Ingram Micro (INGM)

IT distribution giant Ingram Micro (NYSE:INGM) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 8.3% year on year to $12.28 billion. Guidance for next quarter’s revenue was better than expected at $11.97 billion at the midpoint, 1.4% above analysts’ estimates. Its GAAP profit of $0.29 per share was 28% below analysts’ consensus estimates.

Company Overview

Operating as the crucial link in the global technology supply chain with a presence in 57 countries, Ingram Micro (NYSE:INGM) is a global technology distributor that connects manufacturers with resellers, providing hardware, software, cloud services, and logistics expertise.

IT Distribution & Solutions will be buoyed by the increasing complexity of IT ecosystems, rising cloud adoption, and demand for cybersecurity solutions. Enterprises are less likely than ever to embark on these complicated journeys solo, and companies in the sector boast expertise and scale in these areas. However, cloud migration also means less need for hardware, which could dent demand for large portions of the product portfolio and hurt margins. Additionally, planning for potentially supply chain disruptions is ongoing, as the COVID-19 pandemic showed how damaging a pause in global trade could be in areas like semiconductor procurement.

Ingram Micro's primary competitors include global technology distributors such as TD SYNNEX (NYSE:SNX), Arrow Electronics (NYSE:ARW), and ScanSource (NASDAQ:SCSC), as well as regional players like ALSO Holding (SWX:ALSN), Esprinet (BIT:PRT), and cloud-focused distributors such as Pax8 and AppDirect.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $48.93 billion in revenue over the past 12 months, Ingram Micro is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because finding new avenues for growth becomes difficult when you already have a substantial market presence. To accelerate sales, Ingram Micro likely needs to optimize its pricing or lean into new offerings and international expansion.

As you can see below, Ingram Micro’s sales grew at a sluggish 1.3% compounded annual growth rate over the last five years. This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Ingram Micro’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

This quarter, Ingram Micro reported year-on-year revenue growth of 8.3%, and its $12.28 billion of revenue exceeded Wall Street’s estimates by 5.8%. Company management is currently guiding for a 3.7% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 1.8% over the next 12 months. While this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Ingram Micro was profitable over the last five years but held back by its large cost base. Its average operating margin of 1.8% was weak for a business services business.

Analyzing the trend in its profitability, Ingram Micro’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Ingram Micro generated an operating profit margin of 1.6%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Ingram Micro’s full-year EPS dropped 20.9%, or 9.9% annually, over the last two years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Ingram Micro’s low margin of safety could leave its stock price susceptible to large downswings.

In Q1, Ingram Micro reported EPS at $0.29, up from $0.22 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Ingram Micro’s full-year EPS of $1.24 to grow 99.7%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Ingram Micro broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.

Taking a step back, we can see that Ingram Micro’s margin dropped by 1.4 percentage points during that time. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s becoming a more capital-intensive business.

Ingram Micro burned through $230.2 million of cash in Q1, equivalent to a negative 1.9% margin. The company’s cash burn increased from $135.8 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Ingram Micro historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 11.3%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Ingram Micro’s ROIC decreased by 3.8 percentage points annually over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Ingram Micro reported $881.6 million of cash and $3.96 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.32 billion of EBITDA over the last 12 months, we view Ingram Micro’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $157.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Ingram Micro blew past analysts’ revenue and EBITDA expectations this quarter. We were also glad its revenue guidance for next quarter slightly exceeded Wall Street’s estimates. On the other hand, its EPS missed. Still, this print had some key positives. The stock remained flat at $19.68 immediately after reporting.

Updated: May 15, 2025 at 11:28 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Ingram Micro.

We see the value of companies helping consumers, but in the case of Ingram Micro, we’re out. To kick things off, its revenue growth was weak over the last five years. And while its scale makes it a trusted partner with negotiating leverage, the downside is its declining EPS over the last two years makes it a less attractive asset to the public markets. On top of that, its low free cash flow margins give it little breathing room.

Ingram Micro’s P/E ratio based on the next 12 months is 6.9x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $24.08 on the company (compared to the current share price of $20.88).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

To get the best start with StockStory, check out our most recent stock picks, and then sign up for our earnings alerts by adding companies to your watchlist. We typically have quarterly earnings results analyzed within seconds of the data being released, giving investors the chance to react before the market has fully absorbed the information. This is especially true for companies reporting pre-market.