TD Synnex (SNX -8%) is experiencing a downturn today after missing Q2 (May) EPS expectations, despite three previous quarters of double-digit EPS beats. Although EPS landed around the mid-point of prior guidance ($2.50-3.00), it fell short of analyst predictions. Revenue decreased by 0.8% year-over-year to $13.95 billion, also below expectations. This marks SNX's sixth consecutive quarter of year-over-year revenue decline. However, Q3 (Aug) guidance showed in-line EPS and revenue projections.
- SNX serves as a barometer for enterprise spending on network equipment and PCs. Reporting early in the earnings cycle, it provides insights into upcoming trends. As a distributor of third-party IT products, SNX integrates software, servers, and storage systems for businesses.
- Despite today's earnings miss, SNX reports market stabilization. Q2 results were supported by an improving IT spending environment, with growth in gross billings for Endpoint Solutions, Advanced Solutions, and Strategic Technologies.
- Looking forward, SNX anticipates benefiting from accelerated growth in Q3-Q4, driven by a rebounding IT spending market. Non-GAAP gross billings grew 3% year-over-year to $19.3 billion in Q2, at the higher end of prior guidance ($18.4-19.6 billion). Q3 guidance for gross billings is healthy at $18.9-20.1 billion.
- SNX sees AI as a significant opportunity, expecting it to drive transformative growth in the tech sector. The company anticipates benefits across components, devices, data centers, cloud storage, networking, and related software applications and services.
Overall, investors are disappointed with SNX's Q2 results. The EPS miss was unexpected after three consecutive beats, and another year-over-year revenue decline was disheartening. However, the positive turn in gross billings year-over-year is a silver lining, supporting SNX's view of recovering IT spending. This bodes well for tech stocks as earnings season approaches. Additionally, new CEO Patrick Zammit will take over on September 1, succeeding Rich Hume. Zammit, currently COO, will bring fresh perspectives to the next earnings call.
