TD SYNNEX FY2026 Q3: $21.6B of Revenue and the 1.9% Margin of Moving Other People's GPUs

TD SYNNEX grew revenue 37.7% to $21.6 billion in the quarter ended August 31, 2026, its best quarter ever, and kept $416 million of it as GAAP net income — a 1.93% net margin. Non-GAAP diluted EPS of $5.68 rose 58.7% and cleared the top of the company's own outlook; GAAP diluted EPS was $5.18. The same quarter consumed $976 million of free cash flow, and the nine-month figure is negative $2.24 billion, because inventories rose $5.8 billion since November to $15.3 billion while the AI-server business, Hyve Solutions, grew 52%. A distributor's income statement says what it earns per dollar; its balance sheet says what it has to borrow to earn it. We modeled fiscal 2022 through this quarter as a public Beancount ledger so both can be read side by side, the way we did for Jabil — the other company that builds AI hardware for others and keeps less than three cents of every dollar.

The Headline Numbers​

Every line above the gross-profit row grew faster than every line below it, and that is the quarter in one sentence. Revenue rose 37.7% but gross profit only 26.2%, because gross margin fell 61 basis points to 6.61% — the 10-Q attributes the decline "primarily due to product mix in Hyve Solutions and in our Advanced Solutions portfolio." Then the operating leverage kicked in: SG&A grew just 4.9% to $783 million against a 26% rise in gross profit, so SG&A as a share of gross profit fell from 66.0% to 54.9% and operating income jumped 67.6%. The gap between GAAP and non-GAAP earnings growth has a specific cause: GAAP net income includes $37.4 million of "dividends and realized gains upon sale related to certain equity securities" that TD SYNNEX itself strips out of the non-GAAP number, which is why GAAP EPS grew 89% and non-GAAP EPS 59%. The company returned $139 million to stockholders — about $100 million of buybacks and $38 million of dividends — and raised the quarterly dividend 9% to $0.48.

The free-cash-flow row is the one to stare at. Operating cash flow was negative $917 million for the quarter; purchases of property and equipment were $59 million. For the nine months, the 10-Q is direct about why: "a larger increase in inventory, primarily to support growth in our Hyve Solutions business, along with a year-over-year increase in accounts receivable due to the current year revenue growth."

Revenue Deep Dive​

TD SYNNEX re-cut its segments in the first quarter of fiscal 2026 into three regional distribution businesses plus Hyve Solutions, the design-and-manufacturing arm that builds compute, cloud and connected infrastructure for hyperscalers. The 10-Q's segment note gives the quarter:

Hyve Solutions is 17.6% of revenue and 38.8% of operating income. At a 6.56% operating margin it earns three times what the distribution segments earn per dollar (the three regions combined: $393 million on $17.8 billion, or 2.22%), and its growth is understated by accounting: the 10-Q says Hyve's increase was "partially offset by a greater percentage of our sales being presented on a net basis due to program mix, which negatively impacted our revenue growth compared to the prior periods by approximately 66%." That is why TD SYNNEX leads with non-GAAP gross billings — $31.8 billion, up 40.0% — and why the gross-to-net adjustment widened to 32.3% of billings from 31.1%. The revenue line undercounts the volume moving through Hyve's factories. The drivers named are "growth in Manufacturing sales as well as Supply Chain Services."

Americas distribution did the opposite: "a greater percentage of our sales being presented on a gross basis due to the mix of products sold" added roughly 12 points to its 39.9% growth. Strip that out and the Americas grew in the high twenties, with "both our Advanced Solutions and Endpoint Solutions portfolios" contributing. Operating margin rose 14 basis points to 2.48% on "increased operating leverage resulting from the increase in revenue, partially offset by a decline in gross margin."

Europe distribution is the margin recovery story: operating income more than tripled to $117 million and operating margin went from 0.71% to 1.84%, on 30% revenue growth plus "an increase in gross margin in our Endpoint Solutions portfolio in the region." APJ grew 21.7% reported and 27.7% in constant currency, with the rupee and yen the drag.

The demand language is confident but specific. CEO Patrick Zammit's release quote: "Enterprise AI adoption is progressing toward broader production deployments. Data center modernization remains a priority as organizations prepare for next-generation infrastructure requirements, while AI is driving new security, governance, and compliance requirements across technology environments." And: "Distribution and Hyve both performing above our expectations and growing above market." What the release and the 10-Q do not say is as useful: there is no "demand exceeds supply," no "supply remains constrained," no "sold out." A distributor's inventory tells the same story — you do not build $5.8 billion of stock in nine months if the constraint is on the supply side.

The Margin Story​

Four years of gross-margin gains — 6.26% to 6.99% — reversed in one quarter, and the reversal is mix, not price. Hyve builds servers at a lower gross margin than distribution earns on software and services, so a quarter in which Hyve grows 52% dilutes the blended figure mechanically. The 10-Q adds one twist: presenting more revenue on a net basis "positively impacted our gross margin by approximately 11 basis points," so the underlying compression was closer to 72 basis points.

Operating margin went the other way, and the non-GAAP bridge shows where. Amortization of intangibles ($75.2 million) and share-based compensation ($16.3 million) were essentially flat year over year; acquisition, integration and restructuring costs were $2.1 million. Those fixed add-backs plus a payroll line that grew far slower than gross profit are the operating leverage: adjusted SG&A rose 5.2% while gross profit rose 26.2%. The ledger carries all three bridge items as labeled postings on the SG&A account, so the leverage is visible line by line rather than asserted.

On pricing, the filing says nothing a bull could quote. The 10-Q's language is defensive: "Fluctuations in component pricing, particularly for memory components, may affect product costs, availability, and average selling prices," and "As AI applications and related data center investments continue to increase demand for memory-intensive configurations, the resulting changes in memory pricing may impact supply chains, product mix and pricing trends." No "pricing momentum," no "higher prices realized." For a company whose 10-Q describes its own market as "characterized by declining unit prices and short product life cycles," the margin path runs through mix and leverage, not price.

What the $0.50 EPS Gap Is Made Of​

This is an unusually honest bridge. The amortization add-back ($75 million a quarter, $296 million in fiscal 2025) is the long shadow of the Tech Data merger's customer and vendor intangibles — real cost, non-cash, and recurring for years to come. Share-based compensation is the standard exclusion. But the $37.4 million of investment dividends and gains runs the other way: management removed a gain from its non-GAAP number, which is why non-GAAP EPS growth (58.7%) is slower than GAAP (89.1%). Readers who distrust adjusted earnings should note that the adjusted figure here is the more conservative one on everything except amortization.

The One Big Question: Who Funds the Inventory?​

A distributor's product is credit. It buys from Microsoft, HP, Cisco and NVIDIA on vendor terms, holds the stock, sells to 150,000 resellers on customer terms, and lives in the gap. The balance sheet from November 30, 2025 to August 31, 2026 shows that gap widening fast:

Net trade working capital — receivables plus inventories less payables — more than doubled, from $3.6 billion to $7.8 billion, in nine months. Suppliers funded $4.8 billion of the $9.0 billion build through payables; TD SYNNEX funded the other $4.2 billion by running cash down $1.7 billion and adding $0.9 billion of short-term borrowings. The cash-flow statement is blunter still: net borrowings on revolving credit loans were $1.5 billion in the quarter alone, while $700 million of senior notes were repaid at maturity in August. Interest expense and finance charges rose 32% to $120.5 million, "primarily driven by an increase in short-term borrowings to fund working capital requirements, along with increased costs associated with the sale of accounts receivable." That last clause matters: $2.1 billion of receivables had been sold to banks and sat off the balance sheet at quarter end, up from $1.8 billion in November, at a cost of $28.6 million in discount fees for the quarter.

The cash-conversion cycle shows what changed. Each figure is the period-end balance divided by the period's revenue (receivables) or cost of revenue (inventory and payables), scaled to the period's days — 365 for a fiscal year, 92 for the quarter:

From fiscal 2022 to fiscal 2025 the cycle shortened every year, from 24 days to 17, almost entirely because TD SYNNEX stretched its own payables from 87 days to 111. That is the post-merger scale story: a bigger buyer gets longer terms. In the third quarter the cycle jumped to 31 days — inventory days rose ten to 70 while payables days gave back eight. Building servers for hyperscalers means owning GPUs and memory for longer than a software license sits on a shelf, and Hyve's suppliers do not extend the terms a PC maker does. Fourteen days of cycle on $80 billion of annualized cost of revenue is roughly $3 billion of permanent working capital. The question for fiscal 2027 is whether the cycle settles back toward 20 days as the inventory ships, or whether 30 days is simply what a 20%-Hyve mix costs.

Tracking an $80B-a-Year Distributor in Plain Text​

Double-entry bookkeeping is unforgiving in exactly the way a distributor's economics demand: every dollar of revenue must be matched by cost, expense, tax or profit, and every dollar of inventory must be matched by payables, borrowings or equity, or the file does not validate. That is what makes a ledger a better record than a press release — the $37 million investment gain cannot hide in "other," and the $5.8 billion of inventory cannot hide behind a non-GAAP EPS beat. Our how we model every company guide documents the conventions; signs follow Beancount convention below (Income negative, Expenses positive), and the three non-GAAP bridge items are separate labeled postings on the SG&A account so the GAAP-to-non-GAAP walk is auditable from the ledger itself.

; FY2026Q3 Income Statement — fiscal third quarter ended August 31, 2026 (June 1 through August 31, 2026)
; The 10-Q presents one SG&A line of 782.535 that already includes acquisition, integration and
; restructuring costs; gross profit 1,425.414 less that line is operating income 642.879.
; Non-GAAP bridge (MD&A): operating income 642.879 + 2.101 + 75.190 + 16.251 = non-GAAP operating income 736.421.
; Other income, net 32.889 includes 37.354 of dividends and realized gains on equity securities
; (excluded from non-GAAP net income 455.864; non-GAAP diluted EPS 5.68 vs GAAP 5.18).
; Pretax 555.250 − tax 139.010 = net income 416.240.
; Check: -21558.406 + 20132.992 + 688.993 + 75.190 + 16.251 + 2.101 + 120.518 - 32.889 + 139.010 + 416.240 = 0
 
2026-08-31 * "TD SYNNEX Corporation" "FY2026Q3 Income Statement"
  Income:Revenue                                               -21558.406 MUSD  ; as filed
  Expenses:CostOfRevenue                                        20132.992 MUSD  ; as filed
  Expenses:SellingGeneralAdministrative                           688.993 MUSD  ; SG&A excluding the three bridge items below
  Expenses:SellingGeneralAdministrative                            75.190 MUSD  ; amortization of intangibles (non-GAAP bridge)
  Expenses:SellingGeneralAdministrative                            16.251 MUSD  ; share-based compensation (non-GAAP bridge)
  Expenses:SellingGeneralAdministrative                             2.101 MUSD  ; acquisition, integration and restructuring costs (non-GAAP bridge)
  Expenses:OtherNet                                               120.518 MUSD  ; interest expense and finance charges, net
  Expenses:OtherNet                                               -32.889 MUSD  ; other (income) expense, net
  Expenses:IncomeTax                                              139.010 MUSD  ; provision for income taxes
  Equity:Adjustments                                              416.240 MUSD  ; net income offset (retained earnings set by balance assertion)

The one balance-sheet number that tells the narrative is inventories: $9.5 billion → $15.3 billion in nine months, up 61%, on a company whose total assets are $41.8 billion. Read it against equity of $9.3 billion — 22% of assets, down from 28% at the end of fiscal 2023 — and the structure is clear: TD SYNNEX is a $42 billion balance sheet run on $9 billion of equity, $22 billion of supplier credit and $5.5 billion of borrowings, earning $416 million a quarter on it. Return on equity is respectable ($1.08 billion of nine-month net income on $9.3 billion); the quarter's net income is 1% of total assets. That is the distributor's trade, and the AI cycle has made it bigger, not different.

The Multi-Year Arc​

The ledger starts at fiscal 2022 because fiscal 2021 straddles the September 1, 2021 Tech Data merger — three months of combined company on nine months of legacy SYNNEX — and is not comparable to anything on either side of it.

Three things compound here, and only one is revenue. Revenue went nowhere for three years — $62.3 billion in fiscal 2022, $62.5 billion in fiscal 2025 — as the post-pandemic PC hangover offset the merger's scale; nine months into fiscal 2026 it is already at $58.3 billion, and the fourth-quarter outlook implies a year above $80 billion. Net margin, meanwhile, rose every single year, from 1.04% to 1.32% and now 1.85%: the merger synergies, the shrinking acquisition and restructuring line ($222 million in fiscal 2022, $7 million in fiscal 2025), and operating leverage. And the share count fell 16% in four years on $2.0 billion of buybacks funded from $3.5 billion of cumulative free cash flow. GAAP EPS went from $6.77 to $9.95 on flat revenue — margin and share count did all of it. Fiscal 2026 breaks the pattern in both directions: revenue finally grows, and free cash flow turns deeply negative to fund it. The buyback slowed to $292 million for nine months, which is the correct response and also the first time in four years that the capital-return machine has had to yield to the working-capital machine.

The Fourth-Quarter Outlook​

The guide is for a flat sequential quarter: revenue of $21.8–22.6 billion brackets the $21.6 billion just reported, gross billings of $31.4–32.4 billion bracket $31.8 billion, and non-GAAP EPS of $5.65–6.15 brackets $5.68. The midpoint implies fiscal 2026 revenue of roughly $80.5 billion, up about 29% on fiscal 2025. Two details in the reconciliation are worth noting. The non-GAAP bridge assumes $40 million of share-based compensation in the fourth quarter against $16 million in the third — a step-up the release does not explain. And there is no line for investment gains, so the GAAP-to-non-GAAP gap narrows to the amortization and compensation add-backs: GAAP EPS at the midpoint ($4.83) would be down sequentially from $5.18 while non-GAAP ($5.90) would be up, and the difference is the $37 million gain not recurring. Nothing in the outlook addresses cash flow, inventory or borrowings, which — after a quarter that consumed $976 million — is the absence that matters most.

The Verdict: Bull vs. Bear​

Bull Case

• Hyve Solutions grew 51.7% to $3.8 billion at a 6.56% operating margin and now produces 39% of operating income from 18% of revenue; every point of mix shift toward Hyve lifts consolidated operating margin, which already rose 53 basis points to 2.98%.
• Operating leverage is real and measurable: SG&A grew 4.9% on 26.2% gross-profit growth, taking SG&A from 66.0% to 54.9% of gross profit — the lowest in the ledger.
• Net margin has risen every year since the merger (1.04% → 1.32% → 1.85% for nine months) while the diluted share count fell from 95.5 million to 79.8 million; EPS compounds from three sources at once.
• Europe's operating margin went from 0.71% to 1.84% in a year; if it merely reaches the Americas' 2.48%, that is roughly $160 million of annual operating income on current revenue.
• The CEO's framing — "Enterprise AI adoption is progressing toward broader production deployments" — is a volume thesis, and a distributor is paid on volume: gross billings up 40% is the number the model actually runs on.

Bear Case

• Free cash flow of −$976 million in the quarter and −$2.24 billion for nine months; net trade working capital doubled to $7.8 billion, funded by $1.7 billion of cash drawdown and $1.5 billion of quarterly revolver borrowings. The release's own pricing and supply language does not support a claim that this inventory is scarce or pre-sold.
• Gross margin fell 61 basis points to 6.61% — the first material decline in four years — and management attributes it to Hyve mix, the same mix the bull case depends on growing.
• The cash-conversion cycle lengthened from 17 days to 31; at an $80 billion run rate, every ten days of cycle is about $2.2 billion of balance sheet that must be borrowed or taken from buybacks.
• $2.1 billion of receivables are sold off-balance-sheet and $28.6 million of quarterly discount fees sit in interest expense; interest and finance charges rose 32% to $120.5 million and still consume 19% of operating income — down from 24% a year ago only because operating income grew faster than the borrowings that fund it.
• Equity is 22% of assets and falling; the Q4 non-GAAP bridge assumes share-based compensation jumping to $40 million from $16 million with no explanation, and no outlook line addresses cash.

Our Take: TD SYNNEX is the cleanest public read on how much the AI buildout pays the companies in the middle of it — and the answer is 1.9 cents on the dollar, up from 1.3, with an extra $4 billion of working capital as the price of admission. That is a better business than it was: Hyve is the highest-margin thing the company does, operating leverage is visible in the ledger, and the share count keeps falling. But the quarter's record EPS was financed by $1.5 billion of fresh revolver borrowings, and the outlook guides revenue flat sequentially without a word on cash. Like Jabil at a 2.9% net margin, TD SYNNEX converts hyperscaler capex into thin, volume-driven earnings on a balance sheet somebody else mostly funds. We would own it for the operating-leverage arc — and we would want to see inventory days back under 60 before believing the fiscal 2027 cash flow will look like fiscal 2025's.