Shares of TD Synnex plunged 9.4% to $260.71 on Thursday despite the IT distributor posting record fiscal third-quarter results that obliterated Wall Street forecasts. Investors weighed thinner gross margins and heavier working capital demands against the size of the top-line surprise , a classic case of a stock priced for perfection meeting the messy realities of rapid growth.
The Numbers Were Huge — But the Stock Had Already Priced Them In. Revenue reached $21.56 billion, up 37.7% year over year and roughly 12.9% above the $19.10 billion consensus estimate.
Non-GAAP diluted EPS of $5.68 rose 58.7% year over year and came in above the high end of guidance. Yet SNX had rallied from roughly $264 to nearly $288 in the week before the report. The trailing price-to-earnings ratio stood at 20.59 times, notably higher than its five-year median of 15.76 times — a premium that left no room for anything less than flawless execution.
Fast Growth Is Burning Cash, and That Worries Wall Street. TD Synnex's server-manufacturing arm, which builds custom hardware for the largest cloud companies, has been the engine behind the stock's 73.9% year-to-date gain. But that division's margin was pressured by product mix and ramp-up costs, and free cash flow was negative because the company is investing heavily in working capital and capacity.
Inventory levels increased by 30% sequentially last quarter, raising concerns about working capital management. Profits that don't convert into cash eventually test investor patience.
Forward Guidance Is Strong — But May Not Be Enough. For the fiscal fourth quarter, TD Synnex expects EPS of $5.65 to $6.15 and revenue of $21.8 billion to $22.6 billion , both above prior Street estimates. That signals continued AI infrastructure demand. Still, 10 of the 12 major institutional investors tracked by GuruFocus trimmed their positions in recent quarters while only two added shares , suggesting the smart money had already grown cautious.
A Broader Sell-Off Amplified the Pain. The decline landed during a risk-off session with major U.S. indexes lower and Treasury yields elevated, magnifying selling pressure on a stock already stretched to its 52-week range of $142.22 to $298.77 . The central question now: can TD Synnex's AI-fueled growth engine generate enough cash — not just revenue — to justify a valuation that still sits well above its historical norm?