TD Synnex Hyve Hyperscaler Q1 ‘Demand Shortfall’ Sends Shares Down 14 Percent

‘In Q1 Hyve was below expectations due to a component shipment delayed from Q1 to Q2 and demand shortfall, which may last a few quarters,’ says TD Synnex CEO Patrick Zammit.

TD Synnex shares declined 14 percent Thursday after the distributor revealed a “demand shortfall” in its hyperscaler Hyve Solutions Corp. subsidiary, with a major customer delaying an undisclosed component shipment.

“In Q1 Hyve was below expectations due to a component shipment delayed from Q1 to Q2 and demand shortfall, which may last a few quarters,” said TD Synnex CEO Patrick Zammit after the company reported sales and earnings below analyst expectations for its first fiscal quarter ended Feb. 28.

TD Synnex shares were down $17.50 to $108.06 in midday trading, wiping out $1.54 billion in shareholder value with the company’s market capitalization dropping from $10.68 billion on March 26 to $9.14 billion on Thursday.

TD Synnex now expects Hyve revenue for the year to be “slightly down,” said TD Synnex CFO Marshall Witt.

The Hyve shortfall came even as the company’s bread-and-butter distribution business delivered “strong momentum” with all regions and major technologies contributing to a 7.5 percent growth in billings to $20.7 billion, said Zammit.

Overall, TD Synnex reported non-GAAP diluted earnings per share of $2.80 on a 4 percent increase in sales to $14.53 billion. The Wall Street consensus was $2.91 on sales of $14.79 billion.

Hyve Business Is ‘Temporarily Soft’

Zammit said that while the Hyve business is “temporarily soft” he expects the “situation will normalize as the market conditions continue to be favorable.”

Overall, Hyve delivered “double-digit” sales growth year over year but “unfortunately was “slightly lower” than expectations, said Zammit.

As for the component shipment delay to a large hyperscaler customer that impacted results, Zammit said there was “one very large business” that TD Synnex expected to ship components to in the first quarter that did not materialize. “We believe it is going to happen in Q2,” he said. “So it is just temporary. It is just a delay in the shipment, but unfortunately it has impacted our gross profit, our operating margin percent and obviously our cash flow generation.”

C.R. Howdyshell, CEO of Advizex, a Fulcrum IT Partners company that just won Nvidia’s Trailblazer Partner of the Year honor, said he sees the Hyve component shipment delay as part and parcel of doing business in the highly competitive AI infrastructure business.

“This is part of the ebbs and flows of the AI infrastructure business,” he said. “None of the AI deals are easy. They are complex. You have to have patience and play the long game.”

Howdyshell praised TD Synnex for doing a “good job” with customers like Advizex. “I am in frequent contact with executive leadership at TD Synnex, and I see them as being on the right path,” he said.

Unclear What Component Delay Impacted Results

It is unclear what specific component delay impacted TD Synnex results. That said, the wholly owned Hyve subsidiary is a leading provider of AI infrastructure for hyperscaler customers and is an elite Nvidia OEM partner. In fact, TD Synnex was just named Distributor of the Year for Americas Partner for Nvidia for the second consecutive year.

The Nvidia Hopper to Blackwell GPU transition has posed risks for hyperscaler customers and large OEMs juggling demand for the latest and greatest Nvidia GPU.

“We have one customer that has some temporary demand pause in their outlook and so that’s one of the reasons why we’re seeing a little bit softer backdrop in quarter two related to Hyve,” said Witt. “But thinking broader just in terms of the position we play, the markets we serve, the projects we are participating in and also the upcoming customers that we are about to on-board, we feel really good about the demand environment and our ability to participate in growth.”

Witt said the Hyve business has seen “no impact” from the tariffs imposed by the Trump administration. In fact, he said, TD Synnex with its on-shore capabilities is in a “much better position” to continue to provide hyperscaler customers with a “competitive” advantage.

TD Synnex Continues To Make ‘Significant Investment’ In Hyve

Even with the temporary pause in demand, TD Synnex continues to make a “significant investment” around specialized skill sets for the Hyve business, Witt said. “We recognize that in our design capabilities we need to continue to enhance that and win new business,” he said. “So we’re on-boarding a significant amount of technical engineers to enable that to happen. As you know, in many situations the on-boarding and the success of that can take 18 to 24 months to manifest itself. So we feel good about the investments, but we know that the revenue may come in future quarters.”

Witt said that TD Synnex was in a similar situation with an inventory build in its Hyve business in fiscal year 2022. “We saw margin depression associated with carrying that but then we started to see it sell through,” he said. “We saw a strong recovery of our cost of capital and good margin profile for the inventory that we purchased on behalf of our customers. We expect that to be a similar pattern that will take place with Hyve this year going into 2026.”

Zammit, for his part, stressed that the Hyve business continues to be “healthy,” with TD Synnex participating in a “huge” market with hyperscalers funneling more than $250 billion into data center buildouts in 2025.

“We believe that demand continues to be healthy,” he said. “The fact is that the demand in that space is really project-driven and, yes, we have a few projects where for the moment the demand is lower than expected. But again, we believe it is temporary. It is going to come back, and it will help us consume some of the elevated inventory. ... It’s a temporary situation. We are very confident that we are going to address and fix it over the next two quarters.”

Zammit said that the “strength” of the TD Synnex business model has the company growing faster than the overall market. “Our end-to-end strategy, global reach and specialty go-to-market approach continues to allow us to capture a wide range of IT spend,” he said.

Within the strategic technology business, all of TD Synnex’s businesses, including cloud, cybersecurity, data analytics and Hyve, grew by double digits in the quarter across all geographic segments.

Zammit said the company extended its reach in the quarter to 30,000 active partners and 500,000 end users doing business through its cloud marketplace.

“Our ability to deliver local expertise with a global reach makes us a go-to partner for vendors looking to expand in higher-growth markets,” he said.

“As IT solutions become more complex, driven by trends such as the convergence of hardware and software and the proliferation of technologies such as cloud, cybersecurity and AI, our collection of specialists and our go-to-market combined with our market- leading depth of capabilities position us to be the partner of choice for customers and vendors,” he said.