Shares fell 19.4% on the quarter as investors reacted negatively to a clear deceleration in growth within key segments and margin pressures despite modest top-line gains, signaling discomfort with the company’s cautious outlook and uneven execution.
- Consolidated net sales increased 9% year-over-year, driven primarily by infrastructure hardware demand related to AI investment and supply chain agility.
- Hardware grew 10%, led by networking, servers, and enterprise storage, each up more than 20%, while software revenue rose 11%; however, services revenue was flat, weighed down by warranty declines.
- Commercial segment grew 10%, with broad-based demand, while government growth was modest at 5%, impacted by federal procurement delays and budget timing; education rose only 3%, with weakness in higher education offset by K-12 client device purchases.
- Gross profit increased 6%, but non-GAAP operating income rose just 2%, reflecting margin compression from hardware mix shift and lower margin services, plus elevated discretionary expenses.
- Despite record non-GAAP net income per share growth of 6% and strong cash flow generation, investors focused on deceleration trends and cautious commentary around near-term customer spending priorities and supply chain challenges.
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