Greetings and welcome to the Ingram Micro 4th Quarter in Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Willa McMann, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. I'm here today with Paul Bay, Ingram Micro's CEO, and Mike Zilas, our CFO. Before I turn the call over to Paul, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, statements about our strategy, demand plans and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements because of risks and uncertainties discussed in today's earnings release and in our filings with the FCC. We do not intend to update any forward-looking statements. During this call, we will reference certain non-GAAP financial information, Reconciliations of non-GAAP results to GAAP results are included in our earnings press release and the related Form 8K available on the SEC website or on our Investor Relations website. With that, I'll turn the call over to Paul.

Thank you, Willa. Good afternoon, and thank you, everyone, for joining today's call. I'm pleased with our strong execution and results in the quarter and for the full year. In the fourth quarter, we grew revenue by 11.5% with growth across all regions and delivered EPS of $0.96, both succeeding the high end of our guidance. We also delivered adjusted free cash flow of $1.6 billion in the quarter, the highest quarterly level in more than a decade, allowing us to well surpass our goal of generating adjusted free cash flow at a rate of 30% or more of adjusted EBITDA for the year. The top-line strength in the quarter was driven by client and endpoint solutions business, and we again had significant sales of GPU and other AI-related products in our advanced solutions business, which we believe positions us well to further pursue AI-attached opportunities as customers move from the compute to application layer. From a customer category perspective, enterprise remained quite strong, while SMB continued to improve for a fourth straight quarter of sequential growth. Geographically, we had top line growth across all four regions. Over time, we expect MIX to improve favorably from a margin perspective as client and endpoint solution sales moderate and we execute on our advanced solutions and cloud initiatives driven by our X-Vantage platform. We are also very pleased with our strong results for the full year 2025, with net revenue up 9.5 percent and non-GAAP net income up 8.6 percent. We were able to support this strong pipeline of growth while demonstrating solid operating leverage. Because of our Xantage platform and our ongoing AI initiatives, we were able to redeploy many of our associates to high-value-add, go-to-market initiatives to better support our customers. We say that Inger Micro has transformed to become aggressively digital while remaining amazingly human. And it is this combination of skills that is allowing us to deliver value to our customers in an increasingly complex market. Our Expandage platform uniquely positions us to help our customers succeed by digitally connecting vendors and customers at scale across the ecosystem, where we play end-to-end across the demand and supply chains. As we have previously discussed, we are moving through the three phases of X-Vantage value creation, with the first being OPEX efficiency, the second, top-line growth, and the third using data to drive growth and enhance margins and operating leverage. In 2025, we made great strides implementing the second phase of revenue growth and put in place the building blocks to capture the third phase, which will begin taking effect this year. During 2025, we delivered billions of dollars of revenue through the XVantage platform as we meaningfully scaled critical enablement capabilities for our customers and increased the consistency and predictability of revenue and operating income. We have been building X-Vantage for three years with proprietary data, a real-time global data mesh, and over 400 embedded AI and machine learning models, powering our AI differentiation. With AI, architecture matters, and an ERP-agnostic digital platform can deliver capabilities that a portal simply cannot. Through our proprietary real-time AI factory, which includes product ingestion, data enrichment, intelligent pricing, forecasting, and agentic workflows, we are improving the sales productivity, pricing discipline, forecasting accuracy, and cost to serve. While the high-growth AI infrastructure category may temporarily compress margins in the near term, our platform-led AI architecture is designed to convert revenue scale into structural operating leverage and sustainable profit expansion. With X-Vantage capabilities, we are better serving our customers while empowering them to better serve the millions of end customers that rely on their competencies and capabilities. An example of how we are doing this is our Intelligent Digital Assistant, which we call IDA, and I have discussed in prior quarters. During 2025, IDA enabled over a half a million proactive engagements, assisting our customers in converting over 100,000 opportunities in orders worth billions of dollars. Ida had a multiplier effect on our partners' outcomes, enabling the conversion of opportunities to sales orders at almost three times normal conversion ratios. And those solutions contain higher value, advanced solutions, and cloud products almost twice as often as our non-IDA transactions. Ida enables us to accelerate the sales cycles of our partners, increase their opportunity to sale conversion ratio, and focus on higher value segments. While revenue from Ida is still in mid-single digits as a percentage of our overall revenue, we see that a majority of Ida orders contain higher margin, advanced solution, and cloud products, and we believe we will exit 2026 with Ida representing double-digit percentage of the total revenue. While we continue to scale Ida across our operations, we also piloted our agentic assistant, which we call Sales Brief Agent. This interactive agent combines multiple internal and external data sources, enabling associates to identify new opportunities with our customers and convert them into value-added conversations. The agent also assists with value proposition development and the creation of appointments and follow-up tasks. It also helps customers convert these opportunities into sales orders with their end customers. An example of the power of Sales Brief Agent comes from our Canadian operation. Using the agent, our team identified opportunities with a customer to provide a solution for a large multi-corridor implementation with one of their end customers and highlighted an additional opportunity to migrate the software solution of another customer to high-value cloud-based alternatives. We are in the early stage of unleashing the full potential of our agentic roadmap, and we plan on expanding Sales Brief Agent globally during the first half of this year. In addition to Ida and Sales Brief Agent, we are seeing tangible impacts across the platform. For example, in 2025, on the X-Manage platform, self-service orders were up over 100% versus a year ago, improving productivity and enhancing customer experience. Average revenue per customer on X-Manage increased by 14% sequentially from Q3 to Q4 and over 30% year-over-year. In the largest country where we have rolled out XVantage, overall headcount has decreased and the revenue and gross profit per go-to-market head have increased. These points are representative of how XVantage is driving efficiency while freeing up time for high-value personal customer engagement. Underscoring how differentiated our technology is, we were recently granted two patents, and as we have mentioned, we have over 35 patents pending to further automate and accelerate our customers go to market. A recently approved patent is for email to order, or what we call ETO. This patent recognizes our automated solution that converts email orders into touchless order entries using generative AI technology. We receive millions of emails annually that we can now process through ETO. This patent is a significant milestone for our team, and there are more to come proprietary capabilities like eto further illustrate how the x vantage platform is driving optimizations from days to minutes in many areas of the business for the last three years we have been building x vantage on a modern data foundation this has enabled us to incorporate ai quickly and organically into our own platform and transform the way in which we operate We wanted to bring the lessons we have learned during this process to our partners and customers. So in 2025, we launched Enable AI to help them accelerate their own AI journeys. This program is already delivering tangible results, and we are seeing more partners join every quarter. Through our digital journey with X-Vantage, we can help our customers to first understand, then sell and deliver AI to their end customers. Although it's early days, we are encouraged as more customers move from awareness to delivering outcomes to their customers. One example of how customers are using Enable AI is a U.S.-based managed service provider, or MSP, serving the regulated and industrial verticals. After the MSP took the Enable AI assessment, our team facilitated a structured workshop to educate them on growth tracks for data, AI platform, and cloud. We provided targeted training sessions with our respective technical experts along the way. The customer went from chasing custom one-off AI projects to delivering consistent, repeatable solutions for their strategic vendors. Across their customer base, they are now deploying agentic automation for customer support, rolling out AI-enabled inventory, supplier workflow automation, intelligent document processing, and AI governance solutions. What was unstructured AI ambition is now a repeatable revenue motion they are deploying across multiple industries with initial six-figure engagements. Looking back on 2025 and all that we have accomplished with the initiatives I just discussed, I am incredibly proud of our team members. Together, we have navigated through complex issues, including tariffs, interest rates, and geopolitical uncertainty, as well as a cybersecurity incident in July, which we effectively remediated within days. Our associates' ability to deliver to over 165,000 customers and 1,500 vendor partners in 57 countries during this time is truly a testament to their talent, determination, and resilience. In 2025, thanks to our team members' global reach, decades of customer relationships, and our X-Vantage platform, we grew better than the market. Our full-year results highlight our focus on working capital management and profitable growth, while in tandem transforming the way distribution operates. For over four decades, we have stayed nimble in responding to the ever-changing IT spend environment, and the speed of change is faster today than it's ever been. As we look forward to the full year 2026, we are confident that we will continue to successfully navigate the inevitable challenges in the market, as we have done in past cycles. And considering the data points and initiatives I have shared, we are poised to further leverage the power of our platform while maintaining the core customer-centric foundation that has made us successful. We have the people, the platform, and the programs to empower our customers in a new era of technology. Thank you, as always, to our team members, our customers, and our vendors who have worked beside us as we transform. We look forward to another year of relentless execution and innovation. And with that, I'll turn the call over to Mike. Mike?

Thank you, Paul, and good afternoon. I'd like to reiterate how pleased we are with how we closed out the year, exceeding the high end of our guidance range for both net sales and earnings per share, and generating $1.6 billion of adjusted free cash flow in the quarter. I'd like to start my comments today by touching on a few fiscal 2025 highlights. As with prior quarters, I will be focusing primarily on our non-GAAP numbers. Net sales for the full year 2025 were $52.6 billion, representing an increase of 9.5% from 2024, and up 9.0% on an FX-neutral basis. We saw year-over-year increases in net sales across each of our geographic segments, punctuated by our Asia-Pacific region, which drove solid double-digit growth throughout the year. As Paul touched on, and as we have noted before, we saw a significant sales mix shift towards our lower-margin client and endpoint solutions across all of our geographic segments. We also saw strength in large enterprise customers, servers and GPU and AI infrastructure projects, and geographically towards our Asia-Pacific region. All of these trends yield lower average margins, but also lower costs. Full-year operating expenses were $2.63 billion, or 5.00% of net sales. representing a 47 basis point improvement in OPEX leverage from 2024. While a portion of this leverage is a result of the sales mix I just noted, it is also reflective of the benefits of the cost reductions we have taken over the last two years. We also continue to see increased operational efficiencies play out as part of the expanded roadmap we have been discussing now for some time. Non-GAAP net income for the year was $681.9 million, up 8.6% over the prior year, and non-GAAP diluted EPS was $2.90. Adjusted EBITDA for the year was $1.36 billion, up from $1.32 billion in 2024. Moving now to the fourth quarter, net sales were $14.88 billion, up 11.5% year-over-year in U.S. dollars and up 9.1% on an FX-neutral basis. I'm pleased to report that advanced solutions return to growth, with net sales up 11.3% on an FX-neutral basis. This was driven by server, storage, and cybersecurity, but also includes continued large-scale enterprise deals in GPU and AI infrastructure product sets. Client and endpoint solutions grew 8.8%, with strong demand for notebooks and desktops as the refresh cycle has continued through 2025 and now into 2026. From a geographical perspective, we had FX-neutral growth across all four of our regions, led by 14.6% year-over-year growth in APAC, and with North America not far behind, generating net sales of $5.10 billion, dollars, up 9.3% over prior year. Both Asia Pacific and North America sales benefited from the large enterprise, GPU, and AI infrastructure projects I just mentioned. It also saw strong growth in server and storage categories, and both regions saw strength in client and endpoint solutions driven by PCs. EMEA net sales of $4.63 billion were up 13.9% year-over-year in U.S. dollars, and up 5.9% on an FX-neutral basis, with growth across all lines of business, including strong double-digit growth in cloud. Finally, net sales in Latin America were $1.08 billion, up 6.6% in U.S. dollars, and up 1.2% in constant currency, driven by strength in sales of client and endpoint solutions, offset partially by software results in advanced solutions and cloud. Turning to our customer categories, we saw the fourth consecutive quarter of sequential growth in SMB. We remain encouraged by this trend and the role X Bandage is playing in helping us serve this and all of our customer categories. Fourth quarter gross profit came in at $966.4 million or 6.50% of net sales, down 51 basis points from the same period last year. The year-over-year decrease in gross margin was driven primarily by a continued heavy sales mix in our lower-margin client and endpoint solutions, as well as higher business growth coming from our Asia-Pacific region. To elaborate on this geographic impact as an example, our Asia-Pacific gross margin averaged roughly 250 basis points less than the overall average margins of the company. But it's also worth pointing out that our cost to serve across Asia Pacific is also much better than the rest of the world. In addition to these factors, gross margin was also impacted by continued strength in large enterprise customers and significant project-based business in GPU and AI infrastructure product sets. AI-related project sales alone drove an impact in Q4 of more than 15 basis points on gross margins, as these projects continue to be large enterprise deals that are sold on more of a fulfillment basis, which also makes them lower cost to serve and very working capital efficient. But as we've talked about in the past, this investment into GPU and AI infrastructure is also strategically important in the long term as AI becomes more accessible and we move across our broader customer base from enterprise, where our complementary services capabilities also yield greater profit. Q4 operating expenses were $656.7 million, or 4.41% of net sales, compared to 5.15% in the same period last year. The year-over-year improvement in operating leverage of 74 basis points reflects the continued benefits of optimization and automation from X-Vantage, as well as a positive recovery via insurance proceeds that we expect to receive related to a previously disclosed matter. While these proceeds drove a net benefit in Q4, most of which we had baked into our guidance for the quarter. It is offset to a decent extent by reserves and expenses in this quarter for final settlements associated with this matter, as well as the loss of business impacts incurred earlier in the year. During the quarter, adjusted income from operations totaled $350.0 million, and adjusted income from operations margin came in at 2.35 percent compared to 2.29 percent in the same period last year. Our non-GAAP net income for the quarter was $226.7 million compared to $213.1 million in the comparable period last year. Fourth quarter non-GAAP diluted EPS was $0.96 compared to $0.92 in the same period last year and above the high end of our guidance range for the quarter. Quarter adjusted EBITDA grew to $430.9 million compared

to $418.1 million in the comparable period last year. Turning now to our balance sheet. At the

end of Q4, net working capital was $3.6 billion compared to $4.1 billion at the same point last year, reflecting significant reductions in working capital investment to close out the year. Fourth quarter working capital a day improved to 24 days from 26 in the same period last year. Our continued focus on return on working capital, including the expanded use of channel financing solutions to accelerate cash conversion, allowed us to end the quarter with $1.86 billion of cash and cash equivalents and debt of $3.2 billion. This resulted in our net debt-to-adjusted EBITDA leverage ratio, improving sequentially from 2.2 times to 1.0 times. As a result of these factors, our fourth-quarter adjusted free cash flow was $1.63 billion compared to $337.2 million in the prior fiscal fourth quarter, representing our highest quarterly result in more than a decade. This landed our adjusted free cash flow for the full year at $1.10 billion compared to $443.3 million in the prior fiscal year. I previously discussed the seasonality of our free cash flow and am pleased to have well exceeded our goal of realizing 30% or more of our full year adjusted EBITDA to free cash flow in 2025. During 2025, we also paid down $125 million of our term loan balance and we repaid an incremental $200 million in February of this year. This brings our total repayments on term loans to $1.89 billion since the beginning of 2022. During 2025, our interest expense was lower by $35.8 million year-over-year, primarily as a result of these debt paydowns. Shipping now to our guidance for Q1 of 2026, we are guiding net sales of $12.45 billion to $12.80 $0 billion, which represents year-over-year growth of approximately 2.8% at the midpoint. This is comprised of flat-to-low single-digit growth in client and endpoint solutions, low-to-mid single-digit growth in advanced solutions, and double-digit growth in cloud. We expect first-quarter gross profit of $840 million to $895 million, which would represent gross margins of roughly 6.87% at the midpoint. We see mix improving in the new year, so this represents a very solid 38 basis points sequential improvement over Q4 2025 and 12 basis point improvement versus Q1 of 2025 at the midpoint of this guidance. We expect non-GAAP diluted EPS to be in the range of $0.67 to $0.75 per diluted share, which is based on weighted average shares outstanding of approximately $236 million and a non-GAAP tax rate of 27% for the quarter. Finally, while we don't guide on free cash flow, it is likely that we will see a higher than seasonal normal use of cash in the first quarter of 2026, as we came out of 2025 with a very low level of working capital, as I touched on earlier. But our commitment to generating free cash flows remains, and we still expect to realize well over 30% of our adjusted EBITDA generation to free cash flow over 2025 and 26 combined, while we continue to manage our balance sheet with a focus on investing in the business, profitable growth, and quality of sales over time. In closing, I am very happy with how our team continued to execute on overall operating efficiency. We continue to optimized, setting us up very well to capitalize on a curve of upward profitability as we see higher margin growth opportunities present themselves going forward. With that operator, we are ready for the question and answer session.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from Eric Woodring with Morgan Stanley.

Hey, guys. Thank you very much for taking my question. I would love if you could maybe unpack the exact drivers underlying the revenue guidance in the first quarter. I see the really strong gross margin improvement sequentially and modest year over year. I understand the kind of segment-level guidance that you've given, but can you just maybe give us a little bit better flavor on, for example, PC refresh or AI and GPU-enabled sales, Asia-Pack? Just want to understand maybe a little bit more detailed what you're kind of seeing or what you expect to see in OneCube. And then a quick follow-up, please.

Sure, Eric. I'll start on that, and Paul will add, I know. As we said in our prepared remarks, we're assuming on the CDF side, flat to low single-digit growth. And the real factor there is we do still see runway on the PC refresh going out for still a couple quarters as we see demand still pretty strong there. But the compare is certainly a much bigger compare to Q1 of last year, where we also saw great strength in that category. We also had quite a bit of mobility sales in our Q1 of last year. So our mobility subcategory, which is the second biggest, we don't break out the specifics of the subcategories, but it's the second biggest within CES. And that's actually forecast to be down year over year. So you end up with, you know, again, kind of flattish to low single-digit growth in client and endpoint. But we're encouraged where we see continued solid growth more in the low to mid-single digits in advanced solutions with server storage and cyber still being quite strong. We're not assuming any notable GPU deals. It doesn't mean we aren't still participating in those GPU and AI infrastructure deals, but they are, you know, large and they come along, you know, every so often in a handful of our countries, and we're not assuming any notable of those in Q1. And then lastly, cloud, you know, growing at double digits where we continue to see strength in infrastructure as a service, modern workplace, and a handful of other areas. But the only other thing I would just touch on quickly, because you alluded to it, is, you know, where do we see sort of supply constraints? I think overall, I would call our revenue estimates conservative in this regard, because we are starting in Q1, starting to see ASPs increase. We did not really see that in Q4. We didn't see any notable pull forward in Q4 either. But we are starting to see those price increases kick in, which would have an increase in revenue as well as cost of sales. But the wild card there is where is the sort of fungibility of the demand cycle through that. And it's also taking a little bit longer to get the product because of the constraints that exist. So, we sort of off from the ASP standpoint with some of those other, you know, more broader demand and timing factors. So, hopefully that gives you a little bit more color.

No, that's great. Thank you for that. And then just a quick follow-up was, and you touched on it, was just commentary or thoughts around pull forward. It was an above seasonal quarter. We've heard that from some of your peers. But I would just love to kind of understand what exactly you saw and, more importantly, how you protect yourself from that as we look into this period of higher prices and the potential for that to happen. Thanks so much, guys, and best of luck.

Yeah, so I can take the first pass at that one, too. I think, as I just said, yeah, we really did not see anything notable for pull forward in Q4. It remains to be seen how that plays out in Q1. And I sort of gave you a bit of that color on how we're thinking about it from a revenue perspective just now. How we protect ourselves. You know, we're constantly discussing with our OEM partners. We know, you know, well in advance or at least decently in advance when and if price increases are coming in that can afford some opportunity to do buy-in strategically that we may pursue. And that's another reason why we also assume, you know, as we look out at Q1, as I mentioned in my prepared remarks, a bigger than normal seasonal potential outflow of free cash in Q1 as we do work with the vendors to capture those opportunities when they arise.

So the only other thing, this is Paul, is I'll give you a little bit more color kind of on the demand and the conversation we've been having with our customers and our vendors. So we kind of look at the demand in two kind of dimensions. One's the price elasticity, and two is the demand. And so we're really gauging the elasticity of demand, and particularly in the S&B markets. As you know, we serve, and it's too early to see the impact on that right now. On the supply side, so I've had conversations with many of the top largest, our vendor partner CEOs over the last couple of weeks, primarily around advanced solutions and then to some extent the PC, so server storage and kind of what the allocation will look like for the mid-market and SMB channels if there is demand. So they've all confirmed that there will be allocation from a demand perspective or there will be allocation if there is demand. So I think the real question will be kind of that price elasticity and how that does potentially impact demand and how those, you know, prices get absorbed within each of the different product sets. So, we're working, you know, the last thing I would say is we're working with our vendors on potentially alternative solutions, things like on the enterprise level, shifting from what we call CTO or configured order, now moving it to build the order, which helped minimize impacts to pricing and leverages the current available inventory to help make those solutions work. So, you know, those are a couple of things we're doing kind of real time with our vendor partners and our customers.

Thanks for all the color, guys.

Thank you. Our next question is from Catherine Murphy with Goldman Sachs.

Thank you for the question. I was wondering if you could talk more about the momentum you're seeing in the AI infrastructure enablement side. If you could talk more about the role that Ingram and distributors more broadly play in addressing enterprise needs for AI and the infrastructure that you may be selling beyond GPUs. And if there's anything you could share to help us quantify how big this opportunity was in the quarter and where the opportunity could go to for the full year. Thank you very much.

Yeah, so I'll start, and Mike, you can jump in. Mike called it out as prepared remarks. It had a 15 basis point impact that those products that we define as both GPU and AI-enabled infrastructure is what we're looking at. So it did have an impact. We don't call out the revenue necessarily, Catherine, but if I take a step back, this is all about how do we monetize GPU and the related product set. So as I mentioned, the AI-enabled program that we've had, so there's really three growth tracks that we have there. It's about preparation and awareness, execution and training, and then third, which is most important, which is monetizing and driving outcomes. So if we look at kind of the people that were coming through the funnel and the prep and awareness versus actually working through the outcomes, we've seen significant increases in the percent of partners that are not just coming into that first step but getting into the second and the third step. And I called some of that out, one example or use case that we had in this last quarter in my prepared remarks. So we are definitely seeing that opportunity for us to play a role in that. I think it's similar to if you go back, but even at a much quicker pace, if we go back a dozen years ago around cloud, there was a lot of education before it kind of came to the modernization. We're seeing that happen at a much quicker pace now with GPU and or these AI-enabled infrastructure products. So we'll continue to monitor that and see as people continue to move through that pipeline and getting really to working on those outcomes. As I mentioned, we played a pivotal role in that most recent use case that I mentioned in the prepared remarks.

And just as a quick follow-up, noted that these deals are diluted from a gross margin perspective, but how should we think about the cost to serve and overall EBIT margin profile for some of these AI deals? Thank you very much.

Yeah, they're quite low cost to serve because most of these are sold on – right now, what we're selling is more on a fulfillment basis, So not a lot of costs attached to that, and also very working capital efficient. We aren't stocking these deals in advance. They are bespoke.

Our next question is from Samik Chatterjee with J.P. Morgan.

Thanks for taking my question. And maybe, Paul, if I can start on the first one, just in relation to what you're hearing from your customers about any visibility into the second half, And given their current sort of purchasing behavior, what are they telling you about any sort of demand drivers for the second half? And I'm curious if you're seeing the same level of visibility that you see typically at this time of the year into the second half. Any thoughts around that? And I have a follow-up.

Yeah, so this is Paul. So we haven't seen, and we only got it obviously one quarter out, but I'll give you kind of the conversation that we're seeing from a customer perspective. Jeff. Again, working with our vendors and our customers, I think the enterprise, when you look at budgets, is preparing for what they're seeing for the remainder of the year and scheduling that out. As you trickle down more into kind of mid-market, but really SMB, I think it's more fluid right now in terms of what those opportunities are and what the challenges and headwinds and kind of, like I mentioned, the price elasticity. So we're seeing more planning at the enterprise level for budgets for the remainder of the year, and SMB is starting to, you know, have more conversations around what that looks like. Again, we're working, and I think this is where we go back to that, you know, in uncertain environments, we have a great track record of navigating uncertain markets, and because of our reach and scale, we get good visibility globally on kind of all the moving activities. So, we're staying very connected to our vendor community and making sure we're having conversations down in through our channels throughout each of the different geographic regions. So I would say in the end, it's a little bit still fluid as we sit here today. And we haven't seen, as Mike mentioned, we haven't seen a material pull forward and or anything as we sit

here where we are in our RT1. Correct. And maybe just to follow up for Mike, Mike, you did mention for the 1Q guide that you're not assuming any GPU enablement deals as such for now. If you were to see some of those come through, would we expect the same sort of trade-off on gross margin that you had in 4Q, which is a slightly lower margin percentage on the gross margin side, and then essentially being a creative to operating level? Is that sort of the way to think about the 1Q guide in terms of when you see those revenues

Yeah, that's exactly right, Smeek. that that would be the characteristics we would expect if we do capture some of those deals.

But what I want to make sure in Mike's prepared remarks or what we spoke about, it was no material difference than what we've already seen. So, we'll still be participating in that business in Q1. It's just that we're not seeing anything different than what we've seen and discussed over the last couple of quarters.

Great. Thank you. Thanks for taking my questions. Our next question is from David Page with RBC.

Hi, thanks for taking my question, and thanks for all the color provided so far. I know it's early, not sure if you'll be able to answer this, but there's been, I guess, a fluid situation with how tariffs are working and just geopolitics. I was wondering if that was based into the 1Q guide and how you're thinking about 2026. Thank you.

Yeah, so I think, you know, certainly we wouldn't have a quarter without more tariff news, I guess. But it's something we've been living with, quite frankly, since the first Trump administration. So I would just reiterate, they are in the U.S. We are importer of record from the vendor. We do continue to monitor it because, as you've heard us say before, certainly anything that will spark a more inflation can have some impact on demand and probably even a little bit more so in the more profitable SMB categories. where there's more sensitivity there than perhaps in the large enterprise where we've seen that category of customers be a little bit more impervious to the tariff environment. But we just continue to watch it just like everybody else at this point. Thank you. Our next question

is from Ruplu Bhattacharya with Bank of America. Hi, thanks for taking my questions. Mike and Paul,

you talked about the PC refresh cycle continuing. How long do you think that continues and how are you thinking about the mix of client and endpoint versus advanced solutions in fiscal 1q and maybe overall in fiscal 26 you've guided it looks like gross margin to about 6.9 percent in fiscal 1q what are the puts and takes that we should keep in mind as that progresses throughout the year

and i'm yeah so i'll start off yeah yeah this is fall so i'll start off so we saw double digit growth in Q4. And as we mentioned, we were, as we talked about going into 2025, the refresh was a little delayed, then it accelerated. So, we had good growth through each of the corridors. And again, solid double-digit growth in Q4. I would define it as we're in the middle to the beginning of maybe the back half of the refresh. There's still hundreds of millions of units that need to be replaced out there, which implies that there's still a refresh that could go well into 2026. As you've heard from probably our OEM partners, some have said upwards of 40% haven't been upgraded. The market remains durable with a significant portion not refreshed from a Windows 11 standpoint. Again, the industry analysts would say there's still hundreds of millions that are out there. If you look at a little bit, we get asked about AIPCs and the refresh that was happening there. And we're still seeing that kind of being in the middle teens with regard to, you know, AIPCs. I think the question comes down to is what I touched on briefly, which is around the price sensitivity or price elasticity as prices go up on components. what are their other alternatives? So we're looking at are there other alternatives? How do you look at potentially different features within PCs? Maybe everyone doesn't need to have a touchscreen, maybe not the same memory. So we're looking at alternatives. And, you know, I point back to Ruplo that, you know, in uncertain environments, we figured out how to manage through this, and I think with success. And one of the differentiating, you know, value propositions that Inger Micro has is our global reach. So as vendors look to be more narrow about their supply, potentially, supply and demand, a lot of times we benefit because we have that reach and all the different regions, and we could be more pinpointed and making sure that we're delivering on that demand. And, again, on the other products, that's as we talked about, we're just now starting to see those price increases starting to hit, but as we sit here today, it hasn't impacted our demand so far.

okay thanks for the details there paul mike as a follow-up can you talk about your capital allocation priorities either in terms of debt paid down versus buybacks versus mna and also talk about areas of investment i think you said average revenue for customer on x vantage grew 14 sequentially does that factor out other factors like just the growth over of the overall economy is that specifically related to the benefit of x vantage And if so, then is that an area that you continue to invest in?

Yeah, so this is Paul. I'll answer the last question, and then Mike will get into the financials and kind of the capital allocation. So to reiterate, self-service orders were up over 100% versus a year ago, which is driving more productivity across the entire ecosystem and a better customer experience. Our average revenue per customer is up 14% sequentially and 30% year-over-year. These are X-Vantage stats, so independent of kind of the overall company stats for the businesses that are not on X-Vantage. And then in the largest countries where X-Vantage is deployed, total headcount in those countries were down, but both revenue and our gross profit per go-to-market head have increased. So, again, we're driving productivity, and that's related to ExVantage, too. So, we're seeing the benefits. And the last thing I would say is the three phases of ExVantage were about driving frictionless and streamlining operations, driving OPEX. The second one is around demand generation and growth. And then that third one that we're just entering kind of the arena on 2026 is around profitable organic growth and making sure we're matching supply and demand more intelligently. And I'll let Mike speak about the capital allocation.

Yeah, so on the capital allocation, I think we're going to continue to just stay the course with what you've seen us been doing, which I'm pretty pleased with where we've been landing. As we just announced in this earnings, we repaid another $200 million of our term loan in February after year-end, approaching $2 billion in total paydowns of debt over the last handful of years. So we've continued to delever very well with cash flow generation while we are investing in XVantage organically. We haven't done a lot of M&A. We still have the dry powder to do that very easily, especially with smaller tuck-in acquisitions having been more the wheelhouse of the last few years that don't cost a lot of money, but they really bring in tremendous skill sets, alignment in different ways. It doesn't mean we can't also, with our capital structure, pursue a larger deal if that opportunity presented itself. And then lastly, from a return to shareholder perspective, we're proud to continue to be paying a dividend really right out of the gate when we went public. But we've also sequentially raised that dividend by about 2.5% every quarter, and we did that again for this quarter to be paid in a handful of weeks. So we continue to drive that part of the return to shareholders as well, certainly longer term when we have a different kind of overall holding structure from an ownership perspective. Share buybacks would also be, in a normal course, would also be a potential tool. But last but not least, I would just point out we did authorize also a $100 million share buyback that we just announced in this release as well, which is really more of purchasing additional shares from Platinum that would happen adjacent to any follow-on offerings of stock.

Okay. Thank you for all the details. Appreciate it.

Our next question is from Adam Tyndall with Raymond James.

All right. Thanks. Good afternoon. Paul, I wanted to start with the topic du jour on component and memory costs. Some of your vendors have been pretty explicit on their intention to revisit contract terms with channel partners. I think Cisco was pretty explicit in their prepared remarks, and some of the others have followed with some of that. I wonder, based on the Q1 guidance here, it looks like gross margin is getting better, so I'm not seeing that guided in the numbers. but maybe you could talk qualitatively on what you're seeing in terms of the vendor OEMs and those contract terms with channel partners, any impact you're seeing or expecting from here.

Yeah, thanks, Adam. So as it relates to the terms, yes, there are multiple vendors. It depends on what categories, too, that you're looking at. Some are in terms of how long prices are good for. Some are end user dependent on a purchase order, pricing fluctuations. So, yes, there are a number of different things. And we're used to managing in that complexity and being able to do that. And, again, I go back to my comments I made around one of the advantages of Ingram Micro is that our global reach. So, as vendors are looking for a clean supply chain down to demand, meaning the end user, It comes back very quickly, back in through us, and we can communicate to them. So we've got, you know, quote, unquote, war rooms right now going on to make sure we're looking at that demand. And back to my comments of the CEOs that I've been speaking with, which is we'll manage to what their contractual terms that they're trying to get out there, because they're all trying to figure out what's their competitive advantage with regard to capturing share in this uncertain environment and kind of price increases. So we're sitting right in the middle of that. And, again, the fact that we have 1,500 different vendors on a global basis and 165,000 customers globally, it allows us to look at what are the alternatives to other solutions at the same point. So you're right. You're seeing what we're hearing, too, which is vendors are changing their terms, whether it's time to contract, whether it's how long pricings are good for, back orders. You have to have a PO from an end user all the way back through the supply chain. And again, we've managed through this in a number of different areas in the past.

Got it. Thanks. Maybe just a follow-up, you know, AI is the other topic and obviously driving upside in the quarter. I wonder, Paul, with the significant sales of GPU, your philosophy on capturing AI growth, And I mention that because it seems like you're participating in some of the fulfillment aspects. Some of the competitors out there go beyond that and do build and assembly and things like that in AI data centers. I'm wondering if you're inching your way in that direction or how you kind of think about investing in AI and where it makes sense to participate versus where it doesn't. And if I could sneak just one quick one in for Mike to clarify, that pre-cash flow comment, the 30% combined of adjusted EBITDA for 2025 and 2026, I'm thinking that's implying that 2026 may be a cash use year, but I just wanted to clarify that there's a couple different ways to do this.

Yeah, I'll just hit that one real quick first and then let Paul talk on the AI piece. um it was well we said we would be uh we expect to be well over that 30 percent threshold for the two years so uh we do expect and and we're we're pushing the business towards being cash flow positive just not to uh you know and not to the same degree as what we saw in this last quarter and last fiscal year given where we closed the year at uh and the big variable there Adam, as I said earlier, would be whether we do see buy-ins coming on a quarter-by-quarter basis. But for the full year, we still expect to be cash flow positive when it all settles down.

And so, I'll answer the question around GPUs. So, we've expanded it a little bit more. You've heard us talk about GPU and monetization of the GPUs. And I've said it kind of goes from proof of concepts and high-end compute kind of moves downstream. and that's where our Enable AI really participates. So helping partners not only just understand but sell and deliver AI at scale, which some of that is GPU and the monetization around that. There's services that we can provide. I gave a little bit of color in my prepared remarks about the use case. So actually we're looking at it, we think differently than some of the other markets and on a global basis of how we can capture not just GPU monetization, but we call it GPU and AI infrastructure on a go-forward basis. So it is, on that GPU specifically, much lower cost to serve. So it's still good return on working capital and profit to the bottom line. We're going to continue to support that because we sit right in the middle of an ecosystem where we're going to capitalize on where those opportunities are. But what you'll see is continue to build services and capabilities around how we can help our customers really deliver, really understand, deliver, and service AI at scale on a go-forward basis.

Very helpful. Thanks.

Our next question is from Maggie Nolan with William.

Hi. Thank you. So there are a lot of companies and a lot of distributors talking about AI enablement and digital platforms, and I'd like you to maybe double-click on your competitive positioning positioning and what in particular you think are the capabilities within XVantage or elsewhere in the business that would be hardest for your competitors to replicate over the next couple

of years? I'll take that, Maggie. Thank you for the question. This is Paul. So, if you look at we've been on this journey for three years, there's really three different areas. First, we created a data mesh, which is not a data lake. It allows us to really use infrastructure and the information differently from overall architecture we say architecture matters and so first we got the up to have the clean data we pulled that out secondarily we talk about our 400 models that we've been training for over a year which is ai machine learning models and which has allowed us as we mentioned last earnings call to really get into now doing journey and process mapping how to best deliver ai agents on a go forward basis and that's what we're able to do with our sales brief agent. So, we think architecture is completely different. Say it another way, we're building innovation. We're not just integrating or connecting like legacy distribution had done before. I like to say intelligence and data. Ultimately, where we're going is the new business-to-business operating system. So, we're going to continue to build and innovate, not just integrate and connect with regard to our systems. And it's all real-time. It's global. We've got 35 patents pending. We had two approved, which, again, demonstrates the innovation that we're building. And so we're going to continue to make that investment and making sure that ultimately we have the intelligence and data that really helped drive our customers to better outcomes more efficiently and effectively with their end businesses.

Maggie, one other thing I would just add to that is also geographic presence. So, you know, these larger GPU deals that we're talking about are tending to happen probably more predominantly in North America and APAC regions, and our presence across APAC and ability to serve that and actually have a global conversation with these OEMs that others would not be able to have as readily is another, you know, function of our footprint that is advantageous in this regard.

And the last thing I would say, Maggie, global, but really a single pane of glass. So for me, a single pane of glass, as we started this journey, is you have hardware, you have software, you have services, and you have cloud, all in a single platform to be able to transact as opposed to having multiple different systems, multiple different people attached to it. So you can basically deliver an end-to-end experience through all things technology.

Okay, thank you. And then mix improvement in 2026. Should we expect like a linear gross margin improvement quarter over quarter? Or are these large AI infrastructure projects going to introduce some lumpiness?

Yeah, I can take a first pass at that, Maggie. This is Mike. So, I think, you know, we are guiding beyond Q1, but you can see our guide applies a pretty healthy sequential increase, but also year-over-year double-digit basis point improvement in gross margins, which is really a function of how we see that mix play out, as I mentioned in my prepared remarks and also in answering the question earlier. Now, if we were to see more outsized AI infrastructure and GPU deals come into play that skew more towards that, it would be a bit dilutive to that margin, but it would be accretive to gross profit dollars and accretive to overall OI dollars as those deals are. So that's the only thing I would just call out that could be a variable as far as seeing that margin improvement in Q1. As we look out further, we're focused on driving growth of advanced solutions in cloud faster than market and to grow client and endpoint with market, whatever market may be across those categories. That's not anything new, but we expect to continue to do that, and that, too, would create an accretion to margin over time.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Paul Bay for any closing comments.

Thank you for joining today's call. We're proud of the progress we're making in our Q4 performance and results. We exceeded the high end of our guidance and revenue and EPS, along with strong free cash flow generation at the highest quarterly level in more than a decade. As we look forward to full year 2026, we are confident that we will continue to successfully navigate the inevitable challenges in the market as we have done so in past cycles. To reiterate again, we have the people, the platform, and the programs to empower our customers in a new era of technology and look forward to continue execution and innovation into 2026. Have a great rest of your day.

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