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"Ingram Micro is a leader in technology distribution and supply-chain services, functioning as an intermediary between technology manufacturers and customers that include retailers, value-added resellers, and enterprises. The company’s core business revolves around the distribution of IT products and solutions, which include security, cloud infrastructure, business applications, communications, backup and disaster recovery, and managed services. Ingram Micro also offers a suite of services such as financing, marketing, life-cycle management, and technical support. The company’s digital platform, Xvantage, leverages artificial intelligence and machine learning to support the B2B customer experience. Ingram Micro’s global network serves more than 165,000 customers and 1,500 vendors worldwide.
 
 Founded in 1979 as Micro D Inc., Ingram Micro rapidly expanded through a series of mergers and 45 acquisitions, including the 2012 purchase of BrightPoint, a major provider of device life-cycle services."

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Ingram Micro Holding (INGM): Company Profile, Stock Price, News, Rankings

legacy

Ingram Micro Holding

ingram micro holding

Welcome to Ingram Micro's third quarter 2026 earnings conference call. I will now turn the call over to Willa McManmon, Vice President of Investor Relations. Please go ahead.

Good afternoon. Before we begin, I would like to remind you that today's presentation may include forward-looking statements within the meaning of applicable securities laws. These statements reflect our current views and expectations regarding future events, including, but not limited to, financial performance, strategic initiatives, market conditions, and regulatory developments. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control.

Actual results may differ materially from those expressed or implied in these statements due to a variety of factors, including changes in economic conditions, interest rates, competitive pressures, and other risks detailed in our most recent filings and public disclosures.

We undertake no obligation to update or revise any forward-looking statements to reflect new information or future events, except as required by law. In addition, today's discussion may include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in our earnings materials, which are available on our investor relations website. With that, I will now turn the call over to Paul.

Thank you, Willa, and good afternoon, everyone. I am extremely pleased with our performance in the third quarter. Last quarter, we delivered the best second quarter in Ingram Micro's history. This quarter, we built on that momentum and delivered a record third quarter, exceeding our guidance on all financial metrics. We are also raising the fourth quarter and full year 2026 guidance that we provided at our Capital Markets Day in September.

This quarter's execution and the increased guidance reinforces the confidence we shared in September. Ingram Micro is increasingly becoming a different company, combining unmatched global reach, deep technology expertise, and trusted relationships with an intelligent operating system that is changing how we go to market, how our customers grow, and how value is created across the technology ecosystem. Mike will cover the financials in detail, but I would like to underscore the factors that drove the strength in the quarter.

First, demand remains healthy and our growth was broad-based. Net sales grew more than 20% year-over-year with double-digit FX neutral growth in three of our four regions and double-digit growth across all lines of business. Advanced Solutions was our strongest contributor, growing 40% year-over-year with another quarter of strong sales of AI infrastructure and GPUs. Lifecycle Services, which includes our renewed supply chain services and our ITAD and reverse logistics and repairs business, grew 35%. Cloud grew 30% and continued to contribute a gross profit share well into the teens.

Client and Endpoint Solutions grew 10%. Growth was also healthy across customer segments. Second, we continue to demonstrate that we are delivering both growth and operating leverage. The platform investments we have made with Xvantage are helping us improve productivity and scale the business with OpEx as a percentage of net revenue improving even as we continue to invest in future opportunities.

Third, we are seeing growing evidence that our strategy is working as we expand our role beyond traditional distribution to become the intelligent operating system at the center of the global technology ecosystem. That positioning is a result of years of building an AI-native platform with eight patents approved and more than 30 pending, a real-time data mesh capturing roughly 250 million events a day, and more than 400 AI and machine learning models that turn those signals into intelligence and ultimately business outcomes.

At Capital Markets Day, we described this evolution simply. Scale is our advantage. Intelligence is the multiplier. We are moving from traditional distribution to becoming the industry's first intelligent operating system for B2B. Our reach spans more than 165,000 customers and over 1,500 vendor partners across six continents, with the ability to serve 90% of the world's population. Our intelligence allows us to provide solutions to our customers at the speed of change.

Speed matters because the industry keeps evolving. Distribution began with hardware, vendors to distributors, to resellers, to end customers with a model built around buying, holding, and selling inventory. Next came cloud, subscriptions, and consumption, which required new ways of doing business and higher services element. AI is adding another layer of intricacy. Vendors are becoming customers are becoming vendors, and businesses need solutions that combine infrastructure, software, cloud services, and financing.

Complexity is rising faster than the industry can absorb, and we're building an intelligent operating system to solve for this ever-growing complexity for our customers. For decades, distribution connected supply to demand. Today, Xvantage, powered by the data and signals flowing through it, connects demand to supply, turning these activities across the ecosystem into actionable opportunities. This has been a deliberate multi-year journey, and we are executing it in two phases.

The first phase is Xvantage, the platform that connects our vendors, our partners, and their customers, and digitizes and automates how they do business with us on global scale. The second phase is our intelligent operating system, built on that platform foundation. Every transaction on Xvantage creates context, and our intelligence layer connects that context to real-time signals such as renewals, buying patterns, and recommendations. It turns those signals into proactive demand generation, action, and ultimately outcomes.

We are no longer just processing transactions. We are capturing intelligence that makes every interaction smarter for our vendors, our customers, and Ingram Micro. In Q3, we continue to see strength in the platform foundation. Across our 22 platform countries, average revenue per customer on Xvantage increased 39% year-over-year. Self-service represented nearly 70% of orders, up more than 10 percentage points.

Email-to-Order volume increased 33%, processing approximately $1.6 billion of revenue, and time spent per visit increased 40%. Additionally, our Intelligent Digital Assistant, IDA, continues to scale as an important part of our model, with IDA-driven revenue hitting our goal of 10% of global revenue in the quarter. These results demonstrate deeper customer engagement and show that Xvantage is becoming increasingly embedded in how our customers operate. The significant is straightforward.

Greater self-service lowers transactional costs, deeper engagement expands selling opportunities, and more intelligence improves the quality and speed of commercial decisions. We are now applying this intelligence to improve pricing, prioritization, and demand generation. During the quarter, we launched ordering via Model Context Protocol, or MCP, across 12 countries, so customers can interact and transact with Ingram Micro through AI assistants such as ChatGPT, Claude, Gemini, Copilot, or through their own agents with the controls and auditability built into Xvantage.

Anyone can use MCP, but what makes ours different is it connects securely into Xvantage, giving customers' agents access to the global data and intelligence we have built. As one of our customers, Cloud Managed Networks, put it, "The real differentiator is the intelligence it provides." Customers actively using MCP are growing their business with us at nearly four times the rate of those that are not integrated with our platform. That's the shift from digital commerce to agentic commerce, where intelligence moves from insight to action.

Turning to AI, we continue to see strong demand for GPUs and AI infrastructure. Our customers are moving into high-performance computing while focusing on governance, compliance, and security to implement real-world AI use cases. Through Enable AI, Xvantage, and our relationships with hyperscalers and technology vendors, we're helping customers move from exploration to deployment through our own services and certifications.

We are focused on three areas of opportunity. One, reselling and managing AI consumption. Two, attaching professional services around deployment, governance, adoption, and operations. And three, developing new agentic services, including the custom agents we are already building for our SMB customers. This quarter, AWS validated Ingram Micro's competencies within AI, machine learning, and data services, among others, demonstrating that we have the skills and the track record to deliver AI solutions at scale. What matters most to our customers is this.

They don't need to build an AI practice before they can sell an AI project. They own the end customer relationships, and we deliver the solution. We also have an attractive opportunity as we expand our Lifecycle Services business. We are returning to supply chain services by optimizing capacity within our existing infrastructure rather than investing in additional warehouse space. We are also expanding our ITAD and repair capabilities to help customers recover value from existing technologies while meeting strict data security and sustainability requirements.

What excites me most is that all of the transformations I just discussed are happening while the core business continues to perform, and we enable our customers to transform with us. We are growing in some of the most important technology markets in the world, investing in Xvantage, cloud, AI, and Lifecycle Services, creating new routes to market and maintaining the financial discipline necessary to generate attractive returns.

As we look ahead, I remain highly confident in our strategy and the opportunity in front of us. The scale, portfolio, and capabilities we have spent years building are producing tangible outcomes for Ingram Micro and our customers. Our customers sit at the center of everything we do, and we serve as an extension of their businesses.

Together with us, they are entering markets faster, completing work in seconds that historically took days or weeks, and using our intelligence to compete more effectively and accelerate their growth. We are beginning to see the evidence in deeper platform engagement, more proactive selling, and scalable demand generation. In summary, the opportunity to use our unique intelligence to drive demand, our ability to enable our customers to monetize AI and other high-value services, and the expansion of our Lifecycle Services business provides us with further runway to grow.

Our three-year plan supports this, demonstrating growth in operating profit at more than 2x the rate of revenue growth. Our success would not be possible without the trust of our customers and vendors or the execution of our teams around the world. With that, I'll turn the call over to Mike. Mike?

Thank you, Paul, and good afternoon. We followed the best second quarter in our history with a third quarter that again broke multiple records, delivering financial results that exceeded the high end of each of our guidance ranges. Net sales grew more than 20% year-over-year, and that is comprised of double-digit FX neutral growth in North America, Asia Pacific, and Latin America, but also healthy growth of more than 8% in EMEA.

Additionally, each of our lines of business grew double digits. The resulting nearly 15% growth in gross profit dollars, combined with continued discipline and leverage on operating expenses, yielded growth in non-GAAP net income of more than 26% on an FX neutral basis.

On top of this record growth and strong operating leverage, we also generated our second strongest third quarter cash flow to date, and our strongest for a third quarter in more than five years. These results are already demonstrating the foundation of the multi-year financial framework we laid out at our Capital Markets Day in September.

Deliver on our strategic priorities while driving further OpEx leverage and efficiency, and thus drive meaningful profit growth that outpaces our net sales growth. Looking at the quarter in more detail. Net sales of $15.22 billion were up 20.8% year-over-year in U.S. dollars and 21.2% on an FX neutral basis. Advanced Solutions led the way as our fastest-growing line of business at 40% year-over-year, driven by GPU and AI infrastructure product sets, as well as solid growth in server, networking, and storage.

Cloud grew 30% on an FX neutral basis and roughly 36% if we exclude our divestiture of CloudBlue in the third quarter of last year. As I noted at Capital Markets Day, cloud now represents a high teens percentage of our gross profit dollars year to date, and we expect it to reach nearly a quarter of our gross profit within the next few years.

Client and Endpoint Solutions grew 10%, driven by notebooks, desktops, and mobility product sales. Our Lifecycle line of business grew 35%. Geographically, both North America and APAC delivered robust quarters with strong double-digit year-over-year growth. North America led the way with net sales of $5.82 billion, up nearly 32% year-over-year, driven by growth in Advanced Solutions across networking, server, and particularly GPU and AI infrastructure.

Asia Pacific net sales were up 24% on an FX neutral basis, with strong growth in GPU and AI infrastructure in China and in mobility product sales in India and China. Latin America grew 11% on an FX neutral basis, with robust growth in cloud and Advanced Solutions. Finally, net sales in EMEA were up more than 8% on an FX neutral basis, led by growth in Advanced Solutions and cloud.

For just a bit more color on the GPU and AI infrastructure, as we have noted before, this business has continued to build and become meaningful. Even though it generates lower gross margins, the very low cost to serve nature of this business, coupled with its working capital efficiency, makes this a high ROIC opportunity.

Beyond the attractive financial profile, the strategic fit around AI and the key vendors involved remains an integral part of our longer-term strategy that we laid out at our Capital Markets Day in September. In the third quarter of 2026, net sales of GPU and AI infrastructure were more than $1.8 billion, up nearly 160% from roughly $700 million of such sales in Q3 of 2025.

Third quarter gross profit for the company came in at $997 million, up 14.6% year-over-year. Gross margin was 6.55%, down 35 basis points year-over-year. However, excluding the GPU and AI infrastructure deals in both periods, our gross margin was 7.06%, down only four basis points year-over-year, and up sequentially by 10 basis points if we also exclude such deals from the second quarter of 2026. Geographic mix also remains a factor in our margin profile.

Asia Pacific represented nearly 29% of our net sales in Q3, with gross margin of 4.45%. Gross margin for the region is up 10 basis points year-over-year, but still well below the 7.39% gross margin across our other three regions combined. That said, this lower cost to serve and very efficient region delivered an operating margin of 2% in the most recent quarter.

As Paul shared, we are in the third phase of our platform journey, which is using intelligence to drive margin growth through pricing, bundling, and calibrating IDA toward margin optimization. While that won't all happen at once, we are encouraged by the early returns. In North America, where we launched this next phase in the latter part of Q3, we have already started to see some improvements in gross margin in areas of the business where we have targeted the program thus far.

Q3 operating expenses landed at $703 million, or 4.62% of net sales, compared to 5.13% in the same period last year. The prior year included a four basis point impact from loss on the divestiture of CloudBlue and another non-core business. Excluding this, our year-over-year improvement in operating leverage was 46 basis points.

This demonstrates the continued benefits of optimization and automation from Xvantage and the restructuring actions we have taken over the past year, as well as the mix factors associated with our lower cost to serve GPU and AI infrastructure business. We achieved our goal of operating expenses at 5% of net sales or better in 2025, and we are trending well below that in 2026.

Our Q3 result already sits within the 4.4% to 4.8% OpEx leverage range we laid out in our multi-year framework in September, which we are achieving while absorbing higher SaaS and technology infrastructure costs. Adjusted income from operations was $322 million, up 25% year-over-year, with adjusted income from operation margins of 2.12%, up seven basis points, despite the gross margin mix dynamics I just discussed. Adjusted EBITDA was $390 million, up from $342 million generated in the prior fiscal third quarter. Our non-GAAP net income was $210.6 million, up 25%, and non-GAAP diluted EPS was $0.91, up 26% from the prior year, and $0.09 above the high end of our guidance for Q3.

In our Q3 guidance, we assumed a roughly 2% to 3% net benefit to net sales from supply constraint pluses and minuses, as well as a $0.01 to $0.02 negative impact related to the conflict in the Middle East. We estimate that we landed within the 2% to 3% net positive impact range from supply constraint factors that I just noted, and we believe the negative impact of the Middle East conflict ended up being around $0.01. Moving to the balance sheet.

We ended the quarter with net working capital of $5 billion, compared to $4.9 billion to close the same period last year, an increase of less than 2% against net sales growth of nearly 21%. As we also continue to deploy channel financing solutions for our customers, our net working capital of 27 days in Q3 2026 was five days better than the same period of 2025, with improvement in both inventory and payable days.

We continue to manage this area closely with a push for efficiency in how we deploy working capital in a rising ASP environment. From the standpoint of adjusted free cash flow, these factors drove an inflow of $250 million in the third quarter compared to an outflow of $110 million in the third quarter of last year. This was not only our strongest cash flow quarter for the year, but also our second-best third quarter cash flow performance ever, which comes in a quarter where we typically invest in working capital ahead of our seasonally stronger fourth quarter sales.

As we shared in our July earnings call, we did have some buildup in inventory to close Q2, a portion of which related to some strategic pre-buys. This inventory continues to sell down as expected in Q3 and the first part of Q4. Cash flow also benefited from higher income and strong management of our working capital, as I just noted. in September, we completed another secondary offering for 15.1 million shares, which included Ingram repurchasing 625,000 shares for approximately $17 million.

Year to date, we have now repurchased approximately 5.3 million shares, or $122 million from our primary shareholder, and have $53 million remaining under our current authorization for additional share repurchases associated with future secondary offerings. Across the three secondary offerings this year, our primary shareholder has meaningfully reduced its ownership position by roughly 20%, which has in turn increased our public float by nearly three times since the beginning of the year.

We also returned $22.8 million to stockholders through dividends paid during the quarter, and today announced a 2.3% sequential increase to our quarterly dividend to be paid in Q4, which is a 10% increase over the prior year. We entered the quarter with $1 billion in cash and cash equivalents and debt of $3.9 billion. Our net debt to adjusted EBITDA leverage ratio was 1.9 times, improved from 2.2 times in the year-ago quarter as we balance investing for growth with the higher profit generation we are seeing this year.

As we look to Q4, we continue to see a healthy demand environment. Before I get to our guidance, an important reminder. Fiscal 2026 is a 53-week year, and that extra week falls in our fourth quarter. Our guidance reflects this. With that in mind, we are guiding net sales of $17.5 to 17.9 billion, which represents year-over-year growth of roughly 19% at the midpoint and more than 20% at the high end. Our guide assumes a similar 2% to 3% potential positive net impact of supply constraints in Q4.

This guide also assumes continued healthy growth from GPU and AI infrastructure projects based on the pipeline that we currently see. This is our strongest top-line guide, even excluding the extra week impact, since we've been public, reflecting that we continue to see a resilient demand environment. We expect fourth quarter gross profit of $1.08 to 1.12 billion, up roughly 13%year-over-year at the midpoint.

This revenue and gross profit guidance is reflective of many of the same trends in sales mix across products, customers, and geographies that we saw in Q3, including a continued contribution from lower margin, low cost to serve GPU and AI infrastructure deals, while recognizing that the timing of these large deals can be lumpy from quarter to quarter. Excluding these forecasted GPU and AI infrastructure deals, we expect our gross margin for Q4 to be in the high six percents, as Q4 is typically a lower gross margin quarter based on other seasonal mix factors.

We expect non-GAAP diluted EPS to be in the range of $1.05 to $1.15 per diluted share. While the situation in the Middle East remains quite volatile, we assume Q4 may again be negatively impacted by approximately $0.01 to $0.02. Our EPS guidance assumes approximately 231.7 million weighted average shares outstanding and a non-GAAP tax rate of 27%. In closing, I am extremely pleased with our performance in the third quarter, which demonstrates the scalability and earnings power of our operating model.

We delivered broad-based revenue growth, expanded adjusted operating margin despite business mix pressure on gross margin, grew non-GAAP diluted EPS by 26%, improved working capital efficiency and return on invested capital, and generated our strongest third quarter adjusted free cash flow in more than 5 years. We enter the fourth quarter with healthy demand, continued momentum, and clear evidence that our operating model is scaling. Our year-to-date results, together with the guidance we are providing today, reaffirms the multi-year financial framework we laid out at Capital Markets Day.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question is from Joseph Cardoso with JPMorgan.

Hey, thanks for the question here, and congrats on the results. Maybe just for the first one, wanted to touch on, obviously, the strong growth in Advanced Solutions. Maybe just curious, any way that you can frame the growth rate if we X out the GPU AI sales there, and maybe where you are seeing the strong growth and how we should be thinking about potential contributions from pricing or ASPs, and how you guys are thinking about momentum heading into 4Q. Then I do have a follow-up there.

Yeah. I can start. This is Mike. Yeah, I think as we talked about, we saw the GPU and AI infrastructure piece grow from about $700 million last year to $1.8 billion this year. You can see the math there. We did see healthy growth, double-digit growth across the remainder of Advanced Solutions, and still seeing pretty solid strength across server, networking, storage, overall. Specialty lines, also fairly solid. So good, pretty widespread growth on that front.

Okay. Got it. And then maybe just wanted to touch on over the past couple of quarters, GPU and AI sales appear to have driven a meaningful share of the upside to the guidances that you guys provided. And maybe I think each quarter you talked about layering in maybe a more prudent outlook there, just given kind of the lumpiness.

Can you just talk about the visibility that you have in the pipeline around that business today? And should we think about this as becoming a more durable revenue run rate as we go forward where visibility improves, or is it just going to kind of remain in this handful of large projects or orders with less predictable in timing? I'm just trying to think about how we should think about this business maturing over time, and if there is kind of a roadmap or a runway, essentially, in terms of improving visibility here and predictability.

This is Paul, jump in. Your question around durability is, and Mike talked about a little bit in our guide, and I think we're being more transparent about the overall revenue in this business, and we've seen it for multiple quarters now. As we look at the pipelines, we do get visibility

to the products that were coming through. But again, as we've noted previously, sometimes there's a bit of a flush at the end of the quarter that we benefit from. We actually built that into Q4, where we see that revenue coming from. Do I think it's long-term and durable? It's appearing that way in terms of the revenue and where we keep experiencing the growth quarter over quarter.

It's appearing that it's going to be continuing, and that's what we're seeing at least through Q4. Again, on Mike's point, we pull that out, we look at all the products net of the AI deals, and we did see, as I define our core business in networking, storage, and server, good growth excluding the AI deals. We've got a really good, healthy balance across the revenue base, across the countries and regions.

With that, we're seeing more of these AI-type deals showing up in different parts of the world too, for a number of different reasons. We're seeing a balanced revenue diversification in some of these deals coming, not just in a couple of countries, but more popping up through all of the four regions.

Yeah, I think the only thing I would add, we'll continue to give that transparency on how things really wrap up the quarter, as Paul Bay did hit on and you've heard us talk about in the past. It is a little bit spotty during the quarter, and you see some lumpiness that can be a little bit harder to predict just given the constraints on the product themselves. But we're seeing good pipeline, so it's encouraging.

Our next question is from Katherine Murphy with Goldman Sachs.

Thank you very much. I wanted to ask quickly just if there's anything you could help share on the top-line expectations by segment when we think about the fourth quarter, and then I have a quick follow-up.

I can go first on that, and I won't do this by segment. I'll actually talk about our lines of business. I think that's probably what you meant more than the regional segments, but I can certainly speak to regions, too, if that helps. On the lines of business, I think we're talking about 17% to 20% rough growth rate in our guide. You have to remember, again, there is that extra week in the quarter, and that's encompassed in there.

But inclusive of the extra week, we're expecting Client and Endpoint Solutions to probably be lower double digits, similar to where it was in the quarter just completed to some degree. But healthier double digits when you get into Advanced Solutions and our Lifecycle Services business also growing nicely. Then lastly, cloud being probably the stronger double-digit spectrum, similar to what it's been throughout the year.

Back to the question on GPU and AI, that is built into that Advanced Solutions number, with that piece probably growing a little bit more than the overall average Advanced Solutions, but still healthy growth across the rest.

Great. Thank you very much. Then just to follow up, and I know we touched on this with the prior question a little bit, but by my back-of-the-envelope math, mid-teens growth in the core Advanced Solutions. You had previously talked about mid-single digit to high single digit growth there in your prior guide. Anything you can share on what drove the outperformance relative to plan in that core Advanced Solutions product offering, and if that reflects into your outlook into fiscal 4Q as well? Thank you.

Yeah, I will talk a little bit. We had very strong networking growth. The year-over-year compares were a little easier, though. Last year in Q3, our networking had very low single-digit growth, and now we are seeing solid refresh with AI infrastructure, higher bandwidth, Wi-Fi 7, campus modernization, security, and other factors. So we had very solid double-digit revenue growth in the quarter, and that is what I define to that core business minus those AI products.

We are very pleased with the networking business, especially in Q3. And the server business was good also, which I would say even stronger considering the double-digit growth that we had in Q3 of 2025. And that is being driven by the AI servers, GPU demand, spending, agentic AI, and to some extent, the higher memory and component cost. We are pleased with those two categories, minus the AI deals that came in very healthy in Q3.

In the interest of time, we ask the participants to limit themselves to one question and one follow-up. Our next question is from Ruplu Bhattacharya with Bank of America.

Hi, thanks for taking my questions. The main question is on Client and Endpoint Solutions. The segment grew 10%. How do you see the sustainability of PC demand both in the December quarter and heading into next year? If you can talk about demand trends in SMB versus mid-market customers versus larger customers, what are some of the things that can sustain demand in the PC business? I have a follow-up. Thank you.

Okay, I will take this, Ruplu . It is Paul Bay. We saw solid digit revenue growth in our PC year-over-year in Q3, and it is coming off of a big Q3 2025, a very solid double-digit growth. We would define we are in the later innings, but we are not done yet. PC growth still remains durable, still driven by the refresh. Although the units were down low double digits, the increase in ASP significantly offset that unit decline.

We are also seeing AI PCs, because I am sure the question will come up relative to what percentage of our business was AI PCs. It continues to grow and was roughly 50% of our PC revenue in Q3, which we believe is consistent with other reports from our vendors and the industry analysts as people are looking at their infrastructure and how they can run AI workloads. We continue to see demand.

To answer your question, going into Q4 to a lesser extent, but still suggesting the refresh cycle will extend into Q4. To answer your second question, some broad-based themes are what we are hearing from customers. Let me give you some color around the categories from a customer standpoint in the segment.

Our enterprise was up solid double digits. Our core VAR business was flattish, and our SMB business was up in the teens. We saw pretty good growth, as I mentioned in my prepared remarks. There is a number, I think, of different investment cycles that are playing out right now in the enterprise, the AI data centers, we continue to talk about infrastructure modernization, everything wrapped with security.

Our partners are telling us they are bullish right now near term with large pipelines in data center networking and compute, and the focus being for the enterprise customers on AI infrastructure, and really building out across compute capacity storage at the server workloads and network capacity to connect all those systems.

A little bit of a different story in SMB. SMB continues to tend to be a little bit more price sensitive. They seem to be extending their PC replacement cycles and are going to remain an important source for the remaining refresh. Some SMBs are going cloud first, as we have mentioned previously, and then moving the workloads when the budget and timing are right. We are seeing some SMBs tending to go in phases, cloud first, then go quick adoption, then networking, then compute and storage.

And then some that are looking to go with a more standardized offering and integrated stack approach on the AI business and then services. I would say in SMB, it is a little bit of a mixed bag, depending on where those end customers are on their maturity cycle, which played across the trends and reflected our results in terms of the broad growth across all of our categories.

Our next question is from Erik Woodring with Morgan Stanley.

Hey, guys. Thank you very much for taking my questions. Paul, you guys are crushing it this year. I think for the full year, you are guiding to about 17% growth if I take the 4Q midpoint. If I take that in the context of your long-term guide from the Analyst Day, can you help us understand how to think about the shape or trajectory of revenue growth as we think about into next year and beyond?

Because obviously, your comments imply that there is clear durability to this growth. Just help us pair those together, 17% growth this year, 5% growth over the next three years. Just help us understand maybe what the trajectory could look like. Then a quick follow-up, please. Thanks.

Yeah. So Erik, as I said, this is Mike. In the Capital Markets Day, we touched on this a little bit that when we look at 2027, we have a couple comparative factors. We certainly expect ASPs still have some legs of increase, but if you look at IDC or other data, that is going to come to some sort of flattening over some period of time here.

It is already probably starting a little bit more in the PC space. We also see a PC refresh that, as Paul said earlier, has some legs, but that is not going to have that similar duration. Then lastly, just mechanically, we have an extra week in the current year. So that 4% to 6% CAGR that we disclosed on the Capital Markets Day was assuming probably a lower single digit growth next year.

But that would imply certainly higher single digits for the outlying two years in that CAGR. We are still seeing pretty good durability of demand and a long-term cycle of growth here. You just have to be thinking about those couple of factors that play in there. Then most importantly, what we are really focused on is the fact that our long-term CAGR is even faster growth and gross profit, and on the bottom line, more than 2x growth of that revenue pace. So that is really what we are focused on also is the quality of revenues and where we drive the business in the right direction.

Our next question is from Adam Tindle with Raymond James.

Okay. Thanks. Good afternoon, and congrats on the results. I did want to acknowledge, obviously, the very strong growth rates, but ask about a little bit more on gross margin. I was going back through my notes in Q3 of last year, and gross margin was down 30 basis points year-over-year, citing mix. Point being, the comparison in this Q3 was not particularly difficult.

If I looked at the growth by product category, I mean, wow, Advanced Solutions growing off the chart, cloud growing off the chart, and Client and Endpoint, which would typically be lower gross margin at a fraction of growth rates of those higher margin categories, yet gross margin down another 30-plus basis points year-over-year. So I hate to set up the question that way, but I just wanted to maybe press a little bit more to address what is going on from a gross margin standpoint and why there would be pressure. Thanks.

Yeah. I will start on this, and Paul will add. I guess the starting point I would say is just calling again out the GPU and AI infrastructure. As we said, it was $700 million last year. It was nominal, really nothing in the prior year. So that created a part of that mix compare, although I think we have gotten a little bit more transparent in disclosing as we get into this year, the more specific data on that, which now has grown in this Q3 to $1.8 billion.

That is part of the reason we called out, when you look at our gross margin, excluding that outsized growth of that GPU and AI infrastructure, our gross margin this quarter was 7.06%. It was 7.10% last year. So four basis points, roughly flat from a comparative perspective. There are other mixed factors that you have to think about that has continued to be the case on a year-over-year basis. Still healthier growth in large enterprise customers.

Although we are seeing SMB growth happening for sure, as Paul hit on earlier. And we are also seeing outsized growth on an ongoing basis in Asia-Pacific, which was a smaller share of our overall revenues last year and certainly the year before than it is today now in the high 20s or even cracked the 30% barrier last quarter. Those are probably the other things I would call out that you just have to think about in the dynamics of gross margin. But on a like-for-like basis, things are trending pretty normal on that front.

The only other thing I would say is in Q3 we had a little bit more demand in our smartphone, kind of the refresh that is going on. As we know, that is efficient, and again, this gives us a good return to the bottom line, and we know how to manage the working capital, and we got free cash flow out of it. I would say those are the factors.

Strong AI, kind of PC refresh was still good. It was healthy, as I mentioned in the previous question, mobility and a little bit of large customers. Even though the SMB business was up, as I mentioned, we still had our large enterprise customers growing too. Those are the factors that we saw in the quarter.

Our next question is from David Paige with RBC Capital Markets.

Hi. Thank you for taking my question. Congrats on the great results. Mike, Paul, I wanted to ask, first question on free cash flow. Should we still expect a hockey stick in Q4? I know this year's been a little bit different than prior years. Then I have follow-up.

Yeah. David, I think we do expect to see a pretty solid cash flow in Q4. One other thing that I'll just reiterate a little bit, what we said back in mid-September at Capital Markets Day was we were really striving to see positive cash flow for this year, which would represent a pretty solid cash flow for the second half, and we're really happy with where we closed Q3, not just seasonally better, but with our second-best Q3 ever.

So a good performance there as we work through the working capital key points. But again, you have to think about also the simple growth of double digits that takes working capital. With our Q4 guide, our implied growth for the year is in the mid to upper teens. So there is working capital investment that needs to happen there. Therefore, getting to positive free cash flow for the year may be challenging, but we do expect to see healthy cash flow in Q4 for sure.

Great. Thanks. On Xvantage, obviously good to see metrics keep growing and improving. I am trying to think through the large enterprise customers and growth in SMBs. Are the large enterprise customers using Xvantage more or SMBs are using it just as more? I am just trying to figure out how that drops through operating leverage. Thank you.

Yeah. David, it is Paul. It is more an SMB play, and that is where we are seeing the growth. Again, self-service orders representing 70% of the orders. Revenue per customer, again, in our SMB and what we call our growth customers, some of the smaller end of the SMB Email-to-Order. People are transacting increased 33%, and people are spending more time on it to run their business too. I think it is important to note too, why is that happening.

Again, we have been strategic and deliberate. You have heard Mike and I talking about this for the last couple of years, and we first had to get that first phase, which was the operating model with Xvantage in the center. That was about automating everything, transactions, getting, connecting customers.

Ingram Micro Holding (INGM) Q3 2026 Earnings Call Transcript

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