Core Summary

  • TD Synnex CEO Patrick Zammit said on Thursday during the technology distributor's fiscal 2026 second-quarter (three months ended May 31) earnings call that token costs could drive enterprises to invest in on-premises infrastructure to handle AI workloads.
  • "Hardware is becoming a very interesting category again and could see very significant growth," Zammit said. "The cost of tokens could have a very positive impact on on-premises hardware, both in data centers and at the edge."
  • According to Executive Vice President and Chief Financial Officer David Jordan, TD Synnex posted record results for the quarter. Total billings rose 33% year over year to $28.9 billion, with its channel-facing distribution business contributing $23.4 billion. PCs, servers, and networking equipment accounted for more than half of distribution billings, according to the company's quarterly earnings.

Deep Dive

Over the past few quarters, TD Synnex has benefited from tightening supply in the memory and storage chip markets. As component shortages continue to push hardware costs higher, many organizations have accelerated their purchasing to avoid the impact of price increases.

Large channel distributors have been stockpiling inventory and passing increased costs on to partners, which ultimately reach end buyers.

"We are a cost-plus business," Zammit said. "If costs go up, we pass them on to customers. We have no choice."

Jordan added to that, noting the company is focused on ensuring adequate supply to help partners navigate the tight supply situation.

"In a rising price environment, we can benefit from it," Jordan said. "If prices continue to rise, it does bring benefits, but we are not greedy about it. We want a reasonable return on the additional capital invested, but we also share some of the gains with customers to build stronger long-term relationships."

Gartner estimates that DRAM and solid-state drive costs will more than double by the end of the year, pushing PC prices up 17% year over year. Earlier this month, IDC forecast that global PC shipments would decline more than 11% in 2026, with fourth-quarter declines as steep as 20% year over year.

Lidice Fernandez, group vice president of IDC's Worldwide Enterprise Infrastructure Tracker, told Channel Dive in March that server shipments surged sharply in the first three months of the year but are expected to stall as prices rise.

Despite the strong quarterly performance in the distribution business and ongoing hardware refresh cycles, Zammit remains cautious about the market outlook.

"The category I watch most closely is PCs, but with reservations," Zammit said. "There are still many enterprises or companies that need to upgrade their PCs, but it may be the category where I am most cautious."

According to a report released this week, IDC expects component supply tightness to persist beyond next year.

"The gap between vendors that have secured supply and those that have not is widening," wrote Soo Kyoum Kim, vice president of IDC's Semiconductors and Enabling Technologies program. "Major memory producers have been clear in their public guidance: the supply tightness is not a short-term anomaly. This is not an analyst forecast; it is the market telling you how to plan."

TD Synnex is already preparing for the next round of PC and server price increases.

"By the way, we expect another round of price increases in both categories in July," Zammit said. "The price increases are not over yet."