to operate in a far more efficient manner, and that remains extremely scalable. You know, we will invest in some of those specialized skills, but we don't need to invest just simply to handle growth because we've built that much more automation around it.

Yeah, and this is Paul. So as I talked about in my prepared remarks around the 10 countries with maturity, we had double-digit gross profit and gross margin per go-to-market head and delivered lower OPEX driving leverage, and that wasn't really related to the AI deals that we're participating That's really on our core business, and we're going to continue to focus on the opportunities we have there, and that's also not just more efficient and more profitable, but it's also a better experience to the customers because we're using our intelligence and our data to actually bring those opportunities forward, and that's where I go back to being more proactive versus being reactive.

Okay. Thanks for all the details. Appreciate it.

We'll go next to David Page with RBC Capital Markets.

Hi, Mike. Thanks for taking my question. I want to ask on climate endpoint solutions, solid growth, 13% in the quarter. Would you be able to break out category growth, whether it be PCs, mobile, and anything in the CES category?

Yeah, PCs specifically?

Yeah, well, I think you're just asking sort of the general breakout. I mean, we don't give the subcategories, but I think the across client and endpoint, certainly the PC notebook category remain very healthy, growing double digits. We did see solid single-digit, high single-digit growth in smartphones components, some of the consumer electronics categories also growing. So it was actually somewhat healthy across a lot of the CES categories, but PC Notebooks and the continued growth we see there on the refresh cycle continuing was certainly a big driver there.

Yeah, the only thing I would add specifically to the PC comments that Mike made is we still think, as we're seeing the refresh cycle and Windows 11 happen, and as we mentioned, coming off of significant double-digit growth in Q2 of 2025, we think there's still room to run, particularly as AI PCs continue to gain traction. and we talk about that, AIPCs accounted for more than 30% of our revenue in Q2. So we believe this is consistent with what you'd hear from the other OEMs and analysts. So we continue to see solid demand, which would suggest that there's, you know, an extended cycle still with the PC refresh right now.

Yeah, thanks for the color. Go around some of the good quarter. Thanks.

Moving next to Adam Tindall with Rabin James.

Okay, thanks. Good afternoon. This one might be for Mike. If I was to look at this quarter independently, obviously, you know, massive growth, almost 30% growth in APAC. Understand that that's a lower margin region, but very working capital efficient. So it tends to be good returns despite the lower margin. But then I look at the cash flow statement and used over half a billion of cash in the quarter. So I'm just wondering if you could maybe double click on the rationale for such a sizable cash use in the quarter, given such strong APAC, given the GPU stuff that's supposed to be capital efficient? I imagine there's some timing and stuff in here. If you could just talk about the trajectory of cash flow from here, do you still think we can reach positive cash flow for fiscal 26, or what does it look like for investors who are looking for more sustainable cash flow? Thanks.

Yeah. No, thanks, Adam. I think one thing I would point to that I did mention in our prepared remarks, you know, I think there's two factors that are driving a lot of that cash flow phenomenon. One, and I'm going to focus on inventory more than anything here, but it applies on the AR and even the AP side as well. One, the ASPs themselves are driving quite a bit of inflation in the dollar of the balance sheet. So if you think about, if you look at our inventory On a U.S. dollar basis, it's sequentially up about 16% from where we closed Q1. A significant portion of that 16% is just the ASPs themselves. But then on top of that, we have invested strategically, not only for the just general growth we see across the various categories. You're spot on. As we talked about, the AI and GPU piece isn't as much a driver of this. But the other hardware categories do require some investment as well as investment in other elements of the working capital spectrum. So we are seeing, you know, just generally investing for growth and some opportunistic purchases to get out ahead of what continue to be ASP increases. We see the ISP increases in many of the categories starting to decrease in how rapidly they're going up, but they are still going up. So we have sought that opportunity to make some purchases ahead. And so that's another reason for where we see the inventory balance in particular a little bit heightened exiting Q2. So as I look out over the rest of the quarter, you know, we don't guide formally on free cash flow. But what I would leave you is with this, and hopefully it answers the last part of your question. I think we usually have a decent-sized free cash outflow in Q3 where we're stocking for the Q4 or even late Q3 kind of hockey stick in sales that always happens. We still expect demand to be quite healthy through the end of the year, as we've talked about, but we've just pulled forward some of that stocking level. So that could drive a better-than-normal seasonal Q3, and even if it's not to the same degree as we saw last Q4, where we had $1.6 billion of free cash flow in that quarter alone, we certainly see, in all likelihood, a very solid Q4.

Thank you.

Moving on to Ellie Dyek with William Blair.

Hi, this is Ellie on for Maggie Nolan. Congrats on a quarter. My question is, EPS came in at $0.82 this quarter, and the midpoint of guidance implies a sequential step down to $0.77. So, could you just expand a little bit on the drivers there and going forward for the next couple quarters, the ability to drive operating leverage?

Yeah, I can start on that. This is Mike. You know, there's a lot of different factors that go into that. I mean, certainly what's implied by, and I'll focus on even just the high end of the range for this purpose, you know, is a low double-digit revenue growth, a bit more growth on the EPS end of the spectrum. And some of this is just mixed factors as we see how the mix evolves into the next quarter. We do see sequential margin accretion. You can see the, Again, our guide is implying a gross margin around 6.8%, but also a little bit different mix in how we're serving some of that business. And so the leverage is still there and certainly holding serve, and we have those same efficiencies, but we're seeing more of that mix of growth. What we see from a top-line perspective, which we didn't really necessarily lay out specifically in our prepared remarks, but that top-line growth in that guide is still seeing healthy double-digit growth in cloud, which is low cost to serve, very efficient, low working capital. But then we're also seeing probably upper single-digit growth in CES, particularly around the continued legs of a PC refresh that we just talked about. and then, you know, mid to maybe upper single-digit growth in the advanced solutions, but not assuming, you know, outsized GPU and AI infrastructure.

Thank you.

We'll hear next from Alex Valero with Loop Capital Markets.

All right. Thank you for taking my question. Just real quick on gross – can you expand on what the gross margin delta is between deals sourced through X-Vantage versus traditional deals?

We don't this fall. We don't really break that out. What we do talk about is the leverage that we got off of it and the fact that average deals that are going through there are closing four times more than the ones that are not going through X-Vantage. And one of the key points that we made a comment about in our Q4 earnings call earlier this year was our expectations about how much can go through our intelligent deals digital assistant. Our IDA piece of the platform, which generated approximately a billion dollars in net revenue for Q2, it was approximately 7%. Our commitment coming into this year was that we have double digit of our revenue going through IDA, which again is a better business, more profitable, and the conversion rate for our sales organization is four times better than the average kind of opportunities that go through there. So we don't really break out the difference between publicly between, you know, the IDA or, excuse me, X-Vantage versus kind of the core business.

And Alex, just one thing I would add, you know, as we did say, you know, a majority in the countries that we have, you know, substantially more functionality of X-Vantage deployed, you know, the vast majority of their activity is going through X-Vantage now. So XVantage is really serving the whole of the business. It's not necessarily only serving pieces of it. But, you know, things like Ida that Paul just touched on are allowing us also to calibrate our sales force through machine learning towards the higher profit opportunities, where our rebates and other structures going to potentially be beneficial. So there's different calibrations there that are also good opportunities that we're capitalizing on. And it is, again, part of the driver of the fact that when you exclude some of the noise of, you know, outside GPU and AI and the higher growth in Asia-Pac as examples, we actually are growing margin year over year and seeing some of that accretion happening.

Yeah, no, that makes total sense, and that's super helpful, by the way. And that actually brings me to my next question. So I'm assuming as you keep expanding the market share with X-Bantage, you're going to continue getting more deals at that rate. So last quarter you said you were in 21 of 57 countries had X-Bantage. What's the number today, if you guys disclose that?

Yeah, it's 22. So we're really focused and keep in mind, too. So you're right, 57 and we're in 22 countries. And to Mike's point, roughly 75% of our revenue for those countries are going through X advantage. But I want to reiterate that you've got to keep in mind each country is on a little bit of a separate rollout schedule, and so they're at different levels of maturity. And the ones that are more mature that Mike just pointed to, we're actually seeing that benefit out. But we're at 22 countries. Most of the larger ones are on it and, again, are going through the rollout schedule and different levels of maturity.

Got it. Super helpful, guys.

And our next question will come from Carl Ackerman with B&P Paribas.

Thank you. Mike, thank you for providing color on segment revenue drivers for Q3, but could you unpack how much of your revenue guidance is a benefit from component cost pass-throughs that some of your vendors have implemented earlier this year across advanced solutions and client and endpoint solutions?

When you say component cost pass-through, can you elaborate what you mean by that?

Yeah. Yeah, some of those OEMs have certainly raised prices across the hardware aspect of their portfolios. And you spoke about how there's a 2% to 3% net revenue benefit from some constraints. I'm not sure if that is the same as the higher prices that you are benefiting from your OEMs. I just wanted to specify that.

Okay, no, got it, got it. Yeah, I mean, I think first off, I mean, any rise in ASP is passed through by us. We're not eating that cost. You know, I think we do have some of the opportunistic buy-ins that happen, and it hasn't been material, but that can be an opportunity to get out ahead on some of that and create a little bit more margin. But all of that said, we're passing through that cost. Now, so again, I would go back to those different components that we call out in that 2% to 3% net revenue uplift, and as we said, we probably landed closer to the 3% level in our Q2 actual results. It is a combination of the ASP increases, but also any pull forward that may be happening on customer demand to get out ahead of the ASP increases. You know, those are two positive factors. And then there's two headwinds. One is just it takes longer to get the product. You know, supply constraints are causing longer lead times, and that's lengthening out the sales closure cycle. And then just any demand elasticity that, you know, Paul touched on earlier as far as where you may see buying decisions shift a little bit.

So that's kind of the mix of all of those different factors that play into that 2% to 3% or what really landed around 3% in the quarter benefit to our top line. very clear thank you and our last question will come from keith housem with north coast research great thanks guys appreciate it good quarter of you guys appreciate it um in terms of this you know rest of the years you're looking out you know obviously we're hearing a lot of different puts and takes out there in terms of the supply chain and potential product shortages but what are you guys hearing when you talk to the vendors and you talk to some of your largest customers so keith this is paul i'll kind of wrap in what mike just went through asp increases

demand and price elasticity, pull forwards, supply chain challenges. And we guided the same in Q3 as we did the two to 3% in Q2. As we mentioned, we are at the, and Mike noted in his prepared remarks that we are the higher end of it. And so we have seen, you know, demand pull forwards. There's kind of all those puts and takes, but let me give you a little more color. What is different this quarter than when we got together last quarter? Well, prices are still going up that we just talked about, visibility and predictability actually have improved. So customers are getting a better insight on kind of future pricing and product availability. And some of this is coming because vendors you've probably seen in the market, some have extended the duration of some of their price quotes and price validity, which gives customers a little bit more stability as they go through their own sales cycle. So when you're talking about a handful of days and the uncertainty before, now we're looking for some that are, you know, as long as 30 days. So it lets customers have, you know, better visibility. And I would say their pipelines are giving us feedback that their pipelines are healthy, too, as we're in Q3 and improved cost visibility. Still prices are going up, but there's better visibility. And here's what I would say generally, kind of what I'm hearing from customers. Some customers, and I mentioned this before, breaking some of these large infrastructure products, probably more of the SMB market into smaller phases, which is good news because that doesn't mean the demand's going away or they're canceling. It just means they're doing it in phases. While others, like I said, on a positive note, have actually seen stuff that was pushed out a quarter or two ago that are actually coming to fruition. So you kind of look at all the puts and takes. There's going to be some. We're continuing to see resiliency and a solid pipeline in Q3, which is reflected in the strongest guidance we provided today.

Great. Thank you.

And this now concludes our question and answer session. I would like to turn the floor back over to Paul Bay for closing comments.

Thank you all for joining us today. I'd like to close by thanking our team members for their exceptional execution and delivering the best Q2 results in our company history, our customers for their continued trust and partnership, and our shareholders for your ongoing support. The technology market continues to evolve, and we're well-positioned to capitalize on the opportunities ahead. And our focus will remain on innovating for our customers, investing for the long-term growth, and delivering sustainable value. So thank you, everyone, and have a great day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.