TD Synnex (SNX, Financial) experienced a significant initial drop in stock price despite reporting substantial EPS growth in its Q2 results. However, it rebounded strongly during the earnings call. This marks its largest EPS beat in six quarters, following a Q1 miss. Revenue increased by 7.2% year-over-year to $14.95 billion, surpassing guidance expectations of $13.9-14.7 billion. For Q3, SNX provided in-line EPS and revenue guidance, although mid-points were slightly below analyst projections.
- SNX serves as a barometer for enterprise spending on network equipment and PCs, reporting early in the earnings cycle. As a distributor of third-party IT products, SNX assembles software, servers, and storage systems for businesses investing in IT.
- Growth was observed across all regions and major technologies. Software, particularly in virtualization, saw a 20% increase in billings due to cloud cybersecurity and infrastructure software. PCs experienced strong growth from the refresh cycle, and networking showed improvement after previous weak quarters. The public cloud sector continues to grow at double-digit rates.
- Non-GAAP gross billings, a crucial metric for SNX, rose 12.1% year-over-year to $21.6 billion, exceeding prior guidance of $19.7-20.7 billion. Although Q3 guidance for this metric remains flat at $21-22 billion, SNX's conservative approach does not worry investors. Billings growth was consistent across all regions and technologies.
- The stock's rise during the call was partly due to SNX addressing concerns about its hyperscaler segment, Hyve. Previously, SNX reported a "demand shortfall" at Hyve, causing a stock drop in March. However, Hyve achieved high-teen gross billings growth in Q2, alleviating investor concerns.
After a volatile day, SNX's stock rebounded following the earnings call, thanks to positive commentary and strong performance in software and the PC refresh cycle. The company also eased worries regarding Hyve, contributing to the stock's upward movement.
