TD SYNNEX Revenue Jumps 38% to $21.6 Billion in Record Fiscal Q3

TD SYNNEX reported fiscal third-quarter revenue of $21.56 billion, up 37.7% from a year earlier, as the technology distributor posted another record quarter and delivered results well above the outlook it had issued in June.

Gross profit rose 26.2% to $1.43 billion for the quarter ended Aug. 31, while operating income increased 67.6% to $643 million. Net income climbed 83.5% to $416 million, and diluted earnings per share rose 89.1% to $5.18 from $2.74 a year earlier.

In its fiscal third-quarter results, TD SYNNEX said revenue growth was 38.4% on a constant-currency basis. The company also reported non-GAAP gross billings of $31.83 billion, up 40.0% year over year, as both its Distribution and Hyve businesses performed above management’s expectations.

Revenue lands well above the company’s prior outlook

The scale of the revenue beat stands out because TD SYNNEX entered the quarter with a substantially lower forecast. In June, management guided for fiscal third-quarter revenue of $18.2 billion to $19.0 billion. The final $21.56 billion result came about $2.56 billion above the top of that range, or roughly 13.5% higher than the previous high-end estimate.

The quarter also extended the momentum seen earlier in the fiscal year. TD SYNNEX had reported $19.58 billion of revenue for its second quarter, itself described by the company as a record result. Third-quarter revenue was about 10.1% higher sequentially, even before considering the much larger year-over-year comparison.

Non-GAAP gross billings provide another view of the volume moving through the business. TD SYNNEX uses that measure to show amounts billed before accounting presentation adjustments for certain supplier service contracts, software-as-a-service arrangements and fulfillment contracts where the company does not act as principal. Gross billings rose to $31.83 billion from $22.73 billion a year earlier.

The difference between the 37.7% reported revenue increase and the 38.4% constant-currency increase was relatively small. That indicates foreign-exchange movements were not the main explanation for the quarter’s growth. Management instead pointed to strong performance in both Distribution and Hyve, with Chief Executive Patrick Zammit saying both businesses grew above the market.

Profit rises faster than sales despite a lower gross margin

The earnings figures show a different pattern across the income statement. Gross margin narrowed to 6.61% from 7.22% a year earlier, a decline of 61 basis points, even though gross profit increased by $296 million. The lower gross-margin percentage means the company generated less gross profit for each dollar of reported revenue than it did in the prior-year quarter.

Operating profitability moved in the opposite direction. Operating margin increased to 2.98% from 2.45%, a gain of 53 basis points, as operating income rose much faster than revenue. On a non-GAAP basis, operating income reached $736 million, up 55.1%, and non-GAAP operating margin improved to 3.42% from 3.03%.

That divergence is important for interpreting a quarter in which revenue expanded unusually quickly. The reported gross-margin contraction shows that the sales mix carried some margin pressure, but the stronger operating-margin result shows that more of the company’s gross profit reached operating income than a year ago. The numbers therefore point to operating leverage even as the gross-margin percentage moved lower.

Net income reached $416 million compared with $227 million in the year-earlier period. Non-GAAP net income rose 53.9% to $456 million, while non-GAAP diluted EPS increased 58.7% to $5.68. TD SYNNEX’s non-GAAP measures exclude items including amortization of intangible assets, share-based compensation and related tax effects, so they should be read alongside the company’s GAAP results rather than as substitutes for them.

Management tied the quarter’s business momentum to continued spending on technology infrastructure. Zammit said enterprise artificial-intelligence adoption is moving toward broader production deployments and that data-center modernization remains a priority for customers preparing for next-generation infrastructure. He also pointed to growing security, governance and compliance requirements around AI as additional areas of demand. Those comments are management’s assessment of the market, not a separate forecast of industry growth.

TD SYNNEX guides for another high-revenue quarter

For the fiscal fourth quarter, TD SYNNEX expects revenue of $21.8 billion to $22.6 billion. The midpoint of that range, $22.2 billion, would be above the third quarter’s record revenue, though the company cautioned that its outlook is based on current expectations and actual results can differ.

Management also forecast non-GAAP gross billings of $31.4 billion to $32.4 billion. GAAP net income is expected to range from $368 million to $408 million, with diluted EPS of $4.58 to $5.08. The company’s non-GAAP outlook calls for net income of $454 million to $494 million and diluted EPS of $5.65 to $6.15.

The guidance creates a notable contrast between sales and GAAP earnings expectations. Revenue at the midpoint would rise from the third quarter, but the entire fourth-quarter GAAP EPS range sits below the $5.18 just reported. The company did not present that difference as a reversal in demand, and the non-GAAP EPS range overlaps the third quarter’s $5.68 result. Investors will therefore have to separate revenue growth from changes in expenses, mix and accounting items when the next results arrive.

TD SYNNEX also continued returning capital to shareholders. It said it returned $139 million during the quarter, including about $100 million through share repurchases and $38 million through dividends. The board declared another quarterly dividend of $0.48 per share, up 9% from a year earlier, payable Oct. 30 to shareholders of record at the close of business Oct. 16.

The fiscal third-quarter numbers leave TD SYNNEX entering its final quarter with revenue running far ahead of the range management set only three months earlier. The fourth-quarter outlook now calls for another quarter near or above that record sales level, making the durability of Distribution and Hyve demand, along with the balance between growth and margins, the central financial test for the remainder of the fiscal year.