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DATE

Thursday, April 30, 2026 at 5 p.m. ET

CALL PARTICIPANTS

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

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RISKS

  • Michael Zilis stated, "While more limited in frequency, we saw a few instances where projects are being indefinitely deferred simply because the product is not available."
  • Price-sensitive end users are, in some cases, "alter project scope or delay spending" due to inflation and memory supply constraints.
  • Guidance incorporates an estimated negative EPS impact of $0.01 to $0.03 per share from "the volatile situation in the Middle East."

TAKEAWAYS

  • Net Sales -- $13.96 billion, up 13.7% year over year in U.S. dollars and 10% FX-neutral, with all four regions posting double-digit growth in dollars.
  • Cloud Revenue Growth -- 25% FX-neutral and 34% after adjusting for the CloudBlue divestiture, representing the highest-growth segment.
  • Advanced Solutions Growth -- 14% FX-neutral, primarily driven by server, networking, and large-scale GPU and AI infrastructure enterprise deals.
  • Client and Endpoint Solutions -- Nearly 8% FX-neutral growth, led by continued notebook and desktop demand; AI PC penetration is increasing but still represents roughly one-quarter of overall PC sales.
  • Asia-Pacific (APAC) and North America -- APAC net sales grew just over 12% FX-neutral with $4.1 billion in revenue; North America also up just over 12% FX-neutral at $5.0 billion, both driven by Cloud and Advanced Solutions.
  • Gross Profit -- $926 million, up 12% year over year; gross margin 6.63%, down 12 basis points due to a 35-basis-point impact from lower-margin GPU and AI infrastructure sales compared to 5 basis points in the prior year.
  • Non-GAAP Net Income -- $175.5 million, up 22%, reflecting strong operating leverage and improved interest expense from debt reduction.
  • Non-GAAP Diluted EPS -- $0.75, up 23%; at the high end of guidance.
  • Operating Expenses -- $703 million, equal to 5.04% of net sales versus 5.11% the prior year; SG&A leverage improved by 12 basis points year over year.
  • Net Working Capital -- $4.4 billion, up just over 2%, with net working capital days declining to 23 from 29, indicating increased efficiency.
  • Adjusted Free Cash Flow -- Outflow of $962 million, attributed to working capital needs for robust top-line growth and seasonal patterns.
  • Cash and Debt Levels -- Cash and cash equivalents of $916 million; total debt at $3.3 billion; net debt to adjusted EBITDA ratio improved to 1.7x from 2.0x a year prior.
  • Dividend Actions -- $19 million returned via dividends plus a new dividend increase of 2.4% sequentially and 10.5% above the prior year.
  • Share Buybacks -- $75 million of stock repurchased from the majority owner during the quarter; buyback program expanded for future use.
  • Patent Grants -- Four of 35+ patent applications granted, covering AI-driven vendor integration, dynamic SKU generation, automated quote-to-order, and e-mail to order technologies within Xvantage.
  • Xvantage Platform Scale -- 230,000 e-mails processed into orders via e-mail to order (up 78%), powering over $1 billion in sales; IDA and AI models generated 153,000 proactive engagements, supporting over $800 million in AI-led sales; self-service orders exceeded 2 million, with average revenue per customer up 20% year over year.
  • Regional Margin Leadership -- Latin America delivered the highest gross margin among regions, up 69 basis points, through Xvantage-enabled automation and intelligence.
  • Guidance for Q2 -- Net sales expected between $13.6 billion and $14.0 billion (8% year-over-year growth at midpoint), gross profit guidance of $905 million to $950 million (up 8%-13%), and non-GAAP diluted EPS of $0.68 to $0.78, which includes a $0.01-$0.03 per share headwind from Middle East volatility.
  • Memory Supply Constraints -- Contributed an estimated 2%-3% tailwind to year over year net sales driven by increased average selling prices, some demand pull-forward, and selective project deferrals or scope changes where product availability is limited.

SUMMARY

Ingram Micro (INGM 10.46%) reported double-digit year-over-year revenue growth across all operating regions, with Cloud, Advanced Solutions, and Client and Endpoint Solutions all contributing materially. Management provided explicit detail on four recently granted patents powering the Xvantage platform, enabling large-scale automation, AI-driven workflows, and measurable increases in both customer conversions and operating efficiency. Capital deployment included increased dividends, an expanded repurchase program, and improvements to the net debt/EBITDA profile, while working capital discipline remained evident as efficiency gains offset top-line expansion. Notably, guidance for the next quarter features high-single-digit sales and profit growth expectations despite headwinds from supply constraints and geopolitical instability.

  • Management characterized recent performance as moving beyond adoption into "scaling the model," underlining Xvantage as a competitive differentiator and source of operating leverage.
  • The company estimated that AI-driven and automated selling, particularly through IDA, is converting opportunities at "nearly 4x our standard baseline."
  • Diversification across regions and categories is reinforced; North America and APAC led growth, while Latin America achieved the highest regional gross margin and India posted more than 200% IDA revenue growth sequentially.
  • Supply chain pressures remain, as memory constraints are raising average selling prices and causing some projects to be deferred, yet are net accretive to reported sales comparisons.
  • Management indicated that Cloud, especially Infrastructure as a Service, will continue to drive top-line and margin expansion, with on-premise to cloud transitions accelerating due to solution bundling and vendor relationships.
  • Ongoing capital intensity behind Xvantage deployment is expected to continue for four to five quarters, after which spending should stabilize as automation covers more geographies and workflows.

INDUSTRY GLOSSARY

  • Xvantage: Ingram Micro's proprietary AI-powered digital B2B operating platform, integrating sales, quoting, order execution, and workflow automation across global IT distribution.
  • IDA (Intelligent Digital Assistant): An AI- and machine learning-driven tool within Xvantage that proactively engages customers, optimizes conversion, and generates actionable sales recommendations.
  • CloudBlue: A cloud commerce platform previously owned by Ingram Micro, divested in Q3 2025; referenced for adjusted cloud revenue comparisons.
  • CES (Client and Endpoint Solutions): Business segment comprising desktops, notebooks, peripherals, and advanced PC components offered to enterprise and retail customers.

Full Conference Call Transcript

Paul Bay: 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 PCs. 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 to 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 reach 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 Xvantage digital B2B platform has increasingly become a competitive moat. We made this investment ahead of the curve because we anticipated the shift now taking place across the market, where 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 IDA 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.

It's 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 what these granted patents encompass. First, our vendor-agnostic framework uses our AI-driven architecture to integrate with vendors at scale, regardless of the format or underlying systems.

This helps solve one 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 SKU generation capability simplifies historically complex solution configuration, pricing and transaction workflows. What once took days or weeks can now be completed in minutes or even seconds, improving the speed, accuracy, scalability and customer responsiveness. Third, we were granted a patent for our configured and quote-to-order. Configure to order expands funnel creation through automation of complex configurable solutions that were once manual, generating high quote volume, allowing us to touchlessly convert orders through our automated quote-to-order capabilities.

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 uses generative AI to convert unstructured customer e-mails and attachments into structured transactions. In the first quarter alone, it processed 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 to quote, 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, IDA and other AI capabilities delivered more than 153,000 proactive engagements in the quarter, helping customers convert more than $800 million in AI-led net sales during the quarter.

Importantly, quote-to-conversion performance continues to accelerate with IDA-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 to 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 Xvantage-enabled capabilities, LATAM delivered the highest gross margin across our regions, up 69 basis points year-over-year.

By shifting high-velocity SMB demand to self-service and automated quoting and embedding intelligence, our business in the region is 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, IDA 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 vendor side, I am proud to say that we just achieved a specialization for AI apps with Microsoft.

Using Azure AI services, we built AI-powered 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.

Their specialized and 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 they serve 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 uncertainties.

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

Michael Zilis: Thank you, Paul, and good afternoon, everyone. I want to start by reiterating how pleased 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 CloudBlue 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 are low cost to serve. We don't typically stock for these deals, which provides for a strong return on working capital. Turning to Client and Endpoint Solutions or CES.

We saw nearly 8% growth on an FX-neutral basis, with strong demand for notebooks and desktops as the refresh cycle continues and AI PC penetration grows. As a note, this 8% growth is on top of what has been solid double-digit growth for CES in Q1 and all other quarters last year. Geographically, we had FX-neutral 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 an FX-neutral 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, while 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 said products.

While more limited in frequency, we saw a few instances where projects are being indefinitely deferred simply because the product is not available. Second, 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 vendors affected by supply constraints about potentially using our balance sheet for opportunistic inventory buy-in deals.

While we have 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 6.63% 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 5.11% 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 Xvantage in driving leverage and productivity gains, as well as mix factors associated with lower cost to serve categories.

And while we continue to invest in Xvantage 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 1.88% 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, 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 billion 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 leveraging 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 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 lead the way 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 outsized GPU and AI infrastructure projects in our guide, we will continue to participate in these projects. Client and Endpoint Solutions is also still in growth mode with notebook 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 in Q2. 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 times.

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

Katherine Murphy: 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.

Michael Zilis: Yes. Katherine, this is Mike. I can start and Paul will add. I think if we're seeing this probably across a mix of products, but it tends to be more project-based, a little bit more on the Advanced Solutions area, where there's 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.

Paul Bay: Yes. Katherine, this is Paul. I'd say we've seen it in pockets. There was one instance in a 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 two out.

Katherine Murphy: 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?

Paul Bay: 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 Client and Endpoint Solutions business will grow at 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, tailwinds or opportunities with the AI use cases, and I called out one 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 as 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 forwards at SMB specifically too, 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 and refresh around PCs and AI PCs. So we feel pretty good about where we are and hope that, that continues to the back half of the year.

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

Matt Dezort: 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?

Michael Zilis: I could start on that. I think it's -- this is Mike. So I think the -- I think we sort of answered that a little bit in the last question. I think there's -- if you 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 with shipping delays, 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 AI 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 gives you maybe a little bit more flavor of what we're seeing.

Matt Dezort: 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 3 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 in Xvantage versus one of your traditional deals?

Paul Bay: 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 where we saw significant growth where we're using our intelligence. And have been training 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 one of the questions we get is how much revenue is going through IDA and I talked about it in our prior quarter, which is mid-single digits for those that are on Xvantage of the countries, the 21 countries that are on Xvantage are going through IDA.

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, is to have that be double digits by the end of the year of the revenue for those Xvantage 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.

Operator: Our next question is Erik Woodring with Morgan Stanley.

Maya Neuman: 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 throughout the overall device ecosystem, especially on the compute side. And I have a follow-up.

Michael Zilis: Yes. I mean just -- this is Mike. I think just as a general dynamic 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 rapid elasticity of demand that exists. But from our perspective, as we continue to distribute the products 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 does the demand reside, but we're not necessarily going to be conceding margin to try and capture sales.

It's about an ROWC equation for us and driving the right returns and profit metrics whenever we do any sale, honestly.

Paul Bay: 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 PC, if you're buying a microphone, a camera, a display, a 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 Xvantage 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 and our 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.

Maya Neuman: Great. And that partially answers my second question, just on kind of given the persistence of pricing inflation and the strength in Agentic AI. 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?

Paul Bay: I actually think it's a benefit to Ingram's business model. If you look at the investments we've made, actually, our Xvantage 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 hardware, software and cloud and services all in 1 transaction. So as we see that and you notice by our performance, as Mike called out, minus the CloudBlue 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-prem, now they're getting predictability, they're getting space, they'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 business outcome. I actually 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 end businesses want to go.

Operator: Our next question is from David Paige with RBC Capital.

David Paige Papadogonas: 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.

Michael Zilis: 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 a 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 GPU 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.

David Paige Papadogonas: That's very helpful. And then just 1 other thing. I think you've mentioned for CES low single-digit growth for 2Q. I was wondering if you could parse out network, notebooks and mobile or smartphone.

Michael Zilis: Yes. So networks and networking, for instance, would be an Advanced Solutions. So within CES, that low single-digit growth to 2 -- we don't break out the subcomponents, but the 2 biggest sub-pieces of it, just more qualitatively, are PC and desktops and then mobility devices. So we're still seeing runway as Paul said and answered to an earlier question, and it was baked a little bit into our prepared remarks as well on the PC refresh. And AI PCs 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 compare, which we alluded to even in our guide on the mobility side because we saw quite a bit of mobility 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.

David Paige Papadogonas: Congrats on the great results.

Michael Zilis: Thank you.

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

Adam Tindle: 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, Hyve-like business, or does it make more sense to kind of stay in the supply chain lane?

Paul Bay: Yes, I'll start off. Thanks, Adam. This is Paul. So to start off your last point of your question to be ODM-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 GPU chips. So it's GPUs, it's 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 that he said before, which is this is a very low cost to serve business and a very good ROWC 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 solution providers, 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 and give awareness? How we provide execution and training? That third one is 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, the 6 different products or services and what we're doing and our goal is to continue to provide a B2B or B2C experience in a very fragmented B2B business for our intelligent digital experience platform and Xvantage that we continue to focus on and how we extend that out.

Michael Zilis: 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 straddles into our Client and Endpoint in the form of components, but 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 growth 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.

Adam Tindle: Got it. Okay. I mean that's probably a good bridge into 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?

Michael Zilis: Yes. I think just talking a little bit more about the numbers. I mean I think the mechanics of what you're getting at. EBIT is really a function of where does 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 it 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 of that 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 and Endpoint, but also the leverage still continuing from an OpEx perspective.

Adam Tindle: 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.

Michael Zilis: 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. 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 Q4 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 bank on that as well as far as what we expect the year goes on here.

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

Ruplu Bhattacharya: 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 PC unit growth are you factoring in for the year? And as you look at demand from SMB versus larger enterprises, is it trending as you had expected? Or is there anything weaker 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.

Paul Bay: 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 PC 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. Again, that's coming 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, I'd say also cybersecurity, is 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?

Michael Zilis: Yes, Ruplu, I would just reiterate what I said earlier on that perhaps CES piece where we're guiding 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 AI PCs 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 so 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 end, all decent growth categories and then cloud, as we talked about, still seeing very healthy double-digit growth, especially around Infrastructure as a Service.

Ruplu Bhattacharya: 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 Xvantage 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?

Michael Zilis: 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, that kind of a time line playing out here. And that's really more deployment now than it is design.

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 can still bring some of the automation and efficiency to that. Some of those additional countries and that deployment is happening over the coming quarters.

Operator: 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.

Paul Bay: 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.

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