Ingram Micro Holding Corp Aktie

Welcome to Ingram Micro's Third Quarter 2026 Earnings Conference Call. I'll now turn the call over to Willa McManmon, Vice President of Investor Relations. Please go ahead.

Good afternoon. Before we begin, I would like to remind you that today's presentation may include forward-looking statements within the meaning of applicable securities laws. These statements reflect our current views and expectations regarding future events, including, but not limited to, financial performance, strategic initiatives, market conditions and regulatory developments. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. Actual results may differ materially from those expressed or implied in these statements due to a variety of factors, including changes in economic conditions, interest rates, competitive pressures and other risks detailed in our most recent filings and public disclosures. We undertake no obligation to update or revise any forward-looking statements to reflect new information or future events, except as required by law.

In addition, today's discussion may include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in our earnings materials, which are available on our Investor Relations website.

With that, I will now turn the call over to Paul.

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

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

First, demand remains healthy, and our growth was broad-based. Net sales grew more than 20% year-over-year with double-digit FX-neutral growth in 3 of our 4 regions and double-digit growth across all lines of business. Advanced Solutions was our strongest contributor, growing 40% year-over-year with another quarter of strong sales of AI infrastructure and GPUs. Lifecycle Services, which includes our renewed supply chain services and our IT asset disposition and reverse logistics and repairs business grew 35%. Cloud grew 30% and continue to contribute a gross profit share well into the teens. Client and Endpoint solutions grew 10%. Growth was also healthy across customer segments.

Second, we continue to demonstrate that we are delivering both growth and operating leverage. The platform investments we have made with Xvantage are helping us improve productivity and scale the business with operating expense as a percentage of net revenue improving even as we continue to invest in future opportunities.

And third, we are seeing growing evidence that our strategy is working as we expand our role beyond traditional distribution to become the Intelligent Operating System at the center of the Global Technology Ecosystem. That positioning is a result of years of building an AI-native platform with 8 patents approved and more than 30 pending, a real-time data mesh capturing roughly 250 million events a day and more than 400 AI and machine learning models that turn those signals into intelligence and ultimately, business outcomes.

At Capital Markets Day, we described this evolution simply. Scale is our advantage, intelligence is the multiplier. We are moving from traditional distribution to becoming the industry's first Intelligent Operating System for B2B. Our reach spans more than 165,000 customers and over 1,500 vendor partners across 6 continents with the ability to serve 90% of the world's population. And our intelligence allows us to provide solutions to our customers at the speed of change and speed matters because the industry keeps evolving. Distribution began with hardware, vendors to distributors, to resellers to end customers with a model built around buying, holding and selling inventory.

Next came cloud, subscriptions and consumption, which required new ways of doing business and higher services element. Now AI is adding another layer of intricacy. Vendors are becoming customers, customers are becoming vendors and businesses need solutions that combine infrastructure, software, cloud, services and financing. Complexity is rising faster than the industry can absorb, and we are building an intelligent operating system to solve for this ever-growing complexity for our customers. For decades, distribution connected supply to demand. Today, Xvantage, powered by the data and signals flowing through it connects demand to supply, turning these activities across the ecosystem into actionable opportunities. This has been a deliberate multiyear journey, and we are executing it in 2 phases.

The first phase is Xvantage, the platform that connects our vendors, our partners and their customers and digitizes and automates how they do business with us on global scale. The second phase is our intelligent operating system built on that platform foundation. Every transaction on Xvantage creates context and our intelligence layer connects that context to real-time signals such as renewals, buying patterns and recommendations. It turns those signals into proactive demand generation, action and ultimately, outcomes. We are no longer just processing transactions. We are capturing intelligence that makes every interaction smarter for our vendors, our customers and Ingram Micro.

In Q3, we continue to see strength in the platform foundation. Across our 22 platform countries, average revenue per customer on Xvantage increased 39% year-over-year. Self-service represented nearly 70% of orders, up more than 10 percentage points. Email-to-Order volume increased 33%, processing approximately $1.6 billion of revenue and time spent per visit increased 40%. Additionally, our Intelligent Digital Assistant, IDA, continues to scale as an important part of our model, with IDA-driven revenue hitting our goal of 10% of global revenue in the quarter. These results demonstrate deeper customer engagement and show that Xvantage is becoming increasingly embedded in how our customers operate.

A significant is straightforward. Greater self-service lowers transactional costs, deeper engagement expands selling opportunities and more intelligence improves the quality and speed of commercial decisions. We are now applying this intelligence to improve pricing, prioritization and demand generation.

During the quarter, we launched ordering via Model Context Protocol, or MCP across 12 countries, so customers can interact and transact with Ingram Micro through AI assistants such as ChatGPT, Cloud, Gemini, Copilot or through their own agents with the controls and auditability built into Xvantage. Anyone can use MCP, but what makes ours different is it connects securely into Xvantage, giving customers' agents access to the global data and intelligence we have built. That's one of our customers' cloud managed networks put it, the real differentiator is the intelligence it provides and customers actively using MCP are growing their business with us at nearly 4x the rate of those that are not integrated with our platform. That's the shift from digital commerce to agentic commerce, where intelligence moves from insight to action.

Turning to AI. We continue to see strong demand for GPUs and AI infrastructure. Our customers are moving into high-performance computing while focusing on governance, compliance and security to implement real-world AI use cases. Through Enable AI, Xvantage and our relationships with hyperscalers and technology vendors, we are helping customers move from exploration to deployment through our own services and certifications. We are focused on 3 areas of opportunity: one, reselling and managing AI consumption; two, attaching professional services around deployment, governance, adoption and operations; and three, developing new agentic services, including the custom agents we are already building for our SMB customers.

This quarter, AWS validated Ingram Micro's competencies within AI, machine learning and data services, among others, demonstrating that we have the skills and the track record to deliver AI solutions at scale. What matters most to our customers is this. They don't need to build an AI practice before they can sell an AI project. They own the end customer relationships, and we deliver the solution. We also have an attractive opportunity as we expand our Lifecycle Services business. We are returning to supply chain services by optimizing capacity within our existing infrastructure rather than investing in additional warehouse space. We are also expanding our [ ITAD ] and repair capabilities to help customers recover value from existing technologies while meeting strict data security and sustainability requirements.

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

As we look ahead, I remain highly confident in our strategy and the opportunity in front of us. The scale, portfolio and capabilities we have spent years building are producing tangible outcomes for Ingram Micro and our customers. Our customers sit at the center of everything we do, and we serve as an extension of their businesses. Together with us, they are entering markets faster, completing work in seconds that historically took days or weeks and using our intelligence to compete more effectively and accelerate their growth. We are beginning to see the evidence in deeper platform engagement, more proactive selling and scalable demand generation.

In summary, the opportunity to use our unique intelligence to drive demand, our ability to enable our customers to monetize AI and other high-value services and the expansion of our Lifecycle Services business provides us with further runway to grow. And our 3-year plan supports this, demonstrating growth and operating profit at more than 2x the rate of revenue growth. Our success would not be possible without the trust of our customers and vendors for the execution of our teams around the world.

And with that, I'll turn the call over to Mike. Mike?

Thank you, Paul, and good afternoon. We followed the best second quarter in our history with a third quarter that again broke multiple records, delivering financial results that exceeded the high end of each of our guidance ranges.

Net sales grew more than 20% year-over-year, and that is comprised of double-digit FX-neutral growth in North America, Asia Pacific and Latin America, but also healthy growth of more than 8% in EMEA. Additionally, each of our lines of business grew double digits. The resulting nearly 15% growth in gross profit dollars, combined with continued discipline and leverage on operating expenses, yielded growth in non-GAAP net income of more than 26% on an FX-neutral basis.

On top of this record growth and strong operating leverage, we also generated our second strongest third quarter cash flow to date and our strongest for a third quarter in more than 5 years. These results are already demonstrating the foundation of the multiyear financial framework we laid out at our Capital Markets Day in September. Deliver on our strategic priorities while driving further operating expense leverage and efficiency and thus drive meaningful profit growth that outpaces our net sales growth.

Looking at the quarter in more detail. Net sales of $15.22 billion were up 20.8% year-over-year in U.S. dollars and 21.2% on an FX-neutral basis. Advanced Solutions led the way as our fastest-growing line of business at 40% year-over-year, driven by GPU and AI infrastructure product sets as well as solid growth in server, networking and storage.

Cloud grew 30% on an FX-neutral basis and roughly 36% if we exclude our divestiture of Cloud Blue in the third quarter of last year. As I noted at Capital Markets Day, Cloud now represents a high teens percentage of our gross profit dollars year-to-date, and we expect it to reach nearly 1/4 of our gross profit within the next few years.

Client and Endpoint Solutions grew 10%, driven by notebooks, desktops and mobility product sales. And our life cycle line of business grew 35%. Geographically, both North America and APAC delivered robust quarters with strong double-digit year-over-year growth. North America led the way with net sales of $5.82 billion, up nearly 32% year-over-year, driven by growth in Advanced Solutions across networking, server and particularly GPU and AI infrastructure. Asia Pacific net sales were up 24% on an FX-neutral basis, with strong growth in GPU and AI infrastructure in China and in mobility product sales in India and China. Latin America grew 11% on an FX-neutral basis with robust growth in cloud and Advanced Solutions. Finally, net sales in EMEA were up more than 8% on an FX-neutral basis, led by growth in Advanced Solutions and cloud. For just a bit more color on the GPU and AI infrastructure.

As we have noted before, this business has continued to build and become meaningful. And even though it generates lower gross margins, the very low cost to serve nature of this business, coupled with its working capital efficiency makes this a high ROIC opportunity. Beyond the attractive financial profile, the strategic fit around AI and the key vendors involved remains an integral part of our longer-term strategy that we laid out at our Capital Markets Day in September.

In the third quarter of 2026, net sales of GPU and AI infrastructure were more than $1.8 billion, up nearly 160% from roughly $700 million of such sales in Q3 of 2025. Third quarter gross profit for the company came in at $997 million, up 14.6% year-over-year. Gross margin was 6.55%, down 35 basis points year-over-year. However, excluding the GPU and AI infrastructure deals in both periods, our gross margin was 7.06%, down only 4 basis points year-over-year and up sequentially by 10 basis points if we also exclude such deals from the second quarter of 2026.

Geographic mix also remains a factor in our margin profile. Asia Pacific represented nearly 29% of our net sales in Q3 with gross margin of 4.45%. Gross margin for the region is up 10 basis points year-over-year, but still well below the 7.39% gross margin across our other 3 regions combined. That said, this lower cost to serve and lower cost to serve and very efficient region delivered an operating margin of 2% in the most recent quarter.

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

Q3 operating expenses landed at $703 million or 4.62% of net sales compared to 5.13% in the same period last year. The prior year included a 4 basis point impact from loss on the divestiture of Cloud Blue and another noncore business. Excluding this, our year-over-year improvement in operating leverage was 46 basis points. This demonstrates the continued benefits of optimization and automation from Xvantage and the restructuring actions we have taken over the past year as well as the mix factors associated with our lower cost to serve GPU and AI infrastructure business.

We achieved our goal of operating expenses at 5% of net sales or better in 2025, and we are trending well below that in 2026. And our Q3 result already sits within the 4.4% to 4.8% OpEx leverage range we laid out in our multiyear framework in September, which we are achieving while absorbing higher SaaS and technology infrastructure costs.

Adjusted income from operations was $322 million, up 25% year-over-year with adjusted income from operation margins of 2.12%, up 7 basis points despite the gross margin mix dynamics I just discussed. Adjusted EBITDA was $390 million, up from $342 million generated in the prior fiscal third quarter. Our non-GAAP net income was $210.6 million, up 25% and non-GAAP diluted EPS was $0.91, up 26% from the prior year and $0.09 above the high end of our guidance for Q3.

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

Moving to the balance sheet. We ended the quarter with net working capital of $5 billion compared to $4.9 billion to close the same period last year, an increase of less than 2% against net sales growth of nearly 21%. As we also continue to deploy channel financing solutions for our customers, our net working capital of 27 days in Q3 2026 was 5 days better than the same period of 2025, with improvement in both inventory and payable days. We continue to manage this area closely with a push for efficiency in how we deploy working capital in a rising ASP environment.

From the standpoint of adjusted free cash flow, these factors drove an inflow of $250 million in the third quarter compared to an outflow of $110 million in the third quarter of last year. This was not only our strongest cash flow quarter for the year, but also our second best third quarter cash flow performance ever, which comes in a quarter where we typically invest in working capital ahead of our seasonally stronger fourth quarter sales.

As we shared in our July earnings call, we did have some buildup in inventory to close Q2, a portion of which related to some strategic pre-buys. This inventory continues to sell down as expected in Q3 and the first part of Q4. Cash flow also benefited from higher income and strong management of our working capital, as I just noted.

In September, we completed another secondary offering for 15.1 million shares, which included Ingram repurchasing 625,000 shares for approximately $17 million. Year-to-date, we have now repurchased approximately 5.3 million shares for $122 million from our primary shareholder and have $53 million remaining under our current authorization for additional share repurchases associated with future secondary offerings.

Across the 3 secondary offerings this year, our primary shareholder has meaningfully reduced its ownership position by roughly 20%, which has, in turn, increased our public float by nearly 3x since the beginning of the year. We also returned $22.8 million to stockholders through dividends paid during the quarter and today announced a 2.3% sequential increase to our quarterly dividend to be paid in Q4, which is a 10% increase over the prior year. We ended the quarter with $1 billion in cash and cash equivalents and debt of $3.9 billion. Our net debt to adjusted EBITDA leverage ratio was 1.9x, improved from 2.2x in the year ago quarter as we balance investing for growth with the higher profit generation we are seeing this year.

As we look to Q4, we continue to see a demand environment. But before I get to our guidance, an important, fiscal 2026 is a 53-week year, and that extra week falls in our fourth quarter. Our guidance reflects this. With that in mind, we are guiding net sales of $17.5 billion to $17.9 billion, which represents year-over-year growth of roughly 19% at the midpoint and more than 20% at the high end. Our guide assumes a similar 2% to 3% potential positive net impact of supply constraints in Q4. This guide also assumes continued healthy growth from GPU and AI infrastructure projects based on the pipeline that we currently see. This is our strongest top line guide, even excluding the extra week impact since we've been public, reflecting that we continue to see a resilient demand environment.

We expect fourth quarter gross profit of $1.08 billion to $1.12 billion, up roughly 13% year-over-year at the midpoint. This revenue and gross profit guidance is reflective of many of the same trends in sales mix across products, customers and geographies that we saw in Q3, including the continued contribution from lower margin, low cost to serve GPU and AI infrastructure deals, while recognizing that the timing of these large deals can be lumpy from quarter-to-quarter.

Excluding these forecasted GPU and AI infrastructure deals, we expect our gross margin for Q4 to be in the high 6% as Q4 is typically a lower gross margin quarter based on other seasonal mix factors. We expect non-GAAP diluted EPS to be in the range of $1.05 to $1.15 per diluted share. While the situation in the Middle East remains quite volatile, we assume Q4 may again be negatively impacted by approximately $0.01 to $0.02. Our EPS guidance assumes approximately 231.7 million weighted average shares outstanding and a non-GAAP tax rate of 27%.

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

With that, operator, we can now open up the line for questions.

[Operator Instructions] Your first question is from Joseph Cardoso with JPMorgan.

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

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

Okay. Got it. And then maybe just wanted to touch on over the past couple of quarters, GPU and AI sales appear to have driven a meaningful share of the upside to the guidance that you guys provided. And maybe I think each quarter, you talked about layering in maybe a more prudent outlook there, just given kind of the lumpiness. Can you just talk about the visibility that you have in the pipeline around that business today? And should we think about this as becoming a more durable revenue run rate as we go forward where visibility improves? Or it's just going to kind of remain in this like handful of large projects or orders with less predictable in timing? I'm just trying to think about how we should think about this business maturing over time and if there is kind of a road map or a runway essentially in terms of improving visibility here and predictability.

So this is Paul. I'll jump in. And so your question around durability is -- and Mike talked about it a little bit in our guidance, I think we're being more transparent about the overall revenue in this business, and we've seen it for multiple quarters now.

As we look at the pipelines, we do get visibility to the products that were coming through. But again, as we've noted previously, sometimes there's a bit of a flush at the end of the quarter that we benefit from. So we actually built that into Q4 where we see that revenue coming from. So I think it's long term and durable. It's appearing that way in terms of the revenue and where we keep experiencing the growth quarter-over-quarter. So it's appearing that it's going to be continuing, and that's what we're seeing at least through Q4.

And again, on Mike's point, we pull that out and we look at all the products net of the AI deals. And we did see, as I define our core business in networking, storage and server, good growth, excluding the AI deals. So we've got a really good healthy balance across the revenue base, across the countries and regions. And with that, we're seeing more of these AI-type deals showing up in different parts of the world, too, for a number of different reasons. So we're seeing a balanced revenue diversification in some of these deals coming, not just in a couple of countries, but more popping up through all of the 4 regions.

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

Our next question is from Katherine Murphy with Goldman Sachs.

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

So I can go first on that. And I won't do this by segment. I'll actually talk about our lines of business. I think that's probably what you meant more than the regional segments, but I can certainly speak to regions too, if that helps. But on the lines of business, I think we're talking about 17% to 20% rough growth rate in our guide. You have to remember, again, there is that extra week in the quarter, and that's encompassed in there. But inclusive of the extra week, we're expecting Client and Endpoint to probably be lower double digits similar to where it was in the quarter just completed to some degree, but healthier double digits when you get into Advanced Solutions and our Lifecycle business also growing nicely. And then lastly, Cloud being probably the stronger double-digit spectrum, similar to what it's been throughout the year.

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

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

Yes, I'll talk -- this is Paul. I'll talk a little bit. So we got very strong networking growth. The year-over-year compares were a little easier, though. So last year in Q3, our networking had very low single-digit growth. And now we're seeing solid refresh with AI infrastructure, higher bandwidth, WiFi 7, campus modernization, security and other factors. So we had very solid double-digit revenue growth in the quarter, and that's what I define to that core business minuses AI products. So we're very pleased with the networking business, especially in Q3. And the server business was good also, which I would say even stronger considering the double-digit growth that we had in Q3 of 2025, and that's being driven by the AI servers, GPU demand, spending, Agentic AI and so -- and to some extent, the higher memory and component costs. So we're pleased with those 2 categories minus the AI deals that came in very healthy in Q3.

[Operator Instructions] Our next question is from Ruplu Bhattacharya with Bank of America.

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

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

We're also seeing AI PCs because I'm sure the question will come up relative to what percentage of our business was AI PCs that continues to grow and was roughly 50% of our PC revenue in Q3, which we believe is consistent with other reports from our vendors and the industry analysts as people are looking at their infrastructure and how they can run AI workloads. So we continue to see demand to answer your question going into Q4 to a lesser extent, but still suggesting the refresh cycle will extend into Q4.

To answer your second question, kind of some broad-based themes or what we're hearing from customers. So let me give you some color around the categories from a customer standpoint and the segment. So our enterprise was up solid double digits. Our core [ VAR ] business was flattish, and our SMB business was up in the teens. So we saw pretty good growth, as I mentioned in my prepared remarks. And so there's a number, I think, of different investment cycles that are playing out right now in the enterprise, the AI data centers, we continue to talk about infrastructure modernization, everything wrapped with security. And our partners are telling us they're bullish right now near term with large pipelines in data center, networking and compute and the focus being for the enterprise customers on AI infrastructure and really building out across compute capacity storage at the server workloads and network capacity to connect all those systems.

A little bit of a different story in SMB. SMB continues to tend to be a little bit more price sensitive. They seem to be extending their PC refresh replacement cycles and are going to remain an important source for the remaining refresh. Some SMBs are going cloud first, as we've mentioned previously, and then moving the workloads when the budget and timing are right. We're seeing some SMBs tending to go in phases, cloud first and go quick adoption and networking and compute and storage. And then some that are looking to go with a more kind of standardized offering and integrated stack approach on the AI business and then services.

So I guess I would say in SMB, it's a little bit of a mixed bag depending on kind of where those end customers are on their maturity cycle, which played across the trends and reflect in our results in terms of the broad growth across all of our categories.

Our next question is from Erik Woodring with Morgan Stanley.

Paul, you guys are crushing it this year. I think for the full year, you're guiding to about 17% growth if I take the 4Q midpoint. If I take that in the context of your kind of long-term guide from the Analyst Day, just can you help us kind of understand how to think about the shape or trajectory of revenue growth as we think about into next year and beyond? Because obviously, your comments imply that there is clear durability to this growth. But just kind of help us kind of pair those together, 17% growth this year, 5% growth over the next 3 years. Just help us understand maybe what the trajectory could look like? And then a quick follow-up, please.

Yes. So Erik, as I said in the -- this is Mike. In the Capital Markets Day, we touched on this a little bit that -- when we look at '27, we have a couple of comparative factors. We certainly expect ASPs still have some legs of increase. But if you look at IDC or other data, that's going to come to some sort of flattening over some period of time here. And it's already probably starting a little bit more in the PC space. We also see a PC refresh that, as Paul said earlier, has some legs, but that's not going to have that similar duration.

And then lastly, just mechanically, we have an extra week in the current year. So that 4% to 6% CAGR that we disclosed on the Capital Markets Day was assuming probably a lower single-digit growth next year, but that would imply certainly higher single digits for the outlying 2 years in that CAGR. So we're still seeing pretty good durability of demand and a long-term cycle of growth here. You just have to be thinking about those couple of factors that play in there. And then most importantly, what we're really focused on is the fact that our long-term CAGR is even faster growth in gross profit and on the bottom line, more than 2x growth of that revenue pace. So that's really what we're focused on also is the quality of revenues and where we drive the business in the right direction.

Our next question is from Adam Tindle with Raymond James.

Congrats on the results. I did want to acknowledge, obviously, the very strong growth rates, but ask about a little bit more on gross margin. I was kind of going back through my notes in Q3 of last year and gross margin was down 30 basis points year-over-year, citing mix. So point being the comparison in this Q3 was not particularly difficult. And if I looked at the growth by product category, I mean, wow, Advanced Solutions growing off the chart, Cloud going off the chart, and Client and Endpoint, which would typically be lower gross margin at a fraction of growth rates of those higher-margin categories, yet gross margin down another 30-plus basis points year-over-year.

So I hate to set up the question that way, but I just wanted to maybe press a little bit more to address what's going on from a gross margin standpoint and why there would be pressure.

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

When you look at our gross margin, excluding that outsized growth of that GPU and AI infrastructure, our gross margin this quarter was 7.06%. It was 7.10% last year. So 4 basis points roughly flat from a comparative perspective. There are other mix factors that you have to think about that has continued to be the case on a year-over-year basis, still healthier growth in large enterprise customers, although we are seeing SMB growth happening for sure, as Paul hit on earlier. And we're also seeing outsized growth on an ongoing basis in Asia Pacific, which was a smaller share of our overall revenues last year and certainly the year before than it is today, now in the high 20s or even cracked the 30% barrier last quarter.

So those are probably the other things I would call out that you just have to think about in the dynamics of gross margin. But on a like-for-like basis, things are trending pretty normal on that front.

The only other thing I would say is in Q3, we had a little bit more demand in our smartphone kind of the refresh that's going on. So as we know, that's efficient. And again, this gives us a good return to the bottom line, and we know how to manage the working capital, and we got free cash flow out of it. So I'd say those are the factors, strong AI kind of PC refresh was still good. It was healthy. As I mentioned in the previous question, mobility and a little bit of large customers, even though the SMB business was up, as I mentioned, we still had our large enterprise customers growing too. Those are the factors that we saw in the quarter.

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

Congrats on the great results. Paul, I wanted to ask the first question on free cash flow. Should we still expect a hockey stick in 4Q? I know this year has been a little bit different than prior years. And then I have a follow-up.

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

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

Great. And then just on Xvantage, obviously, good to see metrics keep growing and improving. Just I'm trying to think through the large enterprise customers and then growth in SMBs. Are the large enterprise customers using Xvantage more or SMBs are using adjusted more? Just trying to figure out how that drops through operating leverage.

Yes. So Dave, it's Paul. It's more an SMB play, and that's where we're seeing the growth, again, self-service orders representing 70% of the orders, revenue per customer, again, in our SMB and what we call our growth customers, some of the smaller end of the SMB Email-to-Orde. So all people are transacting increased 33% and people are spending more time on it to run their business, too.

And I think it's important to note, too, why is that happening? And again, we've been strategic and deliberate. You've heard Mike and I talking about this for the last couple of years. And we first had to get that first phase, which was the operating model with Xvantage in the center. That was about automating everything, transactions, getting -- connecting customers. And now we're really on this intelligent operating model where we're building on the foundation of Xvantage, where we're turning all those signals now into being proactive and providing demand generation and action. And just to note, without that first step that we took in the first phase, the second one doesn't work.

Our next question is from Keith Housum with Northcoast Research.

Congratulations on the quarter as well. We're hearing more and more from different guys that the supply chain constraints are starting to kind of creep up. Are you guys seeing anything on the horizon there that might concern you that might limit the guidance that you're providing?

No, nothing. I would say, nothing out of what we've been operating in throughout the year and exiting last year. Our pipeline and our back orders haven't dramatically increased in terms of the supply chain. I actually think there's some better visibility if you were to look back a couple of quarters ago because our solution providers now, some people have moved from like 14 days and POs not being to be able to be priced out for a period of time. Now a lot of them have 30 days. You actually have a little bit more consistency and predictability when they actually go to their end users. So I see nothing out of the ordinary right now.

Yes. Keith, the only thing I would add, just remember, although we didn't reiterate the couple of points that we made last quarter that go into that 2% to 3% net impact to supply constraints, but that is the ASPs as well as any potential pull forward, although really we aren't seeing a whole lot of that pull-forward factor or evidence of it in this most recent quarter we just finished. But then that does also take into account the partial offsets of just it takes longer to get the product and some of the demand elasticity. So that's all in that calculus, and we're expecting, as we said also in our guide for Q4, a similar kind of 2% to 3% net impact.

Okay. If I could just follow up, more of a modeling question here just because all weeks are not created equal. But as we think about the extra week for the fourth quarter, are you thinking that's going to be like a 7% to 8% impact on the guidance or perhaps a little bit less?

I would use that as a proxy. We don't really -- you're right, not all weeks are created equal, but we're not necessarily going to try to get down to that level of granularity. So I think you're using a pretty good proxy there.

Our next question is from Ellie Dyke with William Blair.

This is Ellie on for Maggie. I wanted to ask about the midpoint of the gross profit guidance for next quarter. I think it implies a little bit lower than this quarter. So could you just provide some color on the drivers there and anything assumed in that?

Yes. So Q4 typically is our -- is a lower margin quarter just on mix factors. You tend -- we don't do a lot of retail e-tail, but you see a little bit more in that category to the extent we do still have it. So PC and certainly mobility factors in there and even the mix factors as far as how projects close.

But the other thing I would say, and we noted this in our guidance is that we're still seeing a healthy pipeline and expectation on that GPU and AI infrastructure piece. So that healthy double-digit growth we have in Advanced Solutions probably has even a little bit more growth of the GPU AI piece. And our guide for Q4 has margins in the high 6s if you take that out of the equation, which would be relatively comparable to Q4 of last year.

Great. And then just a follow-up. With Client and Endpoint, like the growth differed in different regions. Are there any differences in customer purchasing behavior that explains that? Like it was up in North America, but down in EMEA?

Yes. I don't think there's really much we would call out on the customer front as far as difference in behaviors around the world. It's been pretty consistent.

It's consistent this fall. It's been very consistent in terms of the growth rates around the different regions.

Our next question is from Alek Valero with Loop Capital.

Congrats on the quarter. So my first question is on margins. So I know you guys kind of already answered it when you spoke about Xvantage. What I wanted to ask about was -- I know you guys are talking about the phases Xvantage. When do we start seeing Phase 3 pricing and IDA levers start to show up in the margins?

So this is Paul. We started to see that, and Mike touched on it, and I did a little bit in our prepared remarks. So that third phase of the platform journey where we're using the data, the context and intelligence to drive that margin growth through pricing, bundling capabilities and really calibrating towards margin optimization. We started to actually see that positive signs of that, particularly in North America, but it was late in the quarter when we really started these initiatives. So we like the signs that we've seen in the couple of months that we were running at and where we were targeting those programs. And so we're starting to see that Phase 3 really starting to land in North America and positive results.

Got it. Got it. That's helpful. And I know you answered Ruplu on PCs earlier, but I just wanted to do a follow-up on PCs. So you spoke to Q4, and I know 2027 is still away. But I wanted to ask, given Intel gave first half of '27 guidance and they expect PCs to be softer, do you guys still expect to offset any unit decline with more -- with ASP?

Yes, I can start on that. I mean I think yes. We saw in the quarter we just finished pretty consistent with what market indicators are seeing. It's a low double-digit decline in PC units, but ASP is still continuing to offset that. While ASPs are going up at a lesser rate now than they were a couple of quarters ago in PCs, they are still going up, generally speaking. And that mix of AI PCs creates some legs of demand because we're only at about 50% of PCs sold are in that kind of AI-enabled category. So that could create also some smoothing on both pricing as well as demand levels as we get into Q4. But yes, we are seeing the units -- our unit numbers are pretty in line with what industry numbers are saying right now.

Our next question is from Amit Daryanani with Evercore ISI.

Congrats on the quarter, guys. This is [ Kate ] on for Amit. I guess you pointed out the hockey stick free cash flow for Q4. I guess, could you touch on maybe just 2027, what your expectations are on how that plays out a little bit?

Yes. I would look to what we said in September in Capital Markets Day. We expect as we get into a more kind of normalized growth pattern in the single digits as we laid out in our plan versus what's been double digits now for some -- quite some time, we see a little bit more predictability in sort of the working capital investment needs and so forth. But our target is on an annual basis to generate free cash flow equivalent to 30% or more of our adjusted EBITDA. And I think in some quarters, it could be decently more. But again, that's an annual number. You just have to make sure you don't think about that necessarily being the case quarter-to-quarter because there is some seasonality to cash flow for sure.

Our last question is from Karl Ackerman with BNP Paribas.

This is [ Ari ] for Karl here. Client and Endpoint Solutions grew on notebook and desktops. Could you discuss the split between units and price for client and endpoint in the quarter? And also, how are you managing your go-to-market approach given a pretty large PC CPU maker noting PC volume should remain challenged through the first half of 2027.

So as we mentioned from a PC refresh standpoint, again, we kind of looked at the categories we put Advanced Solutions and specialty together. And we still saw what I would say, networking and server good revenue growth in that business, up modestly across all those categories. And specifically in the Client Endpoint Solution PCs was -- the growth was more than offset by the low double-digit decline in units.

There are no further questions at this time. I would like to hand the floor back over to Paul Bay for any closing remarks.

Thank you, operator. Before we close, I'll highlight 3 drivers of the quarter. Healthy broad-based demand growth with operating leverage and mounting evidence that our strategy to become the intelligent operating system at the center of technology ecosystem is working. In the quarter, we exceeded our guidance across all metrics with strong Q3 cash flow. We're raising our Q4 and full year guidance and remain excited about our initiatives to sustain growth and diversity in our business.

Thank you for your continued interest in Ingram Micro, and thank you for joining us today. We extend our sincere thanks to our team members worldwide, our customers and our vendor partners for their ongoing support. Have a great day.

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

Good morning. Please give a warm welcome to Willa McManmon, Ingram Micro's Vice President, Investor Relations.

Good morning, and thank you for joining us today, both here in Dallas and virtually. Before we begin, please take a moment to review the disclaimer slide on the screen, and I'll just go through some legal language. During today's session, we will make forward-looking statements that are subject to risks that could cause our actual results to differ materially from today's presentation. Please refer to the cautionary statement and risks disclosed in our SEC filings. Information on non-GAAP financial measures that we discuss today, including reconciliations to the most directly comparable GAAP measures can be found in today's materials.

Now let's turn to the agenda. To start the day, Paul Bay will discuss our evolution and how we're expanding our role beyond traditional distribution. Sanjib Sahoo will take a deeper dive into our operating model and strategy. We'll then break for lunch. After lunch, you'll hear directly from some of our customers and our group presidents. Then Mike Zilis and team will discuss our operating model, capital allocation priorities and long-term financial framework. We'll conclude the formal program with a Q&A session. For those of you who are joining us virtually, you'll see the Q&A tab on your screen. Please submit your questions through that tab.

And with that, I'll give the floor to Paul.

Thank you, Willa. Good day, everyone. First, I want to start by saying thank you for joining us here, those of you here in the room with us. Also those of you that are joining us remotely via the webcast. It's been a super busy morning for Ingram Micro here already. We actually got to ring the opening bell, which happened right here this morning. So a great honor after going public in 2024 and getting to ring the opening bell. So we're really excited here to be the first company that's actually hosting a Capital Markets Day here in the New York, Texas Stock Exchange. So pretty exciting.

We look forward to a great day. I have to say I'm more excited now than I've ever been in my almost 30-year career in technology. So let's go ahead and get started. First, I'd like to introduce you to our executive team. Many of them, they're spread throughout the room today. Many of them you'll see presenting. So we're excited to let you get a view into the areas of operation that they have. Willa will walk through that. They have many years of collective experience in technology, in business. And if actually, you put it all together just from an Ingram Micro standpoint, they actually have more than 200 years' worth of Ingram Micro experience. So a very seasoned team, and I'm honored and privileged to be able to lead such a great organization. I may be biased, but I think we have the best team in the industry.

So let's start today with talking about the Advanced Logistics Center that many of you got to tour. Hopefully, you saw that it demonstrated scale, operational discipline, automation, the ability to really effectively move technology efficiently around the world. But I hope you actually experienced more, showing you how we're using technology, the data, the intelligence, the way we're changing to how work is getting done in the operation, all the way from order entry all the way through our ALCs. And the point of today is to really take you on a transformational journey.

We're going to show you how we're moving from a distribution to the industry's first intelligent B2B operating system. We're going to be bringing intelligence at scale, solving complexity and removing friction. We're driving growth with new technologies and new businesses, and we're adding a life cycle services business with our supply chain services, along with our current IT asset disposition business and our reverse logistics and repair business. We're creating higher value for our customers, for our vendors and for Ingram Micro. We believe we're the only company using intelligence to bring a B2B commerce and operations together to drive a new level of value. And today, you're going to get a deeper insight to that. We're fundamentally a different company. You'll see the growth that we're driving, how we're generating that growth as well as our 3-year projection.

So let's start with distribution. Distribution is a great business to be in. The total addressable market that we have, it's making it more relevant now than ever. It lowers costs, complexity. It lowers the need for capital and at scale. The industry is a collection of B2Bs depending on each other for growth and value creation.

IDC predicts $5 trillion TAM, and it was just $2 trillion to $3 trillion just a few years ago. So why Ingram Micro? Number one, Ingram Micro has unrivaled global reach, serving 165,000 customers, 1,500 vendor partners on 6 different continents. We have the ability to service 90% of the world's population. But it's not just about the diversity that we have or the reach that we have, it's really about the revenue reach that we have. And in Q2, North America represented 36% of our business; Asia Pacific, 30%; EMEA, 26%; and Latin America, 8%. So great diversity in that revenue and reach we have.

Number two, the broadest solutions and service offerings across the entire technology life cycle. And that's important because 6 different products are made up of our average deployment that we invoice with our customers. Number three, investing ahead of the trends. We have always led the way in distribution. We invested early in highly technical advanced solutions, our specialty business, things like data capture and point of sale, unified communication and collaboration. We did this both organically and through acquisitions in the early days. We did this again with cloud, where we've announced that we've invested over $650 million in our cloud and our cloud platform. We've invested in our digital platform over the past few years. And now we're bringing the only intelligent operating system for B2B.

In addition, we're creating new routes to market, capitalizing on the technology and AI boom. And finally, we're investing in our Lifecycle Services business. The fourth reason why Ingram Micro is our track record of profitable growth and 47 years of proven success. So how do we operate differently? Customers describe us as a multiplier, an extension of their business. Ingram Micro solves complexity over thousands of business to businesses and hundreds of markets.

A great example, as you can see here, is Chris Leahy, who's the Chairperson, President and CEO of CDW. They're a customer. People ask me quite often, is CDW a customer? They're one of our most valued and largest customers. And they value our partnership because of our scale and innovation. We're an extension of their business. Even with their size, we help augment what they're doing every day. And this strategy of putting the customer in the middle has been part of what we're doing and core to our business for the past 4 years.

Again, it's all designed with the customer in the middle. There's a real differentiation in the way we operate, drive growth and innovate because our strategies are designed with our customer right in the middle of everything we do. We build value by servicing the entire life cycle, how technology is chosen, how technology is purchased, how it's installed and integrated, how it's refreshed and disposed of and the value we create reduces operating costs, accelerates growth, improves productivity and removing friction and time for our customers.

These strategies, as I mentioned, have shaped and we've been using for the last several years, are very customer-focused, focus on their experiences, focus on building more cloud and consumption business, wrapping that all around with more services, operational transformation with an intelligent platform, using intelligence to remove complexity and continuing to drive operational excellence, which has been in our DNA for dozens of years. These strategies and priorities create value with intelligence to uncover and drive new growth and an operating system, which supports faster time to market for our customers, maximizing value for them and for Ingram Micro.

Ingram is the fuel and growth for our customers in every segment. We give our customers a way to pilot to enter new markets, to enter new categories without having to make the investment or the capital or taking on the risk. We are their partner to help grow and resources to innovate. Let me give you an example. Our Enable AI program, which helps customers understand, grow and deliver AI at scale. Customers don't have the skill sets. They don't have the resources. They don't have the competencies, and we augment all of these together, and we're perfectly positioned to help capture this market.

Customers need a business partner that's adding value across the technology life cycle to reduce complexity. A couple of examples that you can see here is our Technical Centers of Excellence. We have one of these in each of our 4 regions. They use our expertise to expand the offerings, presales, post-sales support, integration. Actually, from a post-sales support, we receive calls Level 1 and Level 2 calls directly from the end users on behalf of our vendors and our customers, and we're able to do that for them on a post-sale standpoint.

Technology solutioning, the broad technology categories and vendor solutions. Again, our average products of 6 different products or services helps our customers save time and helps them save money. Enablement with high level of trust to enter new markets, training programs, things like financing, you'll hear more about today. Business insights points our customers to new growth opportunities in adjacent markets, cross-selling, upselling, finding new white space and demand generation, helping them find new logos with richer engagements and broader reach.

Many times, our customers have told me, Paul, you actually know more about my end user than I do. And why is that? It's because of the intelligence we're bringing. One example that you hear us talk about is IDA, our intelligent digital assistant. This is a quantifiable example and our first step towards our intelligence at scale, converting it into commercial action. In Q2, we delivered $1 billion of net new revenue at 4x the conversion rate at a higher margin. Today, you're going to hear from 4 different customers from each of the different regions. And you're going to hear from them about how Ingram Micro is an indispensable business partner to them. So put simply, Ingram Micro's intelligence, expertise and resources is the fuel for our customers, and we're providing them more ways and their operating system to help them deliver new growth at higher value.

So with all this technology we talk about, depending on what shows up on the -- every morning's headlines, technology is great. But at the end of the day, people, relationships and trust matter, especially when it comes to the growth of AI. A great example of this is Jay Miley, who's President and CEO of Myriad360. They're a company that went from under $200 million to over $1 billion. And they did this that was supported by our relationship and they're willing to invest with us. So let's hear a moment from Jay.

[Presentation]

Ingram does take a longer-term perspective, and they're making investments in emerging technologies that, quite frankly, I'm not able to make quite yet because the market is not as mature or maybe it's a little slower to adopt, but they're making those investments for partners like me. And it's, quite frankly, enabling us to adopt and promote and sell technologies that we otherwise most likely would not. They are leveraging AI in ways that some of their competitors just, quite frankly, aren't. And it's making a real impact on our business. It's making us be more agile with our clients. It's helping us be much quicker to market on quotes. Speed really does matter in an industry like ours where change happens every day.

Ingram really is doing a lot of the hard work upfront to make our lives easier. But quite honestly, the true differentiator is the people. The people in the business really matter. We are in a people business. AI is changing the world, and I understand that companies like mine and Ingram Micro are really leveraging it to scale their businesses more effectively. But at the end of the day, it's a people business and Ingram really does the people things well.

So there's a couple of things I would take away from Jay's comments. Ingram Micro takes a longer-term perspective. We're adopting, promoting and helping them deliver technology that he wouldn't be able to do on their own. Speed matters. We're doing the hard work for him. Relationships, people and trust drive growth. And I'll add that by using our technology and intelligence, he's able to find scale that hasn't been done before.

So the ecosystem we're operating in, the lines are blurring based off what vendors are doing, what Ingram Micro is doing, what our customers are doing. This is due to the complexity and specialization. So what are we seeing in the market? Number one, vendors are customers. They look to Ingram Micro to provide reach and specialized skills. Number two, customers are vendors. They're providing their own specialized offerings and their IP that they want to be able to help service other partners in the ecosystem. And number three, Ingram Micro is a service aggregator, right in the middle of how solutions and services are designed, built and delivered. And we anticipated this change over the last 5 years, and these investments perfectly position us to grow.

As these quotes scroll through, there's a couple of takeaways I want you to hear. Mid-market and SMB is a fragmented and untapped and distribution matters. Vendors compensate us as a global partner to help them capture growth where they can't reach. Hyperscalers, they're investing in us because their model isn't built for go-to-market or enablement or finding net new partners. And complexity. Complexity is a core competency. We simplify and scale it no matter the technology or category. Businesses aren't buying the outcomes or businesses aren't buying technology. Businesses are buying outcomes, and we scale outcomes.

Our growth also comes from bringing more technology from more geographic locations, our reach, our portfolio, enabling new technologies, whether it's AI to Neo clouds, providing access to wrapping growing solutions, AIs like Anthropic or partners like Anthropic and OpenAI, adding consumption models and actively deploying and enabling net new emerging vendors. Being able to provide a better way for our customers to grow, operate and service differently. We're investing in ways to generate more growth across the entire technology life cycle.

So let's stay on the theme of higher value. Services across the entire customer life cycle gives Ingram new ways to expand to new markets, modernize and monetize more increased share of that $5 trillion TAM I mentioned. Those that saw the ALC tour today saw state-of-the-art automation, visualization and data management, inventory optimization, real-time KPIs and analytics that's providing for us a whole new profitable business for us to get into.

So let me give you a couple of examples of our Lifecycle Services business. First, the supply chain services. It's aimed directly at our industry and other adjacencies. And for reference, in 2022, we sold our logistics business for $3 billion on $1.7 billion worth of revenue. And we're back with even more automation, efficiencies and intelligence. We're not investing in warehouse capacity. We're actually building -- creating it. So we're creating that space that you saw to be able to give us the opportunity from a supply chain system standpoint.

Secondly, our IT asset disposition and reverse logistics and repair business. This is all part of the circular economy, and we're going to continue to focus on how we can provide net new value-added services, adding new customers. We're adding AI when the constraints in AI, older technology many times is worth as much as the new technology. And we're doing it with a responsible and the strict data requirements and sustainability requirements that global companies require of us. We have the skills, the competencies to scale of the business, and we're a safe, secure, trusted partner. These business create resiliency and provides upside for us in a higher-value market. So our broad portfolio of solutions with our life cycle services and global reach is a strategic advantage.

Where does the growth come from? Our growth comes from bringing new markets more efficiently, especially within the SMB market. Hyperscalers depend on us to grow with AI, the new frontier with new customers and new vendors. If you look at consumption, IDC forecasts consumption to grow by $1.3 trillion by 2029. It's a new way of how cloud is being bought, metered and serviced. The key insight here is routes to market for the mid-market and SMB do not exist today. We're building it.

The channel is even more important with AI solutions. The new growth comes from 3 opportunities that we see. One is reselling AI, consumption, metering, the telemetry that's required. It's all built into Xvantage. Number two, attaching professional services as deployment, governance, driving adoption and operations. And number three, new Agentic services with field deployment engineers, the FDE model, and we're already investing ahead of the curve with this. And it's working.

We hold Microsoft AI Apps specialization. We're building custom agents today for SMBs, and we're building the same for AWS and Google. We're creating a new pipeline of growth. So why do we win with AI? Only Ingram Micro has that unparalleled global reach. We can serve with AI for our customers, we can recruit and enable new ones. We've got a multiyear head start with our platform, bringing hardware, consumption, cloud and services, all to the single pane of glass and platform. The co-investments we're making with hyperscalers and our OEMs to bring AI to these frontier customers and expand the TAM that we're in. The AI ecosystem is building supply. We're building a scalable route to market.

We've had conversations with many technology industry analysts about our strategy and around Xvantage and our intelligent B2B operating system. We received their input, help us explain better this positive new approach that we're taking to the market. And industry analysts have said, one, it removes friction. Two, it provides a unique service layer. Three, it's an intelligent operating system, which is providing a deeper integration. And four, it delivers higher retention and switching costs. Here's a quote you can see here from Steven Dickens, who I believe is here virtually with us today. And Steven is exactly right. The moat around our ecosystem that we've built allows us to serve far more of that $5 trillion TAM than traditional distributors, which brings me to take a little bit of a deeper look at Xvantage. It's our vehicle and our platform for growth and intelligence at scale. It's the foundation for our intelligent operating system.

For us, you've heard us talk about there's really 3 phases of Xvantage and our platform business. Number one, remove friction and operating expense. Number two, provide demand generation, how do we go from being reactive to proactive. And number three, use our data and convert it into intelligence with the buying signals that drives actions and outcomes. You're going to hear a lot about that here shortly from Sanjib Sahoo, who's going to be up next.

So you combine that with our people and our reach, and we're delivering to our customers more speed, more scale and more service to give them a better experience. And our innovation doesn't end with go-to-market. We're building more intelligent ways for B2Bs to transact and operate, which is powering our intelligent operating system, turning intelligence into business value at scale. And I want to be clear, we're building this technology. Our global data mesh, we started. It all starts with the data as we know, and we've been on this journey for a few years now.

We have more than 400 machine learning AI models that have been training for over a year. They're better. They're smarter. They're learning every day. This is all created by thousands of Ingram Micro developers and engineers. We have over 30 patents pending and 8 that have been approved. This demonstrates our commitment to be an innovator serving the industry in brand-new ways.

And now we have our first unified platform operating model, which we call our POM model. Why does that matter? Because we're adding operating leverage to our largest countries. You build, you standardize, you innovate once and you can scale it globally anywhere. So we're taking a fragmented B2B industry, and we're creating this B2C experience for our partners. So something happened. This is great. We're super proud to talk about this. Something happened last year. We actually had Stanford University reach out to us and do a case study on us. So they proactively reached out to us. And this was because we were taking a start-up mentality, basically actively disrupting a 47-year-old business model.

Why were we doing this? It's to be the platform where B2Bs can come, grow, expand, scale and service their partners differently. So the Stanford School of -- Graduate School of Business, Huggy Rao is a professor there, and he's an expert in start-ups. And he said, "Ingram Micro is transforming while performing." They're actually using this case study as part of their graduate studies at Stanford now. So put simply, Ingram Micro is something worth investing in. Ingram Micro's business model allows us to capture the growing markets, hardware, software, cloud, subscription, consumption and the services, all from the single platform.

The growing complexity of AI, many technology solutions, they need a simplified go-to-market and point solutions don't play anymore. Customers and vendors need workloads that are orchestrated in harmony. And our business model fits perfectly right in the center of an entirely new growing ecosystem where the B2Bs and opening new routes to market for mid-market and SMB that we serve every day. And you put this all together with our intelligent operating system, which gives us operating leverage and a path to disrupt legacy models with a different value proposition.

So what you're going to see throughout today is why Ingram Micro. Again, our unparalleled reach that we have, 90% of the world's population, scale that generates value, excellent global revenue diversification, and we do it with the right business practices in every country we operate in. We have the largest portfolio of solutions and services, and it continues to grow with AI. Our life cycle services business, ITAD, reverse logistics and repair and getting back into the supply chain services business. We're continuing and we will continue to invest ahead of the trends. We've always led the way in distribution.

We've invested in highly technical advanced solutions and specialty services. We did this again in cloud. We're creating new routes to market for AI, capitalizing on the technology and AI boom. We invested in our digital platform. And now we're building the industry's only intelligent operating system for B2B. Our track record of profitable growth. We had a very solid Q1. We had the best Q2 in company history, and the second half is shaping up nicely. You'll see the 3-year plan, which reflects growth and innovation. And Mike will cover this later on today, but this really indicates that the momentum that we're building.

So with that, I'd like to turn the stage over to Sanjib Sahoo, who's our President of Global Platforms Group. So please join me on stage, Sanjib. He's going to show how this all comes together and comes to life. Thank you.

Good morning. I'm going to talk about intelligence to impact when my slides come up, that's okay. And Paul talked a lot about intelligence and scale and how we are becoming a different company. Today, I'm going to talk about the operating model, how we are changing it and how we are advancing our strategy to drive new value creation through intelligence.

About 5 years ago, I came from Ingram Micro from B2B and B2C. And it was a very interesting thing that attracted me that we sit at the center of the technology ecosystem. That's very unique. And today, that industry has a problem. Our industry has an intelligence problem. And let me tell you why. When you look at distribution, it started with hardware. The vendors went to distributors, to resellers, to end customers. It was primarily hardware and the motion was inventory centric. You buy, you hold, you sell, you came from logistics, financing, you created a channel. But there was a lot of friction. There was a lot of complexity by doing that. Just imagine the complexity. A single quote took 3 companies, 12 people and 72 hours. That is how this industry operated.

Over the last decade, then came cloud. Onetime transactions changed to subscription models, consumption models changed. And what is more important, as you heard from Paul, the lines were blurring. It created more complexity with billing and coding and the lines started to blur. Then came another major transformation we all know called AI. What AI did was it added way more complexity how you solutionize. As you heard, vendors became customers, customers are vendors. So today, we have an ecosystem problem. And complexity is rising higher than we can absorb it. There are bespoke solutions, tools changing every day, a lot of complexity.

What was a linear network once has become like this. We have our vendors, end customers, customers, service providers, hyperscalers, AI companies, financing and logistics, everybody is going to everybody. That's a lot of complexity. And can we solve complexity by adding way more complexity, by building way more tools? How do we solve it? Because the ecosystem has changed but we are trying to solve the same way. Distribution was designed to move products through a linear chain. It's good. It was value to a product. But today, what you see from all this network is it requires intelligence.

Now let me stop and define what is intelligence. Intelligence is not AI. AI is the technology. Intelligence simply is understanding what happened from this complicated network. Why it happened? And what can happen next? And how do you understand and take action to predict a better outcome? Simply put, this ecosystem creates a lot of signals. How do you understand the context from the signal and drive outcome? Simply put, that is intelligence. And that is the connective tissue today. That this ecosystem needs a connective tissue, which is agnostic. And we are right at the center of that ecosystem being that intelligence layer.

Now this problem cannot be solved by connecting systems. You can connect systems, bespoke solutions. Today, we have to combine intelligence because intelligence will open new routes to market. Complexity was a tax that we paid for this ecosystem. Simplicity is the opportunity. And today, intelligence drives that simplicity and simplifies the ecosystem. It connects all these signals and drives outcomes. Now what is a signal? It's not a transaction. Imagine a customer doing a quoting request. Imagine a customer doing a financial inquiry. How do we learn from that and drive demand or aggregate new opportunities?

If you look at how we started our journey, we started building a platform to digitize our connection with our customers and vendors better because there was so much complexity, fragmentation and friction. Xvantage started to digitize that. As we went through the journey, we found out that it's not that digitization, it brings in transactions. We started building intelligence. Did you realize that the ecosystem has changed. So today, we have to bring in a new way to connect demand and supply. Distribution was connecting supply to demand. Today, with our intelligent platform, we are connecting demand to supply.

Now demand and supply have changed. Let's look at our business for a second. If you look at our supply side, our vendors, we have a long tail of vendors. Today, you heard a single solution takes 6 vendors to aggregate accumulate. The long-tail vendors are looking for being part of a multi-vendor solution. They are looking for how they can generate demand across the other side. They're looking for growth, which they do not get access to the channel. But to service them for a distributor, it takes a lot of effort and scale and cost. If you look at the big vendors, the global vendors, the hyperscalers, the #1 thing that they want is access to net new SMBs or long tail because they want demand generation. I'll talk about how we can get there. They also want intelligence provided to them for their own product and supply chain. That's what they want today. And anyways, we are working with them to cater to the enterprise layer of the business.

Look at our demand side, our customers, the long tail SMB and growth. As you heard from Paul, this is where the opportunity is. It requires a lot of scale and ability to actually address the long tail. You have to automate the experience, increase the value. It requires more of guidance with them. However, if you look at the mid-market, the needs are different. They need more outcome, more of a frontier model. They look for increasing share of wallet, looking at solutioning, looking at outcome, different needs. The enterprise, which we do all the time with our business, they need efficiency, they need scale, they need automation. So the bigger customers need orchestration, the mid-market needs outcome and the long tail needs guidance.

How do you cater to these needs through a single platform? When we started this journey, we thought about how do we connect demand and supply. So we realized the bigger vendors and the enterprise was more efficient in automation, which platform was accelerating. But then we realized that for the long tail, we need a platform-led approach, a platform that can connect with automation. But there is an interesting thing that happened after that. As we are trying to build that long-tail approach, our industry has been changing. What was fulfillment is today context, life cycle, attach, bundling because there's no one solution and solutioning together, packaging and most importantly, demand generation.

So you see the life cycle, even the margin economics are changing. What was rate, GP rate is right now, the dollars to the life cycle, bundling solutioning, demand generation. How do we drive demand generation in the long tail in the long tail. And it's complex. It's difficult to drive that value in the long tail because change is happening all the time. Solutions is coming all the time, but it's our biggest opportunity. Today, intelligence helps us to play in that long tail.

[Presentation]

Ingram Micro is setting the direction of the industry rather than responding to it. Every distributor has tried to reach the long tail of their end customers, of the channel partners' customers by lowering the cost of a transaction. Ingram Micro is lowering the cost of a relationship, which is the constraint that actually binds.

So the true value will come from automation to lower the cost, but really giving guidance through intelligence that will improve the value of the relationship, kind of like a relationship leverage. Now in our journey, you see this is not just data. B2B is complex. Many B2B companies have data. Some have insights, a few have intelligence. Fewer have intelligence at scale. Today, we are uniquely positioned to deliver actionable intelligence at scale. And let me tell you why. In that complicated connected ecosystem where everyone is going to everyone today, we have built a great reach and network. We have 165,000 customers. We have 1,500 vendors through the same network. We have millions of end customers, thousands of services.

So far, it was interesting. We had a distribution business. We built a great network. Interestingly, last few years, as we are building the platform, we have built an information network, which processes today 250 million events daily. These events are signals. These events are telling you something. And if you do not act on the signal on a transaction, you are leaving unrealized value on the table. Today, the demand generation is based on this signal turn to opportunity. When you look at your phone, you have an operating system. But you may not know that operating system. Every day, that operating system looks at your application, memory, storage, takes complexity out and gives you a better outcome. Who is that operating system who is in the center trying to take complexity out with changes every day and giving a better outcome?

And most importantly, driving demand. Keep in mind, demand doesn't start with an order. It starts with a signal and how do we learn the signal to understand that demand is already there. How do we go and find it through the intelligence and action? So who can find it? And I'm going to tell you why we are positioned to find that demand. Now let's look at something more interesting. What was a linear value chain today through our platform and we brought in the transactions has become a different chain. Those events and signals fed with our context of many, many years, then we can reason and action, drive an outcome and recommend. This is creating a new value loop because signals reveal opportunities. Context determines why they matter.

So this has given us this new wheel that can find new ways and new routes to market that we can go forward. And let me give you some examples. Today, with a couple of our top vendors and hyperscalers, we are thinking about combining intelligence. And when we combine intelligence with their signals, with our signals, imagine attached data, refresh data bought in, we can now play in the white space by combining that intelligence and drive action of the agent. This is actually we are doing today. This is not just agents building. This is the combination of intelligence that we are starting to build right now.

Let's look at AI. We all know with AI, you cannot build one solution. If you look at AI, it touches multiple layers. You need a unified platform with hardware consumption, subscription services because AI goes through multiple layers. And if you look at the route to market, enterprise, they're primarily building, they know what they want, they're fulfilling. Mid-market, it's still on the frontier model looking at the outcome. SMB needs guidance. They are still building the infrastructure and the data center. But what is more important is the life cycle. It's not point of time. If you look at how AI is built, it's a journey. You have to go through deploy, govern, adopt and operate.

So our position at the center of this ecosystem, opening new routes to market with customers, vendors, financing gives us a unique opportunity. Our network is strong. Our platform built the automation and integrations brought in the transactions. The transactions are giving signals. And today, our intelligence along with that is making us an opportunity to open new routes to market. And we are becoming that intelligent operating system.

Now you might ask the question, why us? Because AI models can be replicated. AI can be rented. You cannot replicate or rent the operating context. Ingram Micro has 47 years of history of operations. We aggregate all the data. We look at our platform to bring in signals through various experiences. And then we have built our technology foundation. That is creating a unique moat for us to play this agnostic operating system for the B2B. Now this doesn't happen one day. This was years in the coming. And as you heard today, it all starts with people. Now we had a great distribution DNA for many years with a great experienced people but we injected a platform DNA in that ecosystem by hiring more than hundreds of people from tech companies and Silicon Valley companies. And they combine together. They bring in the experience and the expertise. Let's hear from a couple of them how they work together.

[Presentation]

My background is in building consumer-scale data and intelligence systems at Instagram and other e-commerce businesses, where personalization and recommendations, for example, need to run in real time for millions of people. At Ingram, data flows through millions of transactions on our ecosystems from numerous systems and sources, including partner relationships, pricing, customer orders, financing, logistics, et cetera. We have built a real-time data mesh with harmonized data to feed context to our AI factory, and this is our foundation. We are moving from connecting systems to combining intelligence. While frontier AI models are becoming a commodity, what becomes a differentiator is the operating history and context. For example, our platform knows who the partner is, what they buy, what they renew, what they can finance and how they execute. So recommendation lands in context, not in a vacuum.

[Presentation]

I've spent 30 years on the business side of technology and the last 20 of it in distribution. And what we've seen is more of a linear progression. So going from phone calls to faxes, then to e-mail and then to e-commerce. And what's different now is we're seeing an exponential change. This is about expanding the reach of our partners. So for example, being able to do outreach to tens of thousands, if not hundreds of thousands of additional partners that maybe they wouldn't have been able to engage with before.

So the agents are enabled them to have a broader reach, more intelligent reach and be able to add more value in all of their interactions. And this is what makes our approach novel is the combination of the intelligence, the agentic capabilities and our operating model and our industry knowledge that makes it truly unique and is providing a value proposition that is getting a tremendous response from all of our partners.

So our technology teams have built a patented technology moat. It's a journey. It started first by building the platform foundation, the architecture, the data engine experience layer, 42 million lines of code homegrown in the last few years. On top of the platform, then we built a real-time data mesh. And what does it do? The platform experience bring in transactions, but it adds the context with 47 years of data through one source of truth, but 250 million events and signals processing every day. Then we built our custom AI factory.

How do these AI models become production grade? How can we add a combination of context and the intelligence, the models together? On top of that, we started building the journey. You cannot automate or identify a process that is broken. How do you go end-to-end with the journey to build on top of that? Then we build all the models. You heard about it today from Paul, 400 homegrown machine learning and AI models. That's why today, we have that intelligence foundation that is helping us to go and find new opportunities. And it's a platform which is built once and can be delivered to many, multiple segments of customers, multiple size of vendors, different countries, big or small, we have taken a platform approach.

And to do this, we have actually partnered with innovators in the industry. This is a complicated problem to solve together. And together, we are bringing this innovation in this ecosystem. Now where are we in this journey? Today, we have 22 of the 57 countries live on the platform. And in those countries, about 80% of the revenue goes on the platform. And different countries are at a different maturity level because you have to understand that when you build the capability of a platform, then it gives in signals and transactions while you get benefits, but capability and intelligence feeds each other. It keeps on growing.

So you have capabilities feeding intelligence and intelligent outcome. And today, we are starting to have -- I'll talk about it, our intelligent operating model in a region. So we are building on top of these capabilities. And we are showing leverage. In the 10 most mature markets, we see higher gross revenue per head, gross profit per head with lowering go-to-market OpEx. And you can see that the self-service order mix and the revenue for customer orders are increasing. And we are not only doing this leverage for us, we are improving cost for our customers as well.

Now you heard a lot of promise. Let's show some proofs. So we are going to move into intelligence in action. The first thing is Xvantage was not a storefront or a website for customers. It's an experience for the entire ecosystem. If you look at how we have built this experience and a personalized experience with our intelligence, it has an experience for our customers where they come, our mobile app, for our vendors, for our associates internally who can actually operate on that. For integration, it can connect with CPQ, CRMs of our customers within minutes with like Salesforce.

It can even experience for our end customers. So it creates a completely integrated experience through the platform. Those bring in those signals. Now if you look at the automation and intelligence-led efficiency, you heard about ETO, e-mail to order, our patented technology, taking friction out for our customers. It helps us to really make us more efficient. And we are actually driving efficiencies not for us only, even for our customers. Some of the quote-to-order times have improved from days to minutes. And Mike will talk about it more in the OpEx that every handoff we remove takes out cost for us and our customers.

Just look at more detail into this proactive selling mode, which is actionable insights. Paul talked about IDA. When you look at IDA, today, we are looking at algorithms, codes, not only increasing the funnel, but prioritizing with our models to figure out which has the highest propensity to close, where they can actually have better conversion rate. Our associates come today.

They already get a prioritized list. They can prioritize by outcome. They can even look at high-margin opportunities. This is where we are changing the margin. They can look at preparing themselves through an intelligence exposed by our agents that we have built called Sales Briefing Agent. When they give feedback, we can capture further actions. And they can even do a research for a customer that save them a lot of time to prep for that.

This is helping us to change completely from a reactive way to a proactive way of selling, bringing intelligence straight into the sales cycle.

I'm Ray Wang with Constellation Research. The numbers don't lie. Conversion at 4x the normal baseline and $1 billion in AI-led sales shows the progression to an AI-first approach is here.

Now we are bringing the same insights and visibility to our vendors. Our vendors today can log into the same platform, get performance signals, health dashboard. They can even get their customer demand signals. They can even look at their quote pipeline along with conversion propensity in the same platform that is sharing the intelligence today.

Distribution was never known to give this real-time intelligence visibility to our vendors. And now we are combining this to bring in drive actions, what I'll show. Working capital, ROWC. We are using intelligence today in the same process to intelligently buy.

Our associates can do intelligent-driven deal analysis. They can look at how they can optimize the buy-in from the vendors. They can use intelligence to chat with our agent and really figure out how do we improve our DIO. So I'm giving you areas where we're using intelligence to run our business. Imagine data helps you run your business, intelligence helps you grow your business.

If you look at another important component, we talked about B2C in B2B. It's not easy. Some of us, it's an NFL season, watch a game on Sunday, order your food on mobile, come back on Monday and make a phone call. How can we make Sunday to Monday a fun day? And how do you create a B2C experience on a B2B?

Let me give you an example of how we are using intelligence to create a B2C experience on B2B, a single pane of glass with hardware, software subscription services completely personalized for every persona. The widgets are customized. Every action you take, the platform is learning. It can be for any subscription cloud.

It can help you do intelligent search, understanding where you search before based on your persona. It can give you cross-selling recommendations right at that point based on your history. Look at this, we can automatically attach an warranty, understanding the signal that there is a cross-selling opportunity right there.

You can do software pairings, what really goes. In this case, you see that. A unified cart, imagine a single cart, which has hardware, software, subscriptions, services, not different marketplaces, not different platforms, a single cart that shows all of that in a single platform taking complexity out. And when the order is done, you can actually go to the same platform and can do real-time order status tracking, understanding where your actual delivery is and track that from here.

Our customers are spending more time in the platform. We are creating a different B2C experience in B2B. And this experience now we're extending to mobile. Imagine notification of a deal that you have. You want to optimize inventory, you push it through mobile so that your customers can get a real-time notification.

You want -- you have a high propensity quote for a small MSP, you can push it through a mobile app or you can actually do a one-click ordering to do that. We see customers using the phone to not only check pricing, but transacting to the phone right now. Subscriptions, a complicated challenge in the industry. Consumption models change, renewal opportunities.

Imagine you get a renewal signal 1 year before renewal happens. How do you understand that? How do you drive recommendations on subscriptions? How do you take complexity out about the entire subscription life cycle and manage subscriptions how do you have facilitated a one-click auto renew? These are complicated problems to solve in the same platform that you actually had and were selling hardware.

You heard about Enable AI. Today, the experience that we have, we learned by doing AI. We are sharing it with our customers. They can come to the same platform.

They can do a custom skill builder. They can take a readiness assessment to understand where they are in the journey. Really customized for them. Personalized evaluations in the platform for them to understand.

Then we give a maturity scorecard, which rates them. And ultimately, we create a tailored action plan for our customers in the platform that can help them go through that AI journey because AI is a journey, not a destination. I'm going to move to one another thing, which is integration. We need to integrate intelligence together.

You heard about MCP. This is where Xvantage goes beyond Xvantage to connect with our customers. Customers don't have to come to us. We share our intelligence, our context and our history, share with them for benefit of them. Let's hear from one customer how they're leveraging...

What I want to overview with everyone is really the power of the Ingram Micro MCP connection to Xvantage and really how a business like MRE Consulting uses it on a daily basis. When we have specific quotes and we want to create a new quote, what we do is we go into the MCP server and we say, can you create a duplicate?

So now we have a new quote. So I can take this and I can go to my PSA and I can create a new opportunity. I can import that exact new quote. Now within a matter of minutes, I have a new order form that is now sent -- ready to be sent to a client. So this process used to take us about 2, 3 days. And with the power of the MCP server, I'm now able to do this in a matter of minutes.

These integrations bring us signals and to get context. And we are not only stopping that. We're actually now integrating this with any AI frontier assistants.

If you look at this, the platform is connected via these customers. Imagine a small MSP who may not have that IT budget to invest in AI. They can quickly use their own frontier assistants and work with our platform from a catalog getting in seconds to get a recommendation to even get a push model solution that we can do it together. This is where we are combining intelligence not only with our vendors, but also with our customers.

So all of this experience that we are bringing in has a very interesting dynamic. If you look at the actions, the insights, the buying, the B2C design, intelligence anywhere, mobile, go-to-market, assistance, it actually tells us something through all these experiences, we are not only bringing in transactions.

We are gaining the intelligence that is making the next one smarter. That's our new operating model because every transaction creates a context and every intelligence-driven action that we have is actually driving a better outcome because intelligence is connecting that signal to the context to drive an outcome. So this is actually our new operating model.

Today, we are really moving towards an intelligent operating model where a platform connects the participants, brings in their automates, digitizes, but an intelligence drives action, drives reach, drives push where you need to do today because the ecosystem has become so much more complex and you need renewal signals, buying signals, recommendations. Paul talked about platform operating model. We started the journey by standardizing and cost efficiencies throughout the globe. But without that, we could not have built the intelligent operating model. The products, initially, we moved products that we go at scale.

Platform connected the participants, brought in the transactions, gave us the foundation for the intelligence. Today, we have the foundation now for an intelligent operating system to operate. And let me give you a couple of examples of how we are doing this. Our sales pipeline that you saw, sales briefing agent, we integrate with our internal data and external data for signals. And then we prep our sales force, our sales teams with agentic intelligence to understand who to target, where to target and the right opportunity.

You have to understand the propensity -- so you are moving from being an order taker to really being an order maker from reactive to being proactive. Now this approach, we can scale the intelligence with humans and can also scale with agents. If you look at this today, our agentic outreach, the signals we identify are opportunities, upsell, cross-sell opportunities, high propensity quotes, renewals. These are all opportunities you do not get.

These are invisible. You have to go and find them by attaching all the data. Now the agent identifies an opportunity, how do we push? You saw today, we can actually push via the mobile app by a notification.

We can do an MCP. A small customer comes to us, we are pushing. We are not waiting. We push to an MCP. And we can also be an interactive marketing to push and automate intelligence to that. This is where we are now in a phase of creating a repeatable model that operationalize intelligence. Our engine looks at opportunity propensity, intent and then identifies prioritize action. Bill Brandel, who will come here later after lunch, will talk about how we are doing this in North America, starting to show this model.

These actions can be taken by an associate who understands where to reach, by an agent, the ports that we don't cover, how do we go, but not blindly, the right customer at the right time to drive the right outcome, moving a push model. So you feed in growth strategies here and you feed in opportunities. And that's how if you balance all of them, you get your leverage. So really, intelligence is more a growth and operating leverage story. You can look at revenue margin, not only your gross margin, but your operating margin, your productivity, strong cash flow, you balance all this to the intelligence model that you have.

We are turning intelligence into a compounding advantage. We did the hard work using our scale, build the platform to build the integrations and infrastructure. And today, we have created a new growth flywheel. If you look at this, this is the model. The signals when the customers come to us with the experience, they give signals where you have invisible demand, demand generation. That's where our vendors want.

That's where long tail wants. We can attach the entire ecosystem. Now match that with our context for so many years of operating. We use our models and intelligence to reason, understand the action and drive outcome and keep on this loop. This flywheel fuels a new growth engine on the foundation that we have built on the technology moat and the operating experience that we have built. And this converts intelligence into commercial outcomes, a different model. If you look at this entire flywheel, this is the core flywheel. But you saw before, this has helped us to become a broader ecosystem flywheel.

Through this intelligent and actions, we create a better experience. We bring in more vendors, take the complexity out because complexity is the biggest constraint for growth. We bring in more solutions because the industry is not about pushing one solution, it's bundling solutioning together. How do you do that without the intelligence and the solution? You attract more customers, then you can price, promotion, merchandise, then you can bring in the ecosystem partners. We'll talk of center.

This entire ecosystem, somebody had to solve it, who is agnostic. A vendor who focuses on products cannot solve it because they focus on products. Hyperscalers focus on cloud. But we focus on the ecosystem. That is why we are the intelligent operating system of this global tech ecosystem. Xvantage has evolved from being a digital platform to an intelligent operating system of this entire ecosystem because this is a problem somebody had to solve it.

Like you saw from Paul's presentation before, this foundation helps us to create a pivoting business model. We have the operating system, which is bringing signals, bringing in the integrations and the network we have, we can build supply chain, finance, marketing, ITAD. We can add this foundation and keep on expanding from distribution because these are B2B problems. The technology and the operationalization that we are building solves for B2B.

So we are moving from distribution to tech to B2B. So in this journey, you heard Paul saying we have reduced OpEx, and Mike will give more details about it. We have increased revenue. But today, we are now in a phase where through intelligence, we are really getting into margin optimization.

We're optimizing margin and showing the leverage. It's a $5 trillion technology market where intelligence is improving and expanding the value of every transaction. And as I told before, this problem had to be solved. I know a start-up that is solving this problem, a $57 billion start-up with a $5 trillion opportunity. That's us. Because on the base of this foundation, we can bring in other B2B opportunities through this flywheel because today, we have built the foundation.

Distribution moved products. It's really good at it. Platform digitized and connected participants, but that created signals. And if you add to our context, today, we optimize outcomes with our intelligent model that we have. For decades, we moved products. Today, we move intelligence. We just don't move products to the value chain.

We move intelligence to the value chain and maybe we are creating a different value chain because this intelligence model that we are building is driving action to outcome and really building the growth and leverage. And Mike will talk more about it with the intelligence bridge that is changing our economics. So we are changing from a transaction business to a compounding intelligence platform, a different company. Scale is our advantage. Intelligence is a multiplier.

Thank you. We're now taking some questions. So this comes in from our live audience. So Sanjib, can you provide more details on how the Xvantage platform helps vendors, OEMs, customers, basically the entire supply chain, help navigate the current dynamic supply and demand environment, including rising ASPs and component shortages. How does this translate into deeper customer relationships and revenue growth? That's a lot there.

Yes, it's a lot there. If you go back to the segment of vendors that we showed and the segment of customers, if you look at the larger vendors, they actually work with us to do most of the products to the market. And a lot of them is vendor-led and we generate demand in some scenarios. So we play in the role where we fulfill, we take the products, we do it efficiently, and we really give them the opportunity to the channel that they want.

But those vendors today are looking for unmatched demand to the signals. If you look at any large vendor today, the #1 thing they will ask is how to match our pricing, what do we have and get us access to the net new SMB and the long tail. That's the opportunity that they have. And what they want is really a level of segmentation that they don't play generally, and that's not their core competence, but that's where they want to go.

So today, we do a great job in working with the enterprise. So if you look at the platform, the platform has 2 motions. With our transaction automation with our vendors, we do it efficiently take their products in the big customers, the enterprise and the upper mid-market area. But if you look at with the platform gives today with combining intelligence, imagine their pricing data, their signal data, you combine their intelligence with our intelligence, we can get understanding of units, ASPs and signals, and then we can really use our agenting intelligence to actually push it to the long tail and drive value.

That's what the vendors want. Most importantly, the vendors can also come into their platform and can get visibility, as you showed today, they can get visibility, they can get customer demand signals. They can also get understanding their propensity for quotes and performance, which gives them an understanding of their markets even more better.

Great. How hard would it be for competition to replicate what we're doing with Xvantage?

So we are not solving a distribution problem only. We are solving an ecosystem problem. Now if you look at our differentiator, we have the foundation. I showed the journey today, right? It's not about an AI model or it's not about building a platform. Our goal is not to only build the best platform.

We want to build the intelligent operating layer for the ecosystem, which requires the operating context, which requires a technology foundation, which requires the aggregating the data, which takes a lot of effort, which requires your journey mapping, which also requires your foundation of the systems that they talk to each other. That's a lot of complication to build.

Now I cannot comment where competition will catch up, due respect for them. But what I can tell you is that this operating context with the history of operation we have, with the data that we have aggregated over the last few years, the experience that we've created to get the signals and then to build an agentic foundation, it's hard to copy.

How will Xvantage help drive Enable AI and expansion of AI as a whole?

There are 2 ways. If you look at the AI motion that I explained today, it is different in different segments of our customers. A lot of us think AI, we get confused by the AI models or what AI is doing. If you understand that somebody -- a customer asked me a question about AI, said, without data and the infrastructure, your enterprise AI will not work. So if you segment your customers into how AI will work, the enterprise generally are doing mostly fulfillment.

That's where you see the GPUs, how they're coming up right now. So our role is we are really helping it working, participating and participating in that GPU fulfillment. Where there is an opportunity is mid-market and long tail. In the mid-market, you see more outcome-based. AI has about 6 or 7 layers, right? We talk about the hardware layer, but there is an application layer, networking layer, model layer, multiple layers.

How do you bundle the solutions together to drive the right outcome? And how do you partner with the hyperscalers together all vendors. So this whole multi-solution approach is important. So there's a mid-market component to that. In the SMB, I think we need to give guidance. So that requires a push model. That is why we are talking about in our platform today, it requires an intelligent bundling.

We showed about a bundling of solutions.

And then we really have to reach out to the SMBs through the intelligence or the push model to take them in the journey because they are looking for guidance. So we sometimes look at AI as reselling AI capacity. But if you break the AI journey into multiple phases, every segment of customer, different phases, and that's how we intend to partner with them.

Okay. We have time for just one more. We're going a little bit long. Can you talk a little bit about the patents and what -- how they provide a proprietary advantage?

Absolutely. So if you look at our technology journey that our teams have taken, we have written our proprietary code, you saw 42 million lines of code. But the code was structured in a way that is agnostic to data from ERPs to the engines and the experience.

These patents are problems that are B2B. For example, Dynamic SKU, how can we have a SKU not overloading our ERP, creating a B2C design in B2B, an agnostic framework where save time for integration with vendors. As you know, integrations take a long time, using our intelligence and framework, how we can integrate it much more faster.

You saw today a Salesforce integration happening in minutes. So these are some of the patents that we have done, 8 of them approved, which is actually solving B2B problems, not just distribution problems. And as I said before, we are solving an ecosystem problem. These patents position us to solve that to be a different company. I hope you all got that today from our discussions.

Great. Thanks, Sanjib. At this point in time for the virtual audience, we'll be breaking for lunch, and we'll be returning at 12:45 Central Time.

[Break]

Broadcasting. Thank you for joining us back. As Paul mentioned this morning, we are providing intelligence at scale. He outlined our strategy and what Ingram Micro is doing to fuel growth for our customers and our vendor partners. And Sanjib really brought it to life, and you got to see how the platform works, how our intelligence works. And now we actually have 4 customers here representing each of our 4 regions.

And we're going to talk a little bit about what their businesses are about, how they're partnering with Ingram Micro and what we're all doing to drive growth together. So with that, Greg, I'm going to start with you, and maybe you could give us a sense of Pellera and who you are at Pellera and your role and maybe also who your customers are that you're working with.

Sure. Well, first off, thank you to the Ingram team for having us today. We appreciate it. For those that don't know me, my name is Greg Berard, CEO of Pellera Technologies. Pellera is a North American-based solution provider that really focuses on 4 key areas: data center technologies, application modernization and cloud, cybersecurity and then data and AI. We're $5 billion in revenue. We have over 3,000 employees, and we really focus on what we believe to be unique in the marketplace around our AIM philosophy around all those strategic practice areas.

So our ability to help our customers advise them on the solutions they need, implement those technologies and then wrap managed services around all of them as well. From a customer perspective, we've been very acquisitive. So we've acquired companies in every region across North America. So we're really industry agnostic, but we do, do business with the largest financial services, largest health care customers, automotive and public sector would be the 4 largest industries.

Okay. And what are you seeing that's different about the business you're doing today?

Sure. So the biggest thing, as we all know, is the AI trends in the marketplace, right? So we've really started to see a shift towards let's stop talking about AI and let's start implementing technology. So we've helped our customers build very large, high-performance compute clusters.

We've seen them really put more focus on understanding the governance, understanding the compliance, how do they make sure their environment is secure to roll out the AI technology. So we've really seen a big shift towards, let me understand what the use cases are, but now we're starting to implement real-life AI use cases. And that's been a nice shift over the last, I'll call it, 12 to 24 months.

Yes, that's great. So you mentioned $5 billion, so not a small company, fast growth. How is Ingram Micro partnering with you and helping you with that growth?

Yes. Ingram Micro has been a very, very strategic partner of ours since 2017. So they've really been along the growth journey with us, helping us continue to build and explore and expand the business across the board. When I think about the relationships in this business, everything is about relationships. Ingram Micro helps us not only with their relationships and their executive team, but also the relationships we need to have with our strategic partnerships.

So understanding who the OEMs are out there that we should have relationships with and then brokering those deep relationships. The other piece is around supply chain management. We all know that continues to be a challenge, and Ingram does a great job helping us understand what's available. We don't do a lot on the inventory side.

So you guys have been a great partner to help us manage inventory and make sure things are ready when our customers need them. And then the last piece is around financial opportunities, right, helping us be creative, whether it's around acquisitions, whether it's around buying patterns of our customers or nowadays, with the high-performance compute cluster transactions, we're doing deals that are hundreds of millions of dollars and having a partner like Ingram that can help support that is very important for us.

That's fantastic. Thank you.

Thank you.

So Irvin, GBN is a different company than Pellera. Can you talk to us a little bit about GBN and what you specialize in?

Yes. Thank you for inviting us, Ingram. It's a pleasure to be here. So we are a partner in Mexico and LatAm that offer mainly collaboration like contact center. We do cybersecurity, also networking, data center and wireless solution. And our main brand is Cisco.

Fantastic. So who are your target customers that you're supporting?

Our target customers include organizations in retail, manufacturing, hospitality and finance sector.

Okay.

And the key differentiator between us and our competitors is that we speak the language of the business. We don't talk about bits and bytes, hardware, software. We talk about sales growth, operational efficiency and maximizing revenue of our customers.

And that is a really key trend. That's been happening over the last maybe 5 to 7 years that you're no longer talking to the IT suite, you're talking in the line of business leaders.

Yes. Ingram Micro help us by providing a single platform to quote, provision and review all at once through this integration our Cisco deals and discounts flow directly immediately into Xvantage is amazing tool, allowing us to respond much faster to our customers.

Fantastic. Okay. So Gordon, let's switch over to you. Paul mentioned earlier about how customers are also acting as vendors. And I think Viadex is a really good example of that.

Yes, yes. So I'm Gordon Scobie, VP of Technology at Viadex. As Jen mentioned, our business is split into 2 different areas. One is around logistics and the other is around managed services, but we've also been able to create 2 new cloud practices with AWS, GCP and actually OCI using Ingram, which we couldn't have done before. So one of the unique areas that Viadex can provide is we can deploy any form of hardware, any country in the world looking after import, export of records, completing all local in-country administrative tasks, and this is one of our major superpowers of Viadex.

Fantastic. And what is Ingram Micro doing to partner with Viadex and how are we helping you?

Yes. So there's a few areas. One of the main areas is around Viadex uses Ingram to distribute for our global dispersed customers. So one of the things at Viadex is we only deal usually with customers who operate in more than one country.

How we leverage that is through yourselves at Ingram, which is -- helps us to scale across all these different countries. The other is around our AWS and GCP practice. So 14 months ago, we went on a journey to set up the AWS practice. And by using Ingram, we have basically escalated that process from being a partner within the first 14 months.

The way we've built it usually take 3 years, but we've managed to condense us in 14 months because effectively, the Ingram AWS teams is an extension of our teams. So it's great for us to scale. And also in terms of the GCP side, what's happened with GCP, we are already providing the managed services from an AWS point of view.

So some of our customers also use GCP. So within the last 3 weeks, we have managed to create a GCP practice within a week, which we couldn't do without Ingram. So that's -- it's been huge for Viadex to be able to lean on that specialty that Ingram has.

And the final area that where Ingram is bringing value, so we have created an AI SaaS solution that focuses on migrations from data centers and AWS. So based on AWS Bedrock, we have worked in collaboration with Ingram's AWS team to effectively create this SaaS solution, which can condense a MAP assess or a migration assessment from 6 weeks to roughly 6 seconds. So this is something that has been very beneficial for both Ingram and Viadex.

Okay. That speed matters in real life, right? They're first start. Thanks, Gordon. So Chuong, Fuse. Fuse is an exciting company. Tell us a little bit about it and why you partner with Ingram.

Yes. So Fuse, we're a managed service provider based out of Australia, but we now have operations in Vancouver, London, Ho Chi Minh City. We're a little bit different to all the other guys. We're a services business and then we wrap kind of software hardware around it. And we take care of small, medium business.

So what we found after COVID is every business in the world is now a global business. And there was -- we were finding that our clients would be traveling the world, wanting the same level of support in London, in North America as they would in Sydney, Australia. And so that's where we kind of grew our business. And because of the Ingram kind of global scale, we managed to kind of scale up very quickly globally. It was a phone call to Ingram saying we're opening up in Vancouver. Within a few days, we had an account set up. Within a few days after that, we had some line of credit, and we were transacting. And we've turned that kind of Canadian business into 0 to a couple of million dollars of revenue in less than 12 months.

So it was great. And one of the things about Ingram as a whole is whilst they're a global business, a lot of the other distributors kind of -- the regions are quite separate, whereas with Ingram, we find that no matter who we talk to in the world, a leadership team kind of are a global leadership team.

It's quite unique in the world of distributors. And that's what we found as well being an MSP. There's a lot of global MSPs, but they all operate very separately. And our clients didn't like that. They wanted to know that they picked up the phone in Australia. They'd get the same level of support as picking up the phone in Canada. So that's what kind of made us a little bit different.

Excellent. So also, I'd call you a power user of Xvantage. Can you talk a little bit about the benefits that uses...

Look, we kind of went all in with integration and platform. So one of the challenges of the small medium business is scaling quickly, finding staff. And so we -- a few years ago, we decided to go harder into selling services -- whilst we're services led, we wanted to sell more product. And one of the things Xvantage allowed us to do is grow our kind of hardware, software business by exponentially basically.

But because of the power of automation, because of the integrations into the platform, we're able to do that without adding staff, which has just been phenomenal for us. Hardware transactions, API integrations into MCP. I'll use an example this morning. We had a client who placed an order with Dell a few months ago. No ETA. Next thing you know, they're like, we can't find any RAM sticks. I literally cut and paste the config into our AI chat tool, which had MCP integration into Xvantage.

And within 30 seconds, it came back and said, here's the option from the other vendor. Here's 3 options. This is what's in stock. This is not what's in stock, and it came back with standard buy price. All like in the past, you would have had to have gone back to Ingram, they would have had to have gone to the vendor worked out the config, all of those things, like the power of it is phenomenal now.

So just like I find that those things give my team superhuman powers. It makes us able to compete with the big boys where in the past, it would have been hard. It would have been literally me on my own, trying to figure it out. Now I've got some AI tools to help me. So yes, that's been great. And the manual processes that we've been able to replace with automation is just phenomenal.

That's great, superhuman powers, that's intelligence action right there. I love it.

That's it.

And you guys are managing a lot of seats.

Yes. So we're in SMB. We manage about 5,500 seats. So you can imagine in small business, there's a lot of staff churn. Just being able to turn on and off licenses through automation every month, the billing reconciliation for that.

Some companies will churn 20% to 30% of their staff every year. And that means turning on licenses, turning off licenses, onboarding, offboarding. So we've built the integrations that allow us to do all of that work.

But even better, it means that on the first of the month, I press a button and we do our bill run and we capture all the adds, moves, changes because cash flow is the biggest challenge of the small business. And so when you get the billing wrong, it means the clients don't pay their bills on time, which then has a knock-on effect. So the more you can do to automate that process, the better.

Absolutely. And time is money, too, especially with the services business. So Gordon, Viadex is also working with us with -- through Xvantage. Can you talk a little bit about what you guys are seeing?

Yes. So very similar use case to yourself with regards to -- especially from the logistics point of view, where we are looking at different hardware, different pricing. We are also adopting the MCP side as well, which allows the sellers to get quotes, bids out much, much faster than what they had done before.

One of the other areas is around provisioning AWS and GCP accounts. As I mentioned earlier on, it took us a week to set a practice from scratch. But by using Xvantage in terms of the new accounts and the projects, Xvantage stimulates that process, you're talking 2, 3, 4 days, much quicker than what you could do when you were doing it manually.

The other area is around the logistics. So the logistics side of the business, they are heavily rely on Xvantage, which goes back to the same point around where we can now automate a lot of the pricing coming back to the MCP servers.

Yes. And what we were talking about earlier, too, is you're able to put everything on to the same invoices, the same quotes, same orders, right...

There's also another area that we're working with Xvantage on just now, which is beneficial is around the 24/7 AWS support. So my teams have been exploring with Ingram how we can get that up and running instead of me setting up an AWS support team, we are leveraging Ingram for that through Xvantage.

Great. That's outstanding. So Irvin, with GBN, you really see us as a business partner of yours.

Could you tell us more about that and how that works?

Yes, of course. We treat Ingram Micro like -- as extension of our business for resources and expertise. We use training and certification for our consultant team. And we also work with Ingram in presales support for complex design for integrations. And so we use the financial options for Ingram for -- to try to get bigger projects for our customers.

We also do proof of concept when the projects are really difficult. And we also support Ingram Micro as a service provider to extend their business and support other SMB customers in scaling their Cisco solutions.

Okay. So GBN is also a customer?

Yes.

Also serving as a vendor with us?

Exactly. We're working in that a couple of years.

Fantastic. So Chuong, you mentioned that Ingram is partnering with you on intelligence, and you're doing some pretty interesting things with that. Can you give us some more color?

Yes. Look, we're -- I talked about the integration of the MCP platforms. But what we're finding is that in the past, as an MSP, you buy a lot of stuff off the shelf. And you'd use maybe 10% or 20% of those features. What we're finding now is our clients want -- they want to see the value of what we do.

So traditionally, we used to fix computers. We used to go out on site, plug things in, get them working again. That world is kind of changing. Now what they don't see is the 10,000 tickets of security that we do a month. And so what we've had to do is build platforms that show our clients' value in a different way. And the great thing about working with Ingram and their platforms is that we now can build a client dashboard that shows our clients all of their licensing spend, all of the work that we do with them from a ticketing perspective, all the security that we stop, but also they can see the back orders.

They can see the laptops that they have in their fleet that are out of warranty and then we can kind of say to them, right, here's what it's going to cost and this is what's in stock. And we can all service that through a platform that we've built. And I don't know actually, I think everyone in this room knows that kind of from this year onwards, like the ability to write your own code and build things out at scale has moved exponentially quickly.

And I basically had 2 full-time people doing AI and automation within my business. And I think they're doing the work of a team of 20 in the past. And we're bringing things to market now that we could never before. And it's only with the help of partners like Ingram, where we can have a single pane of glass wherever it is in the world for our clients. And that data is super important for us.

Yes. And that's a great example of what Sanjib was talking about is intelligence coming into outcomes that you're able to deliver to your customers, which is exciting. So Greg, back to you. Can you give us a sense for the scale of Pellera just to give us some more context about what you're managing on a day-to-day basis?

Sure. Yes. So as I mentioned earlier, we're $5 billion in revenue. We have over 20,000 employees. But from a partnership perspective, we have over 1,000 partners in our ecosystem. So on a daily basis, we're interacting with a lot of OEMs. And this is an area that we leverage Ingram for as well, right, making sure we have the right relationships and the right partnerships with each other.

But each of our practice leaders is looking at this every year, right? Do we have the right partnerships in place? Are we investing in the right areas? Are we doubling down with the right strategic partners? So understanding from Ingram, what are they seeing in the marketplace? What are the emerging trends that they're looking at? Where are they making investments? So our ability to leverage you guys for that is important to our business so that we can make sure we're doubling down and investing in the right strategic areas.

As I look back 3 years ago, I wouldn't have been up here talking about NVIDIA. I wouldn't have been up here talking about Databricks, right? But now we've invested in these partnerships, and we're growing our Snowflake business. We're growing our NVIDIA partnership, right? So all of those things are important. And as the market continues to evolve even faster, it's more important for us to understand what's out there and leverage you guys to help us do that.

Excellent. And how does that help -- how do our programs and services help to round out that for you?

Yes. So there's a couple of things, right? Number one, enablement and working with your thought leaders and our thought leaders to make sure that we're enabling our sellers. We're enabling our clients so they understand the technologies that are out there. We touched on earlier, just understanding the supply chain and the inventory.

And then more and more now is really structuring deals that make sense for our clients and giving them a way to procure the technology in a way that makes sense for them and a way that we can handle it as well. And I touched on it earlier, but we're doing large, large transactions, and we couldn't do that without Ingram, and we couldn't do it without the creativity that comes to bear as we're structuring these large transactions.

Yes. And so you've heard from many of them about our financial programs, and Eric Tapia is going to talk about that a bit later on what we're doing with that. It's exciting. So what are you seeing in terms of AI? And how are you supporting your customers around it?

Yes. So there's a couple of areas. We talk about the Pellera AI platform, and it comes down into 3 different buckets. The first one is what we call AI factory and high-performance compute clusters. And this is where we're driving very large end-to-end compute, networking and storage transactions with our customers. And these are typically hundreds of millions of dollars, and we're working with Ingram.

We're working with HPE, Dell, NVIDIA, VAST, all of the major compute and storage platforms that are out there. And we're helping our customers understand their use cases from a data perspective and then making sure they have enough compute power, making sure they have enough bandwidth from a networking perspective and then the storage capacity to handle these.

These are large financial services use cases, large health care use cases, working with customers to drive cancer research and other things. So really just taking the business to the next level from an infrastructure perspective.

The second piece is around AI as a feature, right? Every OEM out there is building newer and newer capabilities on a monthly and quarterly basis. So how do we make sure our customers understand what they own today and how can they leverage that to drive the business outcomes they have. And then the third leg of the stool that we talk about is AI as a solution, right? And this is where we're doing design thinking workshops with our customers to understand what's most important to their business, what's going to give them the best ROI.

And then we're working with them to build a road map, helping them build the technology, helping them implement the solutions and then manage it over time. So if we can continue to work together and drive those 3 pieces, that's going to help our customers see more value from AI technologies and help us all continue to drive value and be a growth lever in our business.

That's great. I mean you guys are being a consultant with your AIM approach and with design thinking and all of that in addition to a technology expert.

Exactly.

So that's tough to manage both. So Gordon, you guys also have some unique AI offerings. Can you touch upon those?

Yes. So based on some of the use cases we've had with our customers over the last -- over 12 months, we created a service called Altiora, which basically is an AWS AI solution built on Bedrock, which effectively can take a customer who was looking to do a migration into AWS instead of taking this 4 to 6 weeks, we can now speed that whole process up to, as I said earlier on, 6 seconds.

So we couldn't have done that without the feedback from Ingram because the volume that Ingram are putting through from migration assessments, we are basically looking at that process, look at our customers' process, and that's how we've managed to adopt AI technologies to condense that whole period to save resources, efficiency, accuracy, all within one solution.

So that's running already within AWS through the marketplace and AWS have signed this off as one of their MAP assessment tools of choice, which is a good position to be in. And then the other market where we created a new AI solution is around, we have a SaaS solution that's called Viadex360, which effectively is a cloud management platform that plugs into AWS, Azure, GCP, Databricks and Kubernetes.

But one of the features that we were getting feedback from our customers was they're adopting AI all the time, but they don't know what they're consuming and what that cost us. So effectively, we have built plug-ins to Anthropic, OpenAI, Gemini, and we've included it as part of Viadex360, so we can monetize an individual cost to track an individual user's consumption of tokenization, and that's across all the different LLMs. So not only do you get your hyperscaler cost, you also get your LLM costs as well, which is...

That's really good.

A year ago, you probably couldn't have done that.

Yes. And when earlier, Sanjib mentioned collaborating intelligence, I think that was an excellent example of how we're doing that together as well as that route to market through hyperscalers. We're making it possible for those SMBs to get those services, and we're working together on that.

Yes.

Yes, excellent. So Irvin, with GBN, you guys have a specialty business that you mentioned. Can you -- what are you doing with AI? And can you talk a little bit about that?

Yes, of course. Most of our projects is about contact center include AI solutions. AI agents and AI solution for humans that help to manage better the conversation with their customers. We have customers in different verticals like -- sorry, like hospitality. You can make a reservation without talking with a human and with informal language, taking advantage about all the information they have, like room types, destinations, prices, restaurants, et cetera. And last year, we were in a Cisco Partner Summit and we received an award to be the best collaboration partner in Mexico above mid-market clients.

That's great. And you guys have built this specialty over a number of years.

Exactly, we have a special team making only contact center, about another team doing the rest of the technology.

That's exciting. So Chuong, back to you. How are you integrating AI into the services that you're providing?

Yes. Look, I think this was a big challenge for everyone in managed services over the last few years. It's like how do we monetize AI. And what we've realized is a lot of our clients were building great little tools, little time savers within their business, but they were building it on OpenAI, Claude, they are hosting it on Lovable.

And I think we got an example of one of the tools one of our clients built one day and my CTO is like, we're not logging into this application, and it's on the Internet. So basically, anyone can use it. And like what do you mean? We're like, well, I'm on my laptop right now, and I can access your information without any authentication at all. So from that, we launched what we call Fuse365 AI. So it's hosted on Azure. We spin it up within Ingram's Xvantage platform.

We build it securely for our clients. We put all of their tools in there. And Microsoft had their foundry product, which is great for kind of mid-market and enterprise. There was nothing new in that kind of SMB space. So what we basically said to our clients is we're going to build you a tool set, the data is yours. So a lot of people had staff building AI platforms and no source code. So we went, right, let's build this properly. So we built a managed service product around that. And then basically, it allows most of our clients who are building tools for 5 staff or less to do it themselves.

And then anything bigger than that, that's when our team step in. We've got our own development team in Vietnam. So one of the big challenges now is once you get to a certain size, you have to kind of build some scale around your software dev, but then finding people is hard.

So Vietnam is a great place for us to invest in. And so now that's allowing our clients to kind of build out platforms, get them to a certain size and then say to us, can you take it to the next step, please? And that's where we step in. And then we build a managed service around that to maintain it and manage it for our clients, all hosted within Microsoft Azure with the help of Ingram. That's kind of -- it's been a very little kind of starting point for us.

And just having the Ingram team understand what we're trying to build talk to people at Microsoft on our behalf, get us out in front of the right people, give us kind of upskilling where we didn't have those skills in the past. That's where partnerships work for us.

Fantastic. Well, hopefully, what you all have been able to see is some of the complexity that Paul talked about earlier with, there's at least 6 different products going on a quote and an order. You heard that today. Cybersecurity is also a really important part of the mix, especially with AI and financing and the resources and the extension. So we really appreciate your time today, gentlemen. Thank you for being here. And really thank you for your commitment and your partnership with Ingram Micro from Australia to from Mexico to U.K. and here in the States, thanks for joining us, and we really appreciate it.

Thank you.

Thank you.

Thank you.

All right. We're going to -- thanks, guys. We're going to do a quick switch here and ask that our regional presidents come up here and join me on stage, literally in the hot seat as these lights are getting intense. All right. How's everybody doing? Good. All right, energy, love it. Okay. Hello.

How are you?

I'm good. So we're going to switch gears here, and we're -- you got to hear a little bit from our customers and with their point of view. And really, we did this on purpose to give context to what is a day in a life that they have like? What are they dealing with? What are some of the things they're solving for, how do their businesses need to operate and so forth. So now we're going to talk a little bit about behind the scenes and the work that Ingram Micro is doing to do that.

So to start off, we're going to hit what we're doing with the platform. Sanjib, of course, talked a lot about our intelligent operating system. He called you out, Bill, and said, Bill is going to talk later about what's happening in North America because it is one of our more sophisticated regions in terms of really adopting and using that. So tell us how are your teams working differently now than a year ago?

No. Thank you, Jen. And yes, you did call me out. Thanks, Sanjib. The reality is I've been doing this for 29 years, and I would have to say the difference, what I've seen over this year from years previous is just our ability to be far more proactive.

Historically, we had partners calling us, bringing us opportunities. We'd work with them through to the end, and then we would create a solution and they would deliver it. And that was really the typical flow of how the business works. Leveraging the intelligence of the platform, we are now able to look inside the opportunities that we are working on, and we're able to see additional products and services that would be applicable to that solution.

Leveraging that intelligence and pulling that all together, we're able to put together a much more valuable quote for partners to prepare and send to their end users. The other thing with the platform is because both of -- our entire team is on the platform, you have the vendor and category specialist teams who really understand the nuances of each of the vendors and all of their programs and their products, and they're working hand-in-hand with our sales generalists.

Now the generalist team that owns a relationship, because they're all on the platform, they're building this bill of material together, and they're adding all the necessary components. So the quality of what we are able to produce is far greater than it was before.

And then you heard about speed. When you can send an e-mail and request a quote that can immediately be converted to an order, bypassing all of that handholding that used to have to happen between all of the vendor teams and the different OEMs, you're now within seconds, able to create an order or an opportunity for a client. And so when you think about MCP, and you heard right from our partners, how they're leveraging that in their exploratory stage and as they're crafting opportunities, we're moving these things through the system much faster than ever before. So really, if I were to summarize it all, it's that proactive demand generation we're able to provide. It's really the better quality through the collaboration of our teams and then the speed to market.

Outstanding. So Luis, building on this point of intelligence and scale, you've done a lot of standardization across the LatAm region, specifically with our platform operating model. Can you talk a little bit about what you're doing there?

Absolutely, Jen. Good afternoon, everyone. So yes, one of our priorities in the region in LatAm is how do we standardize our operations and take advantage of all these best practices that we have developed through the world and obviously, using our platform operating model, but always putting Xvantage at the center. Always the driver is our platform. So this has gave us a common way on how we operate throughout the region.

So we devote much more less time to transactions today than what we used to do before. And that allows us to spend more time with our customers while the platform help us doing and expediting all our operations. So we are moving from a fragmented local operations to a unified way of doing the business through our region.

And actually, one proof point that we got out of this is last month, we decided in one of our branches to move all the back-office operation to our PBO, to our platform business operation team. And we rely all the go-to-market team to go with the customers. And the results were fantastic. The results were fantastic, but was one of the best months of sales that we got because the interaction from our sales team with the customer was so good that we were able to gain additional business. So basically, our platform operating model together with Xvantage is transforming our operation from a collection of local operations into a globally standardized platform-powered growth engine.

Fantastic. And that's something we're using universally across all the regions.

Absolutely.

Okay. Let's switch gears and talk a little bit about services and our life cycle services business. So Matt, with growth on our topic here, EMEA has invested a lot in professional services. Can you tell us a little bit more about the services that we're providing and how the partners are using those?

Sure. Thanks. Yes. Professional services has been a key focus for the region of EMEA across the rest of the business for a long time. And we've had great local capability, really good local capability. But what we wanted to do is widen that capability, leverage what we've got today in other parts of the region where we may not have that.

Equally, we want to be able to have consistency in our deployment. That's been crucial. So all the markets that we sort of go into today with services, be it infrastructure, data, AI, cybersecurity, we do that all in-house. We're not outsourcing anything. So we've got fantastic capability now that we can leverage from the center of excellence.

And what that's giving our partners is a very, very low cost of entry into a high-margin area. And they're able to leverage and utilize our highly certified multilingual team of architects, consultants, engineers who pretty much go across all services.

We go from initial consultation all the way through to managed support. And one of the biggest areas that the partners are leveraging from us today is around workload migration. We've heard that mentioned a couple of times already today. And we're giving our partners access to critical components such as program funding that they may not get.

Obviously, the capabilities of our teams, be that technical, engineering support, being able to resell our services and then getting ongoing support as well. So we're really a critical partner to them in many different aspects. What that's creating for us is a repeatable and scalable services growth engine that's creating demand, transformational outcomes and also recurring growth, recurring revenue for our partners as well as ourselves.

And for us, the depth and breadth of our services portfolio that Paul touched on earlier on is wide, and we cover some of the services for products for vendors we may not be selling the hardware on. So it's a real deep engagement we've got around that services business.

And again, it's not just reactive as well. We're proactive in the way that we look at services. We're not sitting there waiting for a quote to come in, we're being proactive. And I'll give an example in the cybersecurity market where we've got a tool called Eyesight. And what that tool is doing, it's assessing publicly available data to look for security vulnerabilities in customer networks.

When we're finding those, we're going back to the partner, providing the partner with a solution to engage back with the customer. So we are really creating that demand. And what we're doing, we're turning that cyber risk into pipeline and into opportunities and allowing our partners to really forge deeper relationships with their end customer.

Great. And I think really key about that is that repeatable, scalable services because when you heard the partners earlier talk about we're an extension of their business. We're providing that as an ongoing something they can depend on and help to make their profitability better and our services are more profitable because they're repeatable and scalable.

Yes, absolutely.

Fantastic. So Luis, you have a pretty sophisticated pre- and post-sales center of excellence. Can you touch on that?

Absolutely, Jen. And actually, as you said, we have become part of our partners' infrastructure, right? So they see us as that as Irvin was mentioning on the previous panel. So when you think the necessity of our customers to have much more technical capabilities, together with the opportunity that we saw in the advanced solutions market, in the advanced solutions space together with cloud. So it's a very good combination, our value proposition.

So what we did is that we took all our technical capabilities that we have through the region and we concentrated in our center of excellence. So that gave us the opportunity or the ability to shift from presales to a much more shared regional model.

So now we pull all our specialists and we deploy them where the opportunities are, where the markets -- the real needs from the markets are. So this reduces the duplication and supports much more opportunities with the same resources. So we are becoming much more productive and effective on that. So we got our center of excellence is divided by technology. So we got specialists for cloud, for cyber, for modern infrastructure and for networking. So we have a very good stack, I would say, of certifications together in the center of excellence.

And when you link that to Xvantage, here is where the beauty comes in. When you have that platform that is driving you the operation, and you are able to put those opportunities into the platform, you can track them from the request all the way to the delivery or the outcome that we are expecting.

And together with that, we get a lot of metrics or KPIs that we can measure, right? We can measure how is the attach rate that we are doing in the offerings that we are putting together to that, what is the conversation and what is the utilization and mainly and most important, our customer satisfaction.

Yes.

So we are able to basically track everything that we do on the platform. So our center of excellence turns expertise into partner enablement, services growth and hyperscaler expansion.

And it's fantastic and key because those certifications can be a very expensive process for our customers to have. So to be able to tap into the expertise and the certifications we have is really key for them. And you even heard that from Jay Miley earlier saying, sometimes the market isn't mature enough for them to invest. And so we're providing that ramp...

Absolutely.

Into growth for them. Excellent. So Bill.

Yes.

Can you touch upon because we are doing some life cycle services, specifically in North America around ITAD. Can you talk to us a little bit about that?

Absolutely. And that's an area that we have been investing in because we see more and more partners leaning in, looking for those value-added services. So when you think about it today, you have a lot of customers that are walking into end-user environments, and they're tripping over old technology or they find it stuffed in a closet somewhere.

So really not knowing what to do with it, giving our partners the opportunity to be able to take that product back, provide any possible value that's left on that towards the solution they're presenting and then dispose of it ethically, compliantly and in an eco-friendly way, really gives them a value to their customer that's super sticky.

Also, what I would say is we now are able to take that technology back, refresh it, resell it if it's still got value left in its journey or just dispose of it properly and make sure that it's done right. The second piece that we've noticed with this ITAD focus is when you have a market like we're in today with the a little uncertainty around the supply chain, around products, we're able to harvest some of the products out of that old technology, leveraging in the new solutions we're delivering today to keep that momentum and that business flowing.

So we're finding it to be a very valuable area to be invested in, and I know our partners are looking for more and more services to attach. This is a key one for them, and we're going to continue to expand this across the globe.

So it's not only life cycle services, part of that circular economy.

100%. You heard Paul mention it and Sanjib earlier.

Okay. All right. We're going to talk about our 2 favorite letters that would be A and I, if anyone was wondering. What we're doing around AI adoption. So Diego, you're doing some exciting things in our APAC region by hosting some AI-focused sessions with hyperscalers and partners, even with government specialists. And what are you hearing? And how are those turning in conversations really turning into growth?

Yes. What I would say is thank you for the question, and good afternoon, everyone. Like 3 or 4 years ago, when I would have a customer meeting, everyone would ask me, okay, what is AI? How AI is going to help my business or even change my life.

Fast forward to today, in Asia Pacific, primarily, the vast majority of the cadence around AI applications, they are coming from Asia Pacific. So in reality, it's not more -- the region is not in a discovery phase. They are more in an implementation phase, right? And with that comes some challenges and different needs by customer segments.

For example, we spoke about hyperscalers. Hyperscalers, they need our reach to mid-market and long tail, and we can offer that. We have programs with Microsoft, Google, AWS, where we have specific programs, as also Matt mentioned, to help them to really reach that segment of the market. We have NeoClouds, and that's where they need speed, financial services, our supply chain services.

And then you have -- we had a customer panel earlier, a couple of MSPs, AI vendors where all what we're doing around AI, our platform, the way we are being able to provision services, the way we're being to build services and hardware in one single pane of glass that's really adding a lot of value and really shows the strength of our model, right, and reach.

So -- and then you have this other big customer, which is called government and the concept of sovereign AI. And sovereign AI from being the seventh priority in terms of investments in a very short period of time, it became the second. So we see a lot of -- and we are participating in projects, okay, with governments around AI deployment, okay? And what governments need is that trusted ecosystem that really can rely on reputable vendors, reputable partners, reputable go-to-market partners like us.

So -- and then Luis mentioned around our centers of excellence and how -- what are the initiatives we do with our partners and vendors. We have one in Singapore, we're being able to show to partners and even in customers success cases that can be, I would say, replicatable.

And at the same time, we have done many events where we introduced the new AI technologies and AI is not only GPUs, that is a cybersecurity layer, observability layer, compute, storage to partners and also end customers. So I think what we are -- and again, shows the power of our reach and trend is we are helping our partner ecosystem to transform opportunities into revenue generation for them.

Excellent. And Luis, I know that we've also got a different value proposition with our hyperscalers. Can you talk about how some acquisitions have helped us become more strategic go-to-market partner?

Absolutely. So what we know from the hyperscalers is that they are very good at attending the enterprise market. So they rely on us to develop, as Diego mentioned also, the SMB and the mid-market segment. So there's where they rely on us to go do that job for them.

So some years ago, we acquired in Brazil, BRLink. So BRLink, it's a premier partner for AWS. So they are very well specialized on the AWS technology. They have over 180 technicians, and they have done over 1,000 migrations actually in the period. So what we do with them, we learn from them how they were attending those -- that segment, and we work with the channel also to develop those capabilities or to show the -- our partners how to develop those capabilities that at the end, they can fulfill by themselves.

But meanwhile, we work together with them, supporting them behind them on all the technical piece, including all the deployment and implementation to support them. But always, what we make sure is that they always maintain their relationship with their own customers. So one of -- also we have done 22 funded assessments that with AWS, as you know that we get funding every time we do an assessment, and we use that funding to pay the migration, so that will not have any impact for the partner or for the end user. And that is working very, very well.

Also, we extend that expertise from Brazil to other countries. So they work together with our Mexico team to build a hybrid solution that end up saving 30% for one of their end users by moving CapEx to OpEx. So that is the collaboration that we see out of that team with all the expertise that they have. So our other regions or other countries can take advantage of all that. So we do not just extend hyperscaler reach into the long tail. We make the long tail capable of selling cloud and AI with us behind.

That's fantastic. And that is really key because enablement for these partners to be able to do more is important. And you heard from Diego, too, we're fully integrating not just in the training part, but actually integrating and how we're handling the service delivery with that. Yes. So diving into APAC a little bit more. Diego, you often describe it as it's where established technology hubs meet the world's fastest-growing digital economy. So tell us what you mean by that.

Yes. I think APAC is a very diversified region, okay? We are seeing really good growth there. In Q2, we reported 28% growth coming from a really strong Q1 at 13.5%. And we have India, which is a great marketplace where we've been for more than 3 decades in that market. It's one of our top 3 markets globally. And we believe that soon will become our second largest one.

So what we see in that region is you have 4 different regions into one, okay, China, India, Southeast Asia, Australia and New Zealand. We see really good progress there. Going back to India, okay, and also some of the topics that Sanjib touched on our intelligence layer, the size of the business, how we are using technology and our platform.

So just to give you an example, 80% of our IDA calls, which is Intelligent Digital Assist calls in India, it's all the calls that our teams are doing and really interacting with our customers. Our mobile solution that we have, India is a mobile-first country. I can tell you that a lot of transactions and a lot of engagement with partners and interactions come from our mobile application.

So I think it's a great marketplace. We see growth not only in India, but also across the other countries. Our SMB and long tail is really outpacing our overall growth. So that's great, and it ties to what we are intending to do in platform-led and platform-fed and how our customers are relying on us.

And then that's what I would say is we continue to see really good growth there. We are doubling down our investments. And we are gaining -- we're growing faster than the market. And I think that will continue. We have a really capable team, okay? Paul mentioned that we are the best team in the country, in the region in the world, okay? For me, I think I can say we have the best team in my region.

But you're not biased or anything.

No.

So, that stat of the 80% IDA calls is really important because when you saw on Sanjib's presentation and he showed the My Sales Insights, you're calling the right customer for the right thing, right? And so it's very targeted, and it's helping us produce and connect those results and those outcomes really quickly.

Yes. And the use of the intelligence and the signals, okay, how we're being more accurate at how we run our business in a super highly diversified and fragmented region, it can make your -- it's a life and day difference for sure.

Absolutely. So that brings us to the topic of scale. And let's talk a little bit about what we're doing with SMBs. We've talked a lot about it being the fastest-growing segment for us. And LatAm is one of our most strategic SMB growth opportunities. So how is Xvantage helping you scale that business in SMB, Luis?

Well, as we have been discussing, SMB, I think, it's one of the largest opportunities, not only in LatAm, but in the world.

Yes.

So what we have done is we have been mixing our platform operating model together with Xvantage in order to make the work much more simple for our associates, for our customers and for our vendors. That allows us, obviously, the opportunity to go and have much more strength relationship with our customers because they have -- our sales team has much more time to do now. So what we're building is basically a one digital experience for all the process. Where they discover the opportunity where we help our customers to discover the opportunity with all the data that we have, with all the statistics that we have, our customers now are able to discover those opportunities that could represent a good business for them.

And then they can follow again. They can price the opportunity, they can make a quotation, they can order and they can follow up all the process until that opportunity is fulfilled or delivered to the customer. So we are focused on making the life easier also for the whole chain.

So today, for our SMB partners, it's much more easy for them to buy from us. They get relevant, much more relevant offers, very directed offers based on the opportunities or the markets that they are serving. And we are seeing very good impact in all the efficiencies by like onboarding the customers has become much more easier to get a quotation. And as I mentioned, the full process.

One example is that we got a customer in Mexico, which is Compusistemas. So they are connected to us 24/7. They are obviously an e-commerce company. So what they do is that they get much more faster answers to all their requests. Before, they used to send e-mails and they used to wait until we respond for quotation for pricing or so.

So today, it's a very, very easy way for them to get all these opportunities. So we are making it easier for our customers to do business with us while preparing the channel ecosystem for the AI area. We leave them some time to think on the strategy while we take care of all the operations.

Absolutely. And the other thing you saw on this topic earlier was the mobile app and you saw pushing these opportunities also through the mobile app. As a marketer, I really like that push strategy. So that complements what we're talking about here, too. So Bill, we're doing some really exciting things in Canada, shout out to our Canadian team. And they made a lot of progress, especially with SMB. Can you tell us a little bit more about what they're doing?

Absolutely. As I mentioned earlier, we're showing up different, and that is especially impactful for SMBs, right? They're oftentimes looking to us for guidance, where are the opportunities? Where should I be placing bets and making investments in the future. Our ability to be able to leverage the intelligence of the operating model to deliver them exactly where they should be focusing their attention has been a key value in Canada and across North America and the world as you're hearing, which I would argue maybe there's a really big opportunity for SMB in Canada since Canada has a super large SMB community.

You guys aren't competitive at all.

I just -- I think there's a real good opportunity there. And the platform is really helping them identify those opportunities. A lot of our MSPs, especially in our SMB space, are looking for guidance around what solution is the right fit for my end customer? Is it a true on-prem? Is it a cloud only? Is it hybrid?

Once we've identified the solution, we can then help them from when they procure it all the way through the implementation and management through all of the services you heard us talk about earlier. So really, it's about providing a faster way of identifying opportunities, helping them create demand and then getting it in the hands of their customers faster, which is a real competitive advantage in the SMB space.

The other thing that we're doing in SMB, we talked a lot about SMB, and you heard a little bit about long tail earlier. A recent development with the platform and with the group working in tandem with Mukund and his team around the data intelligence is we are now developing agents. And those agents are targeting the long tail of our customer community.

What we're doing is we're able to build those agents to identify the right OEM for the right SMB customer. Once the opportunities develop with a click of a button, send out to thousands of customers. In our earliest beta test of this process, we are seeing faster click-through rates and conversion to order than we've ever seen in our marketing campaigns in the long tail. And that is all done through agentic agents with very little touch or human interaction.

However, the good news is we have a very large team in Canada that if those opportunities spark interest and can create more development, those customers have an avenue to come back, and it's the best of leveraging our people, our platform to really deliver a great experience. And what we have seen is really good results in Canada.

Yes. I'm hearing the customers love it because it provides them with a great experience, being proactive.

100% -- and real quick, just to touch on, right? We talked about IDA. The power of IDA is the Intelligent Digital Assistant is giving our leadership team the ability to really decide where are they going to focus the energy of the team. Is it on the order size? Is it on margin? Is there a strategic initiative we're driving for our vendor community? So those opportunities to really steer the team and point them in the right direction has been game changing for us.

Great. All right, Matt, you're closing this out. Let's talk a little bit about how we're using scale and data and our intelligence just to become a differentiated demand generation partner.

Okay. I think lead generation is probably the single biggest thing we've been asked for by our partners today. That's both in the long tail, all the way up through the medium size to the larger customers as well. But it's not just around lead generation. It's more around qualified pipeline, qualified leads. And we're in a great position to see -- do that through our insights. We can see where demand is likely to emerge by leveraging the decades of information, insights that Paul spoke around, Sanjib spoke around earlier on today. So we gain insight into aging technology, refresh cycles and renewals.

And what we're trying to do with all that is take all that intelligent data and create insights and through insights create opportunities and take those opportunities to our partners. So we're connecting the opportunity of the end customer with our partners today and really creating demand for them. We're giving them solutions. So we're not just giving them a lead, we're giving them the whole end-to-end solution for that.

So turning insight into opportunities is absolutely crucial. And there's 2 ways we're doing that today. One, what we call greenfield outreach into end customers, where we're profiling and calling on a set of targeted customers, again, not just finding out what the opportunities are, but putting a solution together, taking that back to the partner who then interacts with their end customers.

Also, I touched on earlier, iSIGHT, cybersecurity, proactive tool again, where we're creating demand. So both of those examples are really creating some value add for our partners and giving them the ability to engage with their customer network. On the vendor side, it's similar. Vendors are always asking us to how can we increase the partner base, how can we reactivate dormant accounts.

And we're doing that as well. We set the marketing center of excellence earlier this year that primarily focuses on that demand generation, again, from the vendor perspective. And what we're doing there is going after new customers, but also reactivating dormant customers. And as an example, we just finished a recent campaign for a very large vendor where we had a 30% reactivation rate around dormant customers. So really successful, really driving change.

And all these activities, they're creating a powerful growth flywheel. For our partners, we're creating new opportunities and demand. For our vendors, we're creating new partners in new markets and reactivating dormant accounts. And for Ingram, we're creating a valuable and a differentiated role in the ecosystem at the center of that ecosystem, driving growth for the channel.

Excellent. Well, thanks to each of you for having some fun here today and sharing some great stories. And now we're going to pass it on so that you can see that growth in action with some numbers and hand this off to Mike Zilis, our CFO.

All right. Thank you very much. One, before I get going, I want to thank everybody who made the trip here in person. We have investors and analysts flying from as far as Denmark to join us today. So really thank you for being here. And as I look back on what we've covered today, we've covered a lot of ground.

For those who are here in person, you got to see how we're putting the advanced back in ALCs and really seeing what's coming to life on what is a brick-and-mortar lifeblood of what we do, but really bringing automation in a different way of thinking about that. So thank you to Bill and Diego for bringing the team through the ALC today.

But then you saw Paul lay out our strategy and how we're transforming and Sanjib really bring it home with the view of what is going on with Xvantage, how is that really driving a difference maker for our business. I'm thrilled you got to hear from some of our customers who are getting to see what -- getting to hear from them what's really driving their business and their needs and how we're partnering together, of course, as part of that.

And then great that you could see our regional presidents. These are the guys who drive that ship home every day, day in and day out in our regions and are doing a great job of it. And having sat in those seats in my past, I know that's not an easy task.

So now as Jen said, I'm going to try and bring this home and give you a little bit of how this funnels through the numbers. In the spirit of seeing some of our team, I have 2 of my team, Eric Tapia, who heads our Global Commercial Finance, and Adolfo Jimenez, who's our Global Treasurer, will join me in a little bit to talk about a few areas.

I do want to apologize. Sanjib dazzled you with both literally and figuratively with animations. That's outside of the comfort zone of finance people. But we do have, if you watch closely, I think, 2, if not 3 animations in this deck. So all right. So let's jump in. So I would be remiss given we're going to be talking about multiyear plans if I didn't give you a little bit of a picture of how this year looks.

So it's been a year of strong growth. It's been a unique year. We've had ASP increases. We've had supply constraints. We've had a conflict in the Middle East that has continued. We have a conflict that seems like it will never end in the Ukraine and Russia, and we've continued to navigate that through that.

We are a company who has proven we can navigate through the adversity and the volatility of the market. But this has been a strong -- a year for strong top line growth, probably explained most by growth in cloud, growth in the GPU and AI infrastructure and how we're focusing on that, and I'll talk a little bit more about that as we go through some of the numbers.

Certainly, growth in cybersecurity and then, of course, PCs and what we're seeing as far as a PC refresh cycle that has been going on now for 6 going on 7 quarters. We've seen the ASP increases. We've seen outsized growth, high 20% growth in our Asia Pac market as we continue to double down, and we will continue to invest in the Asia Pac market. We've seen growth with large customers, but we've seen growth with SMB as well, which is a more profitable value for us and where we are focusing our business, as Sanjib covered.

But it's not all about top line growth. That is important. But as you can see in these numbers, we're also growing gross margin. We will grow gross margin faster than top line this year and our gross profit, I should say. And I think that's an important factor, and that is layering in a lot of these GPU and AI deals. We've talked about those. They are very large ticket deals.

They are low margin, but they are very low cost to serve, extremely working capital efficient, and it's driving an ROIC uptick that you can see in these numbers as well. And working capital investment is about discipline, but we are a countercyclical business. We have to invest into working capital to drive the outcomes that you're seeing through our P&L and ultimately, the returns of the balance sheet.

But we're doing that efficiently, and we'll cover on some of those numbers as well as well as how we see free cash flow playing out. But just a few things on the half 2 specifics before I move on. So one, as we said in our release this morning, we are expecting our Q3 to land at or possibly even better than the upper end of our guidance. We're sitting here 2 weeks, less than 2 weeks before the end of our quarter. That's how we see it right now. But we've talked about lumpiness of some of these AI and GPU deals.

There can be a lot of that close in the last quarter. So that's going to be probably the variable as to how far we may come in at that top end or even above it. But that implies in these numbers actually a pretty strong Q4 as well as far as where we land this shift for the year. So I'm really proud of how we've executed. One thing to note, and I will reference this again later, we do have a 53rd week in our fiscal year. That only happens every 4 or 5 years depending on leap year timings. But that is an important factor because it plays into some of the baselines of growth going forward.

So let's talk about how we see our results. See there's an animation, hold your applause for later. But -- so if you look at the last 3 years, this is a little bit more moderated sales growth. Because remember, back in 2024, we thought the PC refresh was coming. It didn't. It started in '25. We saw a networking compare that was very challenging because we had networking constraints back in '23, even end of '22.

A lot of that was fulfilled in '23 and created that compare issue. So we actually were roughly flat from a revenue perspective in '24. And then we've grown or inclusive of our forecast that I just shared with you, we will have grown to double digits in both of the most recent 2 years. But gross profit has lagged net sales, as you can see here.

We've seen over that period of time, while it's shifted a little bit more this year, we saw outsized growth in large customers where we don't add the same value we do in the long tail of SMB. We saw PCs, which tend to be a lower-margin fulfillment business really growing strong double digits every quarter since the beginning of last year.

We saw GPU and AI infrastructure deals. I just talked about that, lower margin, but very efficient. Even the outsized growth in our Asia Pac region drives a margin factor. The region's gross margin is in the mid-4s to upper 4%. That is dilutive on the whole. But as you saw in our Q2 announcements, our Asia Pac region was the most profitable region in the company from an operating income dollars perspective and the second most from an operating margin perspective. So there's a heavy efficiency there as well, which is why, again, we're doubling down and growing in that region.

But again, you see stronger growth on the net income. because we're bringing the efficiencies to the system, and I'll touch on that shortly. And we're bringing an ROIC that is well above our weighted average cost of capital, and we continue to drive efficiency there as well. So when you look on the right side of the slide, you see our '27 to '29 projections. These are the numbers that were in our release this morning. Slightly more moderated growth on the top line. There's a couple of things that you have to think about there. One is, again, 2 years of double-digit growth, a 53rd week in the baseline year of '26.

ASPs have been increasing. We're seeing in some categories, the rate of increase slowing, but it is still on the rise. We see logically, we're in the later innings to use a baseball reference of the PC refresh, but we're still seeing legs there. We'll see how more AI-enabled PCs play out. And we've seen a doubling in the year-to-date of this year in the GPU and AI -- more than doubling actually of the GPU and AI infrastructure business. So that is a big factor.

So to think about -- because I know everybody will build models for each year to a degree, I would think about '27 as very likely potentially being a lower single-digit growth. But what that would imply, if you look at 4% to 6% CAGR and you also take into account a nearly 2% factor of a 53rd week in the baseline is pretty healthy growth, upper single digits in the outlying years, and we're going to talk about why we're getting there.

More importantly, gross profit growing at a faster clip than revenues, OpEx leverage continuing to drive net income ultimately growing more than 2x the rate of revenue growth and ROIC increasing by 300 to 400 basis points over the last 3 years. So we'll get into more details across all of these metrics.

Before I get to that, I just want to hit on a little bit more of what Sanjib touched on with our platform journey. And why is that driving this? Because that theme will continue to come up. It's come up obviously throughout the day, but it will come up through these numbers as well.

So we have the platform. It's continuing to mature, 22 out of 57 markets right now. We continue to expand in scope and capability, but it is a mature platform in all sense of the word as far as where we do have it deployed. And we talked about 3 phases of that journey. It's come up today as well. The first was really driving efficiency and OpEx out of the system.

We checked that box in '23, '24. Then there's growing revenues above market. We've checked that box in the last year plus. Now we're hitting the dials to really drive the margin story. How do we bring that more profitable engagement, that more fruitful engagement that serves not just us but our customers to drive the outcomes in the market that are needed at the end user level.

And that's really where we're dialing that. So data equals intelligence. We've actively are now consuming more data than we ever have, but we're intelligently using that data to drive the business forward in ways we never have. And actions driven off of this are not just automation and efficiency, it's the customer and the vendor experience. And as I said, we're now calibrating that more towards sales, pricing, quality of revenues and working capital efficiency in the years to come.

So we'll walk now through a little bit more of the financial value of this, but I just want you to think about some of the words that we've talked about today. Intelligence signals outcomes and becomes the multiplier across our business, financial results are ultimately the outcome of that. All right. So if I go to revenues, we're growing net sales faster than market. Let me focus on client and endpoint solutions in the lower left first. You see it's a little bit more moderated growth, 1% to 3%. A couple of factors go into that. One is what I talked about earlier, PC refresh, probably not continuing or even just the double-digit growth compare that we've now experienced for 6 and going on 7 quarters gets a little bit harder. We're also looking, and I'll touch on this a little bit more when I get into the regional comparison on the next slide.

We're also looking at certain areas where we need to rationalize business that just isn't driving a sufficient level of return for our business, and we're going to actively do that. So we look at -- you've heard me say this publicly many times, we look to grow client and endpoint with market. That's a market basket of a lot of things. This still is our biggest pool of revenues in client and endpoint, but we're always going to be calibrating and walking away from the pieces that don't make sense, doubling down in other areas that make a lot of sense. That's the way we've operated. But you see cloud and advanced solutions growing double digits, cloud healthy double digits in this 3-year period to come. That's what we've been experiencing. That's where we're investing in our strategy and our business is to grow above market everywhere where we are working around the world in those areas because that's a different profit profile, a different return profile, and we're going to continue to invest as such.

So if I look at Infrastructure as a Service, cybersecurity, expected to grow double digits for any foreseeable future. GPU and AI deals, those mostly do fall in Advanced Solutions. We are expected to grow -- our model is built on expecting that to grow at roughly that same 9% to 11% you see on Advanced Solutions as a whole. But that's off of a baseline in this year that will probably close the year close to double what it was last year.

Enable AI, we've talked about. That's how we now drive that AI story into the SMB and really bring that home as far as the value prop into the long tail of our end user base. One last thing on cloud. Cloud has an accounting convention that you're -- I think you're all aware of where it is recorded largely on a net revenue basis. But as we've talked about, in the year-to-date, 2026, cloud is now representing a high teens percentage of our gross profit dollars. So this is a scaled business. And at this rate of growth -- by the end of the next 3 years, cloud will represent 1/4 of our business or even surpassing 1/4 of our business in GP dollar terms.

So we are going to continue to focus on that. And then I just want to touch on Lifecycle on the bottom right box or kind of middle, I guess. Paul talked about this. We have the ITAD and RLR business, which we're really driving a more sustainable growth rate around and a more profitable growth rate.

But then we're investing into Lifecycle and Supply Chain Services, which is we're really excited to wrap that up, ramp that up as another area to really capitalize on the core competency. But the platform plays across all of these things. IDA intelligence, recommendations, targeted sales that grow off of the data. That's just a few examples on top line alone that really permeate throughout our business. So now let's look at the regions, if I can get this to advance. There we go. So North America, a little bit more tempered growth. I talked before about some rationalization where we're walking away from some pieces of business that just aren't quite as profitable. We're not yielding the right levels of returns. So we have a little bit more moderated growth in the North America region. But that's okay because we're driving a better profit profile through that, a better return on invested capital. We're expecting to grow Cloud, cyber and GPU/AI infrastructure at similar rates for the full company in North America, where we're rationalizing tends to fall in some of the lesser profitable Advanced Solutions categories as well as in client and endpoint.

Also, North America is the most mature on Xvantage. It was the first region where we were really deploying advanced functionality. And therefore, that growth factor isn't quite as pronounced as it may be in other markets where we're continuing to deploy. APAC, on the other hand, is growing the most rapidly. That probably isn't also much of a surprise. But honestly, APAC, EMEA and LatAm all have more scale coming on the platform. And APAC really does remain that kind of epicenter of the AI investment, which Diego touched on just a few minutes ago in the panel.

But just a reminder on the overall revenue, again, 53rd week in the baseline, take that into account, PC refresh and ASP increases in the historical periods, that's very meaningful. And therefore, again, 2027, I would assume maybe lower single-digit growth, but mid- to upper single digits when you get into '28 and '29 as this model would suggest. Okay. So that go to ex gross profit. Top line, regardless of revenue growth in any given year, we expect to grow gross profit at a higher rate. That is the way we are investing in this business and the way we will drive it. So a 5% to 7% GP CAGR in the coming 3 years.

Product and service mix alone drives some of this. We talked about double-digit growth in Cloud, Advanced Solutions, Lifecycle, but also continuing, on the other hand, to participate in the large GPU and AI infrastructure projects, lower margin, but very efficient. But the platform is also driving growth in gross profit. That's a hard thing to say, as we now see Stage 3 kicking in, which is how do we drive that gross profit and that pricing dynamic. So dynamic pricing recommendations and bundling, demand analysis, demand gen, down to end user level, not just through our customers.

How do we calibrate IDA toward more -- toward margin enhancement? Actionable intelligence is key, and that's what we're driving across the business. Operating efficiencies, this is the piece I'm most proud of from the early days of Xvantage. And it's not just Xvantage. It's been a core competency of this company to drive efficiencies in different ways. It's in our DNA. But in the '23 through -- late '23 through early '25 time frame, we publicly talked about taking more than $200 million of annualized OpEx out of our business. We've been able to grow at double digits and not have to add that back because of the efficiencies and automation we've now brought to the system.

So while we have invested, we have invested around some of those areas we're targeting to grow at higher rates. That's people investment, technical skills, but also technology itself. We haven't had to notably grow our OpEx over that time frame. Our gross profit per go-to-market head, as Sanjib touched on, is better now than I think it's ever been. We've seen precipitous improvement in our OpEx leverage, where we've achieved 5% or better goal in '25, and we're trending well below this in '26. So you can see we are getting to -- almost should have shown this in reverse because that's the way it probably will come to fruition, but from 4.8% down to 4.4% of net sales over the coming years.

So our 3 -- if I put this in just a CAGR sense, as we talked about in other -- in the other context thus far, you can see a 3% to 4% CAGR in OpEx, but that's on a 5% to 7% gross profit growth. So much less than that GP CAGR. And this is inclusive, I should point out that -- and this should really be no surprise, the cost of SaaS and infrastructure is increasing. It's part of the ASP base we're all dealing with, and that's true for our business as well. As we continue to automate with Xvantage, there are costs associated with that.

So what's built into this OpEx number is actually absorbing a high single-digit growth CAGR on SaaS and infrastructure, but we're absorbing that and blending it to a 3% to 4% overall. And that's not a small part of our overall OpEx investment. So we're continuing to not really drive notable increases in the OpEx because of the efficiency we're bringing to the business. We're going to continue to invest in the higher profit, higher ROIC businesses, of course, but the platform will continue to drive efficiency. We will still roll out another 35 countries with more advanced capabilities, and we're going to continue to optimize in other areas.

Some areas that you won't hear us talk about as much because they aren't as big a dollar impact as Xvantage, but they're meaningful as far as what they will drive for efficiency that we'll be working on in the coming years and are already working on is modernizing some of our back-office functions, whether it's in the finance area of my team, in our warehouse ops and in other areas. So that's another area where we will invest and it will drive efficiency. And that's, again, part of our pedigree.

So I've really hit on all the components that hit into net income, but I'm proud to say when I look at where we're targeting our growth that we're expecting to grow non-GAAP net income at a rate more than 2x that of sales. The margin enhancement opportunities, the cost optimization, the quality of revenues, those are all part of this. The AI-related business, also a part of this. But as we move not only from Cloud infrastructure hardware, GPU, but get more into that SMB traction, that all plays across these longer-term strategic priorities you've heard about. So a key note is that we will always be investing in the platform as well as other automation. You've heard me touch on a few examples of that.

But we do expect to exit 2027 at a far more steady state on the Xvantage journey overall. So from 2028 onwards, you will see us cease the non-GAAP add-backs for transformation costs that have appeared in our non-GAAP measures. And that's estimated to be about $120 million in the current year. It will be less than that in '27, and it will be 0 in '28 and onwards. So while we will have run rate and continuing investment always as part of our business, we're going to absorb that, and that is reflected in these numbers.

In other words, that net income growth that we're showing on this slide is actually markedly more if you were to take that factor out of the equation. And you guys can do the math on that. So I obviously need to talk about cash flow. As I'm covering this, I'll ask Eric and Adolfo to come up on stage with me, and they'll move through a couple of slides after this. But the last 3 years that we're presenting in any history here. But honestly, the last 6 years have been anything -- nothing close to normal.

I mean we had -- we've lived through COVID. We've lived through inflation and tariffs and all the refresh that happened post-COVID. We've seen networking supply constraints. We've seen ASP increases. We've seen the boom in AI. Overall, this has created that outsized growth in the double digits. And as I said, we're countercyclical. So this is reflected in our cash flows and has created some volatility. But after a really strong 2025 cash flow, we did signal that '26 would probably be a lesser piece. As you can see in this bar chart, we're still forecasting positive free cash flow.

The variable to get to that is exactly how much of our top line growth we see in this business. A day's sale of our business is now north of $150 million. So working capital is a lifeblood of how we manage our business, and we need to continue to invest in that, and that would be the one variable that we need to see how that plays out as to whether we're at positive free cash flow for the year or not. But we'll keep you informed as to how we see that as we go through future earnings calls.

But we are driving discipline. We're driving working capital days actually lower year-over-year by multiple days. We're driving ROIC increase. So this is actually the right investment. But our North Star continues to be to try to drive on a more consistent annual basis, and I stress annual because this is a very seasonal business from a working capital investment and cash flow perspective. But annually, we expect to generate or sustain a rate of free cash flow that's 30% more or more of that of adjusted EBITDA. And in some years, I hope we're markedly more than that 30% rate. But with that, I'm going to pass it over to first, Eric -- I'm sorry, first to Adolfo, who will cover a little bit more on working capital.

Yes. Thank you, Mike. Yes. So as Mike mentioned, working capital productivity is a key driver of sustainable free cash flow. If you go back to Q2, we have delivered about 3 days of improvement in cash conversion, which is a strong base to build into our 3-year plan where we expect to deliver between 23 and 26 days of cash conversion. That will depend on demand, revenue, many drivers that even seasonality across the year. Now as we look at working capital performance or sustainable free cash flow, we view those as really outcomes from all the initiatives you're seeing here today.

From Paul's opening remarks to Sanjib's presentation about the technology we use to run the business, all of those drive or touch in many places on working capital management and free cash flow generation. When you think about the Xvantage platform, intelligence, automation, all of them drive their decisions commercially and in the operation that allow us to maximize profit and improve cash conversion. When you look at all the pieces that comes into a particular deal, we're able to dial the variables to maximize those deals to turn growth into sustainable financial performance.

As we look at the multiple Xvantage features and capabilities, they are all baked in many of the tools that we use today for working capital. I think Sanjib showed some examples of some of the tools we use from inventory optimization to demand planning to collection tools to AI-driven risk management tools. All of them are embedded in the way we do business today and all of them help us maximize profitability, reduce invested capital, improve free cash flow and enhance total shareholder return.

As we look at all these tools, as important as they are to manage our balance sheet, we want to focus on an area that we would think is critical and strategic for the company, which is channel finance. This is an area that allows us to partner with customers and vendors to deliver solutions in multiple markets in a very capital-efficient way by tapping into incremental capital coming from a global network of financial partners. With that, I want to pass it to Eric to dig into this very important capability.

Thank you, Adolfo. At Global Commercial Finance, our role is to help the commercial teams not only deliver financial commitments, but also bring insights and capabilities that drive optimization of the return on investment capital, ROIC. And channel finance is a great example of how we do that. So let me start with the core financial takeaway of what is channel finance. I know you've heard financing throughout the day. So channel finance for me, in the easiest way of explaining it is same deal, same profit, less capital required from Ingram.

So think essentially about the same transaction, 3 different ways to finance it. If we decide to bring our balance sheet, we offer 30-day terms or we can also extend terms depending on the commercial opportunity if it makes sense economically and strategically. Channel finance essentially provides us a third option in which the funder essentially underwrites the deal, provides the capital, Ingram gets cash earlier and changes RWC, return on working capital significantly, as you can see in this image.

But very important to say. I can turn this. The real value of channel finance beyond balance sheet efficiency is also a growth engine. We're not just plugging in additional capital sources to the channel because financing needs vary by vendor, by customer. And not all funders can solve for every financing need. So channel finance as a team comes in as a solution consultant. We try to match the needs of the customer and the vendor with the right financing solution and the right funder.

And at times, a lot of large deals that we deal with, we're able to win them because of the financing capability. And the value works across the entire ecosystem. For one, resellers can work with end customers to buy more, right, to have additional credit capacity. And that's particularly important for SMB. Oftentimes, they don't have the balance sheet to support larger transactions. On the vendor side, they see channel finance either as an extension of their finance capabilities, for example, OEM captives or as in many cases, vendors see us as their go-to financing partner.

Funders. Funders, they see this great opportunity to allocate capital to this very exciting growing space of IT without necessarily building the commercial reach. It's just not part of their DNA. And most importantly, Ingram benefits from faster cash conversion, but also allows our commercial teams to pursue opportunities more complex, longer term, longer payment terms without necessarily debating between I need to solve for my customer needs, but I need to protect my balance sheet. Channel finance allows to mitigate that.

That's particularly important with our Advanced Solutions, right? Our channel finance volume is very Advanced Solutions-heavy, right, because those deals tend to be longer term, complex. Sometimes they include bundles, hardware, software, service, cloud and may include more than one vendor. So our solution consultants are in the middle in the channel, helping all these parties achieve the best financial outcome.

And what I'm talking about is not aspirational. We are already operating at scale. Today, we boast more than 170 funders in our network. They range from small, local funders, regional, very few are global. Why? Because again, customer and vendor financing needs are different, but also even in countries, available financing structures vary. So it's really hard to scale with one global funder. But essentially, think about this network and the syndicate of funders as an extension of our channel. We also have built a team of over 40 specialists around the world. And these are folks that are coming from equipment and IT financing, structured finance, banking, and they work very, very closely with our commercial go-to-market teams, but also our credit teams, right?

Our credit teams deciding what's the best solution that fits in our balance sheet and channel finance providing an alternative. And that investment, as you can see in the last box, is translating to results. Since 2022, our channel finance revenue has grown 5x, closing in 2025 with over $600 million of revenue. So key points of this section. With channel finance, customers can buy more, vendors can sell more, but Ingram can participate without necessarily growing balance sheet at the same rate. That's how we leverage our position in the ecosystem to not only drive capital efficiency but also growth. And this focus on capital discipline is what's leading me to the next slide where Adolfo is going to present our focus on ROIC. Adolfo, back to you.

Thank you. Yes. As you can imagine, a big fan of channel finance from this side. As we look at ROIC, we start to see acceleration of ROIC since 2025. And a lot of the things that Mike mentioned related to net income growth, acceleration of EBITDA, all of those are playing out in this slide. In the ROIC side, we envision ROIC continue to increase to reach about 16% to 17% by 2029 based on our strategic plan. If you look at this comparison where we've been, it's about 400 basis points from our 2023 levels. The primarily driven, as I mentioned, strong earnings growth. We have a very disciplined capital allocation strategy that we implement internally, and we invest in high return growth opportunities.

Now if we go to the balance sheet side, leverage has been the theme for the company. We've been strengthening our balance sheet since 2021, paying down close to $1.9 billion on debt. We maintain a very solid liquidity profile with $3.9 billion in access to liquidity, which not only enhance our financial profile, but allows that flexibility to invest in the strategic opportunities we want to pursue as a company.

Now when we talk about leverage, we plan to maintain a balance sheet that is comparable to an investment-grade company. From my point of view, we are actually very close to that point. So as you look at leverage story going forward in the strategic plan, a lot of the deleveraging that you see in our forecast is really primarily driven by EBITDA growth, which again goes back to some of the comments that Mike mentioned and some of the data that you saw in the prior charts.

And because that deleverage is coming mostly from EBITDA growth, we view additional debt paydowns really as opportunistic. Now when you put all this together, the ROIC story and the balance sheet story, we believe we have a very strong balance sheet position that allow us to continue investing in our organic growth take some of that capacity to invest in strategic opportunities could be organic or through M&A and to allow us to increase total shareholder return as we go along. Thank you.

All right. Thank you, guys. Appreciate it. So real quick, I'm going to bring home a couple of last slides here. I want to thank everybody who has submitted questions. We have quite a few in the queue because we're going to move to Q&A shortly. There is still time if you ask now and use that [email protected] website to get any last questions in. So see if I can get this to advance. There we go. So let me just recap a couple of things. We covered again, a lot of ground just in a few minutes here on the financial model.

But here's where I would look at our business. Our scale and breadth already provides us an advantage between the vendors, the customers and the end users we serve. But now we bring the maturity of a platform operating model to bear, which is driving true returns across our business. So decision-making, driven by intelligence, data and automation, agent-assisted execution, enhanced customer experience, greater capabilities to drive quality of sales. And by the way, all of those efficiencies don't just pertain to Ingram. As you heard with some of our customers, it's bringing efficiencies to our customers as well and driving them with that intelligence.

So that's a very sticky part of the moat that we're talking about with Xvantage. We're going to continue to grow in a prioritized manner, our Cloud and Advanced Solutions business faster than market. We're going to ensure our CES business remains optimized and grows with market. And we're going to build our Supply Chain Services while accelerating our IT Asset Disposition and Reverse Logistics and Repair businesses. And all of these contribute to higher growth in profitability and higher ROIC, as I hope you've seen through the numbers we presented.

So in other words, scale plus intelligence plus execution equals sustainable value creation, and that's how we're thinking about how we operate. So I know you would boo me off the stage if I don't at least hit on capital allocation. So if I think about this, just a few last words on this. So one, we've invested in the business. We're going to continue to organically invest in the business, but in a calibrated and proficient manner. Smaller M&A has been part of our DNA. We haven't done large. We have the capability to do larger M&A if we see something very opportunistic in that regard.

And I would never say never, but what has really been a good wheelhouse for us is how we've invested in capabilities of what we call tuck-in acquisitions, cybersecurity, the BRLink example that Luis talked about around AWS workload management. Those are areas that have really been easy investments because they're not large dollars, but meaningful outcomes for us. Debt reduction was very critical when Platinum first acquired us, and we had quite a bit of leverage. But ultimately, as Adolfo just covered, we delevered most of that and did most of that while we were private.

So any payment of debt might be just opportunistic. We've done 3 secondary offerings this year, and we've used almost $125 million of our own balance sheet to also buy down shares from Platinum. So I'm very happy with the cadence that we see from that perspective. If you think about it in this way, in a -- just over a 6-month period, 6 months and a week, we've seen the ownership of our primary shareholder decrease by 20%.

And it's a cadence we hope we can continue to deliver on. We're proud also that we've delivered a dividend right out of the gate as a public company, and we've also raised that dividend every quarter since we've been public. But particularly, as Adolfo also covered, as we grow EBITDA, our leverage ratio is ultimately where it needs to be. We do have a goal of being investment grade. And until we are not majority held, the rating agencies won't consider us investment grade. But that remains important because you have to think about tens of billions of trade credit that we have from our vendors around the world.

Many of them are using credit insurers. And just the efficiency of a debt structure of an investment-grade company is important. But from a metrics perspective, we're largely there. And I am excited, if you think about the right side of this chart around the future state where we are not closely held and we can move into more traditional share buybacks as yet another way of returning to shareholders, and we will do that. So I'll leave you just with the following. We have a proven track record of executing for multiple years in what has been a pretty volatile market in many, many ways.

But as evidenced in our 3-year plan looking forward, we're ramping up that execution even further, delivering more returns, more profitability, better results for our shareholders. And I'm more confident, honestly, today than I've ever been on our ability to continue to execute the strategy that we've laid out for you today. So I really want to thank you for your time today. I know we've covered, again, quite a bit. And with that, I think we move into Q&A, and I'll ask Paul and Sanjib to come to the stage with me and answer your questions.

Thank you. We've got about 25 minutes, and then Paul is going to wrap up with just a few minutes to close out the day at 3:00 p.m. Central Time. So I'm going to start with this question. And I apologize, we have a lot of questions. I don't think we'll be able to hit upon all of them, but we'll do the best to get through as many as possible. So if a vendor were choosing between expanding share with Ingram versus another global distributor, what are the top 3 reasons why they would select Ingram?

I'll take that one. Well, we've seen it here recently when HPE announced kind of their global decision to go global with just a couple of partners. And I think you saw it show up in live today. So there's probably 3 or 4 different reasons why. One is we continue to talk about our reach, and it's that diversity of reach. But more importantly, it's the skill sets within each of those regions that we've developed. We talk about those centers of excellence, the competencies we build, what we're doing already for our customers and our vendors.

Again, if you would have asked us a handful of years ago, we wouldn't be taking Level 1 and Level 2 support from our customers or from the end users. And now that's just what we do. And we can replicate that globally. So I think our skill sets. I also think and that's the reach from a global diversification. The other piece is reach as we talk about from a customer standpoint. The 165,000 solution providers we service each and every day gives us further reach. And what the vendors are looking for, no matter if it's the big vendors or emerging vendors as we talk about it, or new technologies that are coming to market, they're looking for that reach, call it, mid-market and below into SMB and then really those growth partners.

They can't reach them. They don't want to reach them, and they look for us to be able to do that. The last thing I would say, as we've seen the evolution in our careers of how the products have come to market, I keep mentioning the 6 different products and services. Vendors recognize they are not the only solution. They're a piece of the solution. And the fact that we have all the other pieces, they look at that now as valuable as opposed to we want to fill the entire stack. So I would say those are a couple of different reasons that, a, differentiate us; and b, why vendors would want to go with us on a global basis.

Thanks, Paul. So Mike, you reiterated your 3Q '26 guidance today. And wondering what the puts and takes are there that lead you to believe you're going to be at the high end of the guidance and in which lines of business and geographies might that be driven?

Yes. So I think I feel pretty comfortable with that full year guidance sitting here, especially with what I said on Q3 hitting at the high end or better, given we're just a couple of weeks away. But the biggest variable is what I hit on in my prepared remarks, honestly, which is do we see some of these really large GPU AI infrastructure deals come in that could drive outsized growth. And we'll talk about that. We will continue to quantify the impacts of that when we ultimately get around to our earnings release at the end of October.

But I feel good about it. I think we're continuing to see probably the biggest growth out of our APAC region, but strong growth across really all of our regions and all of our lines of business. So I feel good about that. I do feel good about how we're starting to see some of those levers that we've talked about kick in on how we're trying to drive a margin story. That's not going to all happen at once. So we're going to continue to see that play out in coming quarters, and we'll talk more about that also in our earnings calls. But I'm excited about the early returns we're seeing as far as some of those levers we're pulling from an automation perspective.

Great. Sanjib, the question is complexity is changing the traditional linear IT supply chain. How does Ingram's new intelligent operating model potentially blur the lines across the traditional supply chain? And I'm going to sort of skip through, this is a long one. How might it change the traditional value chain?

Yes, that's a good question. I think if you look at the traditional IT value, am I audible now? Okay. So there is a lot of handoffs, right? So if you look at we procure from our vendors and OEMs, it goes through how you solution it and then actually send it to our customers. So there's a lot of handoff. What intelligence can do is actually procure them and make from handoff to orchestration and add the layer. So in the future, intelligence can really bring in the value of how we buy, how do we compute and solutionize and how we actually push. And that is very important where we match the demand signals with the supply signals. That is extremely important. And as we go through this chain, it's very important that we use that intelligence to understand velocity because as demand and supply interconnect, as we showed today, the role of the ecosystem changes. And that's where I see more in value and especially with the larger vendors, how we use it intelligence to drive demand generation in the long tail.

Thank you. So Paul, what does Ingram do for AWS? And is our role simply fulfillment?

We do a lot. I guess I would say -- I'll broaden the question, I guess, broader than just AWS. I'll call it hyperscalers. And so it's absolutely more than just distribution. I think we've touched on it a couple of different areas. But just to reiterate, the BRLink capabilities that we have, we're moving workloads from an end user perspective. And we're not just doing that with BRLink. Actually, we brought that to corporate, and we're doing our own training programs and skilling people up and bringing more. So we're touching, I would say, the workloads from a different perspective.

The real importance is the demand generation, kind of similar back to the question I think I was asked about why vendors would want to go with us on a global basis. The hyperscaler is just a piece of the solution. And they don't want to build out the competencies to go touch kind of the mid-market and below. And actually, their mid-market a lot of times is a lot bigger than I would say the traditional mid-market, meaning they're giving us even more access to market and again, attacking that total available market share of that $5 trillion we've talked about.

And building out those competencies, I touched on it today, the Field Deployment Engineer, the FDE model, you're hearing all of the hyperscalers talk about. And we're investing ahead of the curve on that to be able to bring those competencies because they don't want to go hire thousands and thousands of FTEs directly. We can do that. We can do that at scale. We can use our centers of excellence, and we can really touch a market that they are not able to touch and again, bring that together with the 6 different products of solutions that come to market.

Great. And this is a question you haven't had before, but I'll turn it into a 3-parter. So what are you seeing in PC refresh cycle? How are ASPs impacting that cycle? And where are we in the AI PC curve?

So I can start. I mean, so we're still seeing good demand from a PC perspective. It's one of the things I was talking to a couple of people, and I've had a couple of questions over the last couple of weeks, which is if you would look at where we are coming into the year versus where we are almost 10 months or almost 9 months through the year. Actually, the refresh has actually had pretty good legs, stronger than we probably thought it would have been coming into it.

Mike and I have talked about this in Q1 and Q2. We feel good about where we sit in Q3, which is there's still demand there. The other thing I would say that's a little bit different is as the constraints have come out that we've seen and the pressure on technology is that we've actually seen pretty good adoption into AI PCs. So if we would have talked about AI PCs 3 or 4 quarters ago, we would have been talking about what are AI PCs going to be able to do with my business. And now there's actually real use cases where we're seeing that. So we're still continuing to see that increase. Where we are in kind of the innings, I guess, or where we are kind of in this refresh process, there's still hundreds of millions of units, 300 million to 400 million units depending.

I've heard a couple of different stats that still need to be refreshed that are out there. And so it's still yet to be determined. I would also say, Mike talked about a little bit of what we looked at from an annual perspective. The PC refresh was late to start. Before we went public, we grew 30 basis points a year in 2024, and that was because the PC refresh hadn't started. And normally, you see that 4 to 6 quarters out. So it really started to pick up. So I think there's a little bit of elongation going on from a refresh standpoint that we're still continuing to see that momentum. I don't know, Mike, if you have anything.

Yes. Well, I think I hit on this a little bit, but just as I think about it from a model perspective, as we just laid out, and I did touch on this, that CES growth, PCs are the biggest subcomponent of our client and endpoint solutions. And so that a little bit more moderated growth there is both the compares as Paul just hit on, the ASPs being part of that and probably some leveling of that ASP increase but still some legs on PCs. And the wildcard really is going to be that AI-enabled PC penetration. It's still only roughly 30% of what we sell from a perspective of PCs. So there is penetration to come there, and that may smooth that cyclicality a little bit, and we'll see how that plays out. But yes, that's the only thing I would add.

Could you extend that conversation into Advanced Solutions? So how are ASPs and supply chain issues impacting the different areas within Advanced Solutions? And how do you see that?

Yes, I actually think -- sorry. So -- if you look at kind of as it extends into the other product categories, Mike and I touched on this in Q2, and we're still seeing some similar things. The fact that vendors have actually extended going from 14 days in some instances to 30 days, meaning a quote is valid for 30 days. Now the customers that you saw up here can go have a conversation with their customers, their end customers to say, we have this for 30 days as opposed to 14 days or 7 days or early days, it was like hours it felt like.

So there's a little bit more, should I say, predictability in what we're seeing. I think we're still seeing the ASPs come up. They're coming up, as Mike said, a little bit slower than we've seen, but they're still continuing to happen. So I think there's a bit more predictability. When I talk to some of the customers that we were here and many of the customers we do business with, they're seeing a little bit more predictability in terms of where that is sitting from an ASP standpoint outside of PCs also.

Can you help us quantify the benefit you're getting from Xvantage and how much it's benefiting margin, retention rates, attach rates or operating efficiency?

Yes, Sanjib, do you want to hit on more of the qualitative and I'll quantitative?

Sure, absolutely. I think it is an important thing to understand today, we talked about the platform operating model and the intelligent operating model, right? So if you look at it, the initial benefits were coming from OpEx that Mike touched on that where we are automating experience, taking friction out so we took OpEx out of another system. But as we see today, we are driving more revenue, which is we are going and proactively getting demand. Our IDA process is we process more quotes, we increase the pipeline, and then we have a better conversion rate, and we are closing our sales cycles.

That is actually helping us to grow our top line. And as you see right now, the lever, the third phase we are moving with the platform is really that calibration of margin and just figuring it out how we improve that mix in IDA, how we look at pricing abilities, how we look at optimizing our inventory and rebates and how do we push the long tail. So that is giving us the leverage. And to the question about always the revenue will give us the growth leverage, but really the operating margin leverage will be with the cost and how we actually leverage self-service automation with the growth that we can bring in.

Before you get into the numbers real quick, what I would say on top of that is we just started talking about IDA just a couple of quarters ago. So as we found this out and we talked about it, Mike and I talked about a couple of earnings calls ago, that was given us disproportionate growth. That's what we talked about, right? So it was about the revenue, what Sanjib is saying, now we're turning that dial and presenting the opportunities. And it's not just for us from a margin profile, it's also for our customers. So now we can sort through all of the information they have to turn the dial to be more margin accretive versus when we first started this, it was a pilot. We were looking at it saying, wow, this is kind of interesting in what we're doing with the intelligence. And that's how we created IDA to be able to go to our sales organization to be forward being proactive versus being reactive to our customers. So it's allowed us to now still really fine-tune. There's a number of other things we can turn that dial with IDA also.

Yes. So from a numbers perspective, if I talk about top line first, I think we -- I talked about the next 3 years, probably a little bit lower single-digit kind of growth in '27, but decent single-digit growth in '28 and '29. And a lot of that is really attributable to the platform operating model. That's not just driving revenues, it's driving quality of revenues and really driving that more profitable margins. So that's coming through in all the numbers we're sharing, which that's where we have, honestly, to be completely transparent, maybe even some upside as we see that traction really kick in, in the numbers we've shared with you is how much we can really drive around that piece, which is really earlier days for us right now, but we're really excited about the earlier -- how the earlier days are driving results.

And I think that's one of the beautiful things about Xvantage that we're talking about is now we have the intelligence. Again, IDA was even part of our road map a few quarters ago. So there's going to be more IDA-like things we don't know about today that when we discover them, we pilot them and we'll be open to say, here's what's working and here's what we're doing and where we're leaning in. And then again, how we can take that global. Because remember, again, everything we're doing from a platform perspective is on a global basis.

Great. Paul, can you explain the decision to return to Supply Chain Services, how you plan to get back into it and the factors that will allow you to take share there?

Yes. So we're excited about it. So if you go back and I said in 2022, we actually divested our supply chain business prior to going back public again. So one, the noncompetes expired. But more importantly, what we've done is we've taken the data that we've had, and we saw in many of you that got to go see the warehouse tour today of how we're using that data to really be more efficient and free up space. The automation, the intelligence that we're using is freeing up space.

So when I say we're not investing in warehouses, we're actually creating space to be able to go do that. So we think it's a great opportunity. It's a services business. It's good return from a capital standpoint. And again, because of our reach and be able to have this global, we think it's a great value proposition to stay within our ecosystem and slight adjacencies that we can operate in because many times, we're already the largest provider, if not one, and probably 2 on a global basis.

So it's efficient, too, for those partners that want to have a good supply chain. So there's a number of different reasons we're excited about it, but those are what I would say are the most -- we're most excited about. And it takes a bit of time to build up, too, because if you look at the model that Mike presented, we're now that we're out there. We're just now discussing it. Now we can get through that pipeline. We got to get through being able to bring on board, and it takes a little bit of time to ramp some of these partners up.

And Paul, do you expect that to be organic or inorganic or a mixture?

So I think if you look at Lifecycle Services, kind of the 3 brands that fall under that. So Supply Chain Services will be organic. We're going to build this ourselves. We've got the technology, some of the foundation because we have to build back some of the systems. We're going to do that organically. Inorganically, we'll continue to look at things like IT Asset Disposition and what we can do. And I would say the Reverse Logistics and Repair business. So if I separate Lifecycle Services kind of into 2 buckets, one, potentially, it could be inorganic. The other one would for sure be we're going to build it organically.

Okay. And Mike, what are the largest drivers of the company's long-term operating margin growth? And how much of future margin expansion is expected from automation and workflow digitization versus mix shift?

I think, again, if I go back to the 3 phases of our platform journey, one was operating efficiencies. We've taken the cost out that we've talked about. There is still efficiency to get as we continue to deploy Xvantage across a bigger pool of our countries globally. But we've targeted our growth of Xvantage towards our largest markets to start, most of our largest markets. So there is still room there where we see more of that efficiency. The revenue growth above market as sort of the Phase 2 part, again, we're -- I think what we shared today, especially if you take into account some of those baseline factors is revenue growth above market as far as where we see the business going in the coming years. And now it's really more on the profitability spectrum. So I'm not going to necessarily quantify the 3 pieces. But certainly, as you think about our operating profit and our net income -- non-GAAP net income growing at more than 2x our revenue growth rate, it's really extrapolating off of the platform and the capabilities we're bringing to bear as we continue to mature this model around the world.

I mean the good thing about what we've done from an efficiency standpoint in OpEx is we're able to redeploy to proactive activity. So the quality of revenue, as Mike is talking about. So we're able to take those resources and be proactive, and it's showing up in both the profit and the revenues.

Great. We talked a little bit about ASPs and PCs. Can you talk just generally about the pricing environment, supply and demand, how you're thinking about in the out years, memory shortages, how long is that going to go? Just in general, I guess, really sort of demand or the elasticity of demand?

I could hit on it first, and then you guys please add. But I think we've assumed in our model that we are not seeing the rate of growth of ASPs that we've seen this year. There are some category -- subcategories of products that have grown high double digits, even maybe triple digits in some cases. So there's a growth factor there in some areas that we're already seeing some of that rate of increase slow a bit. We talked in our second quarter earnings about a 3% impact on top line associated with all of these factors, which is not just the ASP piece, but also maybe some pull forward, but also the counterpart to all of this, which is it's taking longer to get product.

Supply is constrained. So to close deals takes longer. We have more backlog than we traditionally do today. And then a little bit of that demand elasticity. But again, we haven't seen a lot where we've seen orders just being canceled. There's always some of that. But what we're seeing more of is occasionally, not a tremendous amount, but more recalibration. Customers looking at, maybe I don't need the same number of units, maybe I can downsize my technical specs to make this more affordable in an ASP environment. So I think we do expect as we get into the new year, and I don't think anything I'm saying here is very different than what the OEMs themselves are saying is that we do get to a point where this levels off and plateaus.

But the supply constraints themselves are probably -- from a memory perspective, are probably going to exist for potentially multiple years, honestly, and we'll be navigating through that. And then the last thing I would just say is the ASPs are passed through. We're not eating those costs. So that's an important part as far as the profit metrics. Inflates both our cost of sales and our revenues, but it's not necessarily eating into our margins in a meaningful way, just to be clear.

The only -- I think you answered it. The only one thing I would add is that we're seeing customers as they look out, they may be not rolling out the entire deployment right upfront. They may be rolling out pieces of the deployment, which will make it a little bit better from a revenue perspective and a little bit more predictability because of the constraints because they can't get access to everything. So they'll kind of phase it out along the way versus they would have done everything if they had access to everything right out of the gate. Some of those partners are telling us that's the way they're looking at it now.

Okay. Last question, and then we'll turn it over to you, Paul. But Sanjib, could you talk a little bit about how to gauge success of Xvantage and this move to the intelligent operating system? What are the factors to look for over the next year or so?

Yes. I think there are multiple factors. One is we talked about the value coming in, both from the operating leverage, the revenue growth, and Mike talked about the margin, multiple factors of margin, right? But what is important is the foundation, right? We had built the automation that our transactions and our customers come with experience. And I talked today that, that gives us about 250 million events a day that gives signals. And these signals are helping us to understand demand when there is invisible demand to connect the dots and do demand generation. And that is where we see in the long tail, even outcome-based solutioning in the mid-market or even working with the enterprise, the value coming in.

And as you see here, as we move from the platform operating model to the intelligent model, it's not just a quantifiable value, it's how you operate the business. What you heard today is some of the mature markets you are running the business with the intelligence. You are changing the way you operate, how your sales team going out and proactively reaching out, how you're balancing your factors.

I think that is the success of our platform. It is not a platform supporting just a distribution business. We are becoming the intelligent operating system of the ecosystem. I think that's where we measure. As we bring in more integrations for the ecosystem and solve problems and we can show demand generation with the hyperscalers and the vendors, I think that will be the true success of our platform in the next 3 years.

Great. Thank you all for the answers. And Paul, at this time, we'll have you close out the day.

Perfect. All right. Thanks for hanging in there with us. Can I bring up my closed slides, please? There we go. I think it's coming up. Let me know. I see a blank screen. And now I see a nice ocean, but I can still wrap up. Hopefully, as they change, I see it looks like -- sorry, you're seeing like some. So hopefully, you'll be able to see -- there is a slide creative, but I'll touch on it.

So first of all, I want to say thank you very much for your time today. When we went public back in 2024, we shared our vision. So we're coming up on 2 years that we got to share our vision of becoming a B2B platform company and more importantly, our transformational journey. We talked about it today, removing friction, lowering our OpEx and using data and AI to create intelligence. And now we're talking about how we're using the intelligence to create actionable outcomes.

Today, I hope you realize, and I said it this morning, we're a different company. We're resilient. We've moved at pace. We'll continue to move at pace because it's an unprecedented time in our industry right now. And we've built the capabilities to sustain our progress. A new Ingram Micro has emerged, our portfolio expansion, monetization of AI, what we're doing around with the hyperscalers, the services we're building, all providing room for us to grow.

We're delivering on our financial commitments as we've talked about. We had a good Q1. We had the best Q2 in company history. The back half of the year is shaping up nicely. And our 3-year plan shows us growing profit at 2x the rate of revenue. Our teams have passion, they have desire. We have a huge opportunity in front of us. Along with our partners, alongside of us, we intend to win. Thank you for your time again today, and appreciate giving us all this visibility and opportunity to present to you. Have a great afternoon.

Greetings, and welcome to the Ingram Micro Second Quarter 2026 Earnings Results.

[Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Willa McManmon. Please go ahead.

I'm here today with Paul Bay, Ingram Micro's CEO; and Mike Zilis, our CFO. Before I turn the call over to Paul, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws.

All of these statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to today's earnings release and our SEC filings. Our forward-looking statements are based on information currently available to us, and we do not intend to update these statements except as required by law.

During this call, we will also reference certain non-GAAP financial information. Reconciliations of non-GAAP results to GAAP results are included in our earnings press release furnished to the SEC and available on our Investor Relations website. With that, I'll turn the call over to Paul.

Thank you, Willa, and good afternoon, everyone. I'm extremely pleased with our second quarter performance, which combined with our first quarter results produced a very strong first half of 2026. In the second quarter, we delivered net revenue of approximately $14.5 billion, gross profit dollars of $959 million and adjusted EPS of $0.82, results that came in significantly higher and above our guidance ranges. These results are the best second quarter we have ever delivered and reflect a disciplined execution across our global business, continued momentum with Xvantage and the strength of our diversified portfolio, partner base and global ecosystem. They also demonstrate the power of our operating model.

Mike will walk through the financial performance, but I will begin by highlighting several themes that stood out in the quarter. First, we continue to demonstrate the compounding effect of our operating model. Gross profit dollars grew faster than revenue and adjusted operating income grew nearly 40% year-over-year, while adjusted EBITDA and earnings again outpaced revenue growth. We are increasingly evolving from a reactive selling to a more proactive go-to-market strategy, leveraging data, automation and platform intelligence to identify opportunities earlier, engage partners more effectively and improve productivity across the business.

Second, demand remains healthy. We saw double-digit revenue growth across our 3 primary lines of business. We also delivered revenue growth across all 4 regions and customer categories. Our net revenue by region remains balanced and well diversified with North America contributing 36% of net revenue; Asia Pacific, 30%; EMEA, 26%; and Latin America, 8%. Asia Pacific is now our second highest operating margin region while Latin America remains our most profitable region by operating margin.

During the first half of the year, I traveled to a dozen countries across these regions to meet with partners and team members and saw consistent themes across the markets. Customers said that while some advanced solution deals are taking longer, pipelines remain healthy, and they are very optimistic. AI's top of mind and their end customers are moving from asking what is AI to how do we actually deploy it. This is where Xvantage and enable AI are beginning to pay dividends, which I will discuss shortly. The shift in the market is also driving an even greater push for its outcome-based selling to solve specific business problems with complex solutions driven by AI, automation and security. We are helping our customers provide these solutions through every stage of their sales and deployment cycles from helping to build use cases to providing access to our certified engineers.

The market is evolving. We have invested ahead of the curve to evolve with it and our role in the channel has never been more important. That leads me to my third theme, the continued evolution of our Xvantage digital platform into an intelligent operating system. As AI accelerates changes across the industry, our customers and our vendors need a platform that simplifies complexity, connects data and orchestrate workflows at scale. Our expanded strategy centers around embedded AI, automation and data intelligence driving clear sources of value. This is demonstrated by a reduced operating costs, accelerated growth and expanded profitability.

In Q2, the impact was visible on the data. Time spent on Xvantage increased approximately 40% year-over-year. Average order value increased 12% and average revenue per customer grew 23%, reinforcing that Xvantage is scaling as a global platform. At 10 countries with the most mature expanded implementation showed double-digit year-over-year increases in gross profit and gross margin per go-to-market head and delivered lower operating expenses, demonstrating the platform's leverage. We are seeing the same flywheel effect across our markets, including Asia Pacific, where India provides a strong proof point with nearly 50% year-over-year growth in average order value. Average revenue per customer, which almost doubled and measurable margin impact from strategic pricing and platform-led insights.

Customers are using the platform as a valuable and integrated way to drive their business. And every quarter, we see more users, greater engagement and higher sales on the platform. To illustrate this, self-service orders around the globe reached $2.4 million up 12% year-over-year, increasing efficiency and allowing our team members to focus more on high-value solution selling and customer engagement. E-mail to order our patented AI capability that in just unstructured customer e-mails, turning them into touchless orders, saw volumes increase 43% year-over-year representing approximately $1.4 billion in revenue processed through our AI-enabled workflows that help partners move faster and operate more efficiently.

For the third consecutive quarter, IDA, our intelligent digital assistant continued to demonstrate measurable business value, generating approximately $1 billion in net revenue in Q2, nearly 7% of the company's net revenue ahead of pace on our goal of double-digit revenue contribution by the end of the year. Opportunities supported by IDA converted at nearly 4x the rate of traditional quotes and contributed to a higher mix of advanced solutions and subscription categories. These are not simply adoption metrics, they are business outcomes. As engagement of Xvantage grows, the platform becomes more intelligent, automation improves and our partners transact with greater speed, efficiency and confidence.

Last quarter, we discussed 4 patents that were granted for core innovations that bring greater consumer-like simplicity, personalization, notification and ease of use to complex B2B technology commerce. Since then, 2 additional patents have been granted, further reinforcing the platform's differentiation. One covers our consumer-like end user interface enabling resellers to seamlessly manage and transact with their end customers through Xvantage, advancing our vision of a single pane of glass where you can order hardware, software, cloud and services, which, again, is simplifying the B2B experience.

The other covers an AI-powered alerts and notifications architecture, enabling Xvantage to interpret real-time signals and proactively deliver personalized insights and recommendation actions, further differentiating us as XVantage involves into Ingram Micro's intelligent operating system. We are extending that differentiation by continually meeting our customers where they are in their technology journey. Customers can integrate with Xvantage in multiple ways. And most recently, we introduced model context protocol or MCP, which represents the next step in making Xvantage even more intelligent and accessible.

MCP provides a standardized way for AI agents to securely access Xvantage's data services and workflows. That foundation also enables more sophisticated agent-to-agent interactions where multiple AI agents can collaborate across customers and vendors to automate increasingly complex business processes by securely connecting AI agents to Xvantage, MCP enables customers and vendors to automate workflows across quoting, inventory, ordering and the technology life cycle. The result is a faster, more seamless experience that reduces manual effort and allows our customers to focus on delivering greater value to their own clients while leveraging the full power of Xvantage of the Xvantage platform.

In June alone, adoption of MCP increased 50%, usage grew more than threefold and MCP enabled customers are already automating multiple areas of their business. In short, MCP is providing another way to connect seamlessly with our platform and customers are embracing it. Alongside the platform, we are helping customers and vendors move from AI interest to practical deployment through our enable AI program. We are moving customers through the stages of assessing readiness and supporting repeatable use cases designed to deliver measurable outcomes. Hundreds of customers are in the program. with new customers joining at a rapid pace. Quarter-over-quarter, we have seen more than 60% growth in customers engaged in the program with an almost 100% increase in those moving into AI business case deployment.

The AI opportunity extends well beyond AI infrastructure, moving from pilots to scalable outcomes requires modern infrastructure, clean and structured data, strong security, optimized cloud environments, and the ability to integrate multiple technologies into comprehensive solutions. That complexity plays directly into Ingram Micro's strength and is the reason we rolled out enable AI at the beginning of the year. With the program, we are helping customers identify high-value use cases, build proof of concepts, accelerate deployment and create specialized practices around AI. This is similar to the way we help scale the cloud opportunity, which is now a significant driver of gross profit. We believe enable AI gives us an even larger long-term opportunity to monetize AI.

On the enterprise side, earlier this year, we partnered with key OEMs and the world's leading AI and accelerated computing company to launch a program across several of our key markets, we call this enable AI OEM accelerate. Our goal is to enable mid-market MSPs to confidently pitch, deliver and manage AI factories that drive ROI. Since the launch of our team has helped customers create AI factory opportunities that are already translating into active pipeline to also support larger enterprise customers, enable AI now includes access to one of the world's leading neocloud, creating a direct path into mission-critical AI training and inference workloads. We are still early in AI adoption cycle, particularly with SMB.

While GPU and AI infrastructure remains important on the enterprise side, the larger, longer-term opportunity is helping our broad customer base deploy AI more effectively for their end customers. As adoption expands from large enterprise into the mid-market and SMB segments, our role becomes even more important. Customers need guidance and enablement, vendors need reach and scale, and the ecosystem needs a digital platform capable of connecting it all together. We are working with vendors to do just that. Thomas Kurian, CEO of Google Cloud validated this when he said, and I quote, "Google Cloud and Ingram Micro are working together to remove the complexity from IT distribution with the Xvantage platform. Through this unified platform, we are giving enterprises the ability to transform the way they service customers across every industry. Together, we look forward to partnering further to bring Gemini models and agenetic AI to even more organizations." This type of partnership is why customers rely on us.

Further than this, we are partnering with other leading vendors, including hardware providers, software companies, at hyperscalers, and the vendors are increasingly moving towards global distribution-led sales motions to reach both the enterprise and even more SMB market. These types of global partnerships play to our strength including global and local presence, our COEs are centers of excellence, extensive certifications across technologies and more than 165,000 customers serving millions of end businesses. As an example, in May, HPE announced that Ingram Micro would become 1 of 2 global distribution partners as it moves to a unified distribution model designed to deliver greater simplicity and consistency for partners across lines of business and geographies.

Vendor strategies like this validates the importance of dedicated enablement resources strong operational support and global scale. They also reinforced the value of Ingram Micro's reach and expertise as AI begins to monetize within SMB.

Before I close, I want to highlight our continued commitment to responsible growth and corporate citizenship. There are 10 to 0 goals, which represents our most ambitious sustainability goals, we made meaningful progress in 2025. We reduced operational greenhouse gas emissions by a cumulative 45% over the last 3 years. We achieved our 2030 target to divert more than 90% of waste from landfill and we reduced safety incidents by more than 70% since 2020. We are proud of this progress and look forward to sharing more on our 2025 sustainable impact report that is coming out in a few weeks.

This quarter, we delivered robust growth, exceeded our financial commitments, expanded profitability and continue to advance the strategic initiatives that will drive long-term value creation. Just as importantly, we continue to see growing evidence that Xvantage is creating meaningful differentiation and positioning us to capitalize on the next generation of AI-enabled opportunities. The investments we have made in our platform, talent and intellectual property set us up well for the future. With that momentum and confidence in our execution, we are providing our strongest quarterly guidance to date. Mike will expand on this in more detail. None of this would be possible without the dedication of our team members across 57 countries. Throughout my travels this year, I have seen firsthand our team's tenacity, customer focus and willingness to take on new challenges.

We are building a stronger company that is sustainable and resilient, a more scalable operating model and a platform that will increasingly differentiate us. Looking to the back half of the year, we are confident in both our strategy and our ability to continue executing. The environment remains dynamic but over nearly 5 decades, Ingram Micro has proven to be adaptable and capable of performing above market.

With that, I'll turn the call over to Mike. Mike?

Thank you, Paul, and thanks, everyone, for joining us today. As Paul highlighted, we had a record second quarter with financial results that exceeded the high end of each of our guidance ranges. Our growth was widespread across all geographies, customer categories and our 3 primary lines of business. In terms of operating leverage, our gross profit dollar growth in the double digits combined with our focus on disciplined execution, operating efficiency and quality of business yielded growth in non-GAAP net income at a rate well over 2x that of gross profit.

As we look ahead to the third quarter, we see a continued solid demand environment, driving further year-over-year top line growth enabled by strong execution, which I'll cover more on our guidance discussion shortly.

Now getting to the details of our second quarter, net sales of $14.53 billion were up 13.6% year-over-year in U.S. dollars and up 12.6% on an FX-neutral basis. Cloud was our fastest-growing line of business at 44% FX-neutral growth year-over-year, bolstered by strength in Infrastructure-as-a-Service and cybersecurity. And this is despite an 11% year-over-year impact related to our previously disclosed divestiture of Cloud Blue, which was completed in the third quarter of 2025. Net sales of Advanced Solutions grew 13% on an FX-neutral basis, driven by demand for GPU and AI infrastructure product sets as well as storage and cybersecurity.

Finally, we also saw continued momentum in client and endpoint solutions, with FX-neutral growth of 12%, driven by strong demand for notebooks, desktops and components.

Geographically, we saw growth across each of our 4 regions, once again led by Asia Pacific, which grew 28% on an FX-neutral basis. Latin America also had strong double-digit growth of 19%. Both regions had robust growth in cloud as well as client and endpoint solutions. North America net sales came in at $5.28 billion, up 6% over the prior year. Both Asia Pacific and North America benefited from sales of GPU and AI infrastructure product sets, as we saw our consolidated sales of these products more than doubled year-over-year.

Finally, net sales in EMEA were $3.75 billion, up 5% on an FX-neutral basis, with robust growth in cloud, but also growth in climate endpoint solutions and advanced solutions. Back in April, we discussed for our guidance for Q2 that we expected a combined benefit to net sales of approximately 2% to 3% from various factors related to supply constraints, including increased average selling prices and pull forward of orders ahead of ASP hikes offset partially by longer lead times to get products and some demand elasticity brought on by price increases. While it is quite difficult to quantify precisely all of these impacts, we estimate that we've landed closer to the high end of this 2% to 3% impact from these combined factors.

The year-over-year growth in cloud worldwide and in GPU and AI infrastructure were the other primary factors driving our overachievement to our revenue guidance for Q2. Second quarter gross profit came in at $959 million compared to $839 million last year. The prior year figure included the impact of a write-down of $10.5 million in connection with held-for-sale accounting for a group of noncore assets in our North America region. Excluding this write-down, we saw gross profit growth of nearly 13%. Gross margin came at 6.60% for this year's second quarter, up 4 basis points year-over-year and down slightly if we take into account the 8 basis point negative impact from the prior year write-down I just discussed.

However, the growth in GPU and AI infrastructure deals that I touched on earlier is also an important factor in our margin analysis. Excluding the impact of these deals, our Q2 2026 gross margins were 6.90% which is more than 20 basis points higher than the prior year second quarter, also excluding any such deals. But as I've said in the past, while these deals tend to be lower-margin fulfillment business, they also remain very low cost to serve and working capital efficient and are one of the more notable contributors to a year-over-year increase in adjusted return on invested capital of roughly 240 basis points.

A final factor to touch on quickly related to gross margin is our geographic footprint. As I noted earlier, our Asia Pacific region grew 28% in Q2 and now represents 30% of our total net sales. Our Asia Pacific gross margins were 4.47% in the current year Q2, which is a solid year-over-year increase of 27 basis points for the region. However, this remains a margin rate that is well below the average of the rest of the world. To this point, the margin for just our combined North America, EMEA and LATAM business was 7.53% in the current year quarter. As we've discussed before, this growth in Asia Pacific is well served as we focus on quality of sales across the region. Additionally, our turnarounds have been very successful in India from the challenges in that country in late 2024 through the first half of 2025.

So I'm pleased to say that this lower cost to serve and very efficient region landed in Q2 as our second largest region in terms of both net sales and operating margin, but Asia Pacific was actually our largest region worldwide in terms of operating income.

Now I shift to our operating expenses. We landed Q2 2026 at $722 million or 4.97% of net sales compared to 5.44% in the same period last year. The year-over-year improvement in operating leverage of 47 basis points included a 26 basis point impact related to held-for-sale accounting on 2 divestitures that closed in the third quarter of 2025. The remaining 19 basis point improvement demonstrates our operating leverage and the continued benefits of optimization and automation from Xvantage as well as the mix factors associated with a higher concentration of lower cost to serve sales in the APAC region, as well as GPU and AI infrastructure sales in APAC and North America.

Adjusted income from operations was $280 million, up 40% year-over-year, including the held-for-sale accounting charge in the prior year as growth in gross profit dollars and operating efficiencies are driving significant leverage in the business. Our non-GAAP diluted EPS was $0.82, up 34% from the prior year and well above the high end of our guidance for Q2. As you'll recall in our Q2 guidance, we discussed a potential $0.01 to $0.03 impact related to the conflict in the Middle East and we believe that impact landed closer to the lower end of that range as our team there has continued to execute through this prolonged conflict.

Turning to our balance sheet. We ended the quarter with net working capital of $4.9 billion compared to $4.6 billion to close the same period last year. The higher investment in working capital this year is driven by the increase in net sales and investment needed to capture these opportunities. In particular, we have done some strategic procurement of certain product categories to get out ahead of continued ASP increases and potential memory-related supply shortages. ASP increases themselves also inflate the value of all elements of working capital. But as we continue to push for efficiency in how we deploy working capital in this environment on a days basis, our net working capital of 26 days in Q2 2026 was 3 days better than the same period of 2025. And as I noted earlier, our adjusted ROIC improved by 240 basis points year-over-year.

From a standpoint of adjusted free cash flow, these factors drove an outflow of $527 million in the second quarter. I will touch a bit more on free cash flow in the context of our guidance shortly. But before I turn to that, we also completed another secondary offering in early May for 14.5 million shares, which included a repurchase of 1.2 million shares. Taking into account the 2 secondary offerings we have completed so far this year as well as the smaller Rule 144 unregistered sale of shares by our majority shareholder in June, the ownership interest of Platinum has been reduced by 13% since the beginning of March. We also returned $19 million to stockholders through dividends paid during the quarter and today announced a 2.4% sequential increase to our quarterly dividend to be paid in Q3.

We ended the quarter with $809 million in cash and cash equivalents and debt of $3.8 billion. Our net debt-to-EBITDA leverage ratio was 2.0x, which has improved approximately 0.2x of a turn from the year ago quarter as we balance the need to invest for growth with higher profit generation we saw in this year's Q2.

Shifting now to guidance for Q3. We are guiding net sales of $13.55 billion to $13.95 billion, which represents year-over-year growth of more than 9% at the midpoint and nearly 11% at the high point. We expect third quarter gross profit of $910 million to $955 million, which would represent gross margins in roughly the 6.8% range. This revenue and gross profit guidance is reflective of many of the same trends in sales mix across products, customers and geographies that we saw in Q2. We expect non-GAAP diluted EPS to be in the range of $0.72 to $0.82 per diluted share. Our EPS guidance assumes approximately 231.9 million weighted average shares outstanding and a non-GAAP tax rate of 27%. This guidance also assumes again a roughly 2% to 3% net revenue benefit from supply constraint puts and takes along the same lines as we saw in Q2. And our EPS guidance assumes roughly $0.01 to $0.02 impact related to the continuing conflict in the Middle East.

Lastly, while we don't guide on free cash flow, I want to point out that we need to invest to support the continuing growth we are forecasting. However, as our Q3 guide indicates, we are driving accretion and income generation. Furthermore, we expect our heightened inventory investment exiting Q2 to sell through in full as the year progresses.

In closing, I'm extremely pleased with our record Q2 performance and where we stand today looking into Q3. We expect continued year-over-year growth in our top and bottom lines as we execute and scale our Xvantage platform.

With that, we can now open the line up for questions.

[Operator Instructions]

And our first question will come from Katherine Murphy with Goldman Sachs.

I wanted to ask more about the 13% FX-neutral growth in the Advanced Solutions segment in the quarter. Prior, you had guided to that segment growing high single digits, excluding any GPU fulfillment deals? And made clear that you had some of those, both in APAC and the U.S. region this year. Can you talk about the characteristics of some of those GPU deals in the quarter? And then also how we should think about the performance of the ex GPU demand, specifically CPU demand and how you're participating in the broader refresh outside of the storage and security opportunities you talk to.

Yes, this is Paul. I'll start off. So thanks for the question. So as we noted, part of the upside that we talked about in our overachievement came both in cloud but really around GPU, AI infrastructure and we had very good growth in that, came across the 3 categories, storage server -- networking to some extent, networking, we had a very large Q1, so some of that was timing so we're absolutely participating in what we define as the AI infrastructure data center build-outs that are happening. A lot of that came in Asia Pacific, which was part of the results. If you peel back kind of the general outside of the GPU, AI infrastructure, we saw good growth across the board as we mentioned, we had growth across all lines of business, across all geographies and then also across all customer segments, too.

So a healthy business with a little bit of an uplift from when we define as AI infrastructure and GPU deals.

Mike, I don't know if you have any other.

Yes, Kathy, the only other thing I would add because you asked about sort of the characteristic, which maybe you meant this maybe you didn't, but it's more timing. I mean, I think as we've said in the past, a lot of those deals. One may happen when the supply becomes available, which is part of the constraint, but they tend to end up being back-end loaded. So we didn't guide to a significant outsized amount there, and we ended up seeing that happen with a lot of deals closing in the second half of the quarter. We similarly in our guide for Q3 are not guiding to outsized growth, but there continues to be a pipeline in that in that category of spend happening for sure.

[Operator Instructions]

Our next caller will come from Erik Woodring with Morgan Stanley.

This is Maya on for Erik. So maybe just 1 question for me. There's been a lot of debate around whether enterprises are kind of reallocating IT budgets away from software towards infrastructure hardware, in particular, given the higher prices. Based on what you're seeing across partners and end customers, are you observing any meaningful like software, the hardware budget reprioritization today? And if so, which customer segments or product categories are seeing the biggest benefit there?

I'll start, this is Paul. And so as we look at kind of the pipeline and where the delivery came from, we are seeing a little bit of an effect of some customers. And I would say it's more kind of mid-market and that are breaking kind of other large project deals into smaller phases. And then we're actually seeing on the flip side, some partners that are actually now seeing areas that were previously delayed projects coming to fruition now. So -- as it relates to hardware and software, we still have good growth, high single-digit growth in software and similarly in hardware from a category standpoint. So we're still seeing good strength and part of that goes back to, again, the -- as I mentioned on the prior question, the customer segments and seeing healthy growth across all the customer segments.

So I think it varies, if you get into kind of enterprise, mid-market, versus really the SMB market. So nothing I would say material that we've seen shifting one way or the other.

We'll go next to Joseph Cardoso with JPMorgan.

I just wanted to touch on the HP disclosure or discussion point around them essentially rationalizing maybe their partner ecosystem in terms of distribution. Like if we take a step back and we look at some of the other OEM partners just from a big picture standpoint, how prevalent is that behavior that you're seeing in terms of rationalizing kind of the partner ecosystem here. Just curious in terms of how broadly we're seeing that and if that's a recurring trend maybe across your OEM partners?

Yes. Thanks for the question. This is Paul. And I actually called it out in my prepared remarks, we're actually seeing quite a bit of activity. And I think there's a couple of reasons. One is we're seeing partners really want to do vendor partners, the OEMs that you mentioned and the one I touched on HP that announced that. They want to do more with less. And so you're able to really look at the resources. The way we look at it is we go global, regional, local and 1 of our differentiators is we have centers of excellence in each of the 4 regions, thousands of certificates. And you've heard Mike and I talk about previously, our product sets are made up of 6 different products and services. So we're able to wrap in really what's the business outcome or solution that people are looking for. And then you have the access to 165,000 of our customers.

And again, part of the reason is a co-invest. So you get a little bit longer-term view on a multiyear and the 1 we announced from an HPE is what are we going to do over the next couple of years, where are we going to co-invest and how we're going to resource against that and allows us really to be more strategic as opposed to quarter by quarter or month by month as they look at that. And again, I think because of the capabilities and competencies we built out along with our great geo presence of really good diversity all the way from North America, Asia Pacific, Latin America and EMEA. It allows us to really have that reach and similar skill sets and competencies. And you wrap that around what we're doing with Xvantage from a global perspective. And as we said, it's really 1 code-based and we are actually when you get in North America, you can get the other 22 countries we have that Xvantage launched into. So you get consistency and predictability, and we're able to really focus on long-term strategies.

Joseph, one other thing, those -- all those breath points and certainly the Xvantage platform is a differentiator. I think one other thing that resonates with a lot of vendors, and I don't want to necessarily pin this purely on the HPE discussion. But just as a more general statement is business practices and how we operate around the world with that presence because that is definitely not true. When you talk about some of the local and subregional players in some markets. So that becomes a very key value prop to a lot of the vendors as well.

Our next question will come from Ruplu Bhattacharya with Bank of America.

It relates to AI infrastructure impact on gross margin. It looks like it was a 30 bps headwind this quarter. Going forward, do you think operational benefits from Xvantage can outweigh the mix pressure? Do you think your business can sustainably operate at a higher gross margin level to sustainable higher operating leverage as AI becomes an increasing part of the mix. And Mike, if you can throw in like are you seeing any changes in working capital requirements or financing requirements as AI becomes a bigger part of the mix?

Yes. Well, let me hit on that second part first. I mean I think the AI and GPU, as we have said, is extremely working capital efficient. We're not really stocking that higher-end equipment. It's more when you get it, the projects close. So very low inventory. The terms and conditions on the vendor side are very much offsetting with the customer side. So as I said in my prepared remarks, the AI, GPU piece was a significant contributor to the 240 basis point year-over-year improvement we saw in adjusted ROIC as an example, and also a significant driver of our working capital base being 3 days better year-over-year.

Now as to the efficiency part of your question that you led with and Paul may add to this. I mean, I think Xvantage and the enablement we're driving around our entire ecosystem is true across every single product line. And so it does absolutely apply across the AI, GPU piece and we continue to be very efficient. And that's why you see not only the leverage in a solid state, but even if you just look on absolute dollar growth of OpEx, we have to invest a little bit in the business. We are investing into cloud and enablement and services in some of those areas. But we certainly aren't matching in any way the double-digit growth we've seen year-to-date from a top line perspective, and that's significantly driven by the ability to operate in a far more efficient manner and that remains extremely scalable.

We will invest in some of those specialized skills, but we don't need to invest just simply to handle growth because we've built that much more automation around it.

Yes. And this is Paul. So as I talked about in my prepared remarks around the 10 countries with maturity, we had double-digit gross profit and gross margin per go-to-market head and delivered lower OpEx driving leverage. And that was really related to the AI deals that we're participating on. That's really on our core business, and we're going to continue to focus on the opportunities we have there. And that's also not just more efficient and more profitable, but it's also a better experience for the customers because we're using our intelligence and our data to actually bring those opportunities forward, and that's where I go back to being more proactive versus being reactive.

We'll go next to David Paige with RBC Capital Markets.

Mike, I want to ask on Climate Endpoint Solutions, solid growth, 13% in the quarter. Would you be able to break out category growth, whether it be PCs, mobile and anything in the CES category?

Yes, PC specifically.

Well, I think you're just asking sort of the general breakout. I mean we don't give the subcategories, but I think the across client at that point. Certainly, the PC notebook category remained very healthy, growing double digits. We could see solid single digit -- high single-digit growth in smartphones components, some of the consumer electronics categories also growing. So it was actually somewhat healthy across a lot of the CES categories, but PC notebooks and the continued growth we see there on the refresh cycle continuing was certainly a big driver there.

Yes. The only thing I would add specifically to the PC comments that Mike made is we still think as we're seeing the refresh cycle and Windows 11 happened, and as we mentioned, coming off of significant double-digit growth in Q2 of 2025, we think there's still room to run, particularly as AI PCs continue to gain traction, and we talk about that. AI PCs accounted for more than 30% of our revenue in Q2. So -- and we believe this is consistent with what you'd hear from the other OEMs and analysts. So we continue to see solid demand, which would suggest that there's an extended cycle still with the PC refresh right now.

Moving next to Adam Tindle with Raymond James.

Okay. This 1 might be for Mike. If I was to look at this quarter independently, obviously, massive growth, almost 30% growth in APAC, understand that, that's a lower margin region, but very working capital efficient. So it tends to be good returns despite the lower margin. But then I look at the cash flow statement and you used over $0.5 billion of cash in the quarter. So I'm just wondering if you could maybe double click on the rationale for such a sizable cash use in the quarter given such strong APAC given the GPU stuff that's supposed to be capital efficient.

And then if you could -- I imagine there's some timing and stuff in here. If you could just talk about the trajectory of cash flow from here, do you still think we can reach positive cash flow for fiscal '26? Or what does it look like for investors who are looking for more sustainable cash flow?

Yes. Thanks, Adam. I think 1 thing I would point to that I did mention in our prepared remarks, I think there's 2 factors that are driving a lot of that cash flow phenomenon. One -- and I want to focus on inventory more than anything here, but it applies on the AR and even the AP side as well. One, the ASPs themselves are driving quite a bit of inflation in the dollar of the balance sheet. So if you look at our inventory on a U.S. dollar basis, it's sequentially up about 16% from where we closed Q1 a significant portion of that 16% is just the ASPs themselves. But then on top of that, we have invested strategically not only for the just general growth we see across the various categories you're spot on. I mean, as we talked about, the AI and GPU piece isn't as much a driver of this, but the other hardware categories do require some investment as well as investment and other elements of the working capital spectrum.

So we are seeing just generally investing for growth and some opportunistic purchases to get out ahead of what continue to be ASP increases. We see the ASP increases in many of the categories starting to decrease in how rapidly they're going up. but they are still going up.

So we have saw that opportunity to make some purchases ahead. And so that's another reason for where we see the inventory balance, in particular, a little bit heightened exiting Q2. So as I look out over the rest of the quarter, we don't guide formally on free cash flow. But what I would leave you is with this, and hopefully it answers the last part of your question. I think we usually have a decent sized free cash outflow in Q3 where we're stocking for the Q4 or even wait Q3 kind of hockey stick in sales that always happens. We still expect demand to be quite healthy through the end of the year, as we've talked about, but we've just pulled forward some of that stocking level. So that could drive a better-than-normal seasonal Q3. And even if it's not to the same degree as we saw last Q4, where we had $1.6 billion of free cash flow in that quarter alone. We certainly see in all likelihood a very solid Q4.

Moving on tio Ellie Dyke with William Blair.

This is Ellie on for Maggie Nolan. Congrats on the quarter. My question is EPS came in at $0.82 this quarter, and the midpoint of guidance implies a sequential step down to $0.77, could you just expand a little bit on the drivers there? And going forward for the next couple of quarters, the ability to drive operating leverage.

Yes. I can start on that. This is Mike. There's a lot of different factors that go into that. I mean, certainly, what's implied by -- and I'll focus on even just the high end of the range for this purpose is a low double-digit revenue growth, a bit more growth on the EPS end of the spectrum. And some of this is just mix factors as we see how the mix evolves into the next quarter. We do see sequential margin accretion. You can see the -- again, our guide is implying a gross margin around 6.8%. And -- but also a little bit different mix in how we're serving some of that business. And so the leverage is still there and certainly holding serve, but we are -- and we have those same efficiencies, but we're seeing more of that mix of growth.

What we see from a top line perspective, which we didn't really necessarily lay out specifically in our prepared remarks. But that top line growth in that guide is still seeing healthy double-digit growth in cloud, which is low cost to serve, very efficient, low working capital. But then we're also seeing probably upper single-digit growth in CTS, particularly around the continued length of a PC refresh that we just talked about. And then mid- to maybe upper single-digit growth in the advanced solutions but not assuming outsized GPU and AI infrastructure.

We'll hear next from Alek Valero with Loop Capital Markets.

Just real quick on gross -- on -- can you expand on what the gross margin delta is between deals sourced through Xvantage versus traditional deals?

We don't -- this fall. We don't really break that out. What we do talk about is the leverage that we got off of it and the fact that average deals that are going through there are closing 4x more than the ones that are not going through Xvantage. And 1 of the key points that we made a comment about in our Q4 earnings call earlier this year, was our expectations about how much can go through our intelligent digital assistant, our IDA piece of the platform, which generated approximately $1 billion in net revenue for Q2. It was approximately 7% and our commitment coming into this year was that we'd have double digit of our revenue going through IDA, which again, is a better business, more profitable and the conversion rate for our sales organization is 4x better than the average kind of opportunity that go through there.

So we don't really break out the difference between publicly between the IDA -- or excuse me, Xvantage versus kind of the core business.

And Alek, just 1 thing I would add, as we did say, at -- in the countries that we have substantially more functionality of Xvantage deployed, the vast majority of their activity is going through Xvantage now. So Xvantage is really serving the whole of the business. It's not necessarily only serving pieces of it. But things like IDA that Paul just touched on are allowing us also to calibrate our sales force through machine learning towards the higher profit opportunities, where rebates and other structures going to potentially be beneficial. So there's different calibrations there that are also good opportunities that we're capitalizing on. And it is, again, part of the driver of the fact that when you exclude some of the noise of outside GPU and AI and the higher growth in Asia Pac as examples, we actually are growing margin year-over-year and seeing some of that accretion happening.

Yes. No, that makes sense, and that's super helpful, by the way. And that actually brings me to my next question. So I'm assuming, as you keep expanding the market share with Xvantage, you're going to continue getting more deals at that rate. So last quarter, you said you were at you were in 21 of 57 countries had Xvantage. What's the number today if you guys disclose that?

It's 22. So we're really focused and keep in mind too, so you're right, 57, and we're in 22 countries. And to Mike's point, roughly 75% of our revenue for those countries are going through Xvantage, but I want to reiterate that you got to keep in mind, each country is on a little bit of a separate rollout schedule and so they're at different levels of maturity. And the ones that are more mature that Mike just pointed to, we're actually seeing that benefit out. We're at 22 countries. Most of the larger ones are on it and again, are going through the rollout schedule and different levels of maturity.

Your next question will come from Karl Ackerman with BNP Paribas.

Mike, thank you for providing color on segment revenue drivers for Q3. But could you unpack how much of your revenue guidance is a benefit from component cost pass-throughs that some of your vendors have implemented earlier this year across advanced solutions and client and endpoint solutions.

When you think component cost pass-through, can you elaborate what you mean by that?

Yes. Some of those OEMs have certainly raised prices across the hardware aspect of their portfolios. And you spoke about how there's a 2% to 3% net revenue benefit from some constraints. I'm not sure if that is the same as the as the higher prices that were benefiting -- that you are benefiting from your. So I just wanted to...

Okay. No, got it. Got it. Yes. I mean, I think, first off, I mean, any rise in ASP is passed through by us. We're not eating that cost. And I think where we do have some of the opportunistic buy-ins that happened, and it hasn't been material, but that can be an opportunity to get out ahead on some of that and create a little bit more margin. But all of that said, we're passing through that cost. Now -- so again, I would go back to those different components that we call out in that 2% to 3% net revenue uplift. And as we said, we probably landed closer to the 3% level in our Q2 actual results. It is a combination of the ASP increases, but also any pull forward that may be happening on customer demand to get out ahead of the ASP increases. Those are 2 positive factors.

And then there's 2 headwinds. One is just it takes longer to get the product. Supply constraints are causing longer lead times, and that's lengthening out the sales closure cycle. And then just any demand elasticity that Paul touched on earlier as far as where you may be buying decisions shift a little bit. So that's is kind of the mix of all of those different factors that play into that 2% to 3% or what really landed around 3% in the quarter benefit to our top line.

Our last question will come from Keith Housum with North Coast Research.

Great. Appreciate it. Good quarter for you. Appreciate it. In terms of the rest of the year as you're looking out, obviously, we're hearing a lot of different puts and takes out there in terms of the supply chain and product shortages. But what are you guys hearing when you talk to the vendors and you talk to some of your largest customers.

So Keith, this is Paul. I'll kind of wrap in what Mike just went through. ASP increases, demand and price elasticity, pull forward, supply chain challenges. And we guided the same in Q3 as we did the 2% to 3% in Q2. As we mentioned, we are at the -- and Mike noted in his prepared remarks that we are on the higher end of it. And so we have seen demand pull forward. There's kind of all those puts and takes, but let me give you a little more color what is different this quarter than when we got together last quarter, while prices are still going up that we just talked about. Visibility and predictability actually have improved. So customers are getting a better insight on kind of future pricing and product availability.

And some of this is coming because vendors you've probably seen in the market, some have extended the duration of some of their price quotes and price solidity, which gives customers a little bit more stability as they go through their own sales cycle. So when you're talking about a handful of days and the uncertainty before, now we're looking for some that are as long as 30 days. So lets customers have better visibility. And I would say their pipelines are giving us feedback that their pipelines are healthy, too, as we're in Q3 and improved cost visibility, steel prices are going up, but there's better visibility. And here's what I would say generally, kind of what I'm hearing from customers, some customers, and I mentioned this before, breaking some of these large infrastructure products, probably more of the SMB market into smaller phases, which is good news because that doesn't mean the demand is going away or they're canceling.

It just means they're doing it in phases. While others, like I said, on a positive note, I've actually seen stuff that was pushed out a quarter or 2 ago that were actually coming to fruition. So you kind of look at all the puts and takes, there's going to be some. We're continuing to see resiliency in a solid pipeline in Q3, which is reflected in the strongest guidance we provided today.

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

Thank you all for joining us today. I'd like to close by thanking our team members for their exceptional execution and delivering the best Q2 results in our company history, our customers for their continued trust and partnership and our shareholders for your ongoing support. The technology market continues to evolve, and we're well positioned to capitalize on the opportunities ahead and our focus will remain on innovating for our customers, investing for the long-term growth and delivering sustainable value. So thank you, everyone, and have a great day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Ingram Micro First Quarter 2026 Earnings Results Conference Call. [Operator Instructions] As a reminder this conference is being recorded.

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 key fees.

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 a plan in the first quarter. including healthy top line and margin growth, while Latin America continued to deliver outside margins, both powered by our Xvantage platform. North America's double-digit growth was driven by cloud and advanced solutions which included a large GPU and AI infrastructure sales. The growth across all 4 of our regions underscores our unique global REIT where we out 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 managed digital B2B platform has increasingly becoming a competitive moat. We made this investment ahead of the curve because we anticipated the shift now taking place across the market or B2B customers increasingly expect the same speed, simplicity and personalization they experience in B2C environment.

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 then 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 item to improve conversion, optimize pricing and enable more proactive selling. Over time, we see further opportunity for AI to enhance margin quality, life cycle monetization and operating leverage.

Xvantage is not a tool or a marketplace. It is the operating system for B2B is 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 this architecture and the proprietary technology underneath it. We are pleased that 4 of our 35-plus 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 with these granted patents encompass. First, our meter agnostic framework uses our AI-driven architecture to integrate with vendors at scale, regardless of the format or underlying systems. This helps solve 1 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 degeneration capability simplifies historically complex solution configuration, pricing and transaction workflows. But once to days or weeks can now be completed in minutes or even second improving the speed, accuracy, scalability and customer responsiveness.

Third, we were granted a patent for our configured and quote to order, configure to order expand total creation through automation of complex configurable solutions that were once manual, generating high coal volume, allowing us to punchlessly convert orders through our automated quote-to-order capability. This powerful integration of AI throughout the sales life cycle is helping drive materially stronger quote-to-conversion performance.

Last, our e-mail to order patent use generative AI to convert unstructured customer e-mails and attachments in the structured transactions. In the first quarter alone and process approximately 230,000 e-mails 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 e-mail equip, 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 whole 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, Aida and other AI capabilities delivered more than 153,000 proactive engagements in the quarter, helping customers convert more than $800 million and AI-led net sales during the quarter. Importantly, quote-to-conversion performance continues to accelerate with item-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 2 million self-service orders in the quarter, contributing over 20% growth in average revenue per customer versus the prior year. We are also realizing meaningful productivity gains with both revenue and margin for go-to-market resource increasing as automation enables associates to redirect time for 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 1 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 manage enabled capabilities, LATAM delivers the highest gross margin across our regions, up 59 basis points year-over-year by shifting high-velocity SMB demand to self-service and automated quoting and embedded intelligence, our business in the region that's 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, ID revenue grew more than 200% quarter-over-quarter. We are innovating across the company in other ways as we invest in our partners and build advanced AI competencies.

On the better side, I am proud to say that we just achieved a specialization for AIS with Microsoft. News and Azure AI services, we built AI power capabilities that help partners close customer yield through increased automation, including streamlining the statement of work generation and accelerating sales productivity. The specialization recognizes our professional services expertise and designing and developing AI solutions using Microsoft AI app 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 Mize, President of Data41, said about the designation and I quote, "Ingram Micro feels like an extension of our AI practice. They're specialized in validated expertise helps us guide our customers through the full journey from initial assessment to working proof of value and production deployment." This specialization speaks strongly to how we are extending our advanced services capabilities, including our ability to leverage AI with our partners to deliver technology outcomes to the millions of end businesses at 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 uncertainty.

Our customers are at the center of everything we do, and we are grateful for them. And as always, I'm impressed by the talent and drive of our team who continue to deliver. With Xvantage enabling faster innovation, our path to 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 the unprecedented era. And with that, I'll turn the call over to Mike. Mike?

SP1 Thank you, Paul, and good afternoon, everyone. I want to start by reiterating how sneezed 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 core regions seeing double-digit year-over-year top line growth in U.S. dollars, but also with solid global growth in our 3 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 cloud 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 discussed in past quarters, these deals come at a low margin, but our low cost to serve. We don't typically stop for these deals, which provides for a strong return on working capital.

Turning to client and Endpoint Solutions, or CBS. We saw nearly 8% growth on an FX-neutral basis, with strong demand for notebooks and desktops as the refresh cycle continues and AIPC penetration growth. As a note, this 8% growth is on top of what has been solid double-digit growth for CPS in Q1 and all other quarters last year.

Geographically, we had FX mutual growth across all 4 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 growth across both client and endpoint solutions and advanced solutions. But EMEA generated its strongest growth in cloud-based solutions. And this was achieved while navigating around the challenges of the Middle Eastern conflict that started in the final month of the quarter.

Finally, net sales in Latin America were up 10.1% on [indiscernible] 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. Also, now 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. But there are other factors to consider as well.

First, supply constraints are creating more extended lead times and backlog in debt products. While more limited in frequency, we saw a few instances where projects are being indefinitely deferred simply because the product is not available. 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% to 3%.

Back to my earlier point regarding pull forward of demand. We have ongoing discussions with many of our vectors affected by supply constraints about potentially using our balance sheet for opportunistic inventory buy-in deals. While we haven't done some such deals, and we'll continue to evaluate such opportunities going forward, the impact of volumes in our first quarter results have 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 6.3% 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 5 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 5.1% 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 Vantage and driving leverage and productivity gains, as well as mix factors associated with lower cost to serve categories. And while we continue to invest in managed 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 1.8% 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. Non-GAAP net income in the quarter was $175.5 million compared to $144.2 million in Q1 of 2025, an increase of 22%, reflective of not only the strong growth I just noted in adjusted income from operations, but 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. And 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 million 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 in 2025. This improvement in cash cycle reflects disciplined management of our terms with and payments to vendors, our efforts to optimize inventory levels and upset 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 and therefore, expected a higher-than-normal seasonal outflow of cash in Q1 of this year. So 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 1 to 2 quarters to be more in line with seasonal norms.

I'm 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 flow and included us repurchasing $75 million of stock directly from our majority owner. And 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 and 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 a return to our stockholders. And 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 to $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 leave away with healthy double-digit year-over-year growth with particular strength in Infrastructure as a Service offerings. While we expect Advanced Solutions to also grow higher single digits with ongoing strength in servers, storage and cybersecurity.

While we are not necessarily projecting outside GPU and AI infrastructure projects in our guidance, we will continue to participate in these projects. Client and point solutions is also still in growth mode with notebooks, desktop refresh continuing. But 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 to $950 million, which represents year-over-year growth in gross profit dollars of 8% to 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 to $0.78 per diluted share. Included in this guide is a potential negative impact of $0.01 to $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% to 28%, reflecting solid profit leverage and 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 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 comments. We've proven this in the past, and 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.

[Operator Instructions] Our first question is from Katherine Murphy with Goldman Sachs.

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.

Yes. Katherine, this is Mike. I can start and Paul will add. I think if we're seeing this probably pop a mix of products, but it tends to be more project-based, a little bit more on the Advanced Solutions area where we look and 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. So it's across a spread of different projects. And it's -- and I think as we talked about where we're seeing ranges of price increases probably the price increases from an ASP perspective has certainly been elevated on the PC space, but we also see that happening across server and storage and some of the components that you use themselves to a lesser degree, when you get into networking and some other categories. So that also gives you a little bit of a flavor where there would be more of that sensitivity.

Yes. Katherine this is Paul. I'd say we've seen in it there is 1 instance in the 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 going to happen in Q1, it looks like it may be a quarter or 2 out.

That's very helpful. And knowing that you only guide 1 quarter out, is there anything you can share based on these customer conversations given the demand backdrop about what the back half of the year may look like from a overall enterprise IT demand environment?

Yes. So this is Paul. So again, as you know, we only guide 1 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 we -- our expectations are our clients and headpoint Solutions business will grow market advanced solutions and cloud above market. and we saw that in Q1. We built that into our guide in Q2. Some of the potential, I would say, sooner opportunities with the AI use cases, and I called out 1 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 forward that Mike had mentioned. It's more about enterprise and mid-market companies. SMB is still responding to the more near term. But what I would say is we haven't seen a significant amount of pull forward that SMB specifically to, and we're still seeing resiliency in the business as we sit here today. So the back half of the year, we did see, again, continued growth in and refresh around PCs and AIPC. So 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.

This is Matt on for Maggie at William Blair. I guess 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, are shifting midyear, given the rise in memory prices and inflation.

I could start on that. I think it's -- this is Mike. So I think the or to answer that a little bit in the last question. I think there's -- you do have a budget going into the year. There's going to be a certain amount of spend. And so as prices go up, we're seeing some reallocation where perhaps it's just a shift in scope to something a little bit less balance shift into maybe a lesser product category and so forth. So that's sort of a demand dynamic. But 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 which typical the way anywhere impacted by that part of the world and branching out. And then on top of that, the allocation of product sets by the OEMs into the higher potential products that are serving the demand and some of the things that are driving the constraints in the first place. But -- so it is definitely very dynamic, depending on the category of product, the category of customer, and that can be maybe a little bit more flavor of what we're seeing.

Got it. And as a follow-up, in terms of Xvantage, congrats on all the progress there. I know you've alluded to the 3 phases, the OpEx, demand gen, and then we're starting to get into a profitable organic growth. But can you update us on progress in Phase II and how that's progressing so far in 2026? And what maybe -- what's the true margin delta for a deal that is sourced and completed an Xvantage versus 1 of your traditional deals?

Yes. Thanks, Matt, for the question. This is Paul. So as we called out, we continue to talk about you're right, 3 phases and really now it's about applying the intelligence across the business, and I called out a couple of points. we saw significant growth where we're using our intelligence. And we can train our 400-plus models for over a year now. So they're getting better, and they're improving every single day, they continue to learn. And so we point back to IDA our intelligent digital assistant and the active engagements we had, that was up 50% year-over-year, and what we did, and we talked about it in the prior quarter earnings call. What we're doing is we're fine-tuning those opportunities to be more driven around margin. So when you look at some of the growth we see coming out of cloud and we had a very good cloud quarter. If 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. And 1 of the questions we get is how much revenue is going through it IDA and I talked about it in our prior quarter, which is mid-single digits for those that are on manage of the countries, the 21 countries that are on Xvantage are going [indiscernible]. 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 to have that be double digits by the end of the year of the revenue for those expanded countries being able to deliver through IDA. So we feel very comfortable where we're at today. and the investments that we made and the proof points that we're seeing coming out of the quarter and as we sit here in the current quarter.

Our next question is Erik Woodring with Morgan Stanley.

This is Maya on for Erik today. I have 2 questions. Maybe just to start, given the degree of pricing increases we're seeing in the market today, is there any risk to your kind of historical cost plus pricing model? And could we see any like-for-like margin compression just given the degree of inflation that the overall device ecosystem, especially on the compute side. And I have a follow-up.

Yes. I mean just -- this is Mike. I think just as a general big price increases, just like what we've talked about in the past with tariffs and other factors, that's a pass-through for us. So -- but if I get your question, and I think there is certainly a elasticity of demand that exists. But from our perspective, as we continue to distribute the product and the services that we do, we're going to be pricing accordingly off of the prices in the market. So it's really more a question of where is the demand reside, but we're not necessarily going to be continuing margin to try and capture sales. It's about an RWC equation for us and driving the right returns and profit metrics. Whenever we do any sale, honestly.

Maya, this is Paul. So let me just add a little color to that. I mean, we've been through these cycles before. We've been through shortages. We've been through macroeconomic headwinds based on our -- a couple of thoughts here. Based on our broad vendor and product portfolio, we're able to offer alternatives. So 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. I understand if you have multiple products, maybe you have a or buying a microphone and a camera, the play headset along with that PC vendors are willing to provide maybe a better margin profile to bundle together. So we're putting some programs around that also. And with the advantage intelligence, as I talk about the model, we can better recommend the substitute configuration, bundled product solutions, alternative vendor suppliers. And then the last thing, I think, which is important also is that we are starting to see some movement to from on-prem solutions to actually cloud. And we're starting to see that, and we expect that to happen going into Q2, too. And so what I'd say is our goal is to help customers solve the business needs regardless of the product availability, and that's what's great about Ingram Micro, 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, so our solution providers, customers can go out and deliver the expectations and outcomes to their end businesses they serve every day.

Great. And that partially answers my second question, just on kind of given the persistence of pricing inflation and the strength in the genetic II, how do you think about that shift from on-prem to the cloud in terms of like a long-term risk to Ingram's kind of business model?

I actually think it's a benefit in business model. If you look at the investments we've made, actually, our vantage platform is built off of the $600-plus million that we built. We are investing ahead of the curve in the early days of the cloud a dozen years ago. And so we really built a platform where you can buy Armor software and cloud services all in 1 transaction. So as we see that and you notice by our performance, as Mike called out, minus the cloud Blue divestiture, we're up 34%, and we're guiding towards very strong cloud business in Q2 also. So that solution, which may originally get scoped on from, how we get predictability or in space, we're able to move that. And I'd also say that our deployments still make up 6 different products and services. So it's not just about 1 solution that you're delivering. It's about bundling and bringing that whole solution together for that to opacity 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 things businesses want to go.

Our next question is from David Paige with RBC Capital.

I wanted to double click on the 2Q net sales guide. Maybe if you could just parse out what you're expecting by region. So it looks like there's been momentum sequentially across every region. So I just wanted to think how should we think about growth within regions.

Yes, David, this is Mike. So I think yes, we're pretty happy with the fact that on a U.S. dollar basis, all 4 of our regions grew double digits in Q1. So we said you're right, we did see it fairly widespread. As we look to Q2, I think we would see a little bit of the same sort of trends I think we're seeing strength just really continue in Asia Pacific for quite some time now. And that's coupled with our India business really returning to stability and growth in more normal way, which is good to see now for a couple of quarters running. So impact probably does stand the chance to lead the way. And we still see a little bit more to the extent we do have any of the GTU or AI infrastructure deals, those are still tending to be either in the North America or APAC region. So if we do see something more than our guide there, that might create some outsized growth in those markets. And then 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. And therefore, that does create a little bit of overhang just more generally on the EMEA region, but we still see growth there as well.

That's very helpful. And then just 1 other thing. I think you've mentioned for CES low single-digit growth for I was wondering if you could parse out network, notebooks and mobile or smartphone.

Yes. So networks and networking, for instance, would use advanced solutions. So within CES, that low single-digit growth to 2, we don't put up the of components, but the biggest some pieces of it, just more qualitatively, our PC and desktops and then mobility devices. So we're still seeing runway as Paul said and answered to an earlier question that was based a little bit in our prepared remarks as well. on the PC refresh and IDCs are growing, but there's still roughly 1/4 of our overall PC base. So we're still seeing growth there in some runway. We see probably a little bit harder to compare, which we alluded to even in our guide on the mobility side because we saw quite a bit of ability sales in the first half actually of last year, but certainly in Q2 of last year. So that compare comes a little bit harder. That would center a little bit more in the Asia Pac region to be clear last year. But that would probably read a little bit of that headwind that normalizes to that lower single-digit kind of growth rate.

Congratulations of a great result.

Thank you.

Our next question comes from Adam Tindle with Raymond.

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 could provide any size on it would be helpful. And any aspiration over time to be more ODM like highlight business? Or does it make more sense to kind of stay in the supply chain rate?

Yes, I'll start off. Thanks, Adam. This is Paul. So to start off your last point of your question to be podium-like that is not in our plans today. What we're doing is looking at our partners and where the technology opportunities are. So a lot of it, if you look out from an AI infrastructure standpoint, and GPUs. So it's GPUs, is AI infrastructure product, which touch server networking storage product sets. And many of these large ones are going for proof of concept and/or our specific build for very, very large enterprises. So we're able to help facilitate that I think over time, I hope that this builds into -- we're just talking about categories and product sets because everything is going to be AI-enabled, but we know it's important on this journey to show how we're participating. So -- and again, to Mike's kind of point to the said before, which is this is a very low cost to serve business and a very good ROE business for us. And so 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 so we should provide our partners on a global basis. And that's through our enable AI program. So I talked about it. We have 3 growth tracks around that. How do we prepare a new awareness how we provide execution and training that serve as driving outcomes, which I talked about in my prepared remarks this quarter and then also in the prior quarter where we're doing that. And 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, and it's significantly year-over-year, but more importantly, quarter-over-quarter. So that's where we think we can play a key role in. Again, this is about the total solution and 6 different products or services. and what we're doing. And our goal is to continue to provide our B2C experience in a very fragmented B2B business for our intelligent digital experience platform and advantage that we continue to focus on and how we extend that out.

And the only thing I would add is you asked about kind of size and just like we say with other subcomponents, we don't really break it out, but I just give a little bit of color here, I guess, maybe to help. So the bulk of the GPU and AI infrastructure projects or product sales, I should say, fall in Advanced Solutions. There is a bit that settles into our line point in the form of components the bigger share is in advanced solutions. And as you can probably tell just from the margin impact we called out, it's been a pretty decent real factor year-over-year growing faster than the herd average of Advanced Solutions. As an example. But it's more about -- we want to continue to be driving that transparency more about where the margin is and where that's driving because it does have more of an impact there, honestly. And most importantly, drive on 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. Okay. I mean that's probably a good briefing to 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 kind of growing in line with revenue. And if I look at it on a sequential basis, revenue is down mid-single digits EBIT down 25% or so. And I hear Paul, a lot of 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 kind of get back to a point where we're generating more operating leverage in the model?

Yes. I think just talking a little bit more about the numbers. I mean I think the mechanics of what you're getting at an EBIT is really a function of where is the margin rate get offset by the operating efficiency. So the operating efficiencies are coming through, as we talked about in my prepared remarks, and I'll just focus on the SG&A number. So you take out a little bit of restructuring as an example, that we call out separately on our -- on the face of our income statement, but we're seeing a double-digit basis point leverage there. So we're offsetting the overall margin factor. And then on top of that, if you -- if 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. So it's really more a fact factor and where is that leverage coming through on that growth. Now what you can see is, and you can see this in our guide and even just even as you look at our reported results, while it's not EBITDA, when you take into account some of the efficiencies of debt paydowns and other factors. We're seeing healthy growth, more than 1.5 times the rate of growth, in fact, in net income and earnings per share on a non-GAAP basis as a ratio to what our revenue growth is. And 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 and client endpoint, but also the leverage still continuing from an OpEx perspective.

Okay. And just 1 last quick clarification, Mike. 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 $1 billion hole. Do you think you get to kind of parity or positive free cash flow for the year? Is that what seasonal means? I'm not sure I wanted to understand the parameters on what you were alluding to for free cash flow for the year.

Yes. We definitely see a little bit more just general seasonality of the cash flow than we historically did over the last 2 to 3 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 coming at the end of the year as you saw last year. Now I think last year was exceptional as far as where the balance sheet landed to close the year. So I wouldn't necessarily bank on that. But as I look at the rest of the year, and 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. And 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 cash flow that came in that was an exceptional cash flow for the year, but we do still expect that the ratio of free cash flow to adjusted EBITDA for the 2 years combined will still be north of 30%. So you can kind of think down that as well as far as what we expect the year goes on here.

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

Mike, Paul, as you look into the rest of fiscal '26, can you talk about the relative growth of Advanced Solutions versus endpoints, specifically in the endpoint solutions, what growth are you factoring in for the year? And as you look at demand from SMB versus larger enterprise, is it pending as you had expected? Or is there anything or stronger than you had expected? And same question on the Advanced Solutions side, how are you seeing demand for server, storage, networking trending? And I have a follow-up.

So I'll start. I mean, we saw good growth in all those categories you just mentioned in the quarter. And as we guide, we're looking for strength in all those categories too. I'm actually pleased with the continued momentum in the refresh from a TC standpoint. It was in, call it, the mid- to high teens for the quarter. So when we say double-digit growth, it was good, and we think we're going to continue to see that to getting that come off of very significant growth last year. Our desktop, notebook was high double digits. So we continue to grow there. And we are seeing continued networking server as they also cybersecurity, and we're seeing strength in that also. So we see that, and that's what we built in from a Q2 guide. Again, 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 aspect 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 comment?

Yes, Ruplu, I would just reiterate what I said earlier on that CBS piece where we're diving 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 ITCs as we've talked about. But it's really more of that smartphone compare that level that number off a little bit. overall. And remember, not unlike some other aspects of our business. Smartphones are very low margin. They're low cost to serve as well and generally move pretty fast, but it is a lower-margin business that we see down overall year-over-year networking, server, cybersecurity on the advanced solutions all decent growth categories and then cloud, as we talked about, still seeing very healthy double-digit growth, especially around Infrastructure as a Service.

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

Yes. So good question. I don't think much has changed on this front to answer that initially, and Paul can add to this. I think on the Xvantage story, what we see is probably another 4 to 5 quarters where we see a bit more of the outsized spend continuing. So get into -- once we get into the middle of next year, we see more steady state. And again, it's not too different from what we said a couple of quarters ago where we see that kind of a time line playing out here. And that's really more deployment now than it is designed. There's always going to be design and development happening as we roll out new functionality. But as we said, we have 21 out of 57 countries deployed with the most significant functionality. So there is some tail there, which sort of segues to the second part of your question. We have deployed this in our largest countries. So a majority of our revenue is now trade through Xvantage, but there is still that tail where we considerate some of the automation and efficiency to that. Some of those additional countries and that deployment is 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 aligned 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.

Good morning, everyone. Welcome to Day 2 of the Morgan Stanley TMT Conference. My name is Erik Woodring. I lead the U.S. IT hardware practice here at Morgan Stanley. I'm delighted to be joined by Ingram Micro, the team, Paul Bay, CEO; Mike Zillis, CFO.

Before we do quick introductions, disclosures please on the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So I'd love everyone to please in welcoming Paul Bay, CEO of Ingram Micro, Mike Zillis, EVP and CFO. -- both mainstays and the company, have been around for a long time. I know the company extremely well, obviously. So a great conversation. Thank you for joining us.

Thanks for having us. Glad to be here.

So the easiest and most natural place to kind of start the conversation is recapping 4Q earnings from last night amid a very red day in the market. There are spots of green and Ingram Micro is one of those spots. So congratulations on the execution. Can you just touch maybe highlights from the December quarter, highlights for the year of 2025 and maybe what the message is as we're entering a very dynamic 2026.

Yes. So I'll start and then Michael will obviously jump in. So we had great growth for Q4, 11.5% revenue growth. We exceeded the high end of our EPS guide, and we had a $1.6 billion of free cash flow. So we're excited about that, too. We continue to operate and deliver very good cost leverage in our environment. That's really being driven around the investments we've made over the last couple of years, which we call our XVantage platform. So we had some great stats coming out of Q4 and for the year in terms of usage and how we're really freeing up time for our customers, our solution providers, I'll use that generically to go spend more time with their end users.

And one of the key stats we talked about in Q4 was that for where the XVantage platform is delivered, which is the majority of the big countries, it's global. So what you get in one country, you get the same experience in another country. Our heads were actually down in those countries, but our gross profit and our revenues actually grew.

And so we're doing a lot about kind of 3 phases, taking the friction and OpEx out of the business, helping our partners do the same. The second one is around demand generation and really helping our customers drive demand generation to their end users. And the third is really about profitable growth and margin enhancement as we kind of get into that third phase. Mike, I don't know if you have any.

No. I mean I think the top line growth, I think just the only flavor I would add is we're still seeing quite robust growth in desktop notebook. PC refresh cycle is still alive and continued through the end of the year, and we see it going into '26 with some runway, too. And on top of that, we saw strong advanced solutions growth, especially in server storage. We're playing heavy in the AI space around GPU and AI infrastructure. And then cloud anything as a service, continuing to grow double digits if you normalize for a divestiture we did back in Q3.

Okay. So we'll get into all of those maybe more specifically. But I want to quickly touch on kind of 4Q outperformance, and we touched a little bit on it there in the outlook. But above normal seasonality, above the high end of your guidance range. Importantly, you noted you didn't see any pull forward. So this was just a very strong quarter of execution for you guys. Relative to how you expected the quarter to play out, where did you guys basically do better than you thought? And what does that tell you about where your customers want to spend, what they want to spend on how sustainable that spend is?

There's probably the areas that exceeded a little bit our growth expectation that went into our guide. would have been in the server storage and the GPU and AI infrastructure. And the AI infrastructure, just remember, these deals individually can be hundreds of millions. They're very project-based. But by virtue of that, they can be a little bit spotty. It's -- they're large enterprise deals, and we aren't necessarily forecasting those with a tremendous amount of advanced notice. Same in our guide for Q1. We're not assuming any outsized growth there, but that's going to be opportunity if some of those come across the plate.

The only other thing I would add, Eric, is if you peel back the AI infrastructure and kind of that GPU business within server storage networking, we still had solid growth there, too. So people ask, how is your campus refresh networking going in some of the core products that you traditionally participate and we still saw strong growth there. So you add on top of what Mike said, it comes out with a really good double-digit quarter.

Okay. And Mike, you alluded to this a little bit, but you're guiding to a very modestly subseasonal 1Q. But when we talked last night, you did talk about conservatism embedded into the guide. I always love when you want to be prudent. Again, in this dynamic world, it's the right thing to do, obviously, look at what's going on this week. But unpack where you believe you're being kind of conservative and the relative up and downside risks as you see them, whether they are macro related or company specific.

So the guide calls at the midpoint for just under 3% growth, a range of roughly 2% to 4% using round figures. But more importantly, from a leverage perspective, the guide calls for EPS growth anywhere from 11% to 23%. So -- what we're seeing is a bit of mix change with margin accretion, but also the leverage that we touched on a few minutes ago that we've built from an OpEx perspective and efficiencies with all of the investment that we've done over the last handful of years.

So if I then unpack that kind of revenue growth and get to the crux of your question on the trends, the guide assumes at the midpoint, I'll center around, would assume flat to low single-digit growth in client and endpoint. So client and endpoint, the 2 biggest subcategories, while we don't break them out individually, are PC and desktop and mobility.

PC desktop, we're still expecting to grow. We do still see the runway that we just mentioned from a PC refresh perspective. But we had a very significant spike in mobility sales Q1 of last year. And therefore, that compare becomes a little bit more challenging. The compare in PCs is also challenging because that was a very significant growth quarter last year as well, but -- or more significant anyway.

So that's sort of the client and endpoint, but our guide is built around low to mid-single-digit growth in advanced solutions with server, storage, cybersecurity still being the drivers, conservatism built around the GPU deals that could come in and conservatism even on the PC and desktop side of the equation, if we were to see some pull forward because price increases with memory supply are now starting to kick in. that's a category that is probably seeing a little bit more of the price increases in early days here in Q1.

We didn't see any of that price increase in Q4 to close out the year. And then last but not least, cloud growing double digits. That's been a key growth engine where we see Infrastructure as a Service, modern workplace and other areas continuing to grow quite well.

Okay. Perfect. I'd love if you guys can help us when we take a kind of a big step back and we look at spending trends, macro factors, the pipeline that you see from your customers, I'm not asking for guidance beyond 1Q unless you want to provide it. But like what are you learning about demand in the risk environment? Just like customer end markets, regions, products, you touched on it, Mike, but I'd love if you can just maybe expand a little bit on just -- what are customers telling you? And how does that inform you...

The year? Yes, I'll start. So I think with -- as Mike mentioned, kind of the price increase is just starting to take effect. So enterprise is being much more thoughtful around kind of if they have spend for the year, what are they looking at? What are the price increases and really starting to map out when those deployments should be coming. In addition, knowing that the price increases are here, are they looking at potentially opportunities to have maybe a different feature set? Does everybody need an AI PC? Does everybody need a touchscreen?

Do I need the same amount of memory for different work groups that are we're going to be going through a refresh. Secondarily is when you start kind of getting in SMB market, kind of mid-market SMB are just now starting to really understand and go talk and we're doing a lot of educating around of here's what it means, go talk to your end businesses to understand what's in their pipeline for the year, so we can bring that back and really have good end-to-end visibility with our vendor partners, our OEMs because I think that's critical, especially with the masses of customers we serve and on a global basis.

So some of the advantage we think at Ingram Micro that we have is because of our reach of what we have is the vendors are coming to us to say, "Hey, help us really understand kind of that market. And by the way, when there is going to be demand, we're hearing that there's still going to be allocation available for those kind of mid-market SMB market.

So the opportunity for us to say, and here's what the opportunity is all the way out to the end users. So we're just starting to have that conversation. Are there other ways, some of the OEMs that we're talking with and our customers instead of this PC as an example, on the price increase, can we also wrap it with peripherals so we can kind of cost average and try and help alleviate a little bit of the burden of the price increases. So I would say it's a fluid conversation. We're right in the middle of it and having these conversations, both at a local level and on a global level, both with our customers and also with our vendor partners.

Okay. And then just regionally, any major differences that you see across the world you have exposure, again, Americas, LatAm, Europe, Asia, just any major differences or trends in spending or how customers are trying to address the year and priorities?

Not necessarily at this point. We haven't seen that. Okay.

APAC was -- through '25 was our most significant growth, but all -- we closed Q4 with all regions growing. So we're seeing demand healthy everywhere.

Okay. Okay. Really helpful. Since it's a focus at this conference, I just want to ask you a question before we can move on about just how you think the memory cycle is influencing customer spend in your views. Again, it's kind of early in pricing. Are you hearing concerns about that? You kind of talked about enterprises being a little bit more intentional. Are they willing to move quickly to make decisions?

Just -- again, I think the enterprise is looking to make decisions probably sooner than SMB. SMB is going to have to catch up to that cycle, I think, here in the coming weeks of really what this impact is and to the extent of that impact and really trying to get their arms around kind of that demand from an end user perspective. So more conversations about what that pipeline looks like.

Is there going to be a pull forward? As we mentioned, we haven't seen a pull forward in Q4 and/or to date in Q1. And so what does that look like on a go-forward basis? That's what we're seeing. Okay. Cool. PC market. Mike, you mentioned the kind of being conservative on PCs in 1Q, just given that we're starting to see pricing increases.

I think last night, you also mentioned that the refresh cycle is somewhere around halfway complete. Just would love your perspective on kind of what informs that? Is that the pipeline that informs your view? Is that customer conversations? Just how we're thinking about the evolution of this refresh opportunity that's clearly kind of moved beyond that end-of-life period now?

Yes, I'll start, and I know, Paul, you'll add. it's all of the above as far as the data points that we take in. And you can look at some of the external research suggesting there is still runway. Your question mark is more on second half of this year and where that lands, especially if price increases become more earnest. But we're pretty bullish as far as what we see with still some growth in Q1. Now so the one thing to remember is usually a PC refresh that will get triggered by, for instance, Windows end of life usually happens 5 to 6 quarters in advance.

This one got compressed. We really didn't start to see the pop until Q4 of '24, only less than 4 quarters ahead of that end of life. And it really became robust beginning in Q1 of last year and was robust, double-digit growth throughout the year. But that still implies runway as far as number of units to be refreshed, the data points we hear from our OEM partners as well as what we see in the market, and we see the demand continuing.

And I think amidst maybe broader market concerns about the pace or sustainability of AI spend, what I heard from you guys last night is really encouraging. You're clearly participating in AI infrastructure projects. You are enabling GPU shipments to customers. Based on kind of the ramp that you've seen, let's call it, over the recent past, what inning of the build-out -- and again, when you talk to customers, what inning of the build-out are we -- are you hearing about from your customer base specifically in terms of how prolonged of a potential growth tailwind this could be for you guys?

The AI process. So it's early days. And so we're encouraged, though. So it's early days and you look at -- if you would have asked us Eric a couple of quarters ago, we have enable AI, which is really helping people understand, sell and deploy AI at scale. And the question is how do you monetize kind of the GPU shipments that we've been going through. I

f you look at those 3 phases, the amount of customers quarter-over-quarter that are coming in, not just the Phase 1 for the awareness that are actually getting to the outcome, and I gave one use case, which is a great use case of how we help some partners through that process, and they were able to monetize AI with their end partners.

And again, we're seeing significant increase as a percentage. It's still early days and the amount of partners that are coming through this is still minimal relative to our broad 165,000 customers that we sell to, but we're encouraged by the fact that we're seeing more going through that process as opposed to just coming in and trying to do the awareness and kind of dropping out of the process. So early days, encouraged by what we're seeing, and we're actually starting to see some of that monetization because we're helping partners able to capture that at the end user.

And what do you guys as Ingram Micro maybe do differently or better than peers, competitors, other parts of the market that kind of enable you to win in this market? -- specifically to AI.

Yes. So I would say we've been on this journey for 3 years. And so we've gone through it. And so this isn't just buzzwords of waking up and saying a platform and saying AI, we've actually gone through this process. And so the first thing we did 3 years ago is we created a data lake, not a data -- or a data mesh, not a data lake. So it gives you enterprise ready, your data on a global basis, pulled it out of all of our ERPs.

So it took a year. AI is only as good as the data. And so we've gone through this process. The second thing is we have 400 AI machine learning models that we've been training for a year, which has allowed us now to actually be able to take a process mapping end-to-end, not just one process, but end-to-end processes in the company and use Agentic AI. So the difference is we've gone through this. So now we can go to partners and say, here's the journey we went on. Here's our lessons learned that we went through. Let us help you go do that with your end businesses, too. So I would say we've been in this. We've experienced it, and now we can help our partners get through it also.

The only thing I would add to that is even aside from the technology and the delivery mode, breadth that we've built over time is a big factor here on these AI projects. So remind everybody that we are about 35%, 36% of our revenues are in Asia Pacific and Latin America combined, a much bigger share than most of the players that we compete against. But on top of that, these are global deals with large players, large vendors, large OEMs and to be able to have that discussion of, yes, we can service this large project in Asia and we can service this large project in North America is absolutely a value prop.

Right. Okay. I think that's a good segue into maybe just addressing what has been a theme more broadly in the market, not necessarily specific to micro, but just AI disruption risk. And I'm just thinking from the perspective of like are there tools that could be created at some point that just like allows customers to source solutions directly. Again, I'm just playing the devil's advocate. I'd just love to know how you think about that risk and how you're protecting yourself to make sure, yes, you might find some new tools, but we do more than that.

Yes. So I don't get asked, are we going to be disintermediated very often. So if you go through -- kind of I've been in the business for 30 years. So if you go back all the way to dot-com, distribution was going to be disintermediated. Then you came to cloud. Everybody is going to go buy cloud directly. Now we got AI. Everybody is going to go do it directly. I don't need anybody.

Reality is there's more complexity in technology and how technology is delivered today than ever and how it's consumed because it's not just about one piece plugging it in and servicing it and coming back a year later, 3 years later, whatever it is. to go ahead and say, I'm going to give you better, faster, quicker at a cheaper cost of service.

So complexity, our average deployment, and this is a global stat, is 6 products and services are delivered to that end user on behalf of our solution provider through Ingram Micro. So if you want just one product, yes, that's always been an opportunity for someone to just go buy it direct. You want to put 6 products together and deliver a business outcome and how that gets serviced, you're going to have a big trouble when those 6 products are there and you got to call 6 different people to say, "Hey, this isn't working. It's your fault.

And Eric is going to go, no, it's not. It's Mike's fault. -- go talk to Mike. So that's what the solution provider and the value, and we provide that. And as we build out competencies and skill sets to help augment our customers. So we're right in the middle of it. And we think it will drive productivity. It's done it for our business. You saw from an OpEx standpoint and what we're doing to take that friction out of our business from back end to free up to go have different conversations with our customers to add more value to them. So we're excited about actually where the technology is. We're using it. We're helping to enable it, and we're helping our partners be successful with it, too.

Okay. Great. I think that's a natural segue into maybe one of the areas of most important differentiation, which is Xvantage. So maybe first, before we get into the specifics of exactly what it allows you guys to do that's differentiated. Just where do we stand on the build-out of Xvantage, meaning how many regions are we in, customer adoption, capabilities? And then for us, as we track your success, what are the milestones we want to -- we should be tracking on Xvantage.

So I'll start off and then Mike will for sure, jump in. So the good thing about it, that differentiated is it's all global, and it's real time. So it's in every region. And so it's in the top countries. We have 21 countries that are on it now. Every country has access. So let me take a step back. You have your customer in the same platform, you have Ingram Micro associates and you have our vendors. Every team member globally can have it. The question is, is it automated from being able to have the connectivity to the customer. So full deployment in terms of the capabilities with customer vendor Ingram Micro team member is in 21 countries. Most of them are in the top 10 countries. So if you look around North America, Germany, France, U.K., other countries in Europe and then you look at India, Mexico. So you kind of put it together, it's a majority of the big countries we do business in. Everybody is in a little bit of a different journey. So when you have the same code base, you say, here's some capabilities we've built out. A lot of it comes down to process and change management within those countries to be able to deliver on that. So the more mature countries that are further ahead have just been further down the process. It doesn't mean the other countries aren't catching up to getting that same capabilities out of it. When you look at milestone, there's a couple of things that we look at. One is self-service orders. So this is great. We've developed this platform for people to come on. Are you actually on the platform? And how long are you on it? What are you doing from searches trying to understand, but are those actually turning into orders? And so we're seeing a significant increase. We mentioned it last night that we have 100% self-service orders year-over-year, and it continues to grow. So people are coming on. They're getting value out of it, and they're actually ordering. And it's not because we're saying you have to go order because they're seeing the value out of it. We're actually reactivating dormant customers, customers that haven't done business with us over the last 12 months. On average, it's about 2,000 customers per quarter. We normally announced we had 160,000 customers. This quarter, we said we had 165,000 customers. Great opportunity for us to go back and show up with those customers, and they're actually growing at a significant rate faster many times than the company average, let alone the previous time that they were doing business with Ingram Micro. So there's a number of different stats we look at. We don't talk some of them public, but we look at things like how many times recommendations. So you bought this bottle of water and we recommend you buy this thing because like partners like you and this end user that you're calling on should be selling this warranty, should be selling this service. So we look at the conversion rate of that also. So we have a number of different kind of KPIs we use internally. We're starting to use more of them externally, so everybody can see kind of the progress we're making. First and foremost, if I go back to kind of the strategy, the first one being taking out OpEx, driving friction out of the business, both with us and our partners. That's where you've seen it show up in our P&L, and Mike and I have talked about that over the last year. The second one, driving demand. We've grown faster than market rates. because of the capabilities through Xvantage, it wasn't just 1 quarter because that was a real question, hey, did we just shorten the sales cycle and capture it early? Was it a pull forward? Or has it been consistent? It's been consistent for 4 quarters now. And then the last one is when we have that data and insights, I like to say intelligence is the next B2B operating system because that's what business-to-business wants. They want the data and the intelligence to go run their business differently. I don't know if there's any.

Just milestones maybe as they look.

Yes. Well, so I think on a timing perspective, as Paul said, we're deployed across a number of our largest countries already. We're going to continue to develop and deploy, and we'll always be on some level of journey there. But I think to get to truly steady state, while we don't guide out beyond the quarter, I think we're looking at the balance of this year and probably into the earlier part of next year, where we still see a little bit more of the deployment and development spend before that gets to a little bit more normal course.

Okay. Normal course, remember, we're a technology company now, so you're always innovating. So if people ask, when is the end journey that this is going to happen, we're going to continue to innovate and create value for our partners along the way, but the spend will come down to some extent. Think of xvantage as kind of the front end, and there's some work that we still got to do from a back-end kind of standpoint to kind of back of the office opportunity that we have also.

And I think, Paul, something you outlined last night is kind of the 3 phases of xvantage and you're kind of entering the third phase, so to speak. Can you just help us understand what exactly that means, the kind of financial implications of what Exvantage can do for?

Yes. We think -- I mean, the biggest enhancement should be quality of revenue. So from a margin standpoint, we saw some of the tools that we're delivering that we call IDA Intelligent Digital Assistant. -- and we only have mid-single digits of that business on the -- using Ida today. We expect it to be more than 10%. Those conversion ratios that we've seen were 3x as much for us and our partners because of the data that we're offering up for them to go have a different conversation. Within those conversion ratios also, we see more advanced solutions, which is higher margin and more cloud revenue, too. And we're actually fine-tuning Ida to be focused as we've gone through. I talked about Phase 1 and Phase 2, Phase 2 being kind of that demand generation and revenue. Now we're tilting that revenue more towards quality of revenue. So how do we offer up to our sales organization on Ida to have the quality revenue versus just revenue. So now it will be more around advanced solutions and cloud, which will be a better margin profile for us, too. So -- that's what we expect to happen throughout '26 as we kind of go through that. And as we continue to roll out more countries, they'll be on those same kind of phases also. And you'll see some of that show up in our guide in terms of margin accretion that we're showing that we expect to continue to happen.

And I want to touch on that a natural segue what I thought was the most important kind of most enlightening part of the 4Q results and 1Q guide was just the OpEx control that we're seeing. OpEx as a percentage of gross profit was effectively a 2-year low in 4Q. The guidance you kind of implied, so to speak, I know you don't necessarily guide to it, but it remains well below the kind of trailing 2-year run rate there of OpEx intensity. So I know you mentioned a small kind of insurance benefit. But even if you back that away, like it feels like we're seeing Vantage at work here. And I would just love to maybe understand how sustainable this level of kind of OpEx efficiency is, I think it was like 63%, 64% of GP dollars. I mean, that's fantastic compared to where you've been. So just talk about how you -- where that goes from here. Again, I know you won't guide but.

Yes. No, I can start on that. No, that's fair, very fair. I think that has been the journey we've been focused on. We've seen a mix of our business more towards lower margin but lower cost to serve. So that drives a little bit of cost efficiency, but it's really the baseline of what we've done with XVantage, and we've talked publicly about taking out around $200 million of annualized costs over the last handful of years. But as you start to see that growth and 2025 is a perfect example where for the year, we grew 9%, and we did not add back all of those costs to serve that growth. So we're a far more efficient machine. No reason that, that efficiency doesn't still exist. Where we are going to invest is going to be more around the technical competencies and services around cloud and around some of the advanced solutions categories where that drives also a higher profit margin even despite a little bit more cost to serve. But we can serve that cost in such a more efficient way by having removed a lot of those back office and admin functions that are now automated in a more material way. So we -- you alluded to OpEx as a percentage of GP. It's the same as we do, but also OpEx as a percentage of net revenue. Same thing. -- we finished at 5% for the year. We finished well below 5% in Q4, and our target is to stay below 5%.

Okay. Okay. Perfect. I want to touch on free cash flow. Obviously, extremely impressive. You just had your best cash conversion cycle as far back as we have the data. So again, congratulations, just like, again, you can see why the stock is up the way it is today amidst a blood bath, so to speak. Just what are the implications for free cash in 2026? Where did you excel in 2025? I don't think you're necessarily changing your outlook about how you can convert EBITDA to free cash, but learnings of what you were able to accomplish and how that informs the future.

Yes. So what we said in our guide for Q1, and we really don't even guide on free cash flow, but we felt it important to make this point now coming off of such a huge cash flow generation to close out the year. So it was north of $1.6 billion was about $1.1 billion for the full year of free cash flow generation. Some of that was benefited by timing of our year-end and then -- but a pretty relentless focus on working capital as a whole and continuing to drive efficiency there. And even the areas where we're seeing the growth are more efficient working capital areas. So for instance, these large GPU and AI infrastructure deals that we talk about, while it is a lower margin, it's extreme -- it's very low cost to serve. It's more of a fulfillment kind of mode, but it's also very working capital efficient. We aren't stocking this product. These are kind of project-based where the product moves in through our possession very quickly. So we've become far more working capital efficient tools like XVantage, Ida, the ability to key sales towards areas where there's opportunity because either we have the stock or there's opportunity to procure the stock favorably and move it fast. Those are really key differentiators that are driving this efficiency. But what we said in our guide, well, adjacent to our guide, even though it's not a formal guide, is that we do expect a more than normal seasonal outflow in Q1 only because of how low we closed Q4, but also we may opportunistically use our balance sheet with price increases to do buy-ins. That can also be a favorable use of capital for us, and we are constantly talking with the vendors around those opportunities. So that could create a little bit more of a headwind. But what stands pat here is that we expect in most years to generate more than 30% -- to generate free cash flow equivalent to 30% or more percent of our adjusted EBITDA. We did way more than that in 2025, and we expect '25 and '26 to still be well over that, which implies a positive free cash flow for 2026 as well.

Okay. I just want to maybe ring-fence one risk. It came up last year. I don't think it's an issue anymore. But India, I remember there was obviously an issue in 1Q of last year. I think we've moved beyond that, but just confirm that, that risk is kind of ring-fenced as.

Yes, that's right. So we've talked about it in Q1 and Q2. And it was met expectations in Q3. We feel good about it in Q4. We've got new leadership team. We got process. We're rolling out some additional stuff around xpantage. So we feel good about where we sit in India today going into Q1 and into 2024.

Perfect. Perfect. Mike, for you, you paid down $200 million of your term loan in February. You authorized $100 million share repurchase. You keep growing your dividend. Just -- when we think about capital allocation, weighting of M&A, organic investment, debt reduction, shareholder returns, just maybe stack rank the priorities for us as you see them today.

Sure. Yes. So I think we're going to continue to invest in the business for sure, from an organic perspective, the xvantage investment that we mentioned as well as potentially in some of the people and other things around that, and we'll drive that well within bounds of profit and cash flow metrics. We're proud of the fact that we've now repaid close to $2 billion in debt over the last handful of years, inclusive of the $200 million you just referenced that we paid down a couple of weeks ago. So we're bringing our leverage on a net debt to adjusted EBITDA basis, actually closed the year at 1.0x, down from 2.2x a year earlier. Now I wouldn't say 1 is normal, but certainly being in the high 1s to around 2 is a good wheelhouse for where we should be on a leverage perspective. But we want to continue to repay debt, and that brings our interest coverage down and so forth. And in the meantime, we're happy that we do have some of the return to shareholders built in there. So we have a dividend that we started right out of the gate from when we went public. And every quarter, we've raised that by around 2.5% or a little bit more than that on a sequential basis. And we announced an increase again of the same magnitude in the dividend that will be paid out in a couple of weeks. And then you mentioned the share repurchase. That was an authorization also obtained with our Board in February for $100 million. Now the key focus now with us still being majority owned is that, that wouldn't necessarily be a buy out of public float, but rather participating with a potential follow-on by our sponsor when that happens to buy additional shares down from them. But it is a more blanket authorization that could be used as a regular buyback, and we would absolutely look at that as another means of shareholder return when the time is right on a more traditional way. Last but not least, M&A. I think M&A has been a lifeblood for us for many years. We've done quite a bit over time. But what we've done lately in the realm of M&A has been more smaller tuck-in acquisitions, not very big dollar amounts, but very meaningful as far as capabilities, technology. It doesn't mean we don't have the dry powder to do something bigger if it came along, and we would think about it opportunistically. But those tuck-in acquisitions will continue to be part of our DNA.

Cool. That's great. So we've covered a lot in 35 minutes today. Maybe for each of you, I'd love to just kind of give you the kind of final word here. What's the message you want to leave us and everyone on the webcast with what's underappreciated, what's undervalued as we think about the story from each of your perspective?

Yes. I think for us, it's xvantage and the investments we're making in our customers. We continue to invest ahead of the curve. We did it with cloud. We spent $600 million on our cloud and cloud platform. dozen years ago through that process. That was the underpinning of what we're doing around xvantage is providing value to our customers and making sure that we're driving more efficiency. We're helping drive demand and ultimately using the data and insights for them to help run their business. So we're pretty excited about the investments we're seeing that start to show up from a return, and we expect continued success.

And I would just add, I can't resist to put on my CFO hat here, but I'll just touch on very -- building very much off of Paul's comment. It's all about the efficiency we now have in the system. We can operate in a far more automated manner than we could have a couple of years ago, and it's pretty exciting.

That's a perfect place to end. Paul. Mike, thank you guys very much.

Thanks a lot.

Thank you.

Greetings, and welcome to the Ingram Micro Fourth Quarter and Fiscal Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Willa McManmon, Vice President of Investor Relations. Please go ahead.

Thank you, operator. I'm here today with Paul Bay, Ingram Micro's CEO; and Mike Zilis, our CFO. Before I turn the call over to Paul, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections or other statements about future events, statements about our strategy, demand plans and positioning, growth, cash flow, capital allocation and stockholder return as well as our expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements because of risks and uncertainties discussed in today's earnings release and in our filings with the SEC. We do not intend to update any forward-looking statements. During this call, we will reference certain non-GAAP financial information. Reconciliations of non-GAAP results to GAAP results are included in our earnings press release and the related Form 8-K available on the SEC website or on our Investor Relations website. With that, I'll turn the call over to Paul.

Thank you, Willa. Good afternoon, and thank you, everyone, for joining today's call. I'm 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 4 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 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 chains. As we have previously discussed, we are moving through the 3 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 scaled critical enablement capabilities for our customers and increase the consistency and predictability of revenue and operating income. We have been building Xvantage for 3 years with proprietary data, a real-time global data mesh and over 400 embedded AI and machine learning models, powering 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, and I have discussed in prior quarters. During 2025, IDA enabled over 0.5 million proactive engagements, assisting our customers in converting over 100,000 opportunities in orders worth billions of dollars. IDA had a multiplier effect on our partners' outcomes, enabling the conversion of opportunities to sales orders at almost 3x 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 Agentic 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 conversations. 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 the 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 Agentic road map, and 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 2 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 e-mail to order or what we call ETO. This patent recognizes our automated solution that converts e-mail orders into touchless order entries using generative AI technology. We received millions of e-mails 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 3 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 journeys. This program is already delivering tangible results, and 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's 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 Agentic 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 6-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 4 decades, we have stayed nimble in responding to the ever-changing IT spend environment and the speed of change is faster today than it's 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. And 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. And with that, I'll turn the call over to Mike.

Thank you, Paul, and good afternoon. I'd 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'd 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 9.0% 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 towards 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 towards our Asia Pacific region. All of these trends yield lower average margins, but also lower cost to serve. Full year operating expenses were $2.63 billion or 5.00% 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 2 years. We also continue to see increased operational efficiencies play out as part of the Xvantage road map we have been discussing now for some time.

Non-GAAP net income for the year was $681.9 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'm 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 deals in 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 4 of our regions, led by 14.6% year-over-year growth in APAC. And with North America not far behind, generating net sales of $5.10 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 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 6.50% 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 a 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's 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've 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 $350.0 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 $430.9 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 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 2.2x to 1.0x.

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 $1.10 billion compared to $443.3 million in the prior fiscal year. I've previously discussed the seasonality of our free cash flow, and I'm 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 of this year. 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 paydowns.

Shifting now to our guidance for Q1 of 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 Q1 of 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 don't guide on free cash flow, it is likely that we will see a higher-than-seasonal normal use of cash in the first quarter of 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, and we still expect to realize well over 30% of our adjusted EBITDA generation to free cash flow over 2025 and '26 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 Instructions] Our first question is from Eric Woodring with Morgan Stanley.

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 the kind of segment level guidance that you've given. But can you just maybe give us a little bit better flavor on, for example, PC refresh or AI and GPU-enabled sales, Asia Pac? Just want to understand maybe a little bit more detail what you're kind of seeing or what you expect to see in 1Q? And then a quick follow-up, please.

Sure, Eric. This is Mike. I'll start on that, and Paul will add. I know. So as we said in our prepared remarks, we're 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 don't break out the specifics of the subcategories, but it's the second biggest within CES, and that's 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're 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're not assuming any notable GPU deals. It doesn't mean we aren't still participating in those GPU and AI infrastructure deals, but they are large and they come along every so often in a handful of our countries, and we're 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 because 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. We did not really see that in Q4. We didn't 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. And -- but the wildcard there is where is the sort of fungibility of the demand cycle through that, and it's 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 more broader demand and timing factors. So hopefully, that gives you a little bit more color.

No, that's great. And then just a quick follow-up was, and you touched on it, was just commentary or thoughts around pull forward. It was an above seasonal quarter. We've heard that from some of your peers, but I would just 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 happen.

Yes. So I can again take the first pass of that one, too. I think yes, as I just said, yes, 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're thinking about it from a revenue perspective just now. How we protect ourselves. We're 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-in strategically that we may pursue. And that's another reason why we also assume, as we look out at Q1, as I mentioned in my prepared remarks, a lower -- a more -- 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.

So the only other thing, this is Paul, I'll give you a little bit more color kind of on the demand and the conversation we've been having with our customers and our vendors. So we kind of look at the demand in 2 kind of dimensions. One is the price elasticity and two is the demand. And so we're really gauging the elasticity of demand and particularly in the SMB markets. As you know, we serve and it's too early to see the impact on that right now. On the supply side, so I've had conversations with many of the top largest -- 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've all confirmed that there will be allocation from a demand perspective or there will be allocation if there is demand. So I think the real question will be kind of 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're working -- the last thing I would say is we're working with our vendors on potentially alternative solutions, things like on the enterprise level, shifting from what we call CTO or configure to order, now moving it to build-to-order, which help minimize impacts to pricing and leverages the current available inventory to help make those solutions work. So those are a couple of things we're doing kind of real time with our vendor partners and our customers.

Our next question is from Katherine Murphy with Goldman Sachs.

I was wondering if you could talk more about the momentum you're seeing in the AI infrastructure enablement side. If you could talk more about the role that Ingram and distributors more broadly play in addressing enterprise needs for AI and the infrastructure that you may be selling beyond GPUs. And if there's 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?

Yes. So I'll start, and Mike, you can jump in. Mike called it out in his prepared remarks about a 15 basis point impact that those products that that we define as both GPU and AI-enabled infrastructure is what we're looking at. So it did have an impact. We don't call out the revenue necessarily, Catherine. But if I 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've had. So there's really 3 growth tracks that we have there. It's about preparation and awareness, execution and training. And then third, which is most important, which is monetizing and driving outcomes. So if we look at kind of the people that were coming through the funnel and the prep and awareness versus actually working through the outcomes, we've 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's 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 kind of came to the monetization, we're seeing that happen at a much quicker pace now with GPU and/or these AI-enabled infrastructure products. So we'll continue to monitor that and see as people continue to move through that pipeline and getting really 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.

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

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

Our next question is from Samik Chatterjee with JPMorgan.

And maybe, Paul, if I can start on the first one, just in relation to what you're hearing from your customers about any visibility into the second half? And given 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're 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.

Yes. So this is Paul. So we haven't seen -- and we only guide, obviously, 1 quarter out, but I'll give you kind of the conversation that we're 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're seeing for the remainder of the year and scheduling that out. As you trickle down more into kind of mid-market, but really SMB, I think it's more fluid right now in terms of what those opportunities are and what the challenges and headwinds and kind of like I mentioned, the price elasticity. So we're 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, we're working -- and I think this is where we go back to that 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 kind of all the moving activities. So we're staying very connected. to our vendor community and making sure we're having conversations down in through our channels throughout each of the different geographic regions. So I would say, in the end, it's a little bit still fluid as we sit here today, and we haven't seen -- as Mike mentioned, we haven't seen a material pull forward and/or anything as we sit here where we are in our Q1.

Got it. Got it. And maybe just a follow-up for Mike. Mike, you did mention for the 1Q guide that you're 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 revenues come in?

Yes, that's exactly right, Sumeet. That would be the characteristics we would expect if we do capture some of those deals...

But what I want to make sure in Mike's prepared remarks or what he spoke about, it was no material difference than what we've already seen. So we'll still be participating in that business in Q1. It's just that we're not seeing anything different than what we've seen and discussed over the last couple of quarters.

Our next question is from David Paige with RBC.

I know it's early, not sure if you'll be able to answer this, but there's 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're thinking about 2026.

Yes. So I think certainly, we wouldn't have a quarter without more tariff news, I guess. So -- but it's something we've been living with, quite frankly, since the first Trump administration really is a heightened tariff environment. So I would just reiterate, they are passed through for us. So we aren't absorbing tariffs. And in fact, 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've 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's more sensitivity there than perhaps in the large enterprise where we've 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.

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

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 '26, you've 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.

Yes. So I'll start off. This is Paul. So I'll start off. So we saw double-digit growth in Q4. And as we mentioned, we were -- as we talked about going into 2025, the refresh was a little delayed and then it accelerated. So we had good growth through each of the quarters and again, solid double-digit growth in Q4. I would define it as we're in the middle to the beginning of maybe the back half of the refresh. There's still hundreds of millions of units that need to be replaced out there, which implies that there's still a refresh that could go well into 2026. As you've heard from probably our OEM partners, some have said upwards of 40% haven't been upgraded. The market remains durable with a significant portion not refreshed from a Windows 11 standpoint. And again, the industry analysts would say there's still hundreds of millions that are out there. If you look at a little bit, we get asked about AI PCs and the refresh that was happening there, and we're still seeing that kind of being in the middle teens with regard to AI PCs. I think the question comes down to is 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're looking at are there other alternatives? How do you look at potentially different features within PCs. Maybe everyone doesn't need to have a touchscreen, maybe not the same memory. So we're looking at alternatives. And I point back to Ruplu that in uncertain environments, we figured out how to manage through this, and I think with success. And one of the differentiating value propositions that Ingram Micro 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 into all the different regions, and we could be more pinpoint in making sure that we're delivering on that demand. And again, on the other product that, as we talked about, we're just now starting to see those price increases starting to hit. But as we sit here today, it hasn't impacted our demand so far.

Okay. Mike, as a follow-up, can you talk about your capital allocation priorities either in terms of debt paydown versus buybacks versus M&A? And 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?

Yes. So this is Paul. I'll answer the first -- the last question, and then Mike will get into the financials and kind of the capital allocation. So 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 kind of the overall company stats for the businesses that are not on Xvantage. And then in the largest countries where Xvantage is deployed, total headcount in those countries were down, but both revenue and our gross profit per go-to-market have increased. So again, we're driving productivity, and that's related to Xvantage, too. So we're seeing the benefits. And the last thing I would say is the 3 phases of Xvantage' about driving frictionless and streamlining operations, driving OpEx. The second one is around demand generation and growth. And then that third one that we're just entering kind of the arena on 2026 is around profitable organic growth and making sure we're matching supply and demand more intelligently. And I'll let Mike speak about the the capital allocation.

Yes. So Ruplu, on the capital allocation, I think we're going to continue to just stay the course with what you've seen us been doing, which I'm pretty pleased with where we've been landing. We -- as we just announced in this earnings, we repaid another $200 million of our term loan in February after year-end and have now brought -- we're approaching $2 billion in total paydowns of debt over the last handful of years. So we've continued to delever very well with cash flow generation. While we are investing in Xvantage organically, we haven't 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 don't cost a lot of money, but they really bring in tremendous skill sets or technical skills or vendor alignment in different ways. It doesn't mean we can't also with our capital structure, pursue a larger deal if that opportunity presented itself. And so I would never say never to that, but that hasn't been our main strategy. And then lastly, from a return to shareholder perspective, we're proud to continue to be paying a dividend really right out of the gate when we went public, but we've 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 would also be a potential tool. But last but not least, I would just point out, we did authorize also a $100 million share buyback in the -- that we just announced in this release as well, which is really more of purchasing additional shares from Platinum that would happen adjacent to any follow-on offerings of stock.

Our next question is from Adam Tindle with Raymond James.

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'm not seeing that guided in the numbers. But maybe you could talk qualitatively on what you're seeing in terms of the vendor OEMs and those contract terms with channel partners, any impact you're seeing or expecting from here?

Yes. Thanks, Adam. So as it relates to the terms, yes, there are multiple vendors, and it depends on what categories to. that you're 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're used to managing 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 is that our global reach. So as 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've got "war rooms right now going on to make sure we're looking at that demand. And back to my comments of the CEOs that I've been speaking with, which is we'll manage to what their contractual terms that they're trying to get out there because they're all trying to figure out what's their competitive advantage with regard to capturing share in this uncertain environment and kind of price increases. So we're 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, it allows us to look at what are the alternatives to other solutions at the same point. So you're right, you're seeing what we're hearing, too, which is vendors are changing their terms, whether it's time to contract, whether it's how long pricings are 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've managed through this in a number of different areas in the past.

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 mentioned that because it seems like you're 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'm wondering if you're inching your way in that direction or how you kind of think about investing in AI and where it makes sense to participate versus where it doesn't. And 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'm thinking that's implying that 2026 may be a cash use year, but I just wanted to clarify because there's a couple of different ways to do this.

Yes, I'll just hit that one real quick first and then let Paul talk on the AI piece. Well, we said we would be -- we expect to be well over that 30% threshold for the 2 years. So we do expect and we're 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.

And so I'll answer the question around GPU. So we've expanded it a little bit more. You've heard us talk about GPU and monetization of the GPUs. And I've said it kind of goes from proof of concepts and high-end compute kind of moves downstream. And that's where our enable AI really participate. So helping partners not only just understand but sell and deliver AI at scale, which some of that is GPU and the monetization around that. There's services that we can provide. I gave a little bit of color in my prepared remarks about the use case. So actually, we're 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's still good return on working capital and profit to the bottom line. And we're going to continue to support that because we sit right in the middle of an ecosystem where we're going to capitalize on where those opportunities are. But what you'll see us continue to build services and capabilities around how we can help our customers deliver, really understand, deliver and service AI at scale on a go-forward basis.

Our next question is from Maggie Nolan with William Blair.

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

I'll take that, Maggie. Thank you for the question. This is Paul. So if you look at -- we've been on this journey for 3 years. There's really 3 different areas. First, we created a data mesh, which is not a data lake. It allows us to really use infrastructure and the information differently from an overall architecture. We say architecture matters. And so first, we got you have to have the clean data, we pulled that out. Secondarily, we talk about our 400 models that we've been training for over a year, which is 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. And that's what we were able to do with our sales brief agents. So we think architecture is completely different. Saated another way, we're building innovation. We're not just integrating or connecting like legacy distribution had done before. I'd like to say intelligence and data, ultimately, where we're going is the new business-to-business operating system. So we're going to continue to build and innovate, not just integrate and connect. with regard to our systems. And it's all real time. It's global. We've got 35 patents pending. We had 2 approved, which again demonstrates the innovation that we're building. And so we're going to continue to make that investment and making sure that ultimately, we have the intelligence and data to really help drive our customers to better outcomes more efficiently and effectively with their end businesses.

Maggie, one other thing I would just add to that is also geographic presence. So these larger GPU deals that we're 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, 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.

Okay. And then mix improvement in 2026, should we expect like a linear gross margin improvement quarter-over-quarter? Or are these large AI infrastructure projects going to introduce some lumpiness?

Yes. I can take a first pass at that, Maggie. This is Mike. So I think we aren't 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 OI dollars as those deals are. So that's 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're 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's not anything new, but we expect to continue to do that. And that would -- that too, would create accretion to margin over time.

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

Thank you for joining today's call. We're proud of the progress we are making and our 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 the 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. Thank you for your participation.

Thank you for joining Ingram Micro's Third Quarter 2025 Earnings Call. I'll now hand the call over to Willa Mcmanmon, Vice President of Investor Relations. Please go ahead.

Thank you, operator. I'm here today with Paul Bay, Ingram Micro's CEO; and Mike Zilis, our CFO.

Before I turn the call over to Paul, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections or other statements about future events, statements about our strategy, demand plans and positioning, growth, cash flow, capital allocation and stockholder return as well as our expectations for future fiscal periods.

Actual results may differ materially from those mentioned in these forward-looking statements because of risks and uncertainties discussed in today's earnings release and in our filings with the SEC. We do not intend to update any forward-looking statements.

During this call, we will reference certain non-GAAP financial information. Reconciliations of non-GAAP results to GAAP results are included in our earnings press release and the related Form 8-K available on the SEC website or on our investor relations website.

With that, I'll turn the call over to Paul.

Good afternoon, and thank you for joining today's call. The third quarter was strong with revenues of $12.6 billion, up 7.2% year-over-year and above the high end of our guidance. Non-GAAP diluted earnings per share was $0.72, at the high end of our guidance despite a small impact from the ransomware incident in July. As I shared last quarter, our team responded quickly and effectively to the incident, restoring operations with minimal business disruption, which is reflected in our results.

In terms of market dynamics, we believe we're gaining market share across most regions in the businesses we serve and are encouraged by the growing momentum of our Xvantage digital platform as we deploy it globally. Looking forward, we enter the fourth quarter with confidence in our road map and our guidance, which Mike will detail shortly.

During the third quarter, we saw continued momentum across our core business lines and geographies. Enterprise sales remained strong and our SMB customer category achieved a third straight quarter of sequential growth, which is encouraging. Client and endpoint solutions delivered yet another solid quarter while advanced solutions was down slightly year-over-year, though both server and storage posted strong double-digit gains.

Networking grew modestly driven by an increase in AI proof-of-concept activity and enterprise, partially offset by tough comparisons to last year's strong virtualization sales. As we all know, enterprise companies and technology vendors alike are navigating the unchartered territory of AI transformation. In the third quarter, the pace of change accelerated rapidly with a wave of new partnerships and investments across the industry.

Today, we're seeing enterprise customers at varying stages of their AI proof-of-concepts, mostly on-prem and still primarily focused on the compute layer, often in conjunction with open models. The ultimate goal for these enterprises is to create purpose-built end-to-end solutions using agentic AI, solutions that will redefine their operations, elevate customer engagement and deliver strong returns. We are well positioned to support this customer journey particularly as it moves from early adopters to the broader market.

To do this, we've invested ahead of the curve as we did in the early days of the Internet, advanced solutions and cloud. Following the same playbook over the past 3 years, we've been executing a multiyear plan to build an AI ecosystem. We stand at the center of the $5 trillion global technology landscape with more than 4 decades of experience helping customers embrace technology disruption.

This, in conjunction with our proprietary AI innovation, puts us in a unique position to lead our customers on their AI journey. We are doing this with our internal expertise through our Xvantage platform alongside our external customer-facing Enable AI program that educates and equips partners to assess, sell and deploy AI.

With Xvantage, we're driving real business outcomes from meaningful OpEx reductions to automated top line growth, powered by our intelligent digital assistant, or IDA, which we discussed last quarter. Xvantage was architected 3 years ago with a proprietary AI Factory that supports hundreds of machine learning models across vast data sets. It's not only a growth engine but a learning platform that fuels demand generation for our sales associates and customers.

The AI Factory allows us to design integrated solutions that bring together AI, cybersecurity and cloud, which is crucial because collaboration across the ecosystem is critical to unlocking AI's full potential. Many of our vendor partners are now co-creating solutions with other vendors. With Xvantage, we can deliver these integrated bundles through a seamless self-service experience that combines hardware, software, cloud and services.

For our customers and vendor partners, Ingram Micro's Enable AI program provides the tools to gauge readiness, sell AI solutions and deliver measurable business outcomes at scale. It provides a structured step-by-step path to AI success through maturity assessments, base camps for foundational learning, growth tracks with leading vendors and access the global centers of excellence. Since its launch in early 2025, the Enable AI program has engaged thousands of customers, supported by our leading vendor partners, to walk through the complex AI opportunity with clarity and confidence.

As proof points of the program's early success, AI is the most viewed resource content category on Xvantage by our customers. Additionally, one of the world's largest hyperscalers is using our Enable AI program to simplify customer AI certifications, and a leading GPU vendor is collaborating with us on a multi-vendor AI solutions for key industries. Both these internal and external efforts rely on the accelerating momentum of our Xvantage platform, which is visible in our metrics.

In the third quarter, IDA contributed hundreds of millions of dollars of incremental revenue. We also had rapid international adoption of IDA with IDA-driven revenue with non-U.S. operations growing by more than 100% in the quarter. IDA also drove Q3 quote-to-order conversion rates nearly double those of non-IDA engagements.

Earlier this week, we announced our first enterprise-grade AI agent built with our Xvantage AI Factory and powered by Google's Gemini large language model. This demonstrates how we are combining our internal AI intelligence, which is more than 400 models strong, with Gemini's advanced reasoning and language capabilities.

The new agent, known as Sales Briefing Assistant, introduces a new standard for intelligence: scalable sales enablement in the enterprise. The agent will also help IDA generate better quote conversion driving complementary intelligence for our entire sales life cycle and pipeline. These innovations demonstrated how our AI-first strategy is playing out in tangible measurable capabilities.

As we enter the fourth quarter, it's remarkable how much has changed in just 1 year since our IPO. While the pace of change in our industry is staggering, we continue to focus on what always guides our road map, and that is our customers. We understand that our success is dependent upon them, and what matters most is that we enable them to capture and deliver the value to the millions of end businesses they serve each and every day.

One of our long-time customers, Mark Sutor, President of Access Group and a Trust X Alliance community member, reminded us of this recently when he said, "In my 32 years in IT, I've never experienced a partnership like the one I have with Ingram Micro. I see my own vision reflected in your innovations. It feels like you're building and iterating with me, not just for me. As an example, with Xvantage, our year-end cloud billing process went from 3 full days to just 3 minutes."

At the end of the day, regardless of the sophistication of technology we are enabling, our biggest differentiator is our ability to serve our customers wherever they are in their technology journeys. We are grateful for our customers, our partners and our team members for their dedication and creativity as we transform the B2B experience together.

With that, I'll turn the call over to Mike. Mike?

Thank you, Paul, and good afternoon, everyone. As Paul highlighted, we had a strong third quarter with results that either exceeded or hit the top end of each of our guidance ranges despite the impact of the July ransomware incident.

As discussed on our earnings call in August, the incident prevented us from transacting for a handful of days in early July. At that time, we estimated a potential 1% to 2% top line impact and a $0.02 to $0.04 impact on EPS. With the incident now more than 3 months behind us, we estimate the overall impact landed within a tighter range of 1% to 1.5% of net sales and $0.02 to $0.03 per share. And most importantly, we couldn't be prouder of how our team and our partners around the globe responded to minimize the impact and return to business so quickly.

Looking at the third quarter in more detail. Net sales of $12.60 billion were up 7.2% year-over-year in U.S. dollars and up 6.0% on an FX-neutral basis. Client and endpoint solutions grew most notably at nearly 13% on an FX-neutral basis as we continue to see strong demand for notebooks, desktops and related products. Advanced solutions sales were down 4.5% as growth in servers and storage was offset by softer results in virtualization and infrastructure software.

We also saw a 4% decline in cloud. However, excluding the impact of one of our noncore divestitures during Q3, our cloud net revenues were up low single digits year-over-year. The year-over-year comparison of our cloud net revenues was also diluted by a higher mix of demand for product sales that are recorded on a net basis.

Geographically, we had robust FX-neutral growth in the low teens year-over-year in both Latin America and Asia Pacific regions, while North America growth was more moderate at a bit over 3%. EMEA grew just slightly on an FX-neutral basis as the overall macro environment remains generally softer in parts of Europe.

As I scan across our regional segments, solid growth in client and endpoint solutions, and particularly, the desktop and notebook refresh was a common threat globally. Similarly, servers and storage along with cybersecurity were amongst the largest gains within advanced solutions across most of our geographies. We also saw cloud growth in most geographies, most notably in Infrastructure as a Service and modern workplace solutions.

Networking growth continues to be more moderated in general, while the softness in infrastructure software that I noted earlier was mostly attributable to a large project that closed in Q3 of last year in Europe and did not repeat with the same timing in the current year.

Turning to our customer categories. Our overall mix and year-over-year growth remain more concentrated towards large enterprise customers, but we are also encouraged to see growth starting to accelerate in our higher-margin SMB category, a trend that first started in Q1 of this year.

Moving to gross profit and gross margin. Our third quarter gross profit came in at $870 million compared to $845 million last year. The increase in gross profit dollars was primarily related to increased net sales. An improving margin environment, combined with some strengthening in SMB that I just noted, helped to drive a solid 34 basis point sequential improvement in gross margins. On a year-over-year basis, our gross margins were down 29 basis points due to the continued higher sales mix towards our lower-margin client and endpoint solutions as well as a mix within our advanced solutions product categories towards lower-margin server, storage and other AI enablement product sets.

These higher growth areas are important to our strategic priorities, in partnership with several of our key vendors, where our wins come at lower margin but deliver strong returns on invested capital and serve as a foundational piece to our AI ecosystem strategy. Excluding sales from vendors associated with large GPU shipments, for instance, that were done on a low margin and low cost to serve basis, our total company gross margins would have been Q3 above 7%.

Q3 operating expenses were $646 million or 5.13% of net sales compared to 5.33% in the same period last year. Third quarter operating expenses included a $5.5 million loss or 4 basis points of net sales related to the two divestitures we discussed earlier. The quarter also included $3.5 million or 3 basis points of net sales related to restructuring costs associated with programs to continue optimizing the business, primarily in North America and EMEA.

The year-over-year improvement in OpEx leverage reflects continued benefits of optimization and automation from Xvantage, the cost actions we have previously discussed as well as mix factors associated with lower cost to serve categories.

Adjusted EBITDA for the quarter was $342 million, up 3% in U.S. dollars and up 2% in constant currency. Our non-GAAP diluted EPS of $0.72, which was at the high end of our guidance range, came in flat to prior year. However, our non-GAAP net income was up 6.0% year-over-year, growing from $159 million last year to $169 million this year. The current quarter includes the impact of the July ransomware incident that I noted earlier.

And as we've discussed in the past, our tax rate is also impacted by higher volumes of sales from our Latin American export business, which yields a higher gross margin but also bears withholding tax. This withholding tax impact was $0.03 per share in Q3 of this year versus $0.02 per share in the prior year.

Turning to our balance sheet. We ended the third quarter with net working capital of $4.9 billion compared to $4.3 billion to close the same period last year. The higher investment in working capital this year is driven by the increase in net sales and investment needed to capture these opportunities. On a days basis, our net working capital was 32 days versus 29 days in the same period of 2024. The higher ratio of cloud sales recorded on a net basis had an unfavorable impact on working capital days.

On a similar note, adjusted free cash flow was an outflow of $110 million, again, reflective of investments to grow the business, although this was better than typical Q3 seasonal norms and improved when compared to an outflow of $255 million in the prior fiscal third quarter. We returned $18.3 million to stockholders through dividends paid during Q3, and we announced a 2.6% increase to our quarterly dividend to be paid in Q4.

We ended the quarter with $830 million in cash and cash equivalents and debt of $3.8 billion. Our gross leverage ratio was 2.8x and our net leverage ratio was 2.2x, both of which are roughly flat year-over-year, reflective of our investment in working capital to fund growth, offset by our debt paydowns over the past year.

Shifting now to guidance for Q4 2025. We are guiding net sales of $14 billion to $14.35 billion, which represents year-over-year growth of more than 6% at the midpoint. We expect fourth quarter gross profit of $935 million to $990 million, which would represent gross margins of roughly 6.8% at the midpoint. This revenue and gross profit guidance is reflective of some fairly consistent trends in sales mix across products, customers and geographies to what we saw in Q3.

We expect non-GAAP diluted EPS to be in the range of $0.85 to $0.95 per diluted share. Our EPS guidance assumes approximately 235.9 million weighted average shares outstanding and a non-GAAP tax rate of 33% for the quarter.

In closing, as we look to Q4, we expect to continue our trend of year-over-year net sales growth, and our team remains laser-focused on scaling our Xvantage platform along with other strategic capabilities in which we continue to invest to capture additional market opportunities.

With that, operator, we can turn the call over to questions.

[Operator Instructions] Our first question is from Ruplu Bhattacharya with Bank of America.

Paul, Mike, you talked about continuing strength in PCs, notebooks and desktops and some weakness in advanced solutions. I think you mentioned one large project that didn't renew. I think you said it's a timing issue.

Given the dynamics that you saw this quarter and what you see for the December quarter, how should we think about margins going forward, either gross margins or operating margins? Do you think the trends can get better? And how does the mix of SMB versus large enterprise, how does that impact margins? If you can give us any color there. And I have a follow-up.

Yes. Ruplu, this is Mike. I can start on that and then Paul can add for sure. So what you can see implied in the guidance that we gave on gross profit and revenue is still margins in the high 6s, around 6.9% at the midpoint. That would be still -- or 6.8%, I guess, in the 6.80s at the midpoint. So I think that's still looking at sort of seasonal norms where we see a little bit of a trend of more mix of the higher volume products that we usually see in the spike in Q4, but still less seasonal differential sequentially than what we normally see.

And a lot of that is probably seeing the continued strength in SMB that we've seen gradually building over the last couple of quarters, which is very encouraging for us, of course. We see the advanced solutions, as you just called out from our comments, really more of a timing thing on one large project and a difference in virtualization from a year-over-year perspective. But we continue to see solid growth in servers and storage and we see the opportunity to continue to pursue some of the large GPU deals that we called out, which obviously could be a little bit dilutive from a margin perspective.

But then lastly, cloud we see growing at a more robust level in Q4. So what's implied in our guidance from a growth perspective is client and endpoint probably more in the mid-single digits with still some legs on the desktop and notebook refresh. We see advanced solutions growing in the lower single digits and cloud growing mid- to upper single digits. And that's what's built into our guidance. Anything you want to...

I'd just say it's a geography mix again, too. So we continue to see Asia -- this is Paul. We continue to see Asia Pacific performing very well as a percentage of the overall business as we call out. It's a lower margin but a lower cost to serve also.

Got it. Mike, for my follow-up, if I can ask a little bit on inventory and free cash flow and cash conversion cycle. It looks like inventory sequentially went down a little bit. But as the hardware categories are recovering, how should we think about the pace of inventory reduction?

And should we assume the fourth quarter also is a negative free cash flow quarter as you prepare for the first half of next year? So any color on how we should think about working capital and free cash flow going forward.

Yes. So one of the things that we talked about in our last call is how we exited the end of Q2 with a little bit of buildup of inventory, which was mainly related to some large projects that we're going to sell through in Q3. And that did happen as expected, and that's what's contributing a little bit to the sequential decline you just noted and also a lower than normal seasonal investment into working capital in Q3, where we usually are stocking for the kind of the hockey stick that we see in Q4 sales.

Now I would point you -- we don't give guidance on cash flow and balance sheet, per se. But I would look towards last Q4, where you can see we had quite a sizable positive cash flow in that quarter. And things would point to a very similar sort of trend dynamically as far as where we see the business mix between hardware, software and demand as we look at Q4 encompassing the mix factors that I just mentioned in answer to your first question. So we should see a solid cash flow quarter in Q4.

Our next question is from Erik Woodring with Morgan Stanley.

This is Maya on for Erik. Two questions from me. Maybe just to start, on the traditional hardware side, we've seen PCs growing for multiple quarters now, servers growing as well. Where do you think we are in the cycle kind of across those key like product markets?

So this is Paul. So thanks, Maya. Still seeing good trajectory on the desktop, notebook refresh. We're in the second half of kind of the refresh. But as we sit here today, we're still seeing good demand, not to the extent that we saw in the first half of the year. As you know, as we talked about coming into the year, it kind of progressed very quickly. So I would say we're in the back half or the later innings of the PC refresh.

And if you look at server, that was a very good performance for us in the quarter within our advanced solutions. Networking still had growth. So there is still some of the refresh going on as we talked about previously some of the other categories, but there's still some legs to be there for those categories also.

Got it. And then given what we're seeing in the memory market right now, in prior periods of component cost inflation, have you historically seen customers trying to pull forward spend to try and get ahead of rising component costs? Is this a topic in any conversations that you're having?

Yes. This is Paul again. No, we haven't had any of those conversations at this point in time in terms of pull forwards or from a pricing perspective. It's been pretty traditional from what we're seeing.

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

Congrats on the great results here. I wanted to focus on Xvantage. It was good to hear the momentum with Xvantage, with IDA. I was wondering if you could help frame where the benefit Xvantage is being felt the most. Is that on the SMB side or more enterprise clients, customers using it? And maybe just help us frame like where the actual tailwind from the momentum is coming from.

Yes. David, this is Paul. So thanks for the question. So there's three phases really Xvantage. The first one is all about taking out friction, call it, cost to serve. The second phase is around demand generation, and the third phase is around using data and insights to help our partners drive profitable organic growth. And so what we're seeing is, to answer your question, within product category, actually it's across the board.

Enterprise is using it for different reasons than SMB. SMB Is where they can really manage their whole business. So if you look at one of the things that we have talked about in terms of the benefits of this is you have a single pane of glass, one place to come where you have the customer, you have the vendor and you have our team members. And within the customers' visibility, there's multiple different personas that they can have in there, so effectively allowing small to medium-sized businesses operate and run their whole business.

And that's one of the reasons that we continue to talk about our integrations hub or XI, which allows them to tie into their professional services platforms. And stuff they used to take minutes and months, they actually can do at the click of a button now into their ERP systems. We've given a couple of examples of that. Enterprise partners are using it, but it's more for the traditional pricing availability, partner lookup, does this go with that type of functionality.

Great. That's helpful. And then just to revisit the PC refresh cycle. I know you said maybe mid- to later innings. But looking ahead to '26, do you see maybe AI-powered PCs extending the cycle as people try to upgrade so the hardware could support more compute power that's needed for AI?

Yes. We're still in the early part of the cycle. What we see, and you've probably seen some of the other industry, people that play in this space or our vendors, probably 25% of our PC shipments today, refresh, is an AI PC. So that's still a low percentage. So that does, to your point, give a potential for a longer, smoother refresh kind of driven by AI PC.

So I think it's still yet to be determined because the refresh we're still getting today -- because of only 1/4 of the PCs going out from an AI perspective are really around aged systems and the Windows' end of life. So it's yet to be determined. I think we'll know more kind of at the beginning of next year how AI could potentially provide a longer, smoother refresh cycle into 2026.

Our next question is from Logan Katzman with Raymond James.

This is Logan on for Adam. I just had a question. As we exit this year, what are you guys hearing from customers about a potential budget flush exiting 2025? We've heard from a couple of people that it may be there this year, but I just wanted to get your guys' thoughts.

Yes. This is Mike. I can hit a first pass at that one. I don't think we're necessarily seeing anything abnormal there. I mean, that is part of the reason we typically see a seasonal pop in revenues is budgeting cycles in Q4. And you can see again a pretty healthy sequential increase in our guide going from Q3 to Q4 that would be reflective of that.

I think the bigger variable this year is just how strong will SMB be where, again, we're encouraged to see spending grow. And that budgeting cycle exists just as prominently at an SMB customer to different magnitudes as it does in an enterprise customer. So that would be probably the only variable. But I think we feel pretty bullish that it's a fairly normal cycle in that regard when we look to Q4.

Our next question is from Alek Valero with Loop Capital.

This is Alek on for Ananda. Just two quick ones. So I wanted to ask about the biggest catalysts that we can look for over the next 4 to 6 quarters.

This is Paul. As we mentioned in our prepared remarks, the things that are going on, what we're hearing from a market perspective are a couple of things. One, it's around services that the partners are continuing to build out. The other one, the other two that we're talking about, and you saw us make an announcement is around AI. What is AI, how do you monetize the AI, the spend that's going on in AI right now and then security kind of wrapped around everything.

We also believe as kind of AI continues to develop, we have the opportunity to continue to take those products that are now proof of concepts. And as they go, and we're seeing some of the workloads go to the cloud and we have some of the large relationships with the hyperscalers, so the ability for partners to take what I would call proof of concept into kind of your everyday kind of downstream into the market, so wrapping services around it AI tied in with security.

Got it. And just a quick follow-up. Have you guys heard anything from the bars regarding any feedback around macro?

This is Paul again. Actually, if anything, it's been more encouraging. As we mentioned, last year we were talking about the challenges in SMB. And the fact that we've had 3 quarters now with SMB growth is encouraging because that market is normally the one that bounces back least. And we've been talking about kind of the enterprise for the last couple of quarters.

So the good news is we're seeing sales. And within the SMB sales, we're seeing it across all categories, too. So it's not just centered around one category. So the cloud, networking, cyber and desktop, notebook, they're participating across all categories too. So that's encouraging also.

Yes. Look, the one thing I would just add on that, we've called this out in previous calls when we were seeing the SMB strength. Our view, which isn't too uncommonly shared view from an economic perspective was that certainly tariffs and inflationary environment were creating probably a little bit more overhang, as Paul just alluded to, especially on that SMB space. So that was definitely the more sensitive part of our customer ecosystem to that environment.

And as we see inflation temper back a little bit, more certainty around tariffs, interest rates coming down yet again yesterday with the Fed move, and we'll see what happens after this, those are all pretty encouraging signs that again make us a little bit more bullish about that category of customer for sure.

Thank you. At this time, I would like to turn the floor back over to Paul Bay for any closing comments.

All right. Thank you. So before we wrap up, let me just leave you with a few thoughts from our quarter. First, we delivered strong financial results with all key metrics at or above the high end of guidance, and we are set up for a solid Q4.

Second, our AI and platform momentum continues to build. Xvantage is scaling globally and delivering real value while our Enable AI program is gaining traction. Additionally, as you heard, we introduced our enterprise AI agent built on Google's Gemini large language models this week.

Third, our profitable growth is broad-based across all geographies, business lines and customer segments. And finally, we're excited to welcome over 2,000 participants next week at our global ONE Innovation Summit in Washington, D.C. It's always great to connect with our team, our partners and our industry leaders to shape what's next in technology.

So as always, thank you for joining us today, and a huge thank you to our more than 23,000 team members, our customers and our vendor partners for your continued support. We look forward to catching up with many of you here in the very near future. Thank you, and have a great day.

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