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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

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Ingram Micro Holding

ingram micro holding

Welcome to the Ingram Micro First Quarter 2026 Earnings Results Conference Call. I will now turn the call over to Willa McManmon, Vice President of Investor Relations, for opening remarks. 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 Bay, our CEO.

Thank you, Willa, and everyone who joined today's call. We delivered another strong first quarter in which we grew net revenue nearly 14% on top of a strong prior year comparable and delivered non-GAAP earnings per share of $0.75. Gross profit rose by nearly 12% from last year, and operating leverage remained strong, resulting in over 20% growth in non-GAAP net income. All of these results were at or above the high end of our guidance. Advanced Solutions and Cloud led to growth, driven in part by large GPU and AI infrastructure deals we captured in North America and Asia Pacific in the back half of the quarter. We also had another quarter of strong growth in networking and servers. Cloud again grew double digits with particular strength in Infrastructure as a Service, and Client and Endpoint Solutions also grew with continued strong sales of PCs.

Regionally, Asia Pacific grew at double digits and was our second-largest region by net revenue. As I mentioned in prior quarters, India continues to make progress and performed to plan in the first quarter, including healthy top line and margin growth, while Latin America continued to deliver outsized margins, both powered by our Xvantage platform. North America's double-digit growth was driven by Cloud and Advanced Solutions, which included large GPU and AI infrastructure sales. The growth across all four of our regions underscores our unique global reach, where we have the ability to serve more than 90% of the world's population, underpinned by a unified platform strategy at global scale. I am encouraged by our performance this quarter and the momentum we see ahead. Our investment in our Xvantage digital B2B platform is increasingly becoming a competitive moat.

We made this investment ahead of the curve because we anticipated the shift now taking place across the market, where B2B customers increasingly expect the same speed, simplicity, and personalization they experience in B2C environments. We began the Xvantage journey by bringing together talent from some of the world's largest leading platform companies and combining that expertise with our deep industry knowledge. We built a real-time data mesh and deployed more than 400 AI and machine learning models designed across the end-to-end customer journey. We have progressed from building the foundation to automating workflows and reducing friction to now scaling intelligence through capabilities like Intelligent Digital Assistant, or IDA, to improve conversion, optimize pricing, and enable more proactive selling. Over time, we see further opportunity for AI to enhance margin quality, lifecycle monetization, and operating leverage. Xvantage is not a tool or a marketplace.

It is the operating system for B2B. It's a global real-time intelligence layer powering end-to-end B2B execution as we transform from a traditional IT distributor into a platform company. Xvantage's differentiation begins with its architecture and the proprietary technology underneath it. We are pleased that four of our 35+ patent-pending applications have been granted, recognizing and protecting the innovation already delivering value across our platform today. Our IP strategy is centered on solving the fragmented sales and fulfillment processes that define B2B commerce. Let me recap what these granted patents encompass. First, our vendor-agnostic framework uses our AI-driven architecture to integrate with vendors at scale, regardless of the format or underlying systems. This helps solve one of the most persistent challenges in B2B commerce by enabling real-time integration around inventory, pricing, and product data across a highly fragmented ecosystem.

Second, our dynamic SKU generation capabilities simplifies historically complex solution configuration, pricing, and transaction workflows. What once took days or weeks can now be completed in minutes or even seconds, improving the speed, accuracy, scalability, and customer responsiveness. Third, we were granted a patent for our configure and quote to order. Configure to order expands funnel creation through automation of complex configurable solutions that were once manual, generating high quote volume, allowing us to touchlessly convert orders through our automated quote-to-order capabilities. This powerful integration of AI throughout the sales life cycle is helping drive materially stronger quote-to-conversion performance. Last, our email to order patent uses generative AI to convert unstructured customer emails and attachments into structured transactions.

In the first quarter alone, it processed approximately 230,000 emails into orders, up 78% year-over-year, enabling more than $1 billion in sales with significantly lower manual touch. We are now leveraging this patent IP to enable other functionality for automating end-to-end workflow, like email to quote, further improving speed, responsiveness, and overall customer experience. Taken together, the technology behind these patents is helping improve customer experience while lowering processing costs and increasing operating leverage across the channel. These innovations extend beyond individual capabilities and reflect how we are digitizing the full transaction life cycle, from automating vendor catalog injection, configuration, and pricing to quoting and order execution through a unified AI-driven platform. With the rapid evolution of the AI market, we believe these investments position us well to navigate change and respond more quickly to capitalize on market dynamics.

We are increasingly applying intelligence across core business processes as our AI models continue to learn, improve, and scale. As an example, IDA and other AI capabilities delivered more than 153,000 proactive engagements in the quarter, helping customers convert more than $800 million in AI-led net sales during the quarter. Importantly, quote-to-conversion performance continues to accelerate, with IDA-driven opportunities converting at nearly 4x our standard baseline. Xvantage is driving stronger engagement, improving the customer and associate experience, and supporting better financial outcomes, and we are already seeing that translate into measurable results. We continue to see strong adoption of our self-service capabilities with more than two million self-service orders in the quarter, contributing to over 20% growth in average revenue per customer versus the prior year.

We are also realizing meaningful productivity gains with both revenue and margin per go-to-market resource increasing as automation enables associates to redirect time towards higher-value activities. We believe this is a strong indicator that the digital adoption, automation, and AI-enabled selling are driving greater efficiency and increasing operating leverage across the platform. Geographically, we continue to see proof points across markets. These examples reinforce that Xvantage is not limited to one region. It is a global operating model. We have moved from proving the model to scaling the model with further future expansion opportunities. In the first quarter, India and Latin America provided clear evidence that we are moving from adoption to performance. Through Xvantage-enabled capabilities, LATAM delivered the highest gross margin across our regions, up 69 basis points year-over-year.

By shifting high-velocity SMB demand to self-service and automated quoting and embedding intelligence, our business in the region is scaling efficiently with improved outcomes. In India, Xvantage is providing more pipeline, increased proactive customer engagement, stronger revenue generation, higher quote-to-order conversion, and more predictable performance utilizing the platform. In India, IDA revenue grew more than 200% quarter-over-quarter. We're innovating across the company in other ways as we invest in our partners and build advanced AI competencies. On the vendor side, I am proud to say that we just achieved a specialization for AI apps with Microsoft. Using Azure AI services, we built AI-powered capabilities that help partners close customer deals through increased automation, including streamlining the statement of work generation and accelerating sales productivity.

The specialization recognizes our professional service expertise in designing and developing AI solutions using Microsoft Azure AI and data platforms, which we can leverage on behalf of our partners to deliver more AI projects at scale. One of our key partners, Hans Meijs, President of Data41, said about the designation, and I quote, "Ingram Micro feels like an extension of our AI practice. Their specialized and validated expertise helps us guide our customers through the full journey, from initial assessment to working proof of value and production deployment." End quote. This specialization speaks strongly to how we are expanding our Advanced Services capabilities, including our ability to leverage AI with our partners to deliver technology outcomes to the millions of end businesses they serve each and every day.

With this quarter's results and the continued momentum I just spoke about, as I look at the remainder of the year, I am confident that Ingram Micro will continue executing both our short and long-term strategy by further differentiating as a platform company, regardless of the uncertainties. Our customers are at the center of everything we do, and we are grateful for them. As always, I am impressed by the talent and drive of our team who continues to deliver. With Xvantage enabling faster innovation, our patent securing our technology edge, and AI delivering measurable outcomes, we are moving from proving the platform model to scaling it. It's an exciting time for technology, and Ingram Micro's role in the ecosystem continues to expand as we embrace the opportunities ahead in this unprecedented era. With that, I'll turn the call over to Mike. Mike?

Thank you, Paul, and good afternoon, everyone. I want to start by reiterating how pleased we are with our first quarter results, which met or beat the top end of each of our guidance ranges. The strong performance was widespread geographically, with each of our four regions seeing double-digit year-over-year top-line growth in U.S. dollars, but also with solid global growth in our three primary lines of business. Looking at the quarter in more detail, net sales of $13.96 billion were up 13.7% year-over-year in U.S. dollars and up 10% on an FX-neutral basis. We saw strong double-digit growth in both Cloud and Advanced Solutions. Cloud grew 25% year-over-year on an FX-neutral basis, and that growth was actually 34%, adjusting for the CloudBlue divestiture that closed in Q3 of last year.

Advanced Solutions grew 14% year-over-year on an FX-neutral basis, driven by strength in server and networking. This also included continued large-scale enterprise deals in GPU and AI infrastructure product sets, some of which came in late in the quarter. As we've discussed in past quarters, these deals come at a low margin but are low-cost to serve. We don't typically stock for these deals, which provides for a strong return on working capital. Turning to Client and Endpoint Solutions, or CES, we saw nearly 8% growth on an FX-neutral basis, with strong demand for notebooks and desktops as the refresh cycle continues and AI PC penetration grows. As a note, this 8% growth is on top of what has been solid double-digit growth for CES in Q1 and all other quarters last year.

Geographically, we had FX-neutral growth across all four of our regions, led by just over 12% growth in both APAC and North America. North America net sales came in at $5.0 billion, and APAC was our second-largest region, with net sales of $4.1 billion for the quarter. Both North America and APAC sales were driven by strength in Cloud, and both regions also benefited from large enterprise GPU and AI infrastructure projects, I just mentioned. EMEA net sales of $3.9 billion were up 3.8% on an FX-neutral basis, with gross growth across both Client and Endpoint Solutions and Advanced Solutions. EMEA generated its strongest growth in Cloud-based Solutions. This was achieved while navigating around the challenges of the Middle Eastern conflict that started in the final month of the quarter.

Net sales in Latin America were up 10.1% on an FX-neutral basis, driven by growth in Client and Endpoint Solutions, notably notebooks and desktops, as well as strength in Advanced Solutions and Cloud-based Solutions. Before I get into more details on our results, I'd like to touch on memory supply constraints and their impact, which is a key ongoing factor in the IT industry. We are seeing increases in average selling prices, or ASPs, on certain products ranging from single-digit percentage points well into double-digit percentage points. While it is understandably more difficult for us to quantify with precision, we see some instances of pull forward of demand to get ahead of pricing. There are other factors to consider as well. First, supply constraints are creating more extended lead times and backlog to get products.

While more limited in frequency, we saw a few instances where projects are being indefinitely deferred simply because the product is not available. Second, in some limited cases for end users that have greater price sensitivity, decisions are being made to alter project scope or delay spending. Combined, we estimate the net positive impact of all of these factors on our year-over-year net sales comparison for Q1 to be approximately 2%-3%. Back to my earlier point regarding pull forward of demand. We have ongoing discussions with many of our vendors affected by supply constraints about potentially using our balance sheet for opportunistic inventory buy-in deals. While we have done some such deals and will continue to evaluate such opportunities going forward, the impact of buy-ins in our first quarter results has not been material. Now getting into some further specifics on our first quarter results.

Gross profit came in at $926 million, up 12% year-over-year, and gross margin came at 6.63% of net sales, down 12 basis points year-over-year. The mix shift towards lower margin GPU and AI infrastructure projects drove an impact on margins of roughly 35 basis points, compared to only about five basis points in the first quarter of 2025. Thus, excluding these deals, our Q1 2026 gross margins would have been roughly 7%. This margin performance was a function of growth in our higher margin Cloud and Advanced Solutions offerings, which surpassed the growth of Client and Endpoint Solutions in this comparison. Q1 operating expenses were $703 million, or 5.04% of net sales, compared to 5.11% in the same period last year.

Looking more specifically at our ongoing selling, general, and administrative, or SG&A expenses, our leverage improved year-over-year by 12 basis points. This year-over-year improvement in SG&A leverage was driven by operating efficiencies from cost reductions over the past year, the continued impact of Xvantage in driving leverage and productivity gains, as well as mix factors associated with lower cost to serve categories. While we continue to invest in Xvantage and in the business, particularly in areas like Cloud and Advanced Solutions, we expect our continued optimization efforts will allow us to keep our SG&A expenses less than 5% of net sales for fiscal 2026. Adjusted income from operations was $262 million, up 14% year-over-year, driven by our strong top-line performance and continued operating leverage discipline.

Adjusted income from operations margin was 1.88% compared to 1.87% in the first quarter of 2025, as the lower gross margin from mix of sales was offset by the OpEx leverage improvements I just discussed. An increase of 22%, reflective of not only the strong growth I just noted in adjusted income from operations, also reflective of reduced interest expense from our paydown of debt and more favorable foreign exchange impacts. First quarter non-GAAP diluted EPS came in at the high end of our guidance range at $0.75, an increase of 23% from our prior year quarter. Moving on to our balance sheet. We ended the first quarter with net working capital of $4.4 billion compared to $4.3 billion to close the same period last year.

This increase of only a bit over 2% is far less than the 13.7% increase in net sales year-over-year, as our Q1 net working capital days came in at 23 compared to 29 days in the same period of 2025. This improvement in cash cycle reflects disciplined management of our terms with and payments to vendors, our efforts to optimize inventory levels, and leveraging the capabilities of the Xvantage platform, which together more than offset a slight increase in collection days. As we mentioned in our earnings call in early March, we finished year-end 2025 with an extraordinarily low level of net working capital, therefore expected a higher-than-normal seasonal outflow of cash in Q1 of this year.

Adjusted free cash flow was an outflow of $962 million, which reflects the factors I just noted, including the natural investment in working capital to fund double-digit net sales growth. While we don't formally guide on free cash flow, we expect free cash flow trends over the next one to two quarters to be more in line with seasonal norms. I am also very pleased to note that in early March, we successfully completed a secondary offering of our stock, which further moved the ownership stake of our majority owner into public float and included us repurchasing $75 million of stock directly from our majority owner. Today we announced we are further expanding the repurchase program for future use.

We also returned $19 million to stockholders through dividends paid during the quarter. Today announced an increase in the next quarterly dividend of 2.4% sequentially and 10.5% over the prior year. We ended the quarter with $916 million in cash and cash equivalents and debt of $3.3 billion, bringing our net debt to adjusted EBITDA ratio to 1.7x to close the quarter, which has improved notably from 2.0x in the first quarter of last year and reflective of our continued reduction of debt, including the $200 million of term loan we repaid during Q1. Going forward, we will continue to balance our overall capital allocation to ensure we are making necessary investments in the business and providing return to our stockholders.

To the extent we see opportunities to also continue improving our debt leverage, we will evaluate accordingly. Now shifting to our guidance for Q2 2026. We are guiding net sales of $13.6 billion-$14.0 billion, which represents year-over-year growth of 8% at the midpoint, and is notable given the strong Q2 we had last year, in which we saw more than 10% year-over-year growth. From a category perspective, we expect Cloud to continue to lead the way with healthy double-digit year-over-year growth, with particular strength in Infrastructure as a Service offerings. We expect Advanced Solutions to also grow higher single digits with ongoing strength in servers, storage, and cybersecurity.

While we are not necessarily projecting outsized GPU and AI infrastructure projects in our guide, we will continue to participate in these projects. Client and Endpoint Solutions is also still in growth mode with notebook desktop refresh continuing. Overall, we see year-over-year growth for CES at a more moderate lower single-digit pace. Finally, we have assumed the impact of broader memory supply constraints to have a similar impact in Q2 to what I noted earlier for Q1. We expect these growth trends to yield second-quarter gross profit of $905 million-$950 million, which represents year-over-year growth in gross profit dollars of 8%-13% and also represents gross margin growth both sequentially and year-over-year. We expect non-GAAP diluted EPS to be in the range of $0.68-$0.78 per diluted share.

Included in this guide is a potential negative impact of $0.01-$0.03 per diluted share on our overall results from the volatile situation in the Middle East, where we have a relatively small but nicely profitable business. Even with this impact incorporated, our guidance calls for growth in non-GAAP diluted EPS between 11%-28%, reflecting solid profit leverage in a continuing growth environment. Our EPS guidance assumes 232.7 million weighted average shares outstanding and a non-GAAP tax rate of 27% for the quarter. In closing, I'm very pleased with our execution in Q1, and we expect to continue our trend of strong year-over-year net sales growth in Q2. While memory shortages, rising ASPs, the supply-demand dynamics, and the geopolitical environment are all fluid, we have a track record of navigating through uncertainty.

Our broad geographic reach and breadth and scale of offerings, combined with our long-term partner relationships, uniquely position us to perform during such times. We've proven this in the past, we are even better positioned today with real-time insights and capabilities provided by our Xvantage platform. With that operator, we can now open up the call to take questions.

Thank you. We'll 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 the handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question is from Katherine Murphy with Goldman Sachs.

Thank you for the question. You highlighted some headwinds related to projects either being deferred or some more price-sensitive customers altering the scope as it relates to the current cost environment. I was wondering if you could provide some more color on either the types of products or the types of projects that are being most impacted here, and then I have a quick follow-up? Thank you very much.

Katherine, this is Mike. I can start and Paul will add. We're seeing this probably across a mix of products, but it tends to be more project-based, a little bit more in the Advanced Solutions area, where there's probably a little bit more geared towards smaller customers, where there is a little bit more of that price sensitivity. Large enterprise continues to do generally continues to invest. It's across a spread of different projects. As we talked about where we're seeing ranges of price increases, probably the price increases from an ASP perspective have certainly been elevated on the PC space.

We also see that happening across server and storage, and some of the components, the GPUs themselves, to a lesser degree, when you get into networking and some other categories. That also gives you a little bit of a flavor where there would be more of that sensitivity.

Katherine, this is Paul. I'd say we've seen it in pockets. There was one instance in a smaller country in Europe where they needed a specific configuration around PCs, and the supply is not there for that specific rollout. It will eventually come. The question is, when is it going to come? We thought it was gonna happen in Q1, and it looks like it may be quarter or two out.

That's very helpful. Knowing that you only guide one quarter out, is there anything you can share based on these customer conversations, given this demand backdrop about what the back half of the year may look like from an overall enterprise IT demand environment?

This is Paul. Again, as you know, we only guide one quarter at a time. We're optimistic where we sit today, and based off of our guidance that we've given for Q2. To reiterate, our expectations are our Client and Endpoint Solutions business will grow at market, Advanced Solutions and Cloud above market. We saw that in Q1, and we built that into our guide in Q2. Some of the potential, I would say, tailwinds or opportunities is the AI use cases, and I called out one of those in my prepared remarks, is driving growth, and some of the benefits we're getting. If you look at from a customer perspective, we did see some pull forwards as Mike had mentioned. It's more around enterprise and mid-market companies.

SMB is still responding in their more near-term. What I would say is we haven't seen a significant amount of pull forwards at SMB specifically, too, and we're still seeing resiliency in the business as we sit here today. The back half of the year we did see again, continued growth and refresh around PCs and AI PCs. We feel pretty good about where we are and hope that that continues to the back half of the year.

Our next question is from Maggie Nolan with William Blair.

Hi, team. This is Matt on for Maggie at William Blair. Thanks for taking the questions. Given the current environment, I'm wondering if you can provide some more color on what you're seeing change in terms of lead times and order dynamics that you alluded to with clients and how they're evolving budgets, if at all, or shifting mid-year, given the rise in memory prices and inflation.

I can start on that. This is Mike. We answered that a little bit in the last question. There's, if you have a budget going into the year, there's gonna be a certain amount of spend. As prices go up, we're seeing some reallocation where perhaps it's just a shift in scope to something a little bit less, downshift into maybe a lesser product category, and so forth. That's the demand dynamic. Some of that is also dependent on just how long it takes to get there. Certainly the situation in the Middle East is exacerbating this with shipping delays anywhere impacted by that part of the world and branching out.

Then on top of that, the allocation of product sets by the OEMs into the higher potential products that are serving the AI demand and some of the things that are driving the constraint in the first place. It is definitely very dynamic depending on the category of product, the category of customer, and that gives you maybe a little bit more flavor of what we're seeing.

Got it. Thanks for that color. As a follow-up, in terms of Xvantage, congrats on all the progress there. I know you've alluded to the three phases, the OpEx, demand gen, and then we're starting to get into profitable organic growth. Can you update us on progress in phase III and how that's progressing so far in 2026? What's the true margin delta for a deal that is sourced and completed in Xvantage versus one of your traditional deals?

Thanks, Matt, for the question. This is Paul. As we called out, we continue to talk about, you're right, three phases. Really now it's about applying the intelligence across the business. I called out a couple of points where we saw significant growth where we're using our intelligence, and we've been training our 400+ models for over one year now. They're getting better, and they're improving. Every single day they continue to learn. We point back to IDA, our Intelligent Digital Assistant, and the active engagements we had. That was up 60% year-over-year. What we did, and we've talked about it in the prior quarter, earnings calls, what we're doing is we're fine-tuning those opportunities to be more driven around margin.

When you look at some of the growth we see coming out of Cloud, and we had a very good Cloud quarter, and you look at what we're doing around Advanced Solutions, a lot of that is being fed through the IDA getting into that third phase of what we're able to offer. One of the questions we get is how much revenue is going through IDA? I talked about it in our prior quarter, which is mid-single digits for those that are on Xvantage of the countries. The 21 countries that are on Xvantage, are going through IDA.

We have a lot of headroom to be able to roll out more IDA and our expectations and our commitment, and we're well on our way, is to have that be double digits by the end of the year of the revenue for those Xvantage countries being able to deliver through IDA. We feel very comfortable where we're at today, and the investments that we've made and the proof points that we're seeing coming out of the quarter, and as we sit here in the current quarter.

Thank you. Our next question is Erik Woodring with Morgan Stanley.

Hi. Thank you. This is Maya on for Erik today. I've two questions. Maybe just to start given the degree of pricing increases we're seeing in the market today, is there any risk to your historical cost plus pricing model? Could we see any like-for-like margin compression, just given the degree of inflation throughout the overall device ecosystem, especially on the compute side? I have a follow-up.

This is Mike. Just as a general dynamic, price increases, just like what we've talked about in the past with tariffs and other factors, that's a pass-through for us. I get your question, and there is certainly an elasticity of demand that exists. From our perspective, as we continue to distribute the products and the services that we do, we're gonna be pricing accordingly off of the prices in the market. It's really more a question of where does the demand reside? We're not necessarily gonna be conceding margin to try and capture sales. It's about an ROWC equation for us and driving the right returns and profit metrics whenever we do any sale, honestly.

Maya, this is Paul. Let me just add a little color to that. We've been through these cycles before. We've been through shortages. We've been through macroeconomic headwinds. A couple of thoughts here. Based on our broad vendor and product portfolio, we're able to offer alternatives. We're helping mitigate price increases that may be constrained. We're working with our vendors to provide bundling solutions, and we're doing that from an automated way. Being able to look at vendors saying, if you have multiple products, maybe you have a PC.

If you're buying a microphone, a camera, a display, a headset along with that PC, vendors are willing to provide maybe a better margin profile if you're bundled together. We're putting some programs around that also. With the Xvantage intelligence, as I talk about the models, we can better recommend substitute configuration, bundle product solutions, alternative vendor suppliers. Then the last thing I think which is important also is that we are starting to see some movement too, from on-prem solutions to actually Cloud. We're starting to see that, and we expect that to happen going into Q2 too. What I'd say is our goal is to help customers solve the business needs regardless of the product availability. That's what's great about Ingram Micro and our business model.

It's global, it's resilient, and we can participate in whichever direction the market goes. We're trying to provide tools and resources and alternatives based off of our business. Our solution providers, customers can go out and deliver the expectations and outcomes to their end businesses they serve every day.

Great. Thank you. That partially answers my second question. Just on given the persistence of pricing inflation and the strength in agentic AI, how do you think about that shift from on-prem to the Cloud in terms of a long-term risk to Ingram's business model?

I actually think it's a benefit to Ingram Micro's business model. If you look at the investments we've made, actually, our Xvantage platform is built off of the $600+ million that we built. We were investing ahead of the curve in the early days of Cloud 12 years ago. We've really built a platform where you can buy hardware, software, and cloud, and services all in one transaction. As we see that, and you notice by our performance, as Mike called out, minus the CloudBlue divestiture, we're up 34%, and we're guiding towards very strong Cloud business in Q2 also. That solution, which may originally been scoped on-prem, now they're getting predictability, they're getting space, they're able to move that. I'd also say that our deployments still make up six different products and services.

It's not just about one solution that you're delivering. It's about bundling and bringing that full solution together for that business outcome. I actually think it's an opportunity because it's an area that we continue to invest in, and we have very strong partnerships with each of the hyperscalers, where we can provide that service whichever direction our customers, and ultimately those end businesses want to go.

Our next question is from David Paige with RBC Capital.

Hi. Thank you for taking my question. I wanted to double-click on the 2Q net sales guide. Maybe if you could just parse out what you're expecting by region, 'cause it looks like there's been momentum sequentially across every region. I just want to think how should we think about growth within regions? Thank you.

David, this is Mike. We're pretty happy with the fact that on a U.S. dollar basis, all four of our regions grew double digits in Q1. You're right, we did see it fairly widespread. As we look to Q2, we would see a little bit of the same sorts of trends. We're seeing strength just really continue in Asia Pacific for quite some time now. That's coupled with our India business really returning to stability and growth in a more normal way, which is good to see now for a couple of quarters running. APAC probably does stand the chance to lead the way.

We still see a little bit more to the extent we do have any of the GPU or AI infrastructure deals. Those are still tending to be either in the North America or APAC region. If we do see something more than our guide there, you know, that might create some upsized growth in those markets. The only other thing I would say, and we called this out at the tail end of my guidance remarks our EPS assumption is assuming potentially a little bit of negative impact in the Middle East part of the world. Therefore, that does create a little bit of overhang just more generally on the EMEIA region, but we still see growth there as well.

That's very helpful. Thanks, Mike. Just one other thing. I think you'd mentioned for CES, low single-digit growth for 2Q. I was wondering if you could parse out network, notebooks and mobile or smartphone. Thank you.

Networks and networking, for instance, would be an Advanced Solutions. Within CES, that low single-digit growth, we don't break out the subcomponents, but the two biggest subpieces of it, just more qualitatively, are PC and desktops and then mobility devices. We're still seeing runway, as Paul said in answer to an earlier question, and it was baked a little bit into our prepared remarks as well on the PC refresh. AI PCs are growing, but they're still a  roughly a quarter of our overall PC base. We're still seeing growth there and some runway.

We see probably a little bit harder compare, which we alluded to even in our guide on the mobility side, 'cause we saw quite a bit of mobility sales in the first half actually of last year, but certainly in Q2 of last year. That compare becomes a little bit harder. That was centered a little bit more in the Asia Pac region, to be clear, last year. That would probably create a little bit of that headwind that normalizes to that lower single-digit kind of growth rate.

Thank you. Congrats on the great results.

Our next question is from Adam Tindle with Raymond James.

Okay, thanks. Good afternoon. I wanted to double-click in the Americas region, you've mentioned the AI infrastructure projects that are driving growth. This is obviously a business that has gotten a lot of attention from your primary competitor, and investors are particularly interested in this. Maybe a good forum to take a step back and talk about your capabilities around AI infrastructure. Remind us of this business, to the extent that you can provide any size on it would be helpful. Any aspiration over time to be more ODM-like a Hyve-like business, or does it make more sense to kind of stay in the supply chain lane? Thanks.

I'll start off. Thanks, Adam. This is Paul. To start off with your last point of your question, to be ODM-like, that is not in our plans today. What we're doing is looking at our partners and where the technology opportunities are. A lot of it, if you look at from an AI infrastructure standpoint, and GPU chips, so it's GPUs, it's AI infrastructure product which touch server networking storage product sets. Many of these large ones are going for proof of concepts and/or are specific builds for very, very large enterprises. We're able to help facilitate that.

I think over time, I hope that this melds into we're just talking about categories and product sets because everything's gonna be AI-enabled, but we know it's important on this journey to show how we're participating. To Mike's kind of points that he said before, which is this is very low-cost-to-serve business and it's very good ROWC business for us. We're fulfilling a lot of that product today. With that said, we really have a focus around how do we help our general 165,000 solution providers, partners on a global basis, and that's through our Enable AI program. I've talked about it. We have three growth tracks around that. How do we prepare and give awareness? How do we provide execution and training?

That third one is driving outcomes, which I talked about in my prepared remarks this quarter and then also in the prior quarter where we're doing that. We're encouraged by what we're seeing in terms of how many partners are actually moving through those phases, which means that people are getting more to the deployment side of it, so working on those outcomes. It's significantly up year-over-year, but more importantly, quarter-over-quarter. That's where we think we can play a key role in. This is about the total solution, the six different products or services and what we're doing.

Our goal is to continue to provide, you know, a B2B or B2C experience in a very fragmented B2B business through our intelligent digital experience platform, Xvantage, that we continue to focus on and how do we extend that out.

Adam, the only other thing I would add here, you asked about kind of size and we just like we say with other subcomponents, we don't really break it out. I'll just give a little bit of color here, maybe to help. The bulk of the GPU and AI infrastructure projects or product sales, I should say, fall in Advanced Solutions. There is a bit that straddles into our Client and Endpoint in the form of components, but the bigger share is in Advanced Solutions. As you can probably tell just from the margin impacts we've called out, it's been a pretty decent growth factor year-over-year, growing faster than the herd average of Advanced Solutions, as an example.

It's more about we wanna continue to drive that transparency more about where the margin is and where that's driving 'cause it does have more of an impact there, honestly. Most importantly, drive home the fact that as Paul just reiterated, this is nicely profitable business, even though it's dilutive from a gross margin perspective, just because of that low cost to serve and also the really low working capital investment associated with it.

Got it. That's probably a good bridge into my follow-up question, just on overall business and operational trends really. If you were to give me a quarter where Ingram Micro was growing top line 14%, I would say EBIT would grow faster than that. You typically get leverage in these models, but yet on the EBIT line, we're growing in line with revenue. If I look at it on a sequential basis revenue's down mid-single digits, EBIT's down 25% or so. I hear Paul, a lot of the positives around automation, Xvantage and stuff, and I would think that we would be getting better contribution margin especially given the strong growth.

What are maybe the offsets or what am I missing and how do we get back to a point where we're generating more operating leverage in the model?

Just talking a little bit more about the numbers, the mechanics of what you're getting at on the EBIT is really a function of where does the margin rate get offset by the operating efficiency. The operating efficiencies are coming through as we talked about in my prepared remarks, and I'll just focus on the SG&A numbers. You take out a little bit of restructuring as an example that we call out separately on the face of our income statement. We're seeing double-digit basis point leverage there. We're offsetting the overall margin factor.

On top of that, if it were not for the GPU and AI infrastructure projects, we actually have a year-over-year uptick of nearly 20 basis points in our gross margin as well. It's really more of that factor and where is that leverage coming through on that growth.

What you can see is, you can see this in our guide, even as you look at our reported results, while it's not EBITDA, when you take into account some of the efficiencies of debt pay downs and other factors, we're seeing healthy growth more than 1.5x the rate of growth, in fact, net income and earnings per share on a non-GAAP basis as a ratio to what our revenue growth is.

Our guide is assuming even more of that as we look to Q2 and we continue to see not only a little bit more of the mix factors improving with the outsized growth of Cloud, higher growth in Advanced Solutions than Client and Endpoint, but also the leverage still continuing from an OpEx perspective.

Just one last quick clarification. You talked about seasonal on free cash flow, and I'm just trying to put a finer point on that. We understand the dynamics in Q1 starting in about a $1 billion-dollar hole. Do you think you get to parity or positive free cash flow for the year? Is that what seasonal means? I just am not sure. I wanted to understand the parameters on what you were alluding to for free cash flow for the year. Thanks.

We've definitely seen a little bit more just general seasonality to cashflow than we historically did over the last two to three years. I think generally speaking, we're seeing outflows in the early quarters, especially Q1. We always have a little bit of an outflow in Q3 associated with some of the inventory buying for the higher sales level in Q4, and then we're seeing the larger inflow come in at the end of the year, as you saw last year. Last year was exceptional as far as where the balance sheet landed to close the year,  I wouldn't necessarily bank on that.

As I look at the rest of the year, I would look at those last couple of years just directionally, where you see perhaps a more modest outflow, but certainly modest in nature over the next couple of quarters is what we expect. I would just reiterate what we said coming into this quarter and coming out of the end of last year.

While we do expect coming out of last year having the balance sheet as low as it was and that cashflow that came in in Q4, that was an exceptional cashflow for the year. We do still expect that the ratio of free cashflow to adjusted EBITDA for the two years combined will still be north of 30%. You can kind of bank on that as well as far as what we expect as the year goes on here.

Our next question is from Ruplu Bhattacharya with Bank of America.

Hi. Thanks for taking my questions. Mike, Paul, as you look into the rest of fiscal 2026, can you talk about the relative growth of Advanced Solutions versus Endpoint? Specifically, in the Endpoint Solutions, what PC unit growth are you factoring in for the year? As you look at demand from SMB versus larger enterprise, is it trending as you had expected or is anything weaker or stronger than you had expected? Same question on the Advanced Solutions side. How are you seeing demand for server, storage, networking trending? I have a follow-up.

I'll start. We saw good growth in all those categories you just mentioned in the quarter. As we guide, we're looking for strength in all those categories too. I'm actually pleased with the continued momentum and the refresh from a PC standpoint. It was in, call it, the mid to high teens for the quarter. When we say double-digit growth, it was good, and we think we're gonna continue to see that. That's coming off of very significant growth last year. Our desktop notebook was high double digits, so we continue to grow there. We are seeing continued networking, server, I'd say also cybersecurity, is we're seeing strength in that also. We see that, and that's what we built in from a Q2 guide.

We're not really looking at from a back half of the year, and I go back to some of the ways we're helping mitigate and trying to keep the demand aspects of how we can help fulfill, and then some of the opportunities of looking at different solutions, looking at different bundles, how we can focus on if it's an impact moving from an on-prem to a Cloud Solution. Mike, I don't know if you have any other comments.

Ruplu, I would just reiterate what I said earlier on that CES piece, where we're guiding to lower single digits. It's still solid growth. We don't really break into the units as you asked, but we're still seeing solid growth when you blend sort of the mix of units and ASP increases on the PC and desktop, and still see some of the traction continuing to grow on the AI PCs as we've talked about. It's really more that smartphone compare that levels that number off a little bit, overall.

Remember, not too unlike some other aspects of our business, smartphones are very low margin. They are low-cost to serve as well and generally move pretty fast. It is a lower margin business that we see down overall year-over-year. Networking, server, cybersecurity on the Advanced Solutions end, all decent growth categories.

Cloud, as we talked about still seeing very healthy double-digit growth, especially around Infrastructure as a Service.

Got it. Thanks for the details there. Mike, can I ask you to talk a little bit about OpEx and CapEx? You've had good success with Xvantage. How do you see spending trending on Xvantage going forward, and how should we think about overall CapEx? On the OpEx side, is there, do you have levers to drive OpEx lower? How should we think about that trending?

Good question. I don't think much has changed on this front, to answer that initially, and Paul can add to this. On the Xvantage story what we see is probably another four to five quarters where we see a bit more of the outsized spend continuing. Once we get into the middle of next year, we see more steady state. That's not too different from what we said a couple quarters ago, where we see that kind of a timeline playing out here. That's really more deployment now than it is design. There's always gonna be design and development happening as we roll out new functionality. As we said, we have 21 out of 57 countries deployed with the most significant functionality.

There is some tail there, which segues to the second part of your question. We have deployed this in our largest countries, a majority of our revenues now trade through Xvantage, but there is still that tail where we can still bring some of the automation and efficiency to some of those additional countries, and that deployment's happening over the coming quarters.

Thank you. This concludes our question-and-answer session. I would now like to turn the floor back over to Paul Bay for any closing remarks.

Thank you for joining us today and for your continued support. We are proud of our Q1 performance and results. We are executing across the business to deliver continued growth and innovation. Our patented Xvantage platform is a clear differentiator, and our investments ahead of the curve align with the rapidly scaling AI market. We are positioned well to change the IT distribution market, and we are energized at what's ahead. We look forward to updating you on progress next quarter. Have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Ingram Micro Holding (INGM) Q1 2026 Earnings Call Transcript

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