Ingram Micro (INGM) Q4 2025 Earnings Transcript

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Date

Monday, Mar. 2, 2026 at 5 p.m. ET

Call participants

• Chief Executive Officer — Paul D. Bay
• Chief Financial Officer — Michael Zilis

Takeaways

• Net sales -- $14.88 billion for the quarter, up 11.5% year over year in U.S. dollars and 9.1% on an FX-neutral basis, representing growth across all regions.
• EPS -- Non-GAAP diluted earnings per share reached $0.96 for the quarter, compared to $0.92 last year and above the high end of guidance.
• Adjusted free cash flow -- $1.63 billion for the quarter, the highest quarterly amount in over a decade, with full-year adjusted free cash flow of $1.1 billion.
• Gross profit -- $966.4 million for the quarter, representing a gross margin of 6.5%, down 51 basis points, primarily due to heavy sales mix in lower-margin client and endpoint solutions and Asia Pacific mix.
• Operating expenses -- $656.7 million in the quarter, at 4.41% of net sales, improving 74 basis points year over year.
• Working capital -- Net working capital at period end was $3.6 billion, down from $4.1 billion, with working capital days improving to 24 from 26.
• Debt reduction -- $125 million paid on term loan in 2025 and another $200 million repaid in February, totaling $1.89 billion in paydowns since 2022.
• Regional performance -- Asia Pacific net sales rose 14.6%; EMEA increased 13.9% in dollars (5.9% FX-neutral); North America net sales grew 9.3% to $5.1 billion.
• Advanced solutions -- Net sales grew 11.3% FX-neutral in Q4, led by server, storage, cybersecurity, and large-scale enterprise GPU and AI infrastructure deals.
• Client and endpoint solutions -- Segment grew 8.8% with robust demand for notebooks and desktops, extended by the ongoing PC refresh cycle.
• Cloud segment -- EMEA delivered strong double-digit growth in Cloud; overall Cloud is forecasted for double-digit growth in 2026 guidance.
• xVantage platform -- Self-service orders were up over 100% year over year; average revenue per xVantage customer up 14% sequentially and over 30% year over year, enabling productivity gains and margin expansion opportunities.
• AI initiatives and IDA -- The IDA digital assistant generated over half a million engagements and converted over 100,000 opportunities into orders representing billions in sales, yielding nearly three times normal conversion ratios; IDA revenue comprised a mid-single-digit percent of total but is expected to surpass 10% in 2026.
• 2026 guidance -- Net sales expected in the $12.45 billion to $12.80 billion range (2.8% growth midpoint), gross profit of $840 million to $895 million (implying ~6.87% margin midpoint), and EPS guidance of $0.67 to $0.75; client and endpoint solutions to be flat to low-single digit growth, Advanced Solutions in the low to mid-single digits, Cloud in double digits.
• Insurance proceeds -- Operating expense leverage was assisted by insurance proceeds related to a previously disclosed matter, partially offset by reserves and final settlements incurred in the same quarter.
• Patent approvals -- Two new patents granted, including for “email-to-order” (ETO) generative AI automation, with 35 more patents pending on the xVantage platform.

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Risks

• Gross margin declined 51 basis points due to heavy sales mix in lower-margin client and endpoint solutions and increased APAC contributions, plus a 15 basis point impact from large, low-margin GPU and AI infrastructure deals.
• Fourth quarter insurance proceeds benefitted operating expenses but were offset by new reserves, expenses for final settlements, and prior business losses from a previously disclosed cybersecurity incident.
• Management noted, "it is too early to see the impact" of price elasticity on SMB demand in the context of rising prices, introducing uncertainty in future demand patterns.
• Guidance includes caution of "higher-than-seasonal normal use of cash in 2026" due to low year-end working capital, with the commitment to positive free cash flow but an anticipated temporary outflow.

Summary

Ingram Micro Holding Corporation (NYSE:INGM) reported broad-based revenue growth in all regions and categories, with new records set for adjusted free cash flow and notable debt reduction. The xVantage digital platform delivered marked gains in customer productivity, average revenue per customer, and self-service adoption, while AI-driven sales capabilities—such as IDA—demonstrably improved conversion and contributed increasing revenue share. Cloud and Advanced Solutions are expected to outpace corporate average in 2026, with Cloud guided for double-digit growth and AI infrastructure sales continuing to play a strategic role in large enterprise fulfillment. Management committed to maintaining operating leverage and positive free cash flow, despite working capital seasonality and potential mix-related pressure on margins, while capital allocation priorities balanced further deleveraging, increased dividends, and a newly authorized $100 million share buyback focused on Platinum share purchases.

• xVantage platform's self-service and data-driven automation yielded lowered headcount and higher gross profit per go-to-market head in countries where deployed.
• Patent portfolio expansion included approvals for generative AI-powered ETO and a pipeline of 35 pending applications supporting platform automation.
• Asia Pacific contributed double-digit revenue growth but at gross margins approximately 250 basis points below the company average, reinforcing APAC's low cost to serve but profit/mix challenges.
• Management emphasized the company is prepared for continued volatility in tariffs, price changes, and supply chain contracts, with the ability to use global reach and vendor relationships to adapt to shifting OEM and channel partner terms.
• No material pull-forward in customer orders occurred in Q4, and guidance does not assume notable GPU or AI deals in Q1, but management maintains flexibility to strategically buy in response to price increases.
• CloudBlue and Enable AI initiatives are delivering structured AI monetization frameworks to partners, moving customers from initial awareness into repeatable, outcome-based AI deployments across diverse verticals.
• Dividend has been sequentially raised by approximately 2.5% each quarter since the IPO, and a $100 million share buyback authorization supplements ongoing capital return to shareholders via both debt repayment and dividends.

Industry glossary

• xVantage: Ingram Micro Holding Corporation's proprietary digital cloud and data platform enabling integrated end-to-end automation, AI-driven sales, self-service, and analytics for partners and customers.
• IDA (Intelligent Digital Assistant): An AI-powered assistant embedded in xVantage, enabling proactive customer engagement, sales opportunity conversion, and migration to higher-margin offerings.
• ETO (Email-to-Order): A patented, generative AI-based solution that automates the conversion of customer email orders into touchless system entries, improving order processing speed and accuracy.
• AgenTeq: A branded AI/ML roadmap and set of automation tools within xVantage focusing on sales enablement and workflow improvements for partners.
• CloudBlue: A multi-channel, multi-tier digital commerce platform provided by Ingram Micro Holding Corporation offering subscription, billing, and orchestration management for cloud services via SaaS.
• MSP (Managed Service Provider): A company delivering outsourced IT services, including cloud, security, and enterprise solutions, often targeted by Ingram Micro Holding Corporation enablement programs.

Full Conference Call Transcript

Paul D. Bay: Thank you, Willa. Good afternoon, and thank you, everyone, for joining today's call. I am pleased with our strong execution and results in the quarter and for the full year. In the fourth quarter, we grew revenue by 11.5%, with growth across all regions, and delivered EPS of $0.96, both exceeding the high end of our guidance. We also delivered adjusted free cash flow of $1.6 billion in the quarter, the highest quarterly level in more than a decade, allowing us to well surpass our goal of generating adjusted free cash flow at a rate of 30% or more of adjusted EBITDA for the year.

The top line strength in the quarter was driven by client and endpoint solutions business, and we again had significant sales of GPU and other AI-related products in our Advanced Solutions business, which we believe positions us well to further pursue AI attach opportunities as customers move from the compute to application layer. From a customer category perspective, enterprise remained quite strong, while SMB continued to improve for a fourth straight quarter of sequential growth. Geographically, we had top-line growth across all four regions. Over time, we expect mix to improve favorably from a margin perspective as client and endpoint solution sales moderate and we execute on our Advanced Solutions and Cloud initiatives, driven by our xVantage platform.

We are also very pleased with our strong results for the full year 2025 with net revenue up 9.5% and non-GAAP net income up 8.6%. We were able to support the strong pipeline of growth while demonstrating solid operating leverage. Because of our xVantage platform and our ongoing AI initiatives, we are able to redeploy many of our associates to high value-add go-to-market initiatives to better support our customers. We say that Ingram Micro Holding Corporation has transformed to become aggressively digital while remaining amazingly human, and it is this combination of skills that is allowing us to deliver value to our customers in an increasingly complex market.

Our xVantage platform uniquely positions us to help our customers succeed by digitally connecting vendors and customers at scale across the ecosystem, where we play end-to-end across the demand and supply chain. As we have previously discussed, we are moving through the three phases of xVantage value creation, with the first being OpEx efficiency, the second top-line growth, and the third using data to drive growth and enhance margins and operating leverage. In 2025, we made great strides implementing the second phase of revenue growth and put in place the building blocks to capture the third phase, which will begin taking effect this year.

During 2025, we delivered billions of dollars of revenue through the xVantage platform, as we meaningfully scale critical enablement capabilities for our customers and increase the consistency and predictability of revenue and operating income. We have been building xVantage for three years with proprietary data, a real-time global data mesh, and over 400 embedded AI/machine learning models powering in our AI differentiation. With AI, architecture matters, and an ERP-agnostic digital platform can deliver capabilities that a portal simply cannot. Through our proprietary real-time AI factory, which includes product ingestion, data enrichment, intelligent pricing, forecasting, and agentic workflows, we are improving the sales productivity, pricing discipline, forecasting accuracy, and cost to serve.

While the high-growth AI infrastructure category may temporarily compress margins in the near term, our platform-led AI architecture is designed to convert revenue scale into structural operating leverage and sustainable profit expansion. With xVantage capabilities, we are better serving our customers while empowering them to better serve the millions of end customers that rely on their competencies and capabilities. An example of how we are doing this is our intelligent digital assistant, which we call IDA, I have discussed in prior quarters. During 2025, IDA enabled over a half a million proactive engagements, assisting our customers in converting over 100,000 opportunities into orders worth billions of dollars.

IDA had a multiplier effect on our partners' outcomes enabling the conversion of opportunities to sales orders at almost three times normal conversion ratios, and those solutions contain higher-value Advanced Solutions and Cloud products almost twice as often as our non-IDA transactions. IDA enables us to accelerate the sales cycles of our partners, increase their opportunity-to-sale conversion ratio, and focus on higher-value segments. While revenue from IDA is still in mid-single digits as a percentage of our overall revenue, we see that a majority of IDA orders contain higher-margin Advanced Solution and Cloud products, and we believe we will exit 2026 with IDA representing double-digit percentage of the total revenue.

While we continue to scale IDA across our operations, we also piloted our AgenTeq Assistant, which we call Sales Brief Agent. This interactive agent combines multiple internal and external data sources, enabling associates to identify new opportunities with our customers and convert them into value-added conversation. The agent also assists with value proposition development and the creation of appointments and follow-up tasks. It also helps customers convert these opportunities into sales orders with their end customers. An example of the power of Sales Brief Agent comes from our Canadian operation.

Using the agent, our team identified opportunities with a customer to provide a solution for a large, multi-quarter implementation with one of their end customers, and highlighted an additional opportunity to migrate the software solution of another customer to high-value cloud-based alternatives. We are in the early stage of unleashing the full potential of our AgenTeq roadmap; we plan on expanding Sales Brief Agent globally during the first half of this year. In addition to IDA and Sales Brief Agent, we are seeing tangible impacts across the platform. For example, in 2025, on the xVantage platform, self-service orders were up over 100% versus a year ago, improving productivity and enhancing customer experience.

Average revenue per customer on xVantage increased by 14% sequentially from Q3 to Q4 and over 30% year over year. In the largest country where we have rolled out xVantage, overall headcount has decreased, and the revenue and gross profit per go-to-market head have increased. These points are representative of how xVantage is driving efficiency while freeing up time for high-value personal customer engagement. Underscoring how differentiated our technology is, we were recently granted two patents, and, as we have mentioned, we have over 35 patents pending to further automate and accelerate our customers' go-to-market. A recently approved patent is for email-to-order, or what we call an ETO.

This patent recognizes our automated solution that converts email orders into touchless order entries using generative AI technology. We receive millions of emails annually that we can now process through ETO. This patent is a significant milestone for our team, and there are more to come. Proprietary capabilities like ETO further illustrate how the xVantage platform is driving optimizations from days to minutes in many areas of the business. For the last three years, we have been building xVantage on a modern data foundation. This has enabled us to incorporate AI quickly and organically into our own platform and transform the way in which we operate.

We wanted to bring the lessons we have learned during this process to our partners and customers, so in 2025, we launched Enable AI to help them accelerate their own AI journey. This program is already delivering tangible results; we are seeing more partners join every quarter. Through our digital journey with xVantage, we can help our customers to first understand, then sell and deliver AI to their end customers. Although it is early days, we are encouraged as more customers move from awareness to delivering outcomes to their customers. One example of how customers are using Enable AI is a U.S.-based managed service provider, or MSP, serving the regulated and industrial verticals.

After the MSP took the Enable AI assessment, our team facilitated a structured workshop to educate them on growth tracks for data, AI platform, and cloud. We provided targeted training sessions with our respective technical experts along the way. The customer went from chasing custom one-off AI projects to delivering consistent, repeatable solutions for their strategic vendors. Across their customer base, they are now deploying AgenTeq automation for customer support, rolling out AI-enabled inventory, supplier workflow automation, intelligent document processing, and AI governance solutions. What was unstructured AI ambition is now a repeatable revenue motion they are deploying across multiple industries with initial six-figure engagements.

Looking back on 2025 and all that we have accomplished with the initiatives I just discussed, I am incredibly proud of our team members. Together, we have navigated through complex issues including tariffs, interest rates, and geopolitical uncertainty, as well as the cybersecurity incident in July, which we effectively remediated within days. Our associates' ability to deliver to over 165,000 customers and 1,500 vendor partners in 57 countries during this time is truly a testament to their talent, determination, and resilience. In 2025, thanks to our team members' global reach, decades of customer relationships, and our xVantage platform, we grew better than the market.

Our full-year results highlight our focus on working capital management and profitable growth while in tandem transforming the way distribution operates. For over four decades, we have stayed nimble in responding to the ever-changing IT spend environment, and the speed of change is faster today than it has ever been. As we look forward to the full year 2026, we are confident that we will continue to successfully navigate the inevitable challenges in the market as we have done in past cycles. Considering the data points and initiatives I have shared, we are poised to further leverage the power of our platform while maintaining the core customer-centric foundation that has made us successful.

We have the people, the platform, and the programs to empower our customers in a new era of technology. Thank you as always to our team members, our customers, and our vendors who have worked beside us as we transform. We look forward to another year of relentless execution and innovation. I will now turn the call over to Michael Zilis.

Michael Zilis: Thank you, Paul, and good afternoon. I would like to reiterate how pleased we are with how we closed out the year, exceeding the high end of our guidance range for both net sales and earnings per share, and generating $1.6 billion of adjusted free cash flow in the quarter. I would like to start my comments today by touching on a few fiscal 2025 highlights. As with prior quarters, I will be focusing primarily on our non-GAAP numbers. Net sales for the full year 2025 were $52.6 billion, representing an increase of 9.5% from 2024 and up 9% on an FX-neutral basis.

We saw year-over-year increases in net sales across each of our geographic segments, punctuated by our Asia Pacific region, which drove solid double-digit growth throughout the year. As Paul touched on and as we have noted before, we saw a significant sales mix shift toward our lower-margin client and endpoint solutions across all of our geographic segments. We also saw strength in large enterprise customers, servers, and GPU and AI infrastructure projects, and geographically toward our Asia Pacific region. All of these trends yield lower average margins, but all are also lower cost to serve. Full-year operating expenses were $2.63 billion, or 5% of net sales, representing a 47 basis point improvement in OpEx leverage from 2024.

While a portion of this leverage is a result of the sales mix I just noted, it is also reflective of the benefits of the cost reductions we have taken over the last two years. We also continue to see increased operational efficiencies play out as part of the xVantage roadmap we have been discussing now for some time. Non-GAAP net income for the year was $181.9 million, up 8.6% over the prior year, and non-GAAP diluted EPS was $2.90. Adjusted EBITDA for the year was $1.36 billion, up from $1.32 billion in 2024. Moving now to the fourth quarter. Net sales were $14.88 billion, up 11.5% year over year in U.S. dollars and up 9.1% on an FX-neutral basis.

I am pleased to report that Advanced Solutions returned to growth with net sales up 11.3% on an FX-neutral basis. This was driven by server, storage, and cybersecurity, but also includes continued large-scale enterprise GPU and AI infrastructure product sets. Client and Endpoint Solutions grew 8.8% with strong demand for notebooks and desktops as the refresh cycle has continued through 2025 and now into 2026. From a geographical perspective, we had FX-neutral growth across all four of our regions, led by 14.6% year-over-year growth in APAC, and with North America not far behind, generating net sales of $5.1 billion, up 9.3% over prior year.

Both Asia Pacific and North America sales benefited from the large enterprise GPU and AI infrastructure projects I have just mentioned. North America also saw strong growth in server and storage categories, and both regions saw strength in client and endpoint solutions driven by PCs. EMEA net sales of $4.63 billion were up 13.9% year over year in U.S. dollars and up 5.9% on an FX-neutral basis, with growth across all lines of business, including strong double-digit growth in Cloud. Finally, net sales in Latin America were $1.08 billion, up 6.6% in U.S. dollars and up 1.2% in constant currency, driven by strength in sales of client and endpoint solutions, offset partially by softer results in Advanced Solutions and Cloud.

Turning to our customer categories, we saw the fourth consecutive quarter of sequential growth in SMB. We remain encouraged by this trend and the role xVantage is playing in helping us serve this and all of our customer categories. Fourth quarter gross profit came in at $966.4 million, or 6.5% of net sales, down 51 basis points from the same period last year. The year-over-year decrease in gross margin was driven primarily by continued heavy sales mix in our lower-margin client and endpoint solutions, as well as higher business growth coming from our Asia Pacific region.

To elaborate on this geographic impact, as an example, our Asia Pacific gross margin averaged roughly 250 basis points less than the overall average margins of the company, but it is also worth pointing out that our cost to serve across Asia Pacific is also much better than the rest of the world. In addition to these factors, gross margin was also impacted by continued strength in large enterprise customers and significant project-based business in GPU and AI infrastructure product sets.

These AI-related project sales alone drove an impact in Q4 of more than 15 basis points on gross margins, as these projects continue to be large enterprise deals that are sold on more of a fulfillment basis, which also makes them lower cost to serve and very working capital efficient. But as we have talked about in the past, this investment into GPU and AI infrastructure is also strategically important in the long term as AI becomes more accessible and we move across our broader customer base from enterprise, where our complementary services capabilities also yield greater profit. Q4 operating expenses were $656.7 million, or 4.41% of net sales, compared to 5.15% in the same period last year.

The year-over-year improvement in operating leverage of 74 basis points reflects the continued benefits of optimization and automation from xVantage, as well as a positive recovery via insurance proceeds that we expect to receive related to a previously disclosed matter. While these proceeds drove a net benefit in Q4, most of which we had baked into our guidance for the quarter, it is offset to a decent extent by reserves and expenses in this quarter for final settlements associated with this matter as well as the loss of business impacts incurred earlier in the year.

During the quarter, adjusted income from operations totaled $350 million, and adjusted income from operations margin came in at 2.35% compared to 2.29% in the same period last year. Our non-GAAP net income for the quarter was $226.7 million compared to $213.1 million in the comparable period last year. Fourth quarter non-GAAP diluted EPS was $0.96 compared to $0.92 in the same period last year and above the high end of our guidance range for the quarter. Fourth quarter adjusted EBITDA grew to $439 million compared to $418.1 million in the comparable period last year. Turning now to our balance sheet.

At the end of Q4, net working capital was $3.6 billion compared to $4.1 billion at the same point last year, reflecting significant reductions in working capital investment to close out the year. Fourth quarter working capital at days improved to 24 days from 26 in the same period last year. Our continued focus on return on working capital, including the expanded use of channel financing solutions to accelerate cash conversion, allowed us to end the quarter with $1.86 billion of cash and cash equivalents and debt of $3.2 billion. This resulted in our net debt to adjusted EBITDA leverage ratio improving sequentially from 2.2 times to 1.0 times.

As a result of these factors, our fourth quarter adjusted free cash flow was $1.63 billion compared to $337.2 million in the prior fiscal fourth quarter, representing our highest quarterly result in more than a decade. This landed our adjusted free cash flow for the full year at $1.1 billion compared to $443.3 million in the prior fiscal year. I previously discussed the seasonality of our free cash flow, and I am pleased to have well exceeded our goal of realizing 30% or more of our full-year adjusted EBITDA to free cash flow in 2025. During 2025, we also paid down $125 million of our term loan balance, and we repaid an incremental $200 million in February.

This brings our total repayments on term loans to $1.89 billion since the beginning of 2022. During 2025, our interest expense was lower by $35.8 million year over year, primarily as a result of these debt pay downs. Shifting now to our guidance for 2026. We are guiding net sales of $12.45 billion to $12.80 billion, which represents year-over-year growth of approximately 2.8% at the midpoint. This is comprised of flat to low-single-digit growth in client and endpoint solutions, low to mid-single-digit growth in Advanced Solutions, and double-digit growth in Cloud. We expect first quarter gross profit of $840 million to $895 million, which would represent gross margins of roughly 6.87% at the midpoint.

We see mix improving in the new year, so this represents a very solid 38 basis point sequential improvement over Q4 2025 and 12 basis point improvement versus 2025 at the midpoint of this guidance. We expect non-GAAP diluted EPS to be in the range of $0.67 to $0.75 per diluted share, which is based on weighted average shares outstanding of approximately 236 million and a non-GAAP tax rate of 27% for the quarter. Finally, while we do not guide on free cash flow, it is likely that we will see a higher-than-seasonal normal use of cash in 2026 as we came out of 2025 with a very low level of working capital, as I touched on earlier.

But our commitment to generating free cash flows remains. We still expect to realize well over 30% of our adjusted EBITDA generation to free cash flow over 2025 and 2026 combined, while we continue to manage our balance sheet with a focus on investing in the business, profitable growth, and quality of sales over time. In closing, I am very happy with how our team continued to execute on overall operating efficiency. We continue to optimize, setting us up very well to capitalize on a curve of upward profitability as we see higher-margin growth opportunities present themselves going forward. With that, operator, we are ready for the question-and-answer session.

Operator: Thank you. We will now open for questions. Our first question is from Eric Woodring with Morgan Stanley.

Eric Woodring: Hey, guys. Thank you very much for taking my question. I would love if you could maybe unpack the exact drivers underlying the revenue guidance in the first quarter. I see the really strong gross margin improvement sequentially and modest year over year. I understand that kind of segment-level guidance that you have given, but can you just maybe give us a little better flavor on, for example, PC refresh or AI and GPU-enabled sale? Asia Pac. Just want to understand maybe a little bit more detail what you are kind of seeing or what you expect to see in 1Q? And then a quick follow-up, please. Thank you.

Michael Zilis: Sure, Eric. This is Mike. I will start on that, and Paul can follow if needed. So as we said in our prepared remarks, we are assuming, on the CES side, flat to low-single-digit growth. And the real factor there is we do still see runway on the PC refresh going out for still a couple of quarters as we see demand still pretty strong there. But the compare is certainly a much bigger compare to Q1 of last year where we also saw great strength in that category.

We also had quite a bit of mobility sales in our Q1 of last year, so our mobility subcategory, which is the second biggest—we do not break out the specifics of the subcategories, but it is the second biggest within CES—and that is actually forecast to be down year over year. So you end up with, again, kind of flattish to low-single-digit growth in client and endpoint. But we are encouraged where we see continued solid growth more in the low to mid-single digits in Advanced Solutions with server, storage, and cyber still being quite strong. We are not assuming any notable GPU deals. It does not mean we are not still participating in those GPU and AI infrastructure deals.

They are large, and they come along every so often in a handful of our countries. We are not assuming any notable of those in Q1. And then lastly, Cloud growing at double digits where we continue to see strength in infrastructure as a service, modern workplace, and a handful of other areas. The only other thing I would just touch on quickly, as you alluded to it, is where do we see sort of supply constraints? I think overall, I would call our revenue estimates conservative in this regard because we are starting in Q1, starting to see ASPs increase. Did not really see that in Q4. We did not see any notable pull forward in Q4 either.

But we are starting to see those price increases kick in, which would have an increase in revenue as well as cost of sales. But the wildcard there is where is the sort of fungibility of the demand cycle through that, and it is also taking a little bit longer to get the product because of the constraints that exist. So we sort of offset some of the revenue growth from the ASP standpoint with some of those other, you know, more broader demand and timing factors. So hopefully, that gives you a little bit more color.

Eric Woodring: No, that is great. Thank you for that. And then just a quick follow-up was—and you touched on it—was just commentary or thoughts around pull forward. It was not above seasonal. We have heard that from some of your peers, but I would love to kind of understand what exactly you saw and, more importantly, how you protect yourself from that as we look into this period of higher prices and the potential for that to—

Michael Zilis: Yes. So I can take the first half of that one too. As I just said, we really did not see anything notable for pull forward in Q4. It remains to be seen how that plays out in Q1, but I sort of gave you a bit of that color on how we are thinking about it from a revenue perspective just now. How we protect ourselves? We are constantly discussing with our OEM partners. We know well in advance or at least decently in advance when and if price increases are coming in, that can afford some opportunity to do buy-ins strategically that we may pursue.

And that is another reason why we also assume as we look out at Q1, as I mentioned in my prepared remarks, a bigger-than-normal seasonal potential outflow of free cash in Q1 as we do work with the vendors to capture those opportunities when they arise.

Paul D. Bay: So the only other thing—this is Paul—is I will give you a little bit more color on the demand and the conversation we have been having with our customers and our vendors. So we kind of look at the demand into two dimensions: one is the price elasticity and two is the demand. And so we are really gauging elasticity of demand, and particularly in the SMB markets that we serve, and it is too early to see the impact on that right now. On the supply side, I have had conversations with many of the top largest of our vendor partner CEOs over the last couple of weeks, primarily around Advanced Solutions and then to some extent the PC.

So server, storage, and kind of what the allocation will look like for the mid-market and SMB channels if there is demand. So they have all confirmed that there will be allocation if there is demand. So I think the real question will be that price elasticity and how that does potentially impact demand and how those prices get absorbed within each of the different product sets.

So we are working—the last thing I would say is we are working with our vendors on all potentially alternative solutions, things like on the enterprise level shifting from what we call CTO, or configured to order, now moving it to build to order, which helps minimize impacts to pricing and leverages the current available inventory to help make those solutions work. So those are a couple of things we are doing real time with our vendor partners and our customers.

Eric Woodring: Awesome. Thanks for all the color, guys. Good luck.

Paul D. Bay: Thanks.

Operator: Our next question is from Catherine Murphy with Goldman Sachs.

Catherine Murphy: Thank you for the question. I was wondering if you could talk more about the momentum you are seeing in the AI infrastructure enablement side. If you could talk more about the role that Ingram Micro Holding Corporation and distributors more broadly play in addressing enterprise needs for AI and the infrastructure that you may be selling beyond GPUs? If there is anything you could share to help us quantify how big this opportunity was in the quarter and where the opportunity could go to for the full year. Thank you very much.

Paul D. Bay: Yes. I will start, and Mike, you can jump in. Mike called it out in his prepared remarks that about a 15 basis point impact that those products that we define as both GPU and an AI-enabled product infrastructure is what we are looking at. So it did have an impact. We do not call out the revenue necessarily, Catherine, but if I could take a step back, this is all about how do we monetize GPU and the related product set. So as I mentioned, the AI-enabled program that we have had, there are really three growth tracks that we have there.

It is about preparation and awareness, and training, then third, which is most important, which is monetizing and driving outcomes. So if we look at the people that were coming through the funnel and the prep and awareness, versus actually working through the outcomes, we have seen significant increases in the percent of partners that are not just coming into that first step, but getting to the second and the third step. And I called some of that out—one example or use case that we had in this last quarter in my prepared remarks. So we are definitely seeing that opportunity for us to play a role in that.

I think it is similar to—if you go back, but even at a much quicker pace—if we go back a dozen years ago around Cloud, there was a lot of education before it came to the monetization. We are seeing that happen at a much quicker pace now with GPU and these AI-enabled infrastructure products. So we will continue to monitor that and see as people continue to move through that pipeline and get to working on those outcomes. As I mentioned, we played a pivotal role in that most recent use case that I mentioned in the prepared remarks.

Catherine Murphy: Thank you. And just as a quick follow-up, noted that these deals are dilutive from a gross margin perspective, but how we think about the cost to serve and overall EBIT margin profile for some of these AI deals?

Michael Zilis: Yes. They are quite low cost to serve because most of these are sold on—right now what we are selling is more on a fulfillment basis. So not a lot of cost attached to that and also very working capital efficient. We are not stocking these deals in advance. They are bespoke and run through on a very quick manner through our balance sheet.

Operator: Our next question is from Samik Chatterjee with JPMorgan.

Samik Chatterjee: Hi, thanks for taking my question. And maybe, Paul, if I can start on the first one, just in relation to what you are hearing from your customers about any visibility into the second half and their current sort of purchasing behavior, what are they telling you about any sort of demand drivers for the second half? And curious if you are seeing the same level of visibility that you see typically at this time of the year into the second half? Any thoughts around that? And I have a follow-up. Thank you.

Paul D. Bay: Yes. So this is Paul. We have not seen—and we only guide obviously one quarter out—but I will give you the conversation that we are seeing from a customer perspective. Again, working with our vendors and our customers, I think the enterprise, when you look at budgets, is preparing for what they are seeing for the remainder of the year, scheduling that out. As you trickle down more into kind of mid-market, but really SMB, I think it is more fluid right now in terms of what those opportunities are and what the challenges and headwinds are, and, like I mentioned, the price elasticity.

So we are seeing more planning at the enterprise level for budgets for the remainder of the year, and SMB is starting to have more conversations around what that looks like. Again, in uncertain environments, we have a great track record of navigating uncertain markets, and because of our reach and scale, we get good visibility globally on all the moving activities. So we are staying very connected to our vendor community and making sure we are having conversations down and through our channels throughout each of the different geographic regions.

So I would say, in the end, it is still a little bit fluid as we sit here today, and we have not seen, as Mike mentioned, a material pull forward as we sit here where we are in our Q1.

Samik Chatterjee: Got it. Got it. And maybe just to follow-up for Mike. Mike, you did mention for the 1Q guide that you are not assuming any GPU enablement deals as such for now. If you were to see some of those come through, would we expect the same sort of trade-off on gross margin that you had in 4Q, which is a slightly lower margin percentage on the gross margin side, and then essentially being accretive to operating level? Is that sort of the way to think about the 1Q guide in terms of when you see those revenue come in?

Michael Zilis: Yes. That is exactly right to me. That would be the characteristics we would expect if we do capture some of those deals.

Paul D. Bay: What I want to make sure—in Mike's prepared remarks or what we spoke about—it was no material difference than what we have already seen. So we will still be participating in that business in Q1. It is just that we are not seeing anything different than what we have seen and discussed over the last couple of quarters.

Operator: Our next question is from David Page with RBC.

David Page: Hi, thanks for taking my question and thanks for all the color provided so far. I know it is early—not sure if you will be able to answer this—but there has been, I guess, a fluid situation with how tariffs are working and just geopolitics. I was wondering if that was baked into the 1Q guide and how you are thinking about 2026?

Michael Zilis: Yes. So I think certainly, we would not have a quarter without more tariff news, I guess. But it is something we have been living with, quite frankly, since the first Trump administration really—there is a heightened tariff environment. I would just reiterate, they are passed through for us, so we are not absorbing tariffs in the U.S. We are importer of record on a minority of products we purchase, so usually that price is already baked in from the vendor.

We do continue to monitor it because, as you have heard us say before, certainly anything that will spark a more inflationary environment can have some impact on demand and probably even a little bit more so in the more profitable SMB categories where there is more sensitivity there than perhaps in the large enterprise where we have seen that category of customers be a little bit more impervious to the tariff environment. But we just continue to watch it just like everybody else at this point.

Operator: Thank you. Our next question is from Ruplu Bhattacharya with Bank of America.

Ruplu Bhattacharya: Hi, thanks for taking my questions. Mike and Paul, you talked about the PC refresh cycle continuing. How long do you think that continues? And how are you thinking about the mix of client and endpoint versus Advanced Solutions in fiscal 1Q and maybe overall in fiscal 2026? You have guided, it looks like, gross margin to about 6.9% in fiscal 1Q. What are the puts and takes that we should keep in mind as that progresses throughout the year? And I have a follow-up.

Paul D. Bay: Yes. This is Paul. I will start off. We saw double-digit growth in Q4, and as we mentioned, as we have talked about going into 2025, the refresh was a little delayed, then it accelerated. So we had good growth through each of the quarters and, again, double-digit growth in Q4. I would define it as we are in the middle to the beginning of maybe the back half of the refresh. There are still hundreds of millions of units that need to be replaced out there, which implies that there is still a refresh that could go well into 2026. As you have heard from probably our OEM partners, some have said upwards of 40% have not been upgraded.

The market remains durable, with a significant portion not refreshed from a Windows 11 standpoint. Again, the industry analysts would say there are still hundreds of millions that are out. If you look at a little bit, we get asked about AI PCs and the refresh that was happening there, and we are still seeing that kind of being in the middle teens with regard to AI PC. I think the question comes down to what I touched on briefly, which is around the price sensitivity or price elasticity as prices go up on components, what are their other alternatives. So we are looking at other alternatives. How do you look at potentially different features within PCs?

Maybe everyone does not need to have a touch screen, maybe not the same memory. So we are looking at alternatives, and I point back, Ruplu, that in uncertain environments we have figured out how to manage through this, and I think with success. One of the differentiating value propositions that Ingram Micro Holding Corporation has is our global reach. So as vendors look to be more narrow about their supply potentially—supply and demand—a lot of times we benefit because we have that reach in all the different regions so we could be more pinpoint in making sure that we are delivering on that demand.

And again, on the other product sets, as we talked about, we are just now starting to see those price increases starting to hit, but as we sit here today, it has not impacted our demand so far.

Ruplu Bhattacharya: Okay. Thanks for the details there, Paul. Mike, as a follow-up, can you talk about your capital allocation priorities either in terms of debt pay down versus buybacks versus M&A? Also talk about areas of investment. I think you said average revenue per customer on xVantage grew 14% sequentially. Does that factor out other factors like just the growth of the overall economy? Is that specifically related to the benefit of xVantage? And if so, then is that an area that you continue to invest in?

Paul D. Bay: Thank you. I will answer the last question, and then Michael will get into the financials and the capital allocation. To reiterate, self-service orders were up over 100% versus a year ago, which is driving more productivity across the entire ecosystem and a better customer experience. Our average revenue per customer is up 14% sequentially and 30% year over year. These are xVantage stats, so independent of the overall company stats for the businesses that are not on xVantage. Then in the largest countries where xVantage is deployed, total headcount in those countries was down but both revenue and our gross profit per go-to-market head had increased. So again, we are driving productivity, and that is related to xVantage too.

So we are seeing the benefits. And the last thing I would say is the three phases of xVantage were about driving frictionless and streamlining operations, driving OpEx; the second one is around demand generation and growth; and then that third one that we are entering in 2026 is around profitable organic growth and making sure we are matching supply and demand more intelligently.

Michael Zilis: So, Ruplu, on the capital allocation, I think we are going to continue to just stay the course with what you have seen us doing, which I am pretty pleased with where we have been landing. We, as we just announced in this earnings, repaid another $200 million of our term loan in February after year end and have now brought—we are approaching $2 billion in total pay downs of debt over the last handful of years. So we have continued to delever very well with cash flow generation. While we are investing in xVantage organically, we have not done a lot of M&A.

We still have the dry powder to do that very easily, especially with smaller tuck-in acquisitions having been more of the wheelhouse of the last few years that do not cost a lot of money but really bring in tremendous skill sets, technical skills, or vendor alignment in different ways. It does not mean we cannot also, with our capital structure, pursue a larger deal if that opportunity presented itself, and I would never say never to that, but that has not been our main strategy.

And then lastly, from a return to shareholder perspective, we are proud to continue to be paying a dividend really right out of the gate when we went public, but we have also sequentially raised that dividend by about 2.5% every quarter, and we did that again for this quarter to be paid in a handful of weeks. So we continue to drive that part of the return to shareholders as well. Certainly, longer term, when we have a different kind of overall holding structure from an ownership perspective, share buybacks would also be, in normal course, a potential tool.

But last but not least, I would just point out we did authorize also a $100 million share buyback that we just announced in this release as well. It is really more of purchasing additional shares from Platinum that would happen adjacent to any follow-on offerings of stock.

Ruplu Bhattacharya: Okay. Thank you for all the details. Appreciate it.

Operator: Our next question is from Adam Tindle with Raymond James.

Adam Tindle: Paul, I wanted to start with the topic du jour on component and memory costs. Some of your vendors have been pretty explicit on their intention to revisit contract terms with channel partners. I think Cisco was pretty explicit in their prepared remarks, and some of the others have followed with some of that. I wonder, based on the Q1 guidance here, it looks like gross margin is getting better. So I am not seeing that guided in the numbers. But maybe you could talk qualitatively on what you are seeing in terms of the vendor OEMs and those contract terms with channel partners, any impact you are seeing or expecting from here?

Paul D. Bay: Yes. Thanks, Adam. So as it relates to the terms, yes, there are multiple vendors. It depends on what categories, too, that you are looking at. Some are in terms of how long prices are good for; some are end-user dependent on a purchase order; pricing fluctuations. So yes, there are a number of different things, and we are used to managing in that complexity and being able to do that. And, again, I go back to my comments I made around one of the advantages of Ingram Micro Holding Corporation is our global reach.

So if vendors are looking for a clean supply chain down to demand, meaning the end user, it comes back very quickly back into us, and we can communicate to them. So we have, you know, quote-unquote “war rooms” right now going on to make sure we are looking at that demand and back to my comments of the CEOs that I have been speaking with, which is we will manage to what their contractual terms that they are trying to get out there because they are all trying to figure out what is their competitive advantage with regard to capturing share in this uncertain environment and price increases. So we are sitting right in the middle of that.

And again, the fact that we have 1,500 different vendors on a global basis and 165,000 customers globally allows us to look at what are the alternatives to other solutions at the same point. So you are right. You are seeing what we are hearing, too, which is vendors are changing their terms, whether it is time to contract, whether it is how long pricing is good for, back orders, you have to have a PO from an end user all the way back through the supply chain. And again, we have managed through this in a number of different areas in the past.

Adam Tindle: Got it. Maybe just a follow-up. AI is the other topic and obviously driving upside in the quarter. I wonder, Paul, with the significant sales of GPU, your philosophy on capturing AI growth, and I mention that because it seems like you are participating in some of the fulfillment aspects. Some of the competitors out there go beyond that and do build and assembly and things like that in AI data centers. I am wondering if you are inching your way in that direction or how you kind of think about investing in AI, where it makes sense to participate, versus where it does not. If I could sneak just one quick one in for Mike to clarify.

That free cash flow comment, the 30% combined of adjusted EBITDA for 2025 and 2026—I am thinking that is implying that 2026 may be a cash use year, but I just wanted to clarify because there are a couple of different ways to do this. Thanks, guys.

Michael Zilis: Yes. I will just hit that one real quick first and then let Paul talk on the AI piece. While we said we expect to be well over that 30% threshold for the two years, we do expect, and we are pushing the business towards, being cash flow positive—just not to the same degree as what we saw in this last quarter and last fiscal year given where we closed the year at. And the big variable there, Adam, as I said earlier, would be whether we do see buy-ins coming on a quarter-by-quarter basis. But for the full year, we still expect to be cash flow positive when it all settles down.

Paul D. Bay: And so I will answer the question around GPU. We have expanded it a little bit more. You have heard us talk about GPU and monetization of the GPUs, and I said if it goes from proof of concepts and high-end compute and moves downstream, that is where our Enable AI really participates. So helping partners not only understand but sell and deliver AI at scale, which some of that is GPU and the monetization around that. There are services that we can provide. I gave a little bit of color in my prepared remarks about the use case.

So actually, we are looking at it, we think, differently than some of the other markets and on a global basis of how we can capture not just GPU monetization, but we call it GPU and AI infrastructure on a go-forward basis. So it is, on that GPU specifically, much lower cost to serve, so it is still good return on working capital and profit to the bottom line. We are going to continue to support that because we sit right in the middle of an ecosystem where we are to capitalize on where those opportunities are.

But what you will see us continue to build are services and capabilities around how we can help our customers really understand, deliver, and service AI at scale on a go-forward basis.

Adam Tindle: Very helpful. Thanks.

Operator: Our next question is from Maggie Nolan with William Blair.

Maggie Nolan: Hi, thank you. So there are a lot of companies and a lot of distributors talking about AI enablement and digital platforms, and I would like you to maybe double click on your competitive positioning and what in particular you think the capabilities within xVantage or elsewhere in the business that would be hardest for your competitors to replicate over the next couple of years?

Paul D. Bay: I will take that, Maggie. Thank you for the question. This is Paul. If you look at—we have been on this journey for three years. There are really three different areas. First, we created a data mesh, which is not a data lake. It allows us to use infrastructure and the information differently from an overall architecture. We say architecture matters. So first, we got the opt-out, the clean data. We pulled that out.

Secondarily, we talk about our 400 models that we have been training for over a year, which are AI/machine learning models and which has allowed us, as we mentioned last earnings call, to really get into now doing journey and process mapping—how to best deliver AI agents on a go-forward basis. That is what we are able to do with our Sales Brief Agent. So we think architecture is completely different. Say it another way, we are building innovation, we are not just integrating or connecting like legacy distribution has done before. I like to say intelligence and data—ultimately, where we are going—is the new business-to-business operating system.

So we are going to continue to build and innovate, not just integrate and connect with regard to our systems. It is all real time, it is global. We have 35 patents pending; we had two approved, which again demonstrates the innovation that we are building. And so we are going to continue to make that investment and make sure that ultimately we have the intelligence and data that really help drive our customers to better outcomes more efficiently and effectively with their end businesses.

Michael Zilis: Maggie, one other thing I would just add to that is also geographic presence. So these larger GPU deals that we are talking about are tending to happen probably more predominantly in North America and APAC regions, and our presence across APAC and ability to serve that and actually have a global conversation with these OEMs that others would not be able to have as readily is another function of our footprint that is advantageous in this regard.

And the last thing I would say, Maggie—global, but really a single pane of glass—so for me, a single pane of glass as we started this journey is you have hardware, you have software, you have services, and you have Cloud, all in a single platform to be able to transact as opposed to having multiple different systems, multiple different people attached to it. So you can basically deliver an end-to-end experience through all things technology.

Maggie Nolan: Okay. Thank you. And then mix improvement in 2026—should we expect a linear gross margin improvement quarter over quarter? Or are these large AI infrastructure projects going to introduce some lumpiness?

Michael Zilis: Yes. I can take a first pass at that, Maggie. This is Mike. So I think we are not guiding beyond Q1, but you can see our guide implies a pretty healthy sequential increase, but also year-over-year, double-digit basis point improvement in gross margins, which is really a function of how we see that mix play out as I mentioned in my prepared remarks and also in answering the question earlier. Now if we were to see more outsized AI infrastructure and GPU deals come into play that skew more towards that, it would be a bit dilutive to that margin.

But it would be accretive to gross profit dollars and accretive to overall operating income dollars, as those deals are. So that is the only thing I would just call out that could be a variable as far as seeing that margin improvement in Q1. As we look out further, we are focused on driving growth of Advanced Solutions and Cloud faster than market and to grow client and endpoint with market, whatever market may be across those categories. That is not anything new. We expect to continue to do that, and that, too, would create accretion to margin over time.

Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to Paul D. Bay for any closing comments.

Paul D. Bay: Thank you for joining today's call. Proud of the progress we are making in Q4 performance and results. We exceeded the high end of our guidance in revenue and EPS along with strong free cash flow generation at the highest quarterly level in more than a decade. As we look forward to full year 2026, we are confident that we will continue to successfully navigate inevitable challenges in the market, as we have done so in past cycles. To reiterate again, we have the people, the platform, and the programs to empower our customers in a new era of technology and look forward to continued execution and innovation into 2026. Have a great rest of your day.

This concludes today's conference call. You may disconnect your lines at this time.

Operator: Thank you for your participation.

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