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TD Synnex (SNX +6%) initially traded sharply lower despite reporting huge EPS upside with its Q2 (May) report this morning, but recovered nicely during the earnings call. This was its largest EPS beat of the past six quarters and a nice bounce back following a miss in Q1. Revenues rose a healthy 7.2% yr/yr to $14.95 bln, which was nicely above the high end of guidance of $13.9-14.7 bln. SNX also guided Q3 (Aug) EPS and revs in-line although the mid-points were slightly below analyst expectations.

• SNX is a name we like to keep an eye on to gauge enterprise spending levels for network equipment and PCs. Also, SNX reports early in the earnings reporting cycle, so it gives us a sense of what to expect when earnings season rolls in next month. TD Synnex does not manufacture anything. It's more of a distributor of third party IT products, from software to servers and storage systems. When a business wants to spend on IT, SNX acts as the point person, putting everything together.
• All regions and major technologies experienced growth during the quarter. SNX noted Software continues to be really strong, especially in virtualization, with 20% billings growth fueled by cloud cybersecurity and infrastructure software. SNX also is seeing strong growth in PCs driven by the refresh cycle and SNX is finally seeing growth in networking after multiple weak quarters. Public cloud continues to grow double-digits and SNX sees no reason for a slowdown there.
• Non-GAAP gross billings is a key metric for SNX. It grew 12.1% yr/yr (+11.3% CC) to $21.6 bln, which was above the high end of its $19.7-20.7 bln prior guidance. We think there may be some disappointment with its Q3 guidance for this metric at $21-22 bln, which is flattish with Q2. In fairness, SNX tends to be conservative with this metric and investors do not seem too worried. Billings growth was seen across all regions and major technologies.
• We think another reason the stock moved higher during the call was SNX alleviating concerns about its hyperscaler segment, called Hyve. Recall that the stock gapped lower in late March when SNX described a "demand shortfall" at Hyve, with a major customer delaying a shipment from Q1 to Q2. On the call, SNX said that Hyve grew gross billings in the high teens and did well in Q2. This seems to have put concerns to rest.

It has been a roller coaster ride for SNX today. After initially trading sharply lower following Q2 results, the stock bounced during the earnings call and is up nicely now. There was a good amount of bullish commentary on the call with SNX showing strength across all regions and major technologies, especially software and the PC refresh cycle continues to be a tailwind. Also, we really think SNX calmed some nerves with Hyve.