TD SYNNEX (NYSE: SNX) Q2 2025 Earnings Call dated Jun. 24, 2025
Corporate Participants:
Unidentified Speaker
David Jordan — Americas CFO and Head of Investor Relations
Patrick Zammit — Chief Executive Officer and Director
Marshall Witt — Chief Financial Officer
Analysts:
Unidentified Participant
Adam Tindle — Analyst
Erik Woodring — Analyst
Ruplu Bhattacharya — Analyst
David Vogt — Analyst
David Paige — Analyst
Joe Cardoso — Analyst
Vincent Colicchio — Analyst
Ananda Baruah — Analyst
Presentation:
operator
Good morning. My name is Kate and I will be your conference operator today. I would like to welcome everyone to The TD synics second quarter fiscal 2025 earnings call. Today’s call is being recorded and all lines have been placed on mute to prevent any background noise after the speaker’s remarks. There will be a question and answer session at this time for opening remarks. I would like to pass the call over to David Jordan, America’s CFO and Head of Investor Relations at TD Synnex. David, you may begin.
David Jordan — Americas CFO and Head of Investor Relations
Thank you. Good morning everyone and thank you for joining us for today’s call. With me today is Patrick Zammit, our CEO and Marshall Witt, our cfo. Before we continue, let me remind you that today’s discussions contain forward looking statements within the meaning of the federal securities laws, including predictions, estimates, projections or other statements about future events, including statements about our strategy, demand plans and positioning, growth, cash flow, capital allocation and stockholder return, as well as our financial expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward looking statements. As a result of risk and uncertainties discussed in today’s earnings Release in the Form 8K we filed today in the Risk Factors section of our Form 10K and other reports and filings with the SEC, we do not intend to update any forward looking statements.
Also during this call we will reference certain non GAAP financial information. Reconciliations of GAAP to non gaap. Results are included in the earnings press release and the related Form 8K available on our Investor Relations website ir.tdcynx.com this conference call is a property of TD SYNX and may not be recorded or rebroadcast without our permission. I will now turn the call over to Patrick.
Patrick Zammit — Chief Executive Officer and Director
Thank you David Good morning everyone and thank you for joining us today. I’m excited to report on our strong second quarter performance and provide an update on the impacts we are seeing from the macroeconomic uncertainty. Our Q2 results demonstrate the continued strength of the IT distribution and hyperscaler markets. Meanwhile, our strategy and the execution of our team are enabling us to grow ahead of market. In Q2, gross billings grew 12% 11% in constant currency and non GAAP diluted EPS exceeded the high end of our guidance. With all regions and major technologies contributing, we believe the quarter benefited from some demand pull forward within TDCnext excluding hive, gross billings grew 11% year over year and operating margins expanded resulting in strong operating income growth.
From a technology perspective, we saw strong growth across both Endpoint and Advanced Solutions hive, which is included within the Advanced Solutions portfolio grew gross billings in the high teens hive. Profit margins declined sequentially on which Marshall will provide More color within TDCNext. All regions and major technologies experienced growth during the quarter. Software continues to be a bright spot in our portfolio, experiencing 20% billings growth fueled by cloud, cybersecurity and infrastructure software. Additionally, we continue to see strong growth in PCs driven by the refresh cycle and we were also pleased to see growth in networking. After multiple weak quarters, we saw broad based demand across all our major customer segments, specifically SMB, MSPs and public sector, all of which grew double digits during the quarter.
At Investor day, we shared five strategic imperatives we believe will enable us to deliver above market growth. These include unifying our reach, targeting new customers, distribution, market expansion, diversifying our offerings and accelerating on services. The execution of our strategy is recognized by 40 + honors we received in the channel during the quarter. Additionally, HPE announced yesterday TDCNEXT is their Global Distribution Partner of the Year. Other highlights of honors during the quarter include being named Nvidia’s Americas Distributor of the Year, CrowdStrike Americas Partner of the Year, Dell Emea Distributor of the Year, Lenovo US Distributor of the Year, NetApp Latam Distributor of the Year and Fortinet Hong Kong Distributor of the Year among others.
A key component of our strategy is targeting new customers and allowing them to scale through our digital capabilities. For example, many customers invest a significant portion of their SGA in operational overhead and in the US we helped a new customer to address this with a specialized solution. We partnered with our customer to develop a completely integrated and automated operational model that drove efficiencies through TD Synnex, transactional APIs and custom workflows, everything from configuration to renewals. By fully leveraging our digital capabilities, our partner was able to make an outsized investment in sales, marketing and engineering talent.
This has resulted in exponential sales growth at accretive margins for Both our partner NTDCNext. Additionally, we continue to make great strides with our delivering services strategic imperative. In a recent example with a leading advanced solutions oem, we are deeply engaged in several important services initiatives including building various data center solutions and deploying the AI infrastructure solutions. We are certified to build solutions on their behalf both for their direct and indirect channels and this facilitates robust supply chain acceleration to significantly improve their time to cash and extend their overall capacity. Between our multi vendor technical expertise and our robust integration, supply chain support and professional services, we are well positioned to connect OEMs with a network of technology vendors required for their AI infrastructure Solutions.
Our North Star remains generating profitable growth and free cash flow while being a valued partner to our vendors and customers across the world. We continue to allocate excess cash to high return opportunities to ensure sustainable value creation for our shareholders. Now I will pass it to Marshall for financial performance and outlook.
Marshall Witt — Chief Financial Officer
Thanks Patrick and good morning everyone. We had a strong performance in the second quarter with gross billings of 21.6 billion up 12% year over year, 11% in constant currency and above the high end of our guidance range. We were pleased to see year over year growth across all regions and major technologies. Our teams continue to execute extremely well and in addition to that, we believe we were modestly aided by our customers advancing their forecasted purchases in light of a volatile economic environment. In Q2 there was approximately 31% reduction from gross billings to net revenue which was slightly higher than our expectations.
This was primarily driven by an increase in HIVE transactions where we act as an agent and a higher mix of software. Net revenue was 14.9 billion, up 7% year over year and above the high end of our guidance range. In Q2, our endpoint solutions portfolio grew gross billings 13% year over year driven by the ongoing PC refresh cycle and customers modestly advancing their forecasted purchases. Our Advanced Solutions portfolio grew gross billings 12% year over year, 10% year over year when excluding the impact of Hive. Driven by accelerated demand for data center infrastructure and continued growth in cloud security, AI and other high growth technologies.
Hive, which is reported within the Advanced Solutions portfolio, grew in the high teens primarily due to strength in programs associated with server and network rack builds. Gross profit increased 7% year over year to 1 billion. Gross margin as a percentage of gross billings was 5% which was consistent sequentially and a decline of 21 basis points year over year. Excluding hive, gross margins were relatively flat year over year. HIVE gross margins declined from Q1 due to unrealized FX losses and program mix. We expect a portion of the unrealized FX losses will be recovered as we sell through the product in the back half of the year.
Non GAAP SGA expense was 632 million or 3% of gross billings representing an 11 basis point improvement year over year. The cost to gross profit percentage, which we define as the ratio of non GAAP SGA expense to gross profit was 60% in Q2 consistent with quarter one. Non GAAP operating income increased 7% to 414 million. Non GAAP operating margin as a percentage of gross buildings was 2%, representing a 10 basis point decline year over year and consistent with Q1 interest, expense and finance charges were 90 million, slightly higher than expectations and relatively consistent quarter over quarter.
The non GAAP effective tax rate was approximately 23% which was in line with expectations. Total non GAAP net income was 251 million and non GAAP diluted earnings per share was $2.99, both above the upper end of our guidance range. Turning to the balance sheet for quarter two, net working capital was 4 billion, which is an improvement quarter over quarter. Despite the accelerated growth that we experienced throughout the business, we experienced a four day improvement in our cash conversion cycle on a net basis quarter over quarter consistent with expectations. Free cash flow generation for the quarter was approximately 543 million.
We returned 186 million to stockholders in quarter two with 149 million in share repurchases and 37 million in dividend payments. For the current quarter, our Board of Directors has approved a cash dividend of $0.44 per common share that will be payable on July 25, 2025 to stockholders of record as of the close of business on July 11, 2025, we ended the quarter with 767 million in cash and cash equivalents debt of 4.1 billion. Our growth leverage ratio was 2.4 times and our net leverage ratio was 1.9 times. Moving on to our outlook, I want to start by addressing the fact that we’re in a volatile environment given the ongoing developments with respect to global trade.
I also want to acknowledge that this is our best view based on what we know today. With that, for the third quarter we expect non GAAP gross billings in the range of 21 to 22 billion, representing growth of approximately 6%. At the midpoint, our outlook is based on a euro to dollar Exchange rate of 1.13, net revenue in the range of 14.7 to 15.5 billion, which translates to an anticipated gross to net adjustment of 30% non GAAP net income in the range of 227 to 268 million, non GAAP diluted earnings per share in the range of $2.75 to $3.25 per diluted share.
Based on weighted average shares outstanding of approximately 81.8 million, we expect a non GAAP tax rate of approximately 23% and interest expense of 89 million. We expect to execute approximately 175 million of share repurchases during the quarter and will remain opportunistic on our strategy to return excess cash to our shareholders. In closing, we believe we are in a strong financial position as heading into the second half of the year and are leveraging our strategy to ensure we remain the partner of choice in IT distribution. With that, we’ll open it up for your questions. Operator.
Questions and Answers:
operator
We request that you limit yourself to one question to allow time for the other participants to ask their questions. If there is remaining time, you are welcome to re queue with additional questions. Your first question comes from the line of Catherine Campana with Golden Sachs. Your line is open.
Unidentified Participant
Hi, thank you for the question. It would be helpful if we could get some more color on the demand pull forward that you noted in the prepared remarks. Were there any particular products that benefited likely PCs is my guess but would. Love to know more about the financial. Impacts there and is there any impacts we should be mindful of when we think about the ES and AS mix through the balance of the year because of this pull forward. Thank you.
Patrick Zammit
Yes, good morning. Thanks a lot for the question. So first thing overall, I mean we had a very strong quarter with sales and EPS at the high end of guidance and double digit growth. So we looked at any pull forward. So we saw a little bit of it in PCs. It’s difficult to quantify but we think that max we benefited from 100 to 200 million sales of pull ins, no more than that for the moment. On PCs we see the demand continuing to be strong, especially in B2B and it’s driven again by the refresh refresh of the base purchased during the pandemic and of course the Windows 11 refresh.
Marshall Witt
And Catherine, this is Marshall. Just to comment on following comment for what Patrick said from an overall margin benefit for the quarter we expect that probably was around 10 million of gross profit that was incremental to the quarter. And then thinking about your question on ESAs mix for the second half of the year we do continue to expect there to be refresh strength in the second half. So right now we think it’s probably equal in regards to ESAS mix for the portfolio for the second half.
operator
Thank you very much. Your next question comes from the line of Adam Tyndall with Raymond James. Your line is open.
Adam Tindle
Okay, thank you. Good morning. I just wanted to talk about that pull forward dynamic. Marshall, if I look at your guidance for Q3 it’s similar to what you guided to last year and we’ve got this pull forward dynamic that you talked about. We also have typically a big public sector quarter in Q3, just two factors that might be a little different and cause Q3 to be sub seasonal this year. So I guess the Question would be, as you thought about Q3 guidance, why wouldn’t we see a little bit more muted seasonality in that quarter this year versus last? And then secondly, if you could maybe just revisit, obviously you’re tracking very well relative to the fiscal 2025 guidance that you gave at the analyst day, particularly on an earnings basis that 1150-12 buc.
I wonder if that’s something that we should be sort of reconsidering or maybe pushing the models towards the high end of that as we kind of think about shaping Q4. Thanks.
Marshall Witt
Sure. I’ll cover the pull forward and its impact, the potential impact in the second half. Patrick, talk about the public sector and then I’ll talk about the analyst day comments about the second half. So yeah, as I said, we did experience some pull forward as Patrick mentioned, 100 to 200 million of revenues, some some margin benefit. Right now we’re being fairly prudent in our thoughts for that continuing benefit in the second half of the year. Again, I think the overall thought for us is that demand will soften in the second half of the year, which is pretty consistent with what we had said at Analyst day.
We are expecting to be a little bit on the higher end of that range outcome for our guidance that we provided in quarter three. And then just thinking about quarter four fairly similar to what what we shared at Analyst day, which is that 3 to 4% growth and the typical seasonality you would experience historically between quarter three and quarter four activities and relationships. And Patrick to public sector comment.
Patrick Zammit
Yeah, so we, we had a very strong quarter for the public sector including Fed. I mean we saw also solid growth in The Fed business focus 3 Again, I mean the majority, the vast majority of our public sector business comes from the sled and we continue to be positive on the prospects there. I just add to what Marshall explained that for the moment what we see the underlying trends by technology continue to be relatively positive. Thinking about software, PCs, server networking is back to growth cloud but there is also a macro environment tariff is one.
But also the situation in the Middle east which for the moment leads us to be cautiously optimistic and a little bit prudent in our outlooks.
Adam Tindle
Okay, maybe just a quick clarification for a follow up. Marshall, you talked about free cash flow for the year, 1.1 billion I think was the target. Obviously a much better quarter this quarter but still negative year to date and it’s a pretty big climb in the back half of the year. So just wanted you to maybe revisit your thoughts on Free cash flow for the year. Is that something that should still stand and if so, what would the levers be to get there? Thanks.
Marshall Witt
Yep, sure. So we still believe that we’ll be able to attain the 1.1 billion in free cash flow. We were happy with the improvement in cash conversion and working capital in quarter two with a four day improvement. As you know, when we were commenting last quarter, we expected that to happen. It did. The majority of the working capital improvement is with our HIVE organizations. We entered the year a little bit heavy on working capital for the reasons we articulated in our quarter one call and expect that to unwind throughout the year. So far it’s going as we had thought.
There is some additional optimization that we think we can garner out of hive. So our expectations for quarter three and quarter four for cash days is probably two to three days in quarter three, maybe one to two days in quarter four. Adam, the other thing just to think about as we were talking about the muted IT spots for the second half of the year, as you know, as growth rates decline, even though they are improving in terms of year over year, that does also aid and allow us to improve our working capital as overall growth rates decline.
And then finally, as we mentioned in analyst day, we do expect the netting to cash flow conversion to be at 95% for the full year. So we still feel good about hitting our $1.1 billion target.
Patrick Zammit
Makes sense.
Adam Tindle
Thank you.
Marshall Witt
Thank you.
operator
Your next question comes from the line of Eric Woodring with Morgan Stanley. Your line is open.
Erik Woodring
Hey guys, good morning. Thank you so much for taking my question. You know, Patrick or Marshall, for either one of you, I would love if you could just maybe give us a bit more detail on demand linearity in the quarter. And really what I’m trying to get. Is April was a relatively challenging month. We heard from some of the enterprise OEMs. And so obviously your May quarter kind of straddles that. So I’d love to just better understand a little bit how demand progressed from April into May and then May thus far into June. And anything that stood out for you guys, if you look at that by. Either AS or ES trends. Thanks so much.
Marshall Witt
Sure, Eric. I’ll start within the quarter. We did see strength in March and April. Call it mid teens growth rate. Then it softened a little bit in May, but still a good growth rate in terms of year over year. So it ended up being a very solid quarter for us so far in June. It reflects what we’re guiding if you just think about our outlook. So we generally see Fairly consistent behavior all in quarter two and quarter three from a gross billing perspective. You can see that in our guidance. And then just to comment briefly on high for quarter two.
As you remember, when we came into the quarter, we thought that they would be slightly down in Patrick’s prepared remarks, high grew in the high teens. So they did exceptionally well during the quarter, showed great momentum. So in addition to the distribution intra quarter behavior, we also saw strong growth in Hyatt and Patrick. Anything on ES or as you want to comment on?
Patrick Zammit
Yeah, so very rapidly. I mean, if I look at the main product categories you look at. So let me start with software. I mean, software continues to be really strong, especially in virtualization. We see very nice demand. As I mentioned, public cloud continues to grow. Double digit, very solid growth and no reason to see a slowdown there. Security is another bright spot. I mean, the need for defending against cyber attacks continues to be there and so demand should remain healthy. PCs, we had a very strong quarter. We still believe that next quarter the demand will be there, as I mentioned, because of the refresh cycle.
But refresh cycle is not over. I mean, the good news this quarter was networking. I mean, as we talked about in the previous quarters, there was a tough compare. But now we see this market also coming back, growing and becoming a tailwind overall. So that’s positive. From a regional standpoint, Europe continues to be strong. APJ was very strong. And most important, North America is we see the market also enjoying solid growth. So from a geographic standpoint, I am cautiously optimistic.
Erik Woodring
Great. Thanks so much for the color, guys. Good luck.
operator
Your next question comes from the line of Ruplo Battacario with Bank of America. Your line is open.
Ruplu Bhattacharya
Hi. Thank you for taking my questions. So last quarter you talked about two issues in Hive. There was a demand shortfall, I think from a customer, and there was an issue with inventory and working capital. So are you seeing improvement in both issues? With respect to Hive and then Patrick, for my follow up, I’d like to ask that if we look at your billings growth in 1Q, it was high single digits, about 8% year on year 2Q, you just reported 12%. Europe seems to have grown very strong, 17% year on year. So what is it that is giving you pause to think or giving you cause to think that there’s a pause in Demand in fiscal 2Q or are you just being conservative for the full year? Thank you.
Marshall Witt
I’m going to take the first part.
Patrick Zammit
Yeah, so go start with Hive. Hey, Rupu.
Marshall Witt
So, yeah, you’re right. The Two items we discussed in quarter one around Hive. First of all, Hybe still had a great quarter in quarter one. Another fantastic quarter in quarter two, I think quarter one we said 23% growth, so pretty good. Quarter two, 19% mid, you know, high teens, pretty good. So the demand shortfall was relative or muted against the strong growth within the quarter for both quarters. We did comment about a component buy that we expected to see in court. Quarter one, we expect that to sell through in the second half of this year.
So we’re good. We’re happy about that. And then the comments around inventory working capital. I addressed this a little bit earlier with Adam’s question around the improvement that we saw in cash and in working capital, which was primarily driven by the improvement in Hive working capital as well. And we would expect that to continue to unwind for the rest of the fiscal year.
Patrick Zammit
Yeah, and Ruploo, just on the second question about the year, on year growth rate for Q3. So it’s true that Q1, Q2 we were close to double digit or above double digit. So for Q3 I would say first, last year Q3 we started to see the recovery in distribution and Hive had a very strong quarter. So a tougher base, if you will, in Q3 last year versus so, which explains a little bit the growth rate or the forecasted growth rate for Q3. Second point is the macro uncertainty, which leads us to be again, a little bit more cautious, but nevertheless, as I just explained before, good underlying tailwinds by technology and by region.
So the blend of all that leads us to the guidance we provided and we will see at the end of Q3.
Marshall Witt
And then briefly, just to follow up on the comment of your question on quarter one being 8%, quarter two being 12, and as Patrick’s prepared remarks across the board, we just saw better than expected outcomes for the reasons that we articulated. So just a good performance, good position and good outcomes for the business.
Ruplu Bhattacharya
Sorry, just to clarify one thing. Are you actually seeing any weakness right now in any region or any product line? Or is it your expectation that based on the political and the economic issues that are out there, there could be some weakness? Or are you actually seeing any slowdown right now?
Patrick Zammit
So what we see in June is in line with the guidance we provided. As you know, July is when we will know more about tariffs and so difficult to forecast the impact. So July, August and August is a month, which is interesting. It’s vacation month, for example, in Europe and you have the Middle east. What could be the impact? So again, so Far no concerns. Everything is in line with, with the guidance.
Ruplu Bhattacharya
Okay, thank you so much.
operator
Your next question comes from the line of David Vogt with ubs. Your line is open.
David Vogt
Great, thank you. Thanks Patrick. Thanks, Marshall. Patrick, can I just dive back into high for a second? You know, I think you talked about strong billings of, you know, high teens, but the margin mix was a little bit lower. So can we infer from that comment that what you saw strength in this quarter is more on the CM side versus, versus sort of the spare parts ODM side of the business. And then how does that play into the comments? Again, I think you touched on it briefly, but last quarter, you know, there was some push out of orders.
Did we see those orders come back this quarter for that second customer that’s ramping or is that still on the comm as we go into the third and the fourth quarter? And then I have a follow up.
Patrick Zammit
I’m going to comment. So thanks a lot. I’m going to comment on the top line and Marshall will give you more color on the margin. So if you look at the top line, again, very, very, very strong growth for the ODM CM business, 45% primarily driven by a largest customer. So really the largest customer drove that growth, the second customer. In fact, last quarter the demand paused and we saw demand coming back this quarter slightly below our expectation. But the demand is back, which is a positive.
Marshall Witt
Hey David.
David Vogt
Hey Marshall.
Marshall Witt
How’s it going? So yeah, in regards to the overall margin profile and in my prepared comments I referenced unrealized FX that was a hit to our margin in Hive, but we expect that to recover in the second half of the year. So that was one of the one of the headwinds related to margins for hyve. The other is within the CM ODM mix itself, just the various programs. Its profile for the quarter ended up being a little bit negative to the margins expectations for the quarter. We do expect those to unwind and for margins to improve for HYVE in quarter three.
And then if you think about the overall range of the portfolio, ODM CM is around 6% of total product. And then as we said at analyst day, which is still consistent, is our spares, what we call a data center supply chain ranges between 2 to 4% of total gross billings. The reason why we gave that range, it’s got a little bit of volatility and bumpiness quarter to quarter. But we were a little bit more towards the higher end of that 2 to 4% in quarter two. But wanted to give you that context.
David Vogt
As well, now that’s really appreciated and just. I’m sorry, go ahead, Patrick.
Patrick Zammit
Yeah, I just wanted to add one thing which is that what we see is really the, I mean, exclude the unrealized effects. The margin for HIVE is really stabilizing now. I mean, when you look at it quarter by quarter to quarter, we see this stabilization, which is very encouraging. Sorry.
David Vogt
Got it. And Marshall, just one final question. Can you remind us again, I guess in April when you kind of laid out the balance of this year, kind of, what was the underlying assumption for the tariff regime going forward as we’re coming up to July? Not really a comment about the demand profile now, but just remind us again, what were you kind of embedding? Do tariffs come back sort of on a 10% reciprocal basis across most of the markets that you serve? Kind of just how should we think about it, just given the level of uncertainty? Maybe kind of the baseline?
Marshall Witt
Yeah, well, if you remember, we were living it live in April. And so it wasn’t a ground up assessment other than knowing the demand based on kind of the last iteration that we saw 18 and 19 did soften. I think that to some extent our ability to see that and forecast at a high level what that represented. And now we’re laying out maybe a little bit stronger thought for quarter three within that context. But back to Patrick’s point, still a lot of uncertainty. It’s really going to be difficult to know what happens on July 9 and its impact and where that ultimately settles.
So it’s a long way of telling you that it’s still very uncertain as to what that demand outcome looks like as we finish up this year and going into next year.
David Vogt
Great. Thanks, Marshall. Thanks, Patrick.
Patrick Zammit
Thank you.
operator
Your next question comes from the line of David Page with RBC Capital Markets. Your line is open.
David Paige
Hi, good morning. Thank you for taking our question. I just want to circle back to PC refresh. I was wondering if you could just. In terms of innings, where are we. In terms of the refresh cycle? Or are we just starting in the. Middle towards the end and that’s it. Thanks.
Patrick Zammit
Good morning, David. So according to me, we are in the middle of it. We are not at the start. We saw already the refresh starting at least one, if not two quarters ago. So I think we are in the middle of it. So yeah. And that’s the reason when you look at our guidance, we continue to be positive on the contribution of PC to the overall growth.
David Paige
Thanks, Patrick. Appreciate it.
operator
Your next question comes from the line of Joseph Cardoso, but JP Morgan Your line is open.
Joe Cardoso
Hey, good morning. Thanks for the question. Maybe another follow up question on PCs or ES, maybe more broadly. You’ve had a couple quarters in a row of sequential margin improvement in this business and I was just curious if you could walk us through what is driving this margin improvement particularly. Maybe not an apples to apples comparison, but when I look at your OEM partners, they’ve obviously highlighted some margin pressure within their respective PC businesses. So just curious, you know, what’s been driving the strength in the margin sequentially now for it looks like four quarters or so.
And how are you thinking about the sustainability of that as we think about going into the back half of this year? Thanks.
Marshall Witt
Hey Joe, it’s Marshall. Typically when we do see refresh, we’ve been through a few of these, there is increased demand. With that does come a little bit of a stronger pricing environment in general. So we did mention in the call that we saw some of the momentum in the polling related to that strength and also the margin incremental margin associated with the pricing associated with that. So there is a little bit of temporary aspect to that. But as Patrick said, middle of the game here. Still think there’s probably benefits for us as we go forward.
As you might know, in certain parts of our market, specifically North America, we do a lot of large buys around the PC ecosystem that creates benefits for us that may continue going forward. Your question about, you know, what does it look like after the refresh kind of gets through its game, you know, we typically expect to fall back to normal IT spend plus our normal market share expectations for that. So sustainability, feel good about it. Probably have a little more momentum behind us. Hard to know if that carries through the end of this year or if it extends into next year.
Patrick Zammit
I just want to add one more thing. It’s also mix related product, mix related PC has been driving the growth of the endpoint segment. Also the component business has been very strong and those two categories have better margins relatively speaking. The mobile category has grown much slowly and there the margin is lower. So again mix is also nicely contributing to the improvement of the margin.
Joe Cardoso
That’s very clear. Thanks for the color guys. Appreciate it.
Marshall Witt
Thanks. Jeff.
operator
Your next question comes from the line of Vincent Kolikkia with Barrington Research. Your line is open.
Vincent Colicchio
Yeah. On apj. What drove the strength there and is that sustainable?
Patrick Zammit
Yeah. So good morning. So we had a very strong quote in apj. More or less every country contributed but specifically India and Japan. In Japan it’s driven by the consumer business. India, it’s more the B2B business. We continue to be positive about the prospects of apj. I mean we have a low share in the region, so we have an aggressive growth plan. But most important we are, I mean our growth plan is focused on the margin rich customer segments and product segments. So we believe that we’re going to continue to see solid growth, but also solid mod gross profit generation and operating profit generation.
Vincent Colicchio
Thanks for the color.
Marshall Witt
Thanks, Ben.
operator
Your next question comes from the line of Fernandez Barroa with Loop Capital. Your line is open.
Ananda Baruah
Hey. Yeah, good morning guys. Thanks for taking the question. I guess going back to Hive a couple if I could, is there any distinction or what are the distinctions to be aware of between the 45% growth in the ODM CM segment and the high teens growth in highs. And then Patrick, in your prepared remarks you talked about in some detail working with, working with hyperscalers to build out data center solutions and some of the work you’re doing there. Is that sort of description. Are we watching real time you expanding the complexities of your engagement engagements and the complexity of the scope of the work you’re doing with the hyperscalers.
Could that be part of the reason the margins are starting to be more favorable? As to your remarks a moment ago, and then just one last thing. It’s a clarification. Did you say that networking, you were seeing networking improvement in Hive or that Hive was one of the drivers for the improvement in networking? And I’ll stop there. Thanks guys.
Marshall Witt
Ananda, I’ll go first and then pass it over to Patrick. Good question. So yeah, we did call out the ODM CM Compare and the growth year over year is around 45%. And you’re right, mid teens, what’s the the difference? Supply chain was a little bit down year over year. So that, that’s why the math works that way. So we still, as we acknowledge, believe it’s a good part of our business. It’s lumpy, so it does move around quite a bit. But that’s how you get to that, that mid teen overall growth for Hive in regards to the complexity of engagements with our hyperscale customers? I’ll let Patrick speak to that.
Let him speak to the pipeline not only with existing customers, but potential new expansion as well. And then anything around how network might be driving Hive.
Patrick Zammit
Yeah. So good morning and thanks for the question. So I start with Hive and then I will address the networking question. So I mean our strategy is clearly we want to move up the value chain. That’s the reason we are investing in engineering capabilities to be more on the ODM side rather than cm. We also investing in our SMT capabilities in the US because we think that based on the environment, it’s going to give us a competitive advantage. But also we are diversifying our customer base and we may do more in the future, for example, with sovereign customers where we believe the margin should be slightly better.
So yes, that’s the reason margins are stabilizing and we hope that the outcome of all the actions I just talked about will in fact take us to even better margins going forward. On networking, yes, Hive also had a strong quarter on networking, but excluding Hive in distribution, networking got back to growth. Modest growth. I mean low single digit, but we are back to growth.
Ananda Baruah
That’s all super helpful. Quick follow up, if I could. Are you guys seeing any sort of increased conversation with regards to Hive from a Made in America context with hyperscalers? And I know the customer base opportunity is more global than that with Sovereign and neocloud, but just with the hyperscalers specifically, is there any sort of incremental Made in America conversation that’s going on? Thanks. That’s it for me. Thanks.
Patrick Zammit
Yeah, again, very high level. I mean we have a very nice pipeline of opportunities. So with our existing customers we are working on several programs and hopefully we’re going to close some of them. Again, the design cycle is long, so we’re never completely sure when that’s going to close, but many, many opportunities. But I can confirm that there is also interest from other customers to work with us because of the expertise, the manufacturing capabilities and the service we are providing.
Ananda Baruah
Great. Thank you guys.
Marshall Witt
Thanks Melana.
operator
Again, if you would like to ask a question, press Star one on your telephone keypad. I will turn the call back over to Patrick for closing remarks.
Patrick Zammit
Thank you everyone for joining us. I want to take a moment to express gratitude to our customers, partners and our investors for their support and importantly, our outstanding team of over 23,000 coworkers around the globe for their dedication to serving our customers. We look forward to reconnecting next quarter. I hope you have a good day.
operator
That concludes today’s conference call. You may now disconnect. Have a nice day.