TD SYNNEX (SNX)

IT distribution giant TD SYNNEX (NYSE:SNX) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 7.2% year on year to $14.95 billion. The company expects next quarter’s revenue to be around $15.1 billion, close to analysts’ estimates. Its non-GAAP profit of $2.99 per share was 10.1% above analysts’ consensus estimates.

Company Overview

Serving as the crucial middleman in the technology supply chain, TD SYNNEX (NYSE:SNX) is a global technology distributor that connects thousands of IT manufacturers with resellers, helping businesses access hardware, software, and technology solutions.

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.

TD SYNNEX competes with other major IT distributors including Arrow Electronics (NYSE: ARW), Ingram Micro (privately held), and ScanSource (NASDAQ: SCSC), along with various regional distributors across its global markets.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $60.01 billion in revenue over the past 12 months, TD SYNNEX 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.

As you can see below, TD SYNNEX’s sales grew at an incredible 23% compounded annual growth rate over the last five years. This shows it had high demand, a useful 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. TD SYNNEX’s recent performance shows its demand has slowed significantly as its revenue was flat over the last two years.

This quarter, TD SYNNEX reported year-on-year revenue growth of 7.2%, and its $14.95 billion of revenue exceeded Wall Street’s estimates by 4.4%. Company management is currently guiding for a 2.8% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 1.7% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below the sector average.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

TD SYNNEX’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 2% over the last five years. This profitability was inadequate for a business services business and caused by its suboptimal cost structure.

Looking at the trend in its profitability, TD SYNNEX’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.

In Q2, TD SYNNEX generated an operating margin profit margin of 2.2%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term 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.

Sadly for TD SYNNEX, its EPS declined by 1.5% annually over the last five years while its revenue grew by 23%. However, its operating margin didn’t change during this time, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

In Q2, TD SYNNEX reported EPS at $2.99, up from $2.73 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects TD SYNNEX’s full-year EPS of $11.74 to grow 6.8%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

TD SYNNEX has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.2%, lousy for a business services business.

Taking a step back, we can see that TD SYNNEX’s margin dropped by 2.5 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.

TD SYNNEX’s free cash flow clocked in at $542.9 million in Q2, equivalent to a 3.6% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

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).

TD SYNNEX historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.5%, 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. Unfortunately, TD SYNNEX’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

TD SYNNEX reported $767.1 million of cash and $4.11 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 $1.74 billion of EBITDA over the last 12 months, we view TD SYNNEX’s 1.9× net-debt-to-EBITDA ratio as safe. We also see its $123.2 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 enjoyed seeing TD SYNNEX beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 3.4% to $131.99 immediately after reporting.

Updated: July 15, 2025 at 12:33 AM EDT

Before investing in or passing on TD SYNNEX, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

TD SYNNEX isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its declining EPS over the last five years makes it a less attractive asset to the public markets. And while the company’s scale makes it a trusted partner with negotiating leverage, the downside is its low free cash flow margins give it little breathing room.

TD SYNNEX’s P/E ratio based on the next 12 months is 11.3x. Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $152.17 on the company (compared to the current share price of $142.11).