated quite significantly against the Euro and the APJ currencies. We had double-digit growth. But on top of that, you have the positive impact of the currency.”
TD Synnex’s had a strong public sector business during its second fiscal quarter 2025, including growth in its federal government business, Zammit said.
“For Q3, we continue to forecast growth in the public sector,” he said. “On the Fed, we will see. I know there are some headwinds, but it’s difficult to quantify.”
Strategic Priorities
For now, Zammit is not changing TD Synnex’s strategic priorities for the rest of the year, but instead is sticking with the 10 strategic imperatives it worked on early this year for the next three or four years.
“The environment is what it is today, but we took it into account when we defined our strategic plan,” he said. “I don’t see any reason to change our priorities. We have five growth areas, including digitalization of both the relationship with customers but also leveraging AI for operational excellence as a key priority. We are going to transform the way we do marketing as more and more new key players influence the decision-making process of the end users.”
Overall, TD Synnex is pleased with its second fiscal quarter performance not only because it was higher than guided on both sales and earnings per share, but more because of the quality of the quarter, Zammit said.
“It was another quarter of strong performance for distribution, not only on the top line, but also on the margin and operating income,” he said. “Almost all of the technologies and all the regions contributed to that success. So that means it’s a broad-based strength, not one or two technologies or one or two regions contributing to it. And then we had Hyve which had double-digit growth, which was a good surprise after our guidance was a little bit more pessimistic.”
TD Synnex continues to see its pipeline strengthening, both in terms of new programs and new customers, Zammit said.
“Hopefully we will see some of those pipelines converting into wins in the coming quarters,” he said. “We also see margins stabilizing, and that’s, as you know, very important to us overall. So relatively, we are cautiously optimistic for the future.”
TD Synnex By The Numbers
For its second fiscal quarter 2025, which ended May 31, TD Synnex reported total revenue of $14.95 billion, up 7.2 percent from the $13.95 billion the company reported for its second fiscal quarter 2024.
Revenue for the quarter beat analyst expectations by $640 million, according to Seeking Alpha.
Revenue for the distributor’s Americas business rose 5.3 percent over last year to reach $9.01 billion, while Europe revenue rose 10.5 percent to $4.89 billion and APJ (Asia, Pacific, Japan) revenue rose 8.7 percent to $1.05 billion.
TD Synnex also reported GAAP net income of $184.9 million or $2.21 per share, up from last year’s $143.6 million or $1.66 per share. On a non-GAAP basis, TD Synnex reported net income of $250.5 million or $2.90 per share, up from last year’s $236.9 million or $2.73 per share.
Non-GAAP earnings beat analyst expectations by 27 cents per share, according to Seeking Alpha.
Looking ahead, TD Synnex expects third fiscal quarter 2025 revenue to be between $14.7 billion and $15.5 billion. This compares to the company’s third fiscal quarter 2024 revenue of $14.7 billion.
The company also expects GAAP net income of $159 million to $200 million, or $1.93 to $2.43 per share, up from last year’s $178.6 million or $2.08 per share. On a non-GAAP basis, TD Synnex expects net income of $227 million to $268 million, or $2.75 to $3.25 per share, compared to last year’s $245.4 million or $2.86 per share.
