TD Synnex posts record quarter and pitches AI factories to the channel
The distributor says enterprise AI is moving from pilots to production-scale builds that partners will deliver. Its Hyve manufacturing arm shows what that scale can do to margin
- Adjusted diluted earnings per share rose 58.7% to $5.68, according to TD Synnex
- Manufacturing grew more than 130% and made up about two-thirds of Hyve's gross billings
- The quarterly dividend rises 9% to $0.48 a share
- TD Synnex guides fourth-quarter revenue of $21.8bn–$22.6bn
The Mark III agreement looks like a model TD Synnex will want to repeat in the UK, though it has said nothing about UK plans: the distributor bringing hardware, financing and supply chain, and the partner doing the design, integration and day-two operations. If the margin in AI infrastructure sits in that services layer, resellers and MSPs without GPU integration or AI operations skills risk fulfilling someone else's deal at distribution margin. Before a customer asks for a rack-scale build, partners should find out what TD Synnex UK's AI enablement, credit limits and project financing cover for a mid-sized project. And if vendors really are shrinking their direct reseller lists, a strong distributor relationship becomes the fallback route to market.
“This is one of the largest Enterprise AI factory infrastructure deployments expected to be delivered through the channel”Patrick Zammit, chief executive, TD Synnex
TD Synnex reported record results for its fiscal third quarter, to 31 August, on 24 September. Revenue rose 37.7% year over year to $21.6bn (£16.3bn), and gross billings, an adjusted measure that adds back service contracts and software-as-a-service sales netted out of revenue, rose 40% to $31.8bn (£24.0bn).
Distribution, the business UK resellers buy from, grew gross billings 27% to $24.8bn (£18.7bn), with double-digit growth in every region, chief financial officer David Jordan said on the earnings call. Advanced solutions billings rose 37% on infrastructure, software and AI.
The bigger claim was about how enterprise AI gets built. Chief executive Patrick Zammit said TD Synnex had signed an agreement with Mark III Systems, a Houston-based IT solutions provider, to support an Nvidia AI factory running Vera Rubin NVL72 systems for a large enterprise. He said the deal would bring together design, integration, deployment, day-two operations, financing and supply chain, but named no customer, value or timetable. Zammit also said IBM had extended its relationship with TD Synnex into 20 more countries across Europe, Asia Pacific and Latin America, and that vendors are cutting their numbers of direct resellers and distributors.
The awkward number sits in Hyve, the contract manufacturing arm that builds racks for hyperscalers. Its gross billings more than doubled to $7bn (£5.3bn), but its adjusted operating margin on gross billings fell to 3.61% from 5.04% a year earlier, which Jordan put down to large AI rack programs. The company also used about $1bn (£755m) of free cash flow in the quarter, largely on Hyve inventory and new programs. Distribution moved the other way: its adjusted operating margin rose 35 basis points to 1.95%.
